UNITED STATES

SECURITIES AND EXCHANGE COMMISSION

Washington, D.C. 20549

FORM10-Q

(Mark One):

☒ ☑	QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934.
	For the quarterly period ended March 31, 2021

~~For the quarterly period ended March 31, 2020~~

☐	TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934.
	For the transition period from __________ to __________

~~For the transition period from~~to

Commission File Number:001-35975

Gogo Inc.

(Exact name of registrant as specified in its charter)

Delaware

~~Delaware~~

27-1650905

(State or other jurisdiction of

Incorporation or Organization)

(I.R.S. Employer

Identification No.)

111 North Canal St., Suite ~~1500~~1400

Chicago, IL 60606

(Address of principal executive offices)

Telephone Number~~(312) 517-5000~~ (303) 301-3271

(Registrant’s telephone number, including area code)

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


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

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

Indicate by check mark whether the registrant is a large accelerated filer, an accelerated filer, anon-accelerated filer, a smaller reporting company or an emerging growth company. See the definitions of “large accelerated filer,” “accelerated filer,” “smaller reporting company” and “emerging growth company” in Rule12b-2 of the Exchange Act.

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

Indicate by check mark whether the registrant is a shell company (as defined in Rule12b-2 of the Exchange Act). Yes☐No ☒☑

As of ~~May 7, 2020, 83,770,421~~April 30, 2021, 109,609,821 shares of $0.0001 par value common stock were outstanding.

~~Gogo Inc.~~

~~INDEX~~GogoInc.

INDEX


			Page
Part I.		Financial Information
Item 1.	Financial Statements	2
	~~Financial Statements~~		2
		Unaudited Condensed Consolidated Balance Sheets		2
		Unaudited Condensed Consolidated Statements of Operations		3
		Unaudited Condensed Consolidated Statements of Comprehensive Loss		4
		Unaudited Condensed Consolidated Statements of Cash Flows		5
		Unaudited Condensed Consolidated Statements of Stockholders’ Equity (Deficit)		6
		Notes to Unaudited Condensed Consolidated Financial Statements		7	8
Item 2.		Management’s Discussion and Analysis of Financial Condition and Results of Operations		35	30
Item 3.		Quantitative and Qualitative Disclosures About Market Risk		54	41
Item 4.		Controls and Procedures		55	41

Part II.		Other Information
Item 1.	Legal Proceedings	~~Legal Proceedings~~42		56
Item 1A.	Risk Factors	~~Risk Factors~~43		57
Item 2.		Unregistered Sales of Equity Securities and Use of Proceeds		62	48
Item 3.		Defaults Upon Senior Securities		62	48
Item 4.		Mine Safety Disclosures		62	48
Item 5.	Other Information	~~Other Information~~48		62
Item 6.	Exhibits	~~Exhibits~~49		62
Signatures			64	50

PART I. FINANCIAL INFORMATION

~~ITEM 1.~~

ITEM 1. FINANCIAL STATEMENTS

Gogo Inc. and Subsidiaries

Unaudited Condensed Consolidated Balance Sheets

(in thousands, except share and per share data)


	March 31,			December 31,			March 31,			December 31,
	2020			2019			2021			2020
Assets
Current assets:
Cash and cash equivalents	$	214,229		$	170,016		$	455,152		$	435,345
Accounts receivable, net of allowances of $3,970 and $686, respectively		92,619			101,360
Accounts receivable, net of allowances of $813 and $1,044, respectively								36,232			39,833
Inventories		123,179			117,144			28,560			28,114
Prepaid expenses and other current assets, net of allowances of $997 and $0, respectively		36,462			36,305

Prepaid expenses and other current assets								9,625			8,934
Total current assets		466,489			424,825			529,569			512,226

Non-current assets:
Property and equipment, net		505,584			560,318			61,519			63,493
Goodwill and intangible assets, net		75,083			76,499
Intangible assets, net								51,128			52,693
Operating leaseright-of-use assets		58,085			63,386			32,473			33,690
Othernon-current assets, net of allowances of $6,111 and $0, respectively		86,229			89,672

Other non-current assets, net of allowances of $375 and $375, respectively								13,043			11,486
Totalnon-current assets		724,981			789,875			158,163			161,362

Total assets	$	1,191,470		$	1,214,700		$	687,732		$	673,588

Liabilities and Stockholders’ deficit
Liabilities and stockholders’ deficit
Current liabilities:
Accounts payable	$	35,995		$	17,160		$	11,322		$	11,013
Accrued liabilities		176,238			174,111			94,134			83,009
Deferred revenue		28,472			34,789			3,759			3,113
Deferred airborne lease incentives		30,718			26,582

Current portion of long-term debt								-			341,000
Total current liabilities		271,423			252,642			109,215			438,135

Non-current liabilities:
Long-term debt		1,124,713			1,101,248			1,163,822			827,968
Deferred airborne lease incentives		145,172			135,399
Non-current operating lease liabilities		82,975			77,808			36,354			38,018
Othernon-current liabilities		53,793			46,493			9,844			10,581

Totalnon-current liabilities		1,406,653			1,360,948			1,210,020			876,567

Total liabilities		1,678,076			1,613,590			1,319,235			1,314,702

Commitments and contingencies (Note 13)		—			—						-
Stockholders’ deficit
Common stock, par value $0.0001 per share; 500,000,000 shares authorized at March 31, 2020 and December 31, 2019; 83,825,592 and 88,292,821 shares issued at March 31, 2020 and December 31, 2019, respectively; and 83,773,648 and 88,240,877 shares outstanding at March 31, 2020 and December 31, 2019, respectively		8			9
Additionalpaid-in-capital		1,081,955			979,499
Common stock, par value $0.0001 per share; 500,000,000 shares authorized at March 31, 2021 and December 31, 2020; 97,158,550 and 91,086,191 shares issued at March 31, 2021 and December 31, 2020, respectively; and 92,071,085 and 85,990,499 shares outstanding at March 31, 2021 and December 31, 2020, respectively								9			9
Additional paid-in capital								1,080,305			1,088,590
Accumulated other comprehensive loss		(5,127	)		(2,256	)		(912	)		(1,013	)
Treasury stock, at cost		(98,857	)		—			(98,857	)		(98,857	)
Accumulated deficit		(1,464,585	)		(1,376,142	)		(1,612,048	)		(1,629,843	)

Total stockholders’ deficit		(486,606	)		(398,890	)		(631,503	)		(641,114	)

Total liabilities and stockholders’ deficit	$	1,191,470		$	1,214,700		$	687,732		$	673,588

See the Notes to Unaudited Condensed Consolidated Financial Statements

Gogo Inc. and Subsidiaries

Unaudited Condensed Consolidated Statements of Operations

(in thousands, except per share amounts)


	For the Three Months						For the Three Months
	Ended March 31,						Ended March 31,
	2020			2019			2021			2020
Revenue:
Service revenue	$	150,782		$	165,012		$	59,355		$	57,726
Equipment revenue		33,693			34,537			14,514			13,201

Total revenue		184,475			199,549			73,869			70,927

Operating expenses:
Cost of service revenue (exclusive of items shown below)		70,755			68,121			14,095			11,007
Cost of equipment revenue (exclusive of items shown below)		26,040			29,731			8,282			8,511
Engineering, design and development		22,863			24,728			5,493			7,357
Sales and marketing		9,652			12,318			3,729			4,450
General and administrative		27,166			22,454			10,373			14,706
Impairment of long-lived assets		46,389			—
Depreciation and amortization		32,670			30,749			4,117			3,579

Total operating expenses		235,535			188,101			46,089			49,610

Operating income (loss)		(51,060	)		11,448
Operating income								27,780			21,317

Other (income) expense:
Interest income		(606	)		(1,149	)		(57	)		(578	)
Interest expense		31,174			32,554			29,294			31,143
Other (income) expense		2,993			(3,365	)

Loss on settlement of convertible notes								4,397			-
Other income								(5	)		(1	)
Total other expense		33,561			28,040			33,629			30,564

Loss before income taxes		(84,621	)		(16,592	)
Loss from continuing operations before income taxes								(5,849	)		(9,247	)
Income tax provision		157			207			35			141

Net loss from continuing operations								(5,884	)		(9,388	)
Net loss from discontinued operations, net of tax								(1,801	)		(75,390	)
Net loss	$	(84,778	)	$	(16,799	)	$	(7,685	)	$	(84,778	)

Net loss attributable to common stock per share—basic and diluted	$	(1.04	)	$	(0.21	)
Net loss attributable to common stock per share – basic and diluted:
Net loss from continuing operations							$	(0.07	)	$	(0.12	)
Net loss from discontinued operations								(0.02	)		(0.93	)
Net loss							$	(0.09	)	$	(1.05	)

Weighted average number of shares—basic and diluted		81,205			80,446

Weighted average number of shares—basic and diluted								84,649			81,205

See the Notes to Unaudited Condensed Consolidated Financial Statements

Gogo Inc. and Subsidiaries

Unaudited Condensed Consolidated Statements of Comprehensive Loss

(in thousands)


	For the Three Months							For the Three Months
	Ended March 31,							Ended March 31,
	2020			2019				2021			2020
Net loss	$	(84,778	)	$	(16,799	)	$	(7,685	)	$	(84,778	)
Currency translation adjustments, net of tax		(2,871	)		410			101			(2,871	)

Comprehensive loss	$	(87,649	)	$	(16,389	)	$	(7,584	)	$	(87,649	)

See the Notes to Unaudited Condensed Consolidated Financial Statements

Gogo Inc. and Subsidiaries

Unaudited Condensed Consolidated Statements of Cash Flows

(in thousands)

							For the Three Months
	For the Three Months						Ended March 31,
	Ended March 31,						2021			2020
	2020			2019
Operating activities:
Operating activities from continuing operations:
Net loss	$	(84,778	)	$	(16,799	)	$	(5,884	)	$	(9,388	)
Adjustments to reconcile net loss to cash provided by (used in) operating activities:
Adjustments to reconcile net loss to cash provided by operating activities:
Depreciation and amortization		32,670			30,749			4,117			3,579
Loss on asset disposals, abandonments and write-downs		1,098			1,241
(Gain) Loss on asset disposals, abandonments and write-downs								(100	)		74
Provision for expected credit losses		6,764			84			15		687
Impairment of long-lived assets		46,389			—
Impairment of cost-basis investment		3,000			—
Deferred income taxes		45			44			95			45
Stock-based compensation expense		3,995			4,327			1,849			2,322
Amortization of deferred financing costs		1,419			1,249			1,703			1,419
Accretion and amortization of debt discount and premium		3,326			4,774			84			3,326
Loss on settlement of convertible notes								4,397
Changes in operating assets and liabilities:
Accounts receivable		5,085			10,551			3,586			4,220
Inventories		(6,035	)		(1,118	)		(446	)		(2,196	)
Prepaid expenses and other current assets		1,038			3,015			(375	)		(3,872	)
Contract assets		(10,622	)		(6,175	)		(1,886	)		(2,558	)
Accounts payable		16,399			2,843			292			6,108
Accrued liabilities		(18,291	)		(19,381	)		(10,424	)		(6,882	)
Deferred airborne lease incentives		2,345			(3,923	)
Deferred revenue		1,378			2,257			646			308
Accrued interest		26,413			(19,514	)		27,559			26,413
Warranty reserves		(526	)		(588	)
Othernon-current assets and liabilities		6,915			208			(654	)		285
Net cash provided by operating activities from continuing operations								24,574			23,890

Net cash provided by (used in) operating activities		38,027			(6,156	)
Investing activities from continuing operations:
Purchases of property and equipment								(360	)		(150	)
Acquisition of intangible assets—capitalized software								(342	)		(726	)
Net cash provided by (used in) investing activities from continuing operations								(702	)		(876	)

Investing activities:
Purchases of property and equipment		(13,202	)		(23,154	)
Acquisition of intangible assets—capitalized software		(2,108	)		(4,557	)
Redemptions of short-term investments		—			39,323
Other, net		89			95

Net cash provided by (used in) investing activities		(15,221	)		11,707

Financing activities:
Financing activities from continuing operations:
Proceeds from credit facility draw		22,000			—			-			22,000
Repurchase of convertible notes		(2,498	)		—			-			(2,498	)
Payment of debt issuance costs		—			(557	)		(550	)		-
Payments on financing leases		(247	)		(125	)		(124	)		-
Stock-based compensation activity		(397	)		(58	)		(2,646	)		(397	)

Net cash provided by (used in) financing activities		18,858			(740	)
Net cash provided by (used in) financing activities from continuing operations								(3,320	)		19,105
Cash flows from discontinued operations:
Cash provided by (used in) operating activities								(748	)		14,137
Cash used in investing activities								0			(14,345	)
Cash used in financing activities								0			(247	)
Net cash used in discontinued operations								(748	)		(455	)

Effect of exchange rate changes on cash		51			(276	)		3			51

Increase in cash, cash equivalents and restricted cash		41,715			4,535			19,807			41,715
Cash, cash equivalents and restricted cash at beginning of period		177,675			191,116			435,870			177,675

Cash, cash equivalents and restricted cash at end of period	$	219,390		$	195,651		$	455,677		$	219,390

Cash, cash equivalents and restricted cash at end of period	$	219,390		$	195,651		$	455,677		$	219,390
Less: current restricted cash		560			1,535			525			560
Less:non-current restricted cash		4,601			5,426			-			4,601

Cash and cash equivalents at end of period	$	214,229		$	188,690		$	455,152		$	214,229

Supplemental Cash Flow Information:
Cash paid for interest	$	66		$	46,163		$	31		$	66
Cash paid for taxes		1			41			1			1
Noncash Investing and Financing Activities:
Purchases of property and equipment in current liabilities	$	6,411		$	19,951
Purchases of property and equipment paid by commercial airlines		5,580			5,016

See the Notes to Unaudited Condensed Consolidated Financial Statements

Gogo Inc. and Subsidiaries

Unaudited Condensed Consolidated Statements of Stockholders’ Equity (Deficit)

(in thousands, except share data)

																								For the Three Months Ended March 31, 2021
	For the Three Months Ended March 31, 2020																														Accumulated
										Accumulated																		Additional			Other
							Additional			Other														Common Stock				Paid-In			Comprehensive			Accumulated		Treasury Stock
	Common Stock						Paid-In			Comprehensive			Accumulated			Treasury Stock								Shares		Par Value		Capital			Loss			Deficit		Shares		Amount			Total
	Shares			Par Value			Capital			Loss			Deficit			Shares		Amount			Total
Balance at January 1, 2020		88,240,877		$	9		$	979,499		$	(2,256	)	$	(1,376,142	)		—	$	—		$	(398,890	)
Balance at January 1, 2021																								85,990,499	$	9	$	1,088,590		$	(1,013	)	$	(1,629,843	)	5,077,400	$	(98,857	)	$	(641,114	)
Net loss		—			—			—			—			(84,778	)		—		—			(84,778	)	-		-		-			-			(7,685	)	-		-			(7,685	)
Currency translation adjustments, net of tax		—			—			—			(2,871	)		—			—		—			(2,871	)	-		-		-			101			-		-		-			101
Stock-based compensation expense		—			—			3,995			—			—			—		—			3,995		-		-		7,927			-			-		-		-			7,927
Issuance of common stock upon exercise of stock options																								177,646		-		458			-			-		-		-			458
Issuance of common stock upon vesting of restricted stock units and restricted stock awards		522,490			—			—			—			—			—		—			—		602,826		-		-			-			-		-		-			-
Tax withholding related to vesting of restricted stock units		—			—			(682	)		—			—			—		—			(682	)	-		-		(3,220	)		-			-		-		-			(3,220	)
Issuance of common stock in connection with employee stock purchase plan		87,681			—			285			—			—			—		—			285		11,637		-		116			-			-		-		-			116
Settlement of prepaid forward shares		(5,077,400	)		(1	)		98,858									5,077,400		(98,857	)		—
Impact of the adoption of new accounting standards		—			—			—			—			(3,665	)		—		—			(3,665	)

Balance at March 31, 2020		83,773,648		$	8		$	1,081,955		$	(5,127	)	$	(1,464,585	)		5,077,400	$	(98,857	)	$	(486,606	)

Settlement of convertible notes																								5,288,477		-		33,857			-			-		-		-			33,857
Impact of the adoption of ASU 2020-06																								-		-		(47,423	)		-			25,480		-		-			(21,943	)
Balance at March 31, 2021																								92,071,085	$	9	$	1,080,305		$	(912	)	$	(1,612,048	)	5,077,400	$	(98,857	)	$	(631,503	)

For the Three Months Ended March 31, 2019
Accumulated
Additional Other
Common Stock Paid-In Comprehensive Accumulated Treasury Stock
Shares Par Value Capital Loss Deficit Shares Amount Total
Balance at January 1, 2019
    87,560,694 $ 9 $     963,458 $     (3,554 ) $     (1,228,674 ) —   $     —   $     (268,761 )
Net loss
—       —   —   —   (16,799 ) —   —   (16,799 )
Currency translation adjustments, net of tax
—   —   —   410 —   —   —   410
Stock-based compensation expense
—   —   4,327 —   —   —   —   4,327
Issuance of common stock upon vesting of restricted stock units and restricted stock awards
161,667 —   —   —   —   —   —   —
Tax withholding related to vesting of restricted stock units
—   —   (351 ) —   —   —   —   (351 )
Issuance of common stock in connection with employee stock purchase plan
75,253 —   293 —   —   —   —   293
Impact of the adoption of new accounting standards
—   —   —   —   (3,093 ) —   —   (3,093 )

Balance at March 31, 2019
87,797,614 $ 9 $ 967,727 $ (3,144 ) $ (1,248,566 ) —   $ —   $ (283,974 )

For the Three Months Ended March 31, 2020

Accumulated

Additional

Other

Common Stock

Paid-In

Comprehensive

Accumulated

Treasury Stock

Shares

Par Value

Capital

Loss

Deficit

Shares

Amount

Total

Balance at January 1, 2020

88,240,877

$
9

$
979,499

$
(2,256
)

$
(1,376,142
)

-

$
-

$
(398,890
)
Net loss

-

-

-

-

(84,778
)

-

-

(84,778
)
Currency translation adjustments, net of tax

-

-

-

(2,871
)

-

-

-

(2,871
)
Stock-based compensation expense

-

-

3,995

-

-

-

-

3,995

Issuance of common stock upon vesting of restricted stock units and restricted stock awards

522,490

-

-

-

-

-

-

-

Tax withholding related to vesting of restricted stock units

-

-

(682
)

-

-

-

-

(682
)
Issuance of common stock in connection with employee stock purchase plan

87,681

-

285

-

-

-

-

285

Settlement of prepaid forward shares

(5,077,400
)

(1
)

98,858

-

-

5,077,400

(98,857
)

-

Impact of the adoption of ASU 2016-13

-

-

-

-

(3,665
)

-

-

(3,665
)
Balance at March 31, 2020

83,773,648

$
8

$
1,081,955

$
(5,127
)

$
(1,464,585
)

5,077,400

$
(98,857
)

$
(486,606
)

See the Notes to Unaudited Condensed Consolidated Financial Statements

Gogo Inc. and Subsidiaries

Notes to Unaudited Condensed Consolidated Financial Statements

1.	Basis of Presentation

~~1. Basis of Presentation~~

The Business-Gogo (“~~we,”~~we”, “us,” “our”) is the ~~global leader in providing~~world’s largest provider of broadband connectivity ~~solutions and wirelessin-flight~~ ~~entertainment to the aviation industry. We operate through the following three reportable segments: Commercial Aviation North America, or“CA-NA,”~~ ~~Commercial Aviation Rest of World, or“CA-ROW,”~~ ~~and Business Aviation, or “BA.” Services provided by ourCA-NA~~ ~~andCA-ROW~~ ~~businesses include Passenger Connectivity, which allows passengers to connect to the Internet from their personalWi-Fi-enabled~~ ~~devices; Passenger Entertainment, which offers passengers the opportunity to enjoy a broad selection ofin-flight~~ ~~entertainment options on their personalWi-Fi~~ ~~enabled devices; and Connected Aircraft Services (“CAS”), which offers airlines connectivity~~services for ~~various operations and currently include, among other services, real-time credit card transaction processing, electronic flight bags and real-time weather information. Services are provided byCA-NA~~ ~~on commercial aircraft flying routes that generally begin and end within North America, which for this purpose includes the United States, Canada and Mexico.CA-ROW~~ ~~provides service on commercial aircraft operated by foreign-based commercial airlines and flights outside of North America for North American-based commercial airlines. The routes included in ourCA-ROW~~ ~~segment are those that begin and/or end outside of North America (as defined above) on which our international service is provided. BA providesin-flight~~ ~~Internet connectivity and other voice and data communications products and services and sells equipment forin-flight~~ ~~telecommunications to~~ the business aviation market. BAOur mission is to provide ground-like connectivity to every passenger on every flight around the globe, enabling superior passenger experiences and efficient flight operations. To accomplish our mission, we design, build and operate dedicated air-to-ground (“ATG”) networks, engineer, install and maintain in-flight systems of proprietary hardware and software, and deliver customizable connectivity and wireless entertainment services and global support capabilities to our aviation partners. Our services include ~~Gogo Biz, ourin-flight~~ ~~broadband service, Passenger Entertainment, ourin-flight~~ ~~entertainment service, and~~ satellite-based voice and data services through our strategic alliances with satellite ~~companies.~~providers.

At the closing of the Transaction, the parties entered into certain ancillary agreements, including a transition services agreement, an intellectual property license agreement and commercial agreements. These agreements include an ATG network sharing agreement, pursuant to which we provide certain inflight connectivity services on our current ATG network and, when available, our Gogo 5G network, subject to certain revenue sharing obligations. Under the ATG network sharing agreement, Intelsat will have exclusive access to the ATG network for commercial aviation in North America, subject to minimum revenue guarantees starting at $5 million in the first year of the agreement.

As a result of the Transaction, the CA business is reported in discontinued operations and all periods presented in this Form 10-Q have been conformed to present the CA business as a discontinued operation. We report the financial results of discontinued operations separately from continuing operations to distinguish the financial impact of disposal transactions from ongoing operations. Discontinued operations reporting occurs only when the disposal of a component or a group of components (i) meets the held-for-sale classification criteria or is disposed of by sale or other than by sale, and (ii) represents a strategic shift that will have a major effect on our operations and financial results. The results of operations and cash flows of a discontinued operation are restated for all comparative periods presented.

Unless otherwise noted, discussion in these Notes to Consolidated Financial Statements refers to our continuing operations. Refer to Note 2, “Discontinued Operations” for further information.

Basis of Presentation - The accompanying unaudited condensed consolidated financial statements and notes have been prepared in accordance with accounting principles generally accepted in the United States of America (“GAAP”) and in conformity with Article 10 of RegulationS-X promulgated under the Securities Act of 1933, as amended (the “Securities Act”). Accordingly, they do not include all of the information and notes required by GAAP for complete financial statements and should be read in conjunction with our annual audited consolidated financial statements and the notes thereto included in our Annual Report on Form10-K for the year ended December 31, ~~2019~~2020 as filed with the Securities and Exchange Commission (“SEC”) on March ~~13, 2020~~11, 2021 (the ~~“2019~~“2020 10-K”). These unaudited condensed consolidated 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.

The results of operations and cash flows for the three month period ended March 31, ~~2020, including the impact ofCOVID-19,~~2021 are not necessarily indicative of the results that may be expected for the fiscal year ending December 31, ~~2020.~~2021.

We have ~~one~~1 class of common stock outstanding as of March 31, ~~2020~~2021 and December 31, ~~2019.~~2020.

During March 2020, approximately 5.1 million shares of common stock were delivered to us in connection with the Forward Transactions (as defined and described in Note 10, “Long-Term Debt and Other Liabilities”). We accounted for these shares as Treasury Stock and reclassified $98.9 million from Additional~~Paid-In~~ ~~Capital to Treasury Stock, at cost, in our unaudited condensed consolidated balance sheet. See Note 10, “Long-Term Debt and Other Liabilities,” for additional information.~~

~~Reclassifications –~~~~To conform with the current year presentation, $84 thousand of bad debt expense has been reclassified to a separate line from accounts receivable for the three month period ended March 31, 2019.~~

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

~~2. Impact~~

2.	Discontinued Operations

As discussed in Note 1, “Basis of~~COVID-19~~ ~~Pandemic~~

In Presentation,” on December ~~2019, a novel strain of coronavirus(“COVID-19”)~~ ~~was reported in Wuhan, China, and~~1, 2020, we completed the ~~World Health Organization (the “WHO”) subsequently declaredCOVID-19~~ ~~a “Public Health Emergency of International Concern.” TheCOVID-19~~ ~~pandemic has caused a significant decline in commercial and business air travel, which has materially and adversely affected our business. Approximately 60%~~sale of our ~~revenue comes from our two~~CA business to Intelsat. As a result of the Transaction, the CA business is reported for all periods as discontinued operations.

Gogo Inc. and Subsidiaries

Notes to Unaudited Condensed Consolidated Financial Statements – (Continued)

~~commercial airline segments,CA-NA~~The following table summarizes the results of discontinued operations which are presented as Net loss from discontinued operations in our unaudited condensed consolidated statements of operations (in thousands):

	For the Three Months
	Ended March 31,
	2021			2020
Revenue:
Service revenue	$	-		$	93,056
Equipment revenue		-			20,492
Total revenue		-			113,548

Operating expenses:
Cost of service revenue (exclusive of items shown below)		-			59,748
Cost of equipment revenue (exclusive of items shown below)		-			17,529
Engineering, design and development		-			15,506
Sales and marketing		-			5,202
General and administrative		1,801			12,460
Impairment of long-lived assets		-			46,389
Depreciation and amortization		-			29,091
Total operating expenses		1,801			185,925
Operating income (loss)		(1,801	)		(72,377	)

Total other (income) expense		-			2,997

Loss before income taxes		(1,801	)		(75,374	)
Income tax provision		-			16
Net loss from discontinued operations, net of tax	$	(1,801	)	$	(75,390	)

Gain on sale – Upon the closing of the Transaction on December 1, 2020, we received initial gross proceeds of $386.3 million, which reflects the $400.0 million purchase price, adjusted for cash, debt, transaction expenses and~~CA-ROW.~~ ~~Passenger traffic declined significantly in April 2020 compared~~ working capital. The final purchase price remains subject to ~~March 2020, resulting in an expected significant reduction in service revenue in April 2020 as compared~~change due to ~~the monthly service revenue~~customary post-closing purchase price adjustment procedures set forth in the ~~first quarter~~purchase and sale agreement between Gogo and Intelsat that are not yet complete. In February 2021, Intelsat delivered a draft closing statement that would reduce the working capital portion of ~~2020. The approximate remaining 40%~~the purchase price computation by $9.4 million, which would result in Gogo returning to Intelsat $9.4 million of ~~our revenue comes from our~~the initial gross proceeds. Gogo is reviewing Intelsat’s draft closing statement in accordance with the terms of the purchase and sale agreement. As this post-closing purchase price adjustment is not yet finalized and therefore represents a contingent gain, $9.4 million has been recorded as a deferred gain on sale included within Accrued liabilities. As a result, during December 2020, we recognized within Gain on sale of CA business ~~aviation segment, BA, which has also seen~~ a ~~sharp decrease in flight activity. Additionally, since many business aircraft are flying~~pretax gain on sale of $38.0 million, computed as the $386.3 million of initial gross proceeds less ~~frequently, there was an increase in requests forone-month~~ ~~account suspensions and a significant decrease in new plan activations in April 2020 compared to March 2020.~~

~~In response to~~(i) the~~COVID-19~~ pandemic and resulting developments, we developed, and continue to refine on an ongoing basis, a range of projections based on estimated market conditions, and have implemented measures to protect our employees, ensure potential $9.4 million post-closing purchase price adjustment not yet finalized, (ii) the ~~business has adequate liquidity and maintain the~~carrying value of ~~our business segments, while at~~ the ~~same time continuing to make~~assets and liabilities transferred in the ~~interest payments on our outstanding debt. These measures include, but are not limited to, the following:~~Transaction and (iii) Transaction-related costs.

•

~~Employee and customer safety~~ – Our employees are our most important resource and we are focused on the safety of our people and our customers. Every country in which we operate has issued work from home orders and over 1,000 of our employees are working remotely, with limited personnel in place for certain location-specific activities.

•

~~Personnel actions~~ ~~– We implemented several cost-cutting measures related to personnel, including implementing a hiring freeze, suspending~~Stock-based compensation – In August 2020, ~~merit salary increases and deferring the Chief Executive Officer’s 2019 bonus payout.~~

Additionally, we furloughed approximately 54% of our workforce and reduced compensation for most other employees, starting May 4, 2020. The furloughs impact approximately 600 employees across the entire company. The time and duration of the furloughs will vary based on workload in individual departments. Salary reductions begin at 30% for the Chief Executive Officer, then 20% for the executive leadership team and reducing downward by staff level from there. In addition, the compensation ~~for the members~~committee of our Board of Directors ~~has been reduced~~(the “Compensation Committee”) approved modifications to the vesting conditions and exercise periods of outstanding equity compensation awards held by ~~30%. Certain types~~certain of our then-current employees ~~such as hourly workers, have not had their compensation reduced.~~

•

~~Expense management~~ – We have identified responsive action plans / levers that we are implementing, or considering implementing as needed, to dramatically reduce costs in order to ensure our long-term viability, including the following:

~~Renegotiating terms with suppliers, including satellite capacity providers;~~

~~Deferring purchases~~who became employees of ~~capital equipment;~~

~~Delaying aircraft equipment installations;~~

~~Reducing marketing, travel and othernon-essential~~ ~~spend; and~~

~~Renegotiating terms with airline partners.~~

•

~~Financing~~~~– In March 2020, we drew $22 million under the ABL Credit Facility.~~

•

~~Government assistance~~ – We applied for an $81 million grant and a $150 million loan under the recently enacted Coronavirus Aid, Relief, and Economic Security Act (the “CARES Act”). If we receive such assistance, we will be subject to certain restrictions and will be required to modify the personnel actions discussed above to comply with the terms of the government assistance. Additionally, receipt of funds may require the consent of a majority of the holders of the 2024 Senior Secured Notes and the consent of the lenders under the ABL Credit Agreement to amend the terms governing such indebtedness.

~~We expectCOVID-19~~ ~~to continue to have a significant negative impact on our revenue and we are unable to predict how long that impact will continue. The extent~~Intelsat in the Transaction. These modifications became effective upon the consummation of the ~~impact~~Transaction. Pursuant to such modifications, the options and restricted stock units (“RSUs”) held by Intelsat employees generally vest on the earlier of~~COVID-19~~ (i) the original vesting date and (ii) November 30, 2021; provided that the employee does not voluntarily resign from and is not terminated for cause by Intelsat prior to such date. Certain of these awards vest based on conditions that are not classified as a service, market or performance condition and as a result such awards are classified as a liability. Other than mark-to-market accounting adjustments, all costs related to stock-based compensation for our ~~CA and BA businesses and our financial and operational performance will depend on future developments, including~~prior employees who became employees of Intelsat in the ~~duration, spread and severity~~Transaction were recognized as of ~~the outbreak, the duration and geographic scope of related travel advisories and restrictions and the extent of the impact ofCOVID-19~~ ~~on overall demand for commercial and business aviation travel, all of which are~~

December 31, 2020.

Gogo Inc. and Subsidiaries

Notes to Unaudited Condensed Consolidated Financial Statements – (Continued)

~~highly uncertain and cannot be predicted. We are unable to predict how long~~The following is a summary of our stock-based compensation expense by operating expense line contained within the pandemic and its negative impact will persist, what additional measures may be introduced by governments or private parties or what effect any such additional measures may have on air travel, our business partners and our business. Not only is the durationresults of ~~the pandemic and future combative measures unknown, the overall situation is extremely fluid, and it is impossible to predict the timing of future material changes~~ discontinued operations (in ~~the situation and whether the Company’s actions in response will be sufficient or successful.~~thousands):

		For the Three Months
		Ended March 31,
		2021		2020
Cost of service revenue	$	-	$	444
Engineering, design and development		-		597
Sales and marketing		-		423
General and administrative		1,053		209
Total stock-based compensation expense	$	1,053	$	1,673

For additional information on our ~~long-lived assets~~stock-based compensation plans, see Note 16, “Employee Retirement and ~~Note 8, “Intangible Assets,~~Postretirement Benefits.” ~~for additional information on our indefinite-lived assets.~~

~~Credit Losses~~~~—We regularly evaluate our accounts receivable and contract assets for expected credit losses and recorded credit losses for~~Other Costs Classified to Discontinued Operations – During the three ~~month period~~months ended March 31, ~~2020. We are continuously monitoring our assumptions used~~2021, we incurred $0.7 million of additional costs (exclusive of the stock-based compensation expense noted above) primarily due to ~~determine our expected credit losses, including~~employer-paid taxes arising from the ~~impact~~exercise of ~~theCOVID-19~~ ~~pandemic, which could cause us to record additional material credit losses in future periods. See Note 9, “Composition of Certain Reserves and Allowances,” for additional information.~~stock options by former employees now employed by Intelsat.

~~3. Recent Accounting Pronouncements~~

3.	Recent Accounting Pronouncements

Accounting standards adopted:

On January 1, ~~2020,~~2021, we adopted ASU~~2016-13,~~~~Financial Instruments-Credit Losses (ASC 326)~~2020-06, Debt with Conversion and Other Options (Subtopic 470-20) and Derivatives and Hedging – Contracts in Entity’s Own Equity (Subtopic 815-40): ~~Measurement~~Accounting for Convertible Instruments and Contracts in an Entity’s Own Equity (“ASU 2020-06”).ASU 2020-06 simplifies the accounting for certain convertible instruments by removing the separation models for convertible debt with a cash conversion feature or convertible instruments with a beneficial conversion feature. As a result, convertible debt instruments will be reported as a single liability instrument with no separate accounting for embedded conversion features. Additionally, ASU 2020-06 amends the diluted earnings per share calculation for convertible instruments by requiring the use of ~~Credit Losses~~the if-converted method. The treasury stock method is no longer available. This standard is effective beginning on ~~Financial Instruments~~ ~~(“ASU2016-13”),~~ ~~which~~January 1, 2022, with early adoption permitted. Adoption of the standard requires using either a modified retrospective or a full retrospective approach. We elected to early adopt ASU 2020-06 using the ~~measurement and recognition of expected credit losses for financial assets held at amortized cost.~~modified retrospective approach.

The cumulative ~~effect adjustment from~~impact of using the modified retrospective approach for the adoption of ~~ASC 326 impacted~~ASU 2020-06 on our unaudited condensed consolidated balance sheet as of January 1, ~~2020 by the recognition of allowance for credit losses as~~2021 is summarized below:

         Balances
   Balance at       with
   December 31,    Impact of    Adoption of
   2019    ASC 326    ASC 326
Assets

Accounts receivable
   101,360    (1,386 )    99,974
Prepaid and other current assets
   36,305    (356 )    35,949
Othernon-current assets
   89,672    (1,923 )    87,749
Equity

Accumulated deficit
   (1,376,142 )    (3,665 )    (1,379,807 )


	Balance at December 31,			Impact of ASU 2020-			Balances with Adoption of
	2020			06			ASU 2020-06
Liabilities
Long-term debt	$	827,968		$	21,943		$	849,911
Equity
Additional paid-in capital	$	1,088,590		$	(47,423	)	$	1,041,167
Accumulated deficit	$	(1,629,843	)	$	25,480		$	(1,604,363	)

~~See Note 9, “Composition of Certain Reserves and Allowances,” for additional information.~~

On January 1, ~~2020,~~2021, we adopted ~~ASU2018-15,~~ ~~Intangibles~~Accounting Standards Update No. 2019-12 – ~~Goodwill and Other –Internal-Use~~ ~~Software (Subtopic350-40):~~ ~~Customer’s~~Income Taxes (Topic 740) Simplifying the Accounting for ~~Implementation Costs Incurred~~Income Taxes (“ASU 2019-12”). The amendments in ~~a Cloud Computing Arrangement That Is a Service Contract~~(“ASU~~2018-15”),~~ ~~which requires an entity in a hosting arrangement that is a service contract to follow the guidance in Subtopic350-40~~ ~~to determine which implementation costs to capitalize as an asset related~~ 2019-12 eliminate certain exceptions to the ~~service contract~~incremental approach for intraperiod tax allocation and ~~which costs to expense.~~interim period income tax accounting for year-to-date losses that exceed projected losses. ASU 2019-12 also clarifies and simplifies other aspects of the accounting for income taxes. Adoption of this standard did not have a material impact on our unaudited condensed consolidated financial statements.

~~On January 1, 2020, we adopted ASU2018-13,~~ ~~Fair Value Measurement (Topic 820): Disclosure Framework – Changes to the Disclosure Requirements for Fair Value Measurement~~~~(“ASU2018-13”),~~ which modifies the disclosure requirements related to recurring or nonrecurring fair value measurements. Currently all of our fair value measurements are classified as Level 2 within the fair value hierarchy, and as such, the adoption of this standard did not have an impact on our unaudited condensed consolidated financial statements. See Note 14, “Fair Value of Financial Assets and Liabilities,” for additional information.

Gogo Inc. and Subsidiaries

Notes to Unaudited Condensed Consolidated Financial Statements – (Continued)

~~New pronouncements:~~

~~In March 2020, the Financial Accounting Standards Board (“FASB”) issued Accounting Standard UpdateNo. 2020-04,~~~~Reference Rate Reform (Topic 848): Facilitation of the Effects of Reference Rate Reform on Financial Reporting~~ ~~(“ASU2020-04”),~~ which provides optional expedients and exceptions for applying U.S. GAAP to contracts, hedging relationships and other transactions affected by the discontinuation of the London Interbank Offered Rate (LIBOR) and other interbank offered rates. This guidance is effective beginning on March 12, 2020 through December 31, 2022. We do not currently believe that the adoption of this standard will have a material impact on our consolidated financial statements.

~~4. Revenue Recognition~~

~~Arrangements with commercial airlines~~

~~ForCA-NA~~ ~~andCA-ROW,~~ pursuant to contractual agreements with our airline partners, we place our equipment on commercial aircraft operated by the airlines in order to deliver our service to passengers on the aircraft. We currently have two types of commercial airline arrangements: turnkey and airline-directed. Under the airline-directed model, we have transferred control of the equipment to the airline and therefore the airline is our customer in these transactions. Under the turnkey model, we have not transferred control of our equipment to our airline partner and, as a result, the airline passenger is deemed to be our customer. Transactions with our airline partners under the turnkey model are accounted for as an operating lease of space on an aircraft. See Note 12, “Leases,” for additional information on the turnkey model.

4.	Revenue Recognition

Remaining performance obligations

As of March 31, ~~2020,~~2021, the aggregate amount of the transaction price in our contracts allocated to the remaining unsatisfied performance obligations was approximately ~~$585~~$86 million. Approximately $84 million most of which relate to our commercial aviation contracts. Approximately $109 million represents future equipment revenue that is expected to be recognized within the next one to three years. The remaining $476 million primarily represents connectivity and entertainment service revenues which are recognized as services are provided, which is expected to occur through the remaining term of the ~~contract (approximately5-10~~ ~~years).~~contract. The remaining $2 million represents future equipment revenue that is expected to be recognized within the next year. We have excluded from this ~~amount: all variable consideration derived from our connectivity or entertainment services that is allocated entirely to our performance of obligations related to such services;~~amount consideration from contracts that have an original duration of one year or less; revenue from passenger service on airlines operating under the turnkey model; and revenue from contracts that have been executed but under which have not yet met the accounting definition of a contract since the airline has not yet determined which products in our portfolio it wishes to select, and, as a result we are unable to determine which products and services will be transferred to the customer.less.

Disaggregation of revenue

The following table presents our revenue disaggregated by category(in thousands):

									For the Three Months
	For the Three Months Ended								Ended March 31,
	March 31, 2020								2021		2020
	CA-NA		CA-ROW		BA		Total
Service revenue
Service revenue:
Connectivity	$	68,869	$	18,029	$	56,975	$	143,873	$	58,403	$	56,975
Entertainment, CAS and other		4,959		1,199		751		6,909

Entertainment and other										952		751
Total service revenue	$	73,828	$	19,228	$	57,726	$	150,782	$	59,355	$	57,726

Equipment revenue
Equipment revenue:
ATG	$	4,396	$	—	$	9,624	$	14,020	$	10,597	$	9,624
Satellite		1,832		14,184		3,374		19,390		3,703		3,374
Other		80		—		203		283	214			203

Total equipment revenue	$	6,308	$	14,184	$	13,201	$	33,693	$	14,514	$	13,201

Customer type
Airline passenger and aircraft owner/operator	$	43,702	$	6,517	$	57,726	$	107,945
Airline, OEM and aftermarket dealer		26,258		25,399		13,201		64,858
Third party		10,176		1,496		—		11,672

Customer type:
Aircraft owner/operator/service provider									$	59,355	$	57,726
OEM and aftermarket dealer										14,514		13,201
Total revenue	$	80,136	$	33,412	$	70,927	$	184,475	$	73,869	$	70,927

~~Gogo Inc. and Subsidiaries~~

~~Notes to Unaudited Condensed Consolidated Financial Statements – (Continued)~~

   For the Three Months Ended
   March 31, 2019
   CA-NA    CA-ROW    BA    Total
Service revenue

Connectivity
   $ 79,818    $ 18,854    $ 52,685    $ 151,357
Entertainment, CAS and other
   12,209    918    528    13,655








Total service revenue
   $ 92,027    $ 19,772    $ 53,213    $ 165,012








Equipment revenue

ATG
   $ 2,872    $ —      $ 11,335    $ 14,207
Satellite
   630    13,159    5,235    19,024
Other
   540    —      766    1,306








Total equipment revenue
   $ 4,042    $ 13,159    $ 17,336    $ 34,537








Customer type

Airline passenger and aircraft owner/operator
   $ 54,349    $ 5,851    $ 53,213    $ 113,413
Airline, OEM and aftermarket dealer
   30,913    25,491    17,336    73,740
Third party
   10,807    1,589    —      12,396








Total revenue
   $ 96,069    $ 32,931    $ 70,549    $ 199,549

Contract balances

Our current andnon-current deferred revenue balances totaled ~~$57.9~~$3.8 million and ~~$56.7~~$3.1 million as of March 31, ~~2020~~2021 and December 31, ~~2019,~~2020, respectively. Deferred revenue includes, among other things, fees paid for equipment ~~multi-pack~~ and subscription connectivity ~~products, sponsorship activities and airline-directed equipment and connectivity and entertainment service.~~products.

Our current andnon-current contract asset balances totaled ~~$70.8~~$14.1 million and ~~$64.2~~$12.2 million as of March 31, ~~2020~~2021 and December 31, ~~2019,~~2020, respectively. The contract asset balance as of March 31, 2020 was net of allowances of $7.1 million. See Note 9, “Composition of Certain Reserves and Allowances,” for additional information regarding allowances. Contract assets represent the aggregate amount of revenue recognized in excess of billings primarily for ~~our airline-directed contracts.~~certain sales programs.

~~Capitalized STC balances~~Major Customers

NaN customer accounted for ~~our airline-directed contracts were $16.5 million and $17.5 million as~~more than 10% of March 31, 2020 and December 31, 2019, respectively. The capitalized STC costs are amortized over the life of the associated airline-directed contracts as part of our engineering, design and development costs in our unaudited condensed consolidated statements of operations. Total amortization expense was $0.8 million and $0.3 million, respectively, forrevenue during the three month periods ended March 31, 2021 and 2020 and ~~2019.~~0 customer accounted for more than 10% of accounts receivable as of March 31, 2021 or December 31, 2020.

5.	5. Net Loss Per Share

Basic and diluted net loss per share have been calculated using the weighted average number of common shares outstanding for the period.

The shares of common stock effectively repurchased in connection with the Forward Transactions (as defined and described in Note 10, “Long-Term Debt and Other Liabilities”) are considered participating securities requiring thetwo-class method to calculate basic and diluted earnings per share. Net earnings in future periods will be allocated between common shares and participating securities. In periods of a net loss, the shares associated with the Forward Transactions will not receive an allocation of losses, as the

Gogo Inc. and Subsidiaries

Notes to Unaudited Condensed Consolidated Financial Statements – (Continued)

counterparties to the Forward Transactions are not required to fund losses. Additionally, the calculation of weighted average shares outstanding as of March 31, ~~2020~~2021 and ~~2019~~2020 excludes approximately 2.1 million shares ~~and 7.2 million shares, respectively,~~ associated with the Forward Transactions.

As a result of the net loss for the ~~three month~~three-month periods ended March 31, ~~2020~~2021 and ~~2019,~~2020, all of the outstanding shares of common stock underlying stock options, deferred stock units and restricted stock units were excluded from the computation of diluted shares outstanding because they were anti-dilutive.

~~Gogo Inc. and Subsidiaries~~

~~Notes to Unaudited Condensed Consolidated Financial Statements – (Continued)~~

The following table sets forth the computation of basic and diluted earnings per share for the three month periods ended March 31, ~~2020~~2021 and ~~2019;~~2020; however, ~~because of~~for the ~~undistributed losses,~~reasons described above, the shares of common stock associated with the Forward Transactions are excluded from the computation of basic earnings per ~~share in 2020 and 2019 as undistributed losses are not allocated to these shares~~ (in thousands, except per share amounts):

							For the Three Months
	For the Three Months						Ended March 31,
	Ended March 31,						2021			2020
	2020			2019
Net loss from continuing operations							$	(5,884	)	$	(9,388	)
Net loss from discontinued operations								(1,801	)		(75,390	)
Net loss	$	(84,778	)	$	(16,799	)		(7,685	)		(84,778	)
Less: Participation rights of the Forward Transactions		—			—			-			-

Undistributed losses	$	(84,778	)	$	(16,799	)	$	(7,685	)	$	(84,778	)

Weighted-average common shares outstanding-basic and diluted		81,205			80,446			84,649			81,205

Net loss attributable to common stock per share from continuing operations-basic and diluted							$	(0.07	)	$	(0.12	)

Net loss attributable to common stock per share from discontinued operations-basic and diluted								(0.02	)		(0.93	)

Net loss attributable to common stock per share-basic and diluted	$	(1.04	)	$	(0.21	)	$	(0.09	)	$	(1.05	)

6.	Inventories

Inventories consist primarily of telecommunications systems and parts and are recorded at the lower of average cost or market. We evaluate the need for write-downs associated with obsolete, slow-moving and nonsalable inventory by reviewing net realizable inventory values on a periodic basis.

Inventories as of March 31, ~~2020~~2021 and December 31, ~~2019~~2020 were as follows (in thousands):


	March 31,		December 31,			March 31,		December 31,
	2020		2019			2021		2020
Work-in-process component parts	$	23,585	$	23,141	$	14,654	$	15,405
Finished goods		99,594		94,003		13,906		12,709

Total inventory	$	123,179	$	117,144	$	28,560	$	28,114

7.	Composition of Certain Balance Sheet Accounts

Prepaid expenses and other current assets as of March 31, ~~2020~~2021 and December 31, ~~2019~~2020 were as follows (in thousands):

					March 31,		December 31,
	March 31,		December 31,		2021		2020
	2020		2019
Contract assets, net of allowances of $997 and $0, respectively(1)	$	14,319	$	12,364
Prepaid satellite services		7,970		11,299
Contract assets					$	2,729	$	2,417
Restricted cash		560		560		525		525
Other		13,613		12,082		6,371		5,992

Total prepaid expenses and other current assets	$	36,462	$	36,305	$	9,625	$	8,934

~~(1)~~

~~Allowance for contract assets as of March 31, 2020 is due to the adoption of ASC 326. See Note 9, “Composition of Certain Reserves and Allowances,” for additional information.~~

~~Property and equipment as of March 31, 2020 and December 31, 2019 were as follows (~~~~in thousands~~):12

   March 31,    December 31,
   2020    2019
Office equipment, furniture, fixtures and other
   $ 56,482    $ 56,205
Leasehold improvements
   44,403    44,389
Airborne equipment(1)
   709,980    737,593
Network equipment
   225,169    229,451




   1,036,034    1,067,638
Accumulated depreciation
   (530,450 )    (507,320 )




Total property and equipment, net
   $ 505,584    $ 560,318

~~(1)~~

~~Decrease in Airborne equipment is due primarily to the impairment of airborne equipment associated with three of our airline agreements. See below for additional information.~~

Gogo Inc. and Subsidiaries

Notes to Unaudited Condensed Consolidated Financial Statements – (Continued)

Property and equipment as of March 31, 2021 and December 31, 2020 were as follows (in thousands):

	March 31,			December 31,
	2021			2020
Office equipment, furniture, fixtures and other	$	11,309		$	10,986
Leasehold improvements		12,012			12,012
Network equipment		139,159			139,884
		162,480			162,882
Accumulated depreciation		(100,961	)		(99,389	)
Total property and equipment, net	$	61,519		$	63,493

Othernon-current assets as of March 31, ~~2020~~2021 and December 31, ~~2019~~2020 were as follows (in thousands):

   March 31,    December 31,
   2020    2019
Contract assets, net of allowances of $6,111 and $0, respectively(1)
   $ 56,516    $ 51,829
Deferred STC costs
   16,475    17,453
Restricted cash
   4,601    7,099
Other(2)
   8,637    13,291




Total othernon-current assets
   $ 86,229    $ 89,672

	March 31,		December 31,
	2021		2020
Contract assets, net of allowances of $375 and $375, respectively	$	11,349	$	9,775
Other		1,694		1,711
Total other non-current assets	$	13,043	$	11,486

~~(1)~~

~~Allowances for contract assets as of March 31, 2020 is due to the adoption of ASC 326. See Note 9, “Composition of Certain Reserves and Allowances,” for additional information.~~

~~(2)~~

Decrease due in part to the $3.0 million impairment of a cost-basis investment which is included in Other (income) expense within our unaudited condensed consolidated statements of operations for the three month period ended March 31, 2020.

~~We review our long-lived assets, including property and equipment,right-of-use~~ ~~assets, and othernon-current~~ assets, for potential impairment whenever events indicate that the carrying amount of such assets may not be recoverable. We perform this review by comparing the carrying value of the long-lived assets to the estimated future undiscounted cash flows expected to result from the use of the assets. We group certain long-lived assets by airline contract and by connectivity technology. If we determine an impairment exists, the amount of the impairment is computed as the difference between the asset group’s carrying value and its estimated fair value, following which the assets are written down to their estimated fair value.

~~In light of theCOVID-19~~ outbreak and its impact on air travel, including decreased flights, decreased gross passenger opportunity and our airline partners’ temporary parking of a significant number of their aircraft, we conducted a review as of March 31, 2020 and determined that the carrying values for the asset groups related to three of our airline agreements for the CA business exceeded their estimated undiscounted cash flows, which triggered the need to estimate the fair value of these assets. Fair value reflects our best estimate of the discounted cash flows of the impaired assets. For the airborne assets and~~right-of-use~~ assets associated with the three airline agreements (the “impaired assets”), we recorded an impairment charge of $46.4 million for the three month period ended March 31, 2020, reflecting the difference between the carrying value and the estimated fair value of the impaired assets.

~~We are continuously monitoring theCOVID-19~~ pandemic and its impact. If the negative impact of the pandemic on the assets related to our airline agreements continues, including as a result of airline partners’ decisions to temporarily park certain aircraft to reduce capacity, we could incur additional material impairment charges in future periods.

Accrued liabilities as of March 31, ~~2020~~2021 and December 31, ~~2019~~2020 were as follows (in thousands):

					March 31,		December 31,
	March 31,		December 31,		2021		2020
	2020		2019
Airline related accrued liabilities	$	40,882	$	43,592
Accrued interest		43,461		17,048	$	44,807	$	17,836
Employee compensation and benefits		15,136		29,954
Accrued satellite network costs		19,438		13,843
Employee compensation and benefits ⁽¹⁾						19,796		35,516
Operating leases						8,198		8,089
Deferred gain on sale of CA business ⁽²⁾						9,400		9,400
Warranty reserve		12,639		13,165		2,400		2,400
Operating leases		9,484		12,241
Airborne equipment and installation costs		4,293		11,466
Taxes						1,800		2,022
Other		30,905		32,802		7,733		7,746

Total accrued liabilities	$	176,238	$	174,111	$	94,134	$	83,009

(1)	Includes $14.1 million and $19.2 million as of March 31, 2021 and December 31, 2020, respectively, expected to be paid in shares of Gogo common stock upon the vesting of certain equity awards issued to former employees now employed by Intelsat and classified within discontinued operations.

(2)	Relates to sale of CA business. See Note 2, “Discontinued Operations,” for additional information.

Other non-current liabilities as of March 31, 2021 and December 31, 2020 were as follows (in thousands):

	March 31,		December 31,
	2021		2020
Asset retirement obligations	$	4,520	$	4,401
Deferred tax liabilities		2,203		2,108
Other		3,121		4,072
Total other non-current liabilities	$	9,844	$	10,581

Gogo Inc. and Subsidiaries

Notes to Unaudited Condensed Consolidated Financial Statements – (Continued)

~~Othernon-current~~ ~~liabilities as of March 31, 2020 and December 31, 2019 were as follows (~~~~in thousands~~):

   March 31,    December 31,
   2020    2019
Deferred revenue
   $ 29,433    $ 21,889
Asset retirement obligations
   11,773    11,560
Deferred tax liabilities
   2,384    2,340
Other
   10,203    10,704




Total othernon-current liabilities
   $ 53,793    $ 46,493

8. Intangible Assets

Our intangible assets are comprised of both indefinite-lived and finite-lived intangible assets. Intangible assets with indefinite lives ~~and goodwill~~ are not amortized; rather, they are reviewed for impairment at least annually or whenever events or circumstances indicate the carrying value of the asset may not be recoverable. We perform our annual impairment tests of our indefinite-lived intangible assets ~~and goodwill~~ during the fourth quarter of each fiscal ~~year.~~year, and the results from the test performed in the fourth quarter of 2020 indicated no impairment. We also reevaluate the useful life of indefinite-lived intangible assets each reporting period to determine whether events and circumstances continue to support an indefinite useful life. The results of our annual indefinite-lived intangible assets ~~and goodwill~~ impairment assessments in the fourth quarter of ~~2019~~2020 indicated no impairment. ~~As of March 31, 2020, as a result ofCOVID-19,~~ ~~we reviewed the carrying value of our indefinite-lived intangible assets and goodwill and concluded there were no impairments.~~

As of both March 31, ~~2020~~2021 and December 31, ~~2019,~~2020, our goodwill balance ~~all of which related to our BA segment,~~ was $0.6 million.

Our intangible assets, other than goodwill, as of March 31, ~~2020~~2021 and December 31, ~~2019~~2020 were as follows (in thousands, except for weighted average remaining useful life):


	Weighted																Weighted
	Average		As of March 31, 2020							As of December 31, 2019							Average	As of March 31, 2021							As of December 31, 2020
	Remaining		Gross					Net		Gross					Net		Remaining		Gross					Net		Gross					Net
	Useful Life		Carrying		Accumulated			Carrying		Carrying		Accumulated			Carrying		Useful Life		Carrying		Accumulated			Carrying		Carrying		Accumulated			Carrying
	(in years)		Amount		Amortization			Amount		Amount		Amortization			Amount		(in years)		Amount		Amortization			Amount		Amount		Amortization			Amount
Amortized intangible assets:
Software		2.5	$	180,568	$	(139,943	)	$	40,625	$	177,190	$	(135,154	)	$	42,036	2.3	$	50,357	$	(33,632)		$	16,725	$	50,029	$	(31,739)		$	18,290
Other intangible assets		7.8		3,000		(1,445	)		1,555		3,000		(1,440	)		1,560	8.0		1,500		-			1,500		1,500		-			1,500
Service customer relationships				8,081		(8,081	)		—		8,081		(8,081	)		—			8,081		(8,081	)		-		8,081		(8,081	)		-
OEM and dealer relationships				6,724		(6,724	)		—		6,724		(6,724	)		—			6,724		(6,724	)		-		6,724		(6,724	)		-

Total amortized intangible assets				198,373		(156,193	)		42,180		194,995		(151,399	)		43,596			66,662		(48,437)			18,225		66,334		(46,544)			19,790

Unamortized intangible assets:

FCC Licenses				32,283		—			32,283		32,283		—			32,283			32,283		-			32,283		32,283		-			32,283

Total intangible assets			$	230,656	$	(156,193	)	$	74,463	$	227,278	$	(151,399	)	$	75,879		$	98,945	$	(48,437)		$	50,508	$	98,617	$	(46,544	)	$	52,073

Amortization expense was ~~$4.8~~$1.9 million and ~~$5.3~~$1.5 million, respectively, for the three month periods ended March 31, ~~2020~~2021 and ~~2019.~~

~~Gogo Inc. and Subsidiaries~~

~~Notes to Unaudited Condensed Consolidated Financial Statements – (Continued)~~

2020.

Amortization expense for the remainder of 2021, each of the next ~~five~~four years and thereafter is estimated to be as follows (in thousands):


	Amortization		Amortization
Years ending December 31,	Expense		Expense
2020 (period from April 1 to December 31)	$	13,092
2021	$	14,451
2021 (period from April 1 to December 31)			$	5,569
2022	$	9,670	$	4,911
2023	$	2,808	$	2,435
2024	$	547	$	894
2025			$	894
Thereafter	$	1,612	$	3,522

Actual future amortization expense could differ from the estimated amount as a result of future investments and other factors.

~~9. Composition of Certain Reserves and Allowances~~

~~Credit Losses~~—We regularly evaluate our accounts receivable and contract assets for expected credit losses. Our expected loss allowance methodology for accounts receivable is developed using historical collection experience, current and future economic and market conditions, and a review of the current status of each customer’s trade accounts receivables. Due to the short-term nature of such receivables, the estimated amount of accounts receivable that may not be collected is based on the aging of the accounts receivable balances and the financial condition of customers. Additionally, specific allowance amounts are established to record the appropriate provision for customers that have a higher probability of default. Our monitoring activities include timely account reconciliation, dispute resolution, payment confirmation, consideration of each customer’s financial condition and macroeconomic conditions. Balances are written off when determined to be uncollectible. We apply a similar methodology towards our current and~~non-current~~ contract asset balances. However, due to the inherent additional risk associated with a long-term receivable, an additional provision is applied towards contract asset balances that will diminish over time as the contract nears its expiration date. For the three months ended March 31, 2020, we also considered the current and estimated future economic and market conditions resulting from the~~COVID-19~~ ~~pandemic in the determination of our estimated credit losses.~~

Estimates are used to determine the expected loss allowances. Such allowances are based on management’s assessment of anticipated payment, taking into account available historical and current information as well as management’s assessment of potential future developments. We are continuously monitoring our assumptions used to determine our expected credit losses, including the impact of~~COVID-19,~~ ~~which could cause us to record additional material credit losses in future periods.~~

~~A summary of our allowances for credit losses were as follows (~~~~in thousands~~):

      Prepaid    Other
   Accounts    and other    non-current
   receivable    current assets    assets
Balance at January 1, 2020
   $ 686    $ —      $ —
Cumulative-effect adjustment of ASC 326 adoption
   1,386    356    1,923
Current-period provision for expected credit losses⁽¹⁾
   1,935    641    4,188
Write-offs charged against the allowances
   —      —      —
Other, including dispositions and foreign currency
   (37 )    —      —






Balance at March 31, 2020
   $ 3,970    $ 997    $ 6,111

Gogo Inc. and Subsidiaries

Notes to Unaudited Condensed Consolidated Financial Statements – (Continued)

~~(1)~~

~~The current-period provision for expected credit losses was due primarily to the impact ofCOVID-19.~~ One international airline partner in particular accounted for approximately 70% of the provision recorded during the three month period ended March 31, 2020. Subsequent to March 31, 2020, such airline partner’s financial condition continued to deteriorate and we expect to record additional credit losses during the three month period ending June 30, 2020.Warranties

~~Warranties~~—

We provide warranties on parts and labor related to our products. Our warranty terms range from two to ~~ten~~five years. Warranty reserves are established for costs that are estimated to be incurred after the sale, delivery and installation of the products under warranty. The warranty reserves are determined based on known product failures, historical experience and other available evidence, and are included in accrued liabilities in our unaudited condensed consolidated balance sheets. Our warranty reserve balance was ~~$12.6~~$2.4 million ~~and $13.2 million, respectively,~~ as of both March 31, ~~2020~~2021 and December 31, ~~2019.~~

~~Gogo Inc. and Subsidiaries~~

~~Notes to Unaudited Condensed Consolidated Financial Statements – (Continued)~~2020.

~~10.~~

10.	Long-Term Debt and Other Liabilities

Long-term debt as of March 31, ~~2020~~2021 and December 31, ~~2019~~2020 was as follows (in thousands):


	March 31,			December 31,				March			December
	2020			2019				31, 2021			31, 2020
2024 Senior Secured Notes	$	921,310		$	921,137		$	973,623		$	973,539
2022 Convertible Notes		205,020			201,868			208,514			215,122
ABL Credit Facility		22,000			—
2020 Convertible Notes		—			2,498

Total debt		1,148,330			1,125,503			1,182,137			1,188,661
Less deferred financing costs		(23,617	)		(24,255	)		(18,315	)		(19,693	)

Less current portion of long-term debt								-			(341,000	)
Total long-term debt	$	1,124,713		$	1,101,248		$	1,163,822		$	827,968

2024 Senior Secured Notes -

On April 25, 2019 (the “Issue Date”), Gogo Intermediate Holdings LLC (“GIH”) (a wholly owned subsidiary of Gogo Inc.) and Gogo Finance Co. Inc. (a wholly owned subsidiary of GIH) (“Gogo Finance” and, together with GIH, the “Issuers”) issued $905 million aggregate principal amount of 9.875% senior secured notes due 2024 (the “Initial Notes”) under an indenture (the “Base Indenture”), dated as of April 25, 2019, among the Issuers, us, as guarantor, certain subsidiaries of GIH, as guarantors (the “Initial 2024 Subsidiary Guarantors” and, together with us, the “Initial 2024 Guarantors”), and U.S. Bank National Association, as trustee (the “Trustee”) and collateral agent (the “Collateral Agent”). On May 3, 2019, the Issuers, the Initial 2024 Guarantors and the Trustee entered into the first supplemental indenture (the “First Supplemental Indenture”) to increase the amount of indebtedness that may be incurred under Credit Facilities (as defined in the 2024 Indenture) by GIH or its subsidiaries that are 2024 Guarantors (as defined below) by $20 million in aggregate principal amount. On March 6, 2020, the Issuers, the Initial 2024 Guarantors, Gogo Air International GmbH (an indirect subsidiary of GIH) (“Gogo International”) and the Trustee entered into a second supplemental indenture (the “Second Supplemental Indenture”) to add Gogo International as a guarantor under the 2024 Indenture. On July 31, 2020, the Issuers, the Initial 2024 Guarantors, Gogo International and Gogo Inflight Internet Canada Ltd., Gogo ATG LLC and Gogo CA Licenses LLC (collectively, the “Additional Guarantors” and, together with the Initial 2024 Guarantors and Gogo International, the “2024 Guarantors”) and the Trustee entered into a ~~second~~third supplemental indenture (the “Third Supplemental Indenture”) to add the Additional Guarantors as guarantors under the 2024 Indenture. On November 9, 2020, the Company, the Issuers, the 2024 Guarantors and the Trustee entered into a fourth supplemental indenture (together with the Base Indenture, the First Supplemental Indenture, the Second Supplemental Indenture and the ~~First~~Third Supplemental Indenture, the “2024 Indenture”) to ~~add Gogo International as a guarantor to~~increase the ~~2024 Indenture.~~amount of indebtedness under the Credit Facilities (as defined in the Base Indenture) that may be incurred by the Issuers or the Subsidiary Guarantors (as defined in the Base Indenture) by $50 million in aggregate principal amount. On May 7, 2019, the Issuers issued an additional $20 million aggregate principal amount of 9.875% senior secured notes due 2024 (the ~~“Additional~~“2019 Additional Notes”). ~~We refer to~~On November 13, 2020, the Issuers issued an additional $50 million aggregate principal amount of 2024 Senior Secured Notes (the “2020 Additional Notes” and, together with the Initial Notes and the 2019 Additional Notes, ~~collectively as~~ the “2024 Senior Secured Notes”). The 2024 Senior Secured Notes were offered and sold in transactions exempt from registration under the Securities Act. The Initial Notes were issued at a price equal to 99.512% of their face value, ~~and~~ the 2019 Additional Notes were issued at a price equal to 100.5% of their face value, resulting in aggregate gross proceeds of $920.7 million and the 2020 Additional Notes were issued at a price equal to 103.5% of their face value, resulting in aggregate gross proceeds of $51.8 million. Additionally, we received approximately $0.1 million for interest that accrued from April 25, 2019 through May 7, 2019 with respect to the 2019 Additional Notes that was included in our interest payment on November 1, 2019. On April 1, 2021, the Issuers elected to call for redemption in full all $975,000,000 aggregate principal amount outstanding of the 2024 Senior Secured Notes in accordance with the terms of the 2024 Indenture. The Trustee delivered a notice of conditional full redemption to all registered holders of the 2024 Senior Secured Notes. The redemption was conditioned, among other things, upon the incurrence of indebtedness, pursuant to a new senior secured term loan and/or credit facility or from one or more other sources, in an amount satisfactory to the Issuers. The 2024 Senior Secured Notes ~~are~~were redeemed on May 1, 2021 (the “Redemption Date”), at a redemption price equal to 104.938% of the principal amount of the 2024 Senior Secured Notes redeemed plus accrued and unpaid interest to (but not including) the Redemption Date. The 2024 Senior Secured Notes were guaranteed on a senior secured basis by Gogo Inc. and all of GIH’s existing and future restricted subsidiaries (other than Gogo Finance), subject to

Gogo Inc. and Subsidiaries

Notes to Unaudited Condensed Consolidated Financial Statements – (Continued)

certain exceptions. The 2024 Senior Secured Notes and the related guarantees ~~are~~were secured by second-priority liens on the ABL Priority Collateral (as defined below) and by first-priority liens on the Cash Flow Priority Collateral (as defined below), including pledged equity interests of the Issuers and all of GIH’s existing and future restricted subsidiaries guaranteeing the 2024 Senior Secured Notes, except for certain excluded assets and subject to permitted liens. Upon the closing of the Transaction, certain subsidiaries were released from their guarantees under the 2024 Indenture, and certain of the ABL Priority Collateral and Cash Flow Priority Collateral were released.

As of March 31, ~~2020~~2021 and December 31, ~~2019,~~2020, the outstanding principal amount of the 2024 Senior Secured Notes was ~~$925.0~~$975 million for both ~~dates,~~periods, the unaccreted debt discount was ~~$3.7~~$1.4 million and ~~$3.9~~$1.5 million, respectively, and the net carrying amount was ~~$921.3~~$973.6 million and ~~$921.1~~$973.5 million, respectively.

We used a portion of the net proceeds from the issuance of the ~~2024 Senior Secured~~Initial Notes and the 2019 Additional Notes to fund the redemption of all the outstanding 2022 Senior Secured Notes (as defined below) and to repurchase $159 million aggregate principal amount of ~~the~~Gogo Inc.’s 3.75% Convertible Senior Notes due 2020 (the “2020 Convertible ~~Notes (as defined below)~~Notes”).

The maturity date of the 2024 Senior Secured Notes ~~will mature on~~was May 1, 2024. The 2024 Senior Secured Notes ~~bear~~bore interest at a rate of 9.875% per year, payable semiannually in arrears on May 1 and November 1 of each year, beginning on November 1, 2019.

~~Gogo Inc. and Subsidiaries~~

~~Notes to Unaudited Condensed Consolidated Financial Statements – (Continued)~~

We paid approximately ~~$22.0~~$22.6 million of origination fees and financing costs related to the issuance of the 2024 Senior Secured Notes, which have been accounted for as deferred financing costs. The deferred financing costs on our ~~unaudited condensed~~ consolidated balance sheet are being amortized over the contractual term of the 2024 Senior Secured Notes using the effective interest method. Total amortization expense was $1.0 million and $0.9 million, respectively, for the three month ~~period~~periods ended March 31, 2021 and 2020. Amortization expense is included in interest expense in the unaudited condensed consolidated statements of operations. As of March 31, ~~2020~~2021 and December 31, ~~2019,~~2020, the balance of unamortized deferred financing costs related to the 2024 Senior Secured Notes was ~~$18.9~~$15.5 million and ~~$19.7~~$16.6 million, respectively, and ~~was~~is included as a reduction to long-term debt in our unaudited condensed consolidated balance ~~sheet.~~sheets. See Note 11, “Interest Costs,” for additional information.

The 2024 Senior Secured Notes ~~are~~were the senior secured indebtedness of the Issuers and ~~are:~~

were:

effectively senior to (i) all of the Issuers’ existing and future senior unsecured indebtedness to the extent of the value of the collateral securing the 2024 Senior Secured Notes and (ii) the Issuers’ indebtedness secured on a junior priority basis by the same collateral securing the 2024 Senior Secured Notes to the extent of the value of such collateral, including the obligations under the ABL Credit Facility (as defined below) to the extent of the value of the Cash Flow Priority Collateral;
•
effectively senior to (i) all of the Issuers’ existing and future senior unsecured indebtedness to the extent of the value of the collateral securing the 2024 Senior Secured Notes and (ii) the Issuers’ indebtedness secured on a junior priority basis by the same collateral securing the 2024 Senior Secured Notes to the extent of the value of such collateral, including the obligations under the ABL Credit Facility (as defined below) to the extent of the value of the Cash Flow Priority Collateral;

•

effectively equal in right of payment with the Issuers’ existing and future (i) unsecured indebtedness that is not subordinated in right of payment to the 2024 Senior Secured Notes and (ii) indebtedness secured on a junior priority basis by the same collateral securing the 2024 Senior Secured Notes, if any, in each case to the extent of any insufficiency in the collateral securing the 2024 Senior Secured Notes;

•

structurally senior to all of our existing and future indebtedness, including our 2022 Convertible Notes (as defined below);

•

senior in right of payment to any and all of the Issuers’ future indebtedness that is subordinated in right of payment to the 2024 Senior Secured Notes;

•

structurally subordinated to all of the indebtedness and other liabilities of any non-2024 Guarantors (other than the Issuers); and

•

effectively subordinated to all of our existing and future indebtedness secured on a senior priority basis by the same collateral securing the 2024 Senior Secured Notes to the extent of the value of such collateral, including the obligations under the ABL Credit Facility to the extent of the value of ABL Priority Collateral.

~~structurally senior to all of our existing and future indebtedness, including our 2022 Convertible Notes (as defined below);~~

~~senior in right of payment to any and all of the Issuers’ future indebtedness that is subordinated in right of payment to the 2024 Senior Secured Notes;~~

~~structurally subordinated to all of the indebtedness and other liabilities of anynon-2024~~ ~~Guarantors (other than the Issuers); and~~

~~Each guarantee is a senior secured obligation of such 2024 Guarantor and is:~~

effectively senior in right of payment to all existing and future (i) senior unsecured indebtedness to the extent of the value of the collateral securing such guarantee owned by such 2024 Guarantor and (ii) indebtedness secured on a junior priority basis by the same collateral securing the guarantee owned by such 2024 Guarantor to the extent of the value of the collateral securing the guarantee, including the obligations under the ABL Credit Facility to the extent of the value of the Cash Flow Priority Collateral;

effectively equal in right of payment with all existing and future unsubordinated indebtedness and indebtedness secured on a junior priority basis by the same collateral securing the guarantee owned by such 2024 Guarantor, if any, in each case to the extent of any insufficiency in the collateral securing such guarantee;

~~effectively subordinated to the obligations under the ABL Credit Facility of each 2024 Guarantor to the extent of the value of the ABL Priority Collateral owned by such 2024 Guarantor;~~

~~effectively senior in right of payment to all existing and future subordinated indebtedness, if any, of such 2024 Guarantor; and~~

~~structurally subordinated to all indebtedness and other liabilities of anynon-2024~~ ~~Guarantor subsidiary of such 2024 Guarantor (excluding, in the case of our guarantee, the Issuers).~~

Gogo Inc. and Subsidiaries

Notes to Unaudited Condensed Consolidated Financial Statements – (Continued)

Each guarantee was a senior secured obligation of such 2024 Guarantor and was:

•

effectively subordinated to the obligations under the ABL Credit Facility of each 2024 Guarantor to the extent of the value of the ABL Priority Collateral owned by such 2024 Guarantor; and

•

effectively senior in right of payment to all existing and future subordinated indebtedness, if any, of such 2024 Guarantor; and structurally subordinated to all indebtedness and other liabilities of any non-2024 Guarantor subsidiary.

The security interests in certain collateral ~~may~~were able to be released without the consent of holders of the 2024 Senior Secured Notes if such collateral iswas disposed of in a transaction that ~~complies~~complied with the 2024 Indenture and related security agreements, and if any grantor of such security interests iswas released from its obligations with respect to the 2024 Senior Secured Notes in accordance with the applicable provisions of the 2024 Indenture and related security agreements. Under certain circumstances, GIH and the 2024 Guarantors ~~have~~had the right to transfer certain intellectual property assets that on the Issue Date ~~constitute~~constituted collateral securing the 2024 Senior Secured Notes or the guarantees to a restricted subsidiary organized under the laws of Switzerland, resulting in the release of such collateral. In addition, the 2024 Indenture ~~permits~~permitted indebtedness incurred under the ABL Credit Facility to be secured on a first-priority basis by certain of the same collateral that secures the 2024 Senior Secured Notes.

The Issuers ~~may~~were able to redeem the 2024 Senior Secured Notes, in whole or in part, at any time prior to May 1, 2021, at a redemption price equal to 100% of the principal amount of the 2024 Senior Secured Notes redeemed plus the make-whole premium set forth in the 2024 Indenture as of, and accrued and unpaid interest, if any, to (but not including) the applicable redemption date.

On or after May 1, 2021, the 2024 Senior Secured Notes ~~will be~~were redeemable at the following redemption prices (expressed in percentages of principal amount), plus accrued and unpaid interest, if any, to (but not including) the redemption date (subject to the right of holders of record on the relevant regular record date on or prior to the redemption date to receive interest due on an interest payment date), if redeemed during the twelve-month period commencing on May 1 of the following years:

	Redemption
Year	Price
2021	104.938	%
2022	102.469	%
2023 and thereafter	100.000	%

In addition, at any time prior to May 1, 2021, the Issuers ~~may~~were able to redeem up to 40% of the aggregate principal amount of the 2024 Senior Secured Notes with the proceeds of certain equity offerings at a redemption price of 109.875% of the principal amount redeemed, plus accrued and unpaid interest, if any, to (but not including) the date of redemption;provided, however, that 2024 Senior Secured Notes representing at least 50% of the principal amount of the 2024 Senior Secured Notes ~~remain~~remained outstanding immediately after each such redemption.

In addition, if GIH receives cash proceeds in connection with the entry into or continuation of a strategic relationship, or equity from us in connection with the sale of stock to a complimentary business (in each case, a “strategic investment”) at any time prior to May 1, 2020, the Issuers may redeem up to $150 million of the aggregate principal amount of the 2024 Senior Secured Notes at 103% of the principal amount of the 2024 Senior Secured Notes to be redeemed, plus accrued and unpaid interest, if any, to (but not including) the redemption date with the proceeds from such strategic investment.

The 2024 Indenture ~~contains~~contained covenants that, among other things, ~~limit~~limited the ability of the Issuers and the 2024 Subsidiary Guarantors and, in certain circumstances, our ability, to: incur additional indebtedness; pay dividends, redeem stock or make other distributions; make investments; create restrictions on the ability of GIH’s restricted subsidiaries to pay dividends to the Issuers or make other intercompany transfers; create liens; transfer or sell assets; merge or consolidate; and enter into certain transactions with the Issuers’ affiliates.

The 2024 Indenture also provided that if we completed certain sales or transfers of assets, we were required to apply the Net Cash Proceeds (as defined in the Base Indenture) generated therefrom within 365 days to either permanently repay indebtedness, in accordance with the terms of the 2024 Indenture, or invest in property or non-current assets of a nature or type used in our, or a similar or related, business. If we did not so apply the Net Cash Proceeds from the Transaction by December 1, 2021, GIH would have been

Gogo Inc. and Subsidiaries

Notes to Unaudited Condensed Consolidated Financial Statements – (Continued)

required to make an offer to repurchase for cash an aggregate principal amount of the 2024 Senior Secured Notes equal to any Net Cash Proceeds not so applied as of such date, at a repurchase price equal to 100% of the principal amount thereof, plus accrued and unpaid interest, if any, to (but not including) the payment date. As a result, we classified $341 million of the 2024 Senior Secured Notes as short-term debt on the unaudited condensed and consolidated balance sheet as of December 31, 2020, representing the amount of the 2024 Senior Secured Notes potentially to be repurchased with the Net Cash Proceeds. As a result of entering into the Term Loan and Revolving Facility, discussed below, the $341 million has been classified as long-term debt on the unaudited condensed consolidated balance sheet as of March 31, 2021.

Most of these covenants, ~~will cease~~including the covenant related to the application of Net Cash Proceeds from certain sales or transfers of assets, would have ceased to apply if, and for as long as, the 2024 Senior Secured Notes ~~have~~had investment grade ratings from both Moody’s Investment Services, Inc. and Standard & Poor’s.

If we or the Issuers ~~undergo~~underwent specific types of change of control accompanied by a downgrade in the rating of the 2024 Senior Secured Notes prior to May 1, 2024, GIH iswas required to make an offer to repurchase for cash all of the 2024 Senior Secured Notes at a repurchase price equal to 101% of the principal amount thereof, plus accrued and unpaid interest, if any, to (but not including) the payment date.

The 2024 Indenture ~~provides~~provided for events of default, which, if any of them ~~occur,~~occurred, would ~~permit~~have permitted or ~~require~~required the principal, premium, if any, and interest on all of the then outstanding 2024 Senior Secured Notes issued under the 2024 Indenture to be due and payable immediately. As of March 31, ~~2020,~~2021, no event of default had occurred.

ABL Credit Facility –

On August 26, 2019, Gogo Inc., GIH and Gogo Finance (together GIH and Gogo Finance are referred to as the ~~“Borrowers”~~“ABL Borrowers”) entered into a credit agreement (the “ABL Credit Agreement”) among the ABL Borrowers, the other loan parties party thereto, the lenders party thereto, JPMorgan Chase Bank, N.A., as administrative agent (the “Administrative Agent”), and Morgan Stanley Senior Funding, Inc., as syndication agent, which ~~provides~~provided for an asset-based revolving credit facility (the “ABL Credit Facility”) of up to $30 million, subject to borrowing base availability, and includes letter of credit and swinglinesub-facilities.

~~Gogo Inc.~~ On April 30, 2021, the ABL Borrowers terminated the ABL Credit Agreement and ~~Subsidiaries~~

~~Notes to Unaudited Condensed Consolidated Financial Statements – (Continued)~~

all commitments thereunder.

Borrowing availability under the ABL Credit Facility iswas determined by a monthly borrowing base collateral calculation that is based on specified percentages of the value of eligible accounts receivable (including eligible unbilled accounts receivable) and eligible credit card receivables, less certain reserves and subject to certain other adjustments as set forth in the ABL Credit Agreement. Availability iswas reduced by issuance of letters of credit as well as any borrowings. As of March 31, ~~2020~~2021 and December 31, ~~2019, $22.0~~2020, the facility was undrawn and as of March 31, 2021, $20.8 million ~~and zero, was outstanding~~remained available for borrowing under the terms of the agreement that would allow for the Borrowers to meet the “payment conditions” criteria as described in the ABL Credit ~~Facility, respectively.~~Agreement.

The final maturity of the ABL Credit Facility iswas scheduled to occur on August 26, 2022, unless the aggregate outstanding principal amount of our 2022 Convertible Notes (as defined below) ~~has~~had not, on or prior to December 15, 2021, been repaid in full or refinanced with a new maturity date no earlier than February 26, 2023, in which case the final maturity date ~~shall~~would have instead bebeen December 16, 2021.

Loans outstanding under the ABL Credit Facility ~~bear~~bore interest at a floating rate measured by reference to, at the ABL Borrowers’ option, either (i) an adjusted London inter-bank offered rate plus an applicable margin ranging from 1.50% to 2.00% per annum depending on a fixed charge coverage ratio, or (ii) an alternate base rate plus an applicable margin ranging from 0.50% to 1.00% per annum depending on a fixed charge coverage ratio. Unused commitments under the ABL Credit Facility are subject to a per annum fee ranging from 0.25% to 0.375% depending on the average quarterly usage of the revolving commitments.

The obligations under the ABL Credit Agreement ~~are~~were guaranteed by Gogo Inc. and all of its existing and future subsidiaries, subject to certain exceptions (collectively, the “ABL Guarantors”), and such obligations and the obligations of the ABL Guarantors ~~are~~were secured on a (i) senior basis by a perfected security interest in all present and after-acquired inventory, accounts receivable, deposit accounts, securities accounts, and any cash or other assets in such accounts and other related assets owned by each ABL Guarantor and the proceeds of the foregoing, subject to certain exceptions (the “ABL Priority Collateral”) and (ii) junior basis by a perfected security interest in substantially all other tangible and intangible assets owned by each ABL Guarantor (the “Cash Flow Priority Collateral”).

The ABL Credit Agreement ~~contains~~contained customary representations and warranties and customary affirmative and negative covenants. The negative covenants ~~include~~included restrictions on, among other things: the incurrence of additional indebtedness; the incurrence of additional liens; dividends or other distributions on equity; the purchase, redemption or retirement of capital stock; the payment or redemption of certain indebtedness; loans, guarantees and other investments; entering into other agreements that create

Gogo Inc. and Subsidiaries

Notes to Unaudited Condensed Consolidated Financial Statements – (Continued)

restrictions on the ability to pay dividends or make other distributions on equity, make or repay certain loans, create or incur certain liens or guarantee certain indebtedness; asset sales; sale-leaseback transactions; swap agreements; consolidations or mergers; amendment of certain material documents; certain regulatory matters; Canadian pension plans; and affiliate transactions. The negative covenants ~~are~~were subject to customary exceptions and also ~~permit~~permitted dividends and other distributions on equity, investments, permitted acquisitions and payments or redemptions of indebtedness upon satisfaction of the “payment conditions.” The payment conditions ~~are~~were deemed satisfied upon Specified Availability (as defined in the ABL Credit Agreement) on the date of the designated action and Specified Availability for the prior30-day period exceeding agreed-upon thresholds, the absence of the occurrence and continuance of any default and, in certain cases, pro forma compliance with a fixed charge coverage ratio of no less than 1.10 to 1.00.

The ABL Credit Agreement ~~includes~~included a minimum fixed charge coverage ratio test of no less than 1.00 to 1.00, which iswas tested only when Specified Availability iswas less than the greater of (A) $4.5 million and (B) 15.0% of the then effective commitments under the ABL Credit Facility, and continuing until the first day immediately succeeding the last day of the calendar month which ~~includes~~included the thirtieth (30th) consecutive day on which Specified Availability iswas in excess of such threshold so long as no default has occurred and is continuing and certain other conditions are met. As of March 31, ~~2020,~~2021, Specified Availability had not fallen below the amount specified and therefore the minimum fixed charge coverage ratio test was not applicable. ~~Full availability under the ABL Credit Facility may be limited by our ability to comply with the fixed charge coverage ratio in future periods.~~

The ABL Credit Agreement ~~provides~~provided for events of default, which, if any of them ~~occurs,~~occurred, would permit or require the principal, premium, if any, and interest on all of the then outstanding obligations under the ABL Credit Facility to be due and payable immediately and the commitments under the ABL Credit Facility to be terminated.

~~Gogo Inc. and Subsidiaries~~

~~Notes to Unaudited Condensed Consolidated Financial Statements – (Continued)~~

On August 26, 2019, the Borrowers and the ABL Guarantors entered into an ABL collateral agreement (the “ABL Collateral Agreement”), in favor of the Administrative Agent, whereby the ABL Borrowers and the ABL Guarantors granted a security interest in substantially all tangible and intangible assets of each ABL Borrower and each ABL Guarantor, to secure all obligations of the ABL Borrowers and the ABL Guarantors under the ABL Credit Agreement, and U.S. Bank National Association, as cash flow collateral representative, and JPMorgan Chase Bank, N.A., as ABL agent, entered into a crossing lien intercreditor agreement (the “Intercreditor Agreement”) to govern the relative priority of liens on the collateral that secures the ABL Credit Agreement and the 2024 Senior Secured Notes and certain other rights, priorities and interests.

~~We paid approximately $0.9 million of origination fees and financing costs related to~~On November 30, 2020, the issuance of the ABL Credit Facility, which have been accounted for as deferred financing costs. The deferred financing costs on our unaudited condensed consolidated balance sheet are being amortized over the contractual term of the ABL Credit Facility using the effective interest method. Total amortization expense was $0.1 million for the three month period ended March 31, 2020. Amortization expense is included in interest expense in the unaudited condensed consolidated statements of operations. As of March 31, 2020 and December 31, 2019, the balance of unamortized deferred financing costs relatedIssuers entered into a limited consent to the ABL Credit ~~Facility was $0.7 million~~Agreement with the financial institutions listed on the signature pages thereof and ~~$0.8 million, respectively,~~JPMorgan Chase Bank, N.A., as administrative agent, pursuant to which the Lenders (as defined in the ABL Credit Agreement) provided consent to the consummation of the Transaction.

2021 Credit Agreement

On April 30, 2021, Gogo Inc. and ~~is included~~GIH (“the Borrower”) entered into a credit agreement (the “2021 Credit Agreement”) among Gogo, the Borrower, the lenders and issuing banks party thereto and Morgan Stanley Senior Funding, Inc., as administrative agent (the “Administrative Agent”), which provides for (i) a ~~reduction to long-term debt~~term loan credit facility (the “Term Loan Facility”) in ~~our unaudited condensed consolidated balance sheet. See Note 11, “Interest Costs,” for additional information.~~

~~2022 Senior Secured Notes~~~~– On June 14, 2016, the Issuers issued $525 million~~an aggregate principal amount of ~~12.500% senior secured notes due 2022~~$725 million, issued with a discount of 0.5%, and (ii) a revolving credit facility (the “Original 2022 Senior Secured Notes”) under an Indenture, dated as of June 14, 2016 (as amended and supplemented thereafter, the “Indenture”), among the Issuers, us, as guarantor, certain subsidiaries of GIH, as guarantors (the “2022 Subsidiary Guarantors”“Revolving Facility” and together with ~~us,~~ the ~~“2022 Guarantors”), and U.S. Bank National Association, as Trustee and as Collateral Agent. On January 3, 2017,~~Term Loan Facility, the ~~Issuers issued $65~~“Facilities”) of up to $100 million, which includes a letter of credit sub-facility. The Term Loan Facility amortizes in nominal quarterly installments equal to one percent of the aggregate initial principal amount thereof per annum, with the remaining balance payable upon final maturity of ~~additional 12.500%~~the Term Loan Facility on April 30, 2028. There are 0 amortization payments under the Revolving Facility, and all borrowings under the Revolving Facility mature on April 30, 2026.

The Term Loan Facility bears annual interest at a floating rate measured by reference to, at the Borrower’s option, either (i) an adjusted London inter-bank offered rate (subject to a floor of 0.75%) plus an applicable margin of 3.75% or (ii) an alternate base rate plus an applicable margin of 2.75%.

Loans outstanding under the Revolving Facility bear annual interest at a floating rate measured by reference to, at the Borrower’s option, either (i) an adjusted London inter-bank offered rate (subject to a floor of 0.00%) plus an applicable margin ranging from 3.25% to 3.75% per annum depending on the Borrower’s senior secured ~~notes due 2022 (the “January 2017 Additional Notes”). The January 2017 Additional Notes were issued at a price equal~~first lien net leverage ratio or (ii) an alternate base rate plus an applicable margin ranging from 2.25% to ~~108% of their face value resulting in gross proceeds of $70.2 million. On September 25, 2017,~~2.75% per annum depending on the ~~Issuers issued $100 million aggregate principal amount of additional 12.500%~~Borrower’s senior secured ~~notes due 2022 (the “September 2017 Additional Notes”). We refer~~first lien net leverage ratio. Additionally, unused commitments under the Revolving Facility are subject to a fee ranging from 0.25% to 0.50% per annum depending on the ~~Original 2022 Senior Secured Notes,~~Borrower’s senior secured first lien net leverage ratio.

The Facilities may be prepaid at the ~~January 2017 Additional Notes~~Borrower’s option at any time without premium or penalty (other than customary breakage costs and except during the ~~September 2017 Additional Notes collectively as~~first six months following the ~~“2022 Senior Secured Notes.”~~

~~On April 15, 2019, the Issuers elected to call for redemption in full all $690 million aggregate principal amount outstanding~~closing of the ~~2022 Senior Secured Notes in accordance with the terms~~Facilities during which certain prepayments of the Indenture. The redemption was conditioned, among other things, upon the incurrence of indebtedness in connection with the issuance of the 2024 Senior Secured Notes or from one or more other sources, in anTerm Loan Facility are subject to a prepayment premium), subject to minimum principal payment amount satisfactory to the Issuers which condition was satisfied by the issuance of the 2024 Senior Secured Notes. On April 25, 2019, the Issuers irrevocably deposited, or caused to be irrevocably deposited, with the Trustee funds solely for the benefit of the holders of the 2022 Senior Secured Notes, cash in an amount sufficient to pay principal, premium, if any, and accrued interest on the 2022 Senior Secured Notes to, but not including, the date of redemption and all other sums payable under the Indenture. The Trustee executed and delivered an acknowledgement of satisfaction, discharge and release, dated as of April 25, 2019, among other documents, with respect to the satisfaction and discharge of the 2022 Senior Secured Notes. On May 15, 2019, the 2022 Senior Secured Notes were fully redeemed in accordance with the terms of the Indenture, and the amount deposited with the Trustee on April 25, 2019 was paid to the holders of the 2022 Senior Secured Notes. The make-whole premium paid in connection with the redemption was $51.4 million and we wrote off the remaining unamortized deferred financing costs of $9.1 million and the remaining debt premium of $11.7 million relating to the 2022 Senior Secured Notes in connection with the redemption thereof, which together are included in the loss on extinguishment of debt in our consolidated statements of operations for the year ended December 31, 2019.requirements.

We paid approximately $15.9 million of aggregate origination fees and financing costs related to the issuance of the 2022 Senior Secured Notes, which were accounted for as deferred financing costs. Additionally, we paid approximately $1.4 million of consent fees in connection with the Supplemental Indenture, which partially offset the net carrying value of the 2022 Senior Secured Notes. Total amortization expense was $0.8 million for the three month period ended March 31, 2019. Amortization expense is included in interest expense in the unaudited condensed consolidated statements of operations. As noted above, the remaining unamortized deferred financing costs were written off as of May 15, 2019.19

Gogo Inc. and Subsidiaries

Notes to Unaudited Condensed Consolidated Financial Statements – (Continued)

~~Convertible~~Subject to certain exceptions and de minimis thresholds, the Term Loan Facility is subject to mandatory prepayments in an amount equal to:

•

100% of the net cash proceeds of certain asset sales, insurance recovery and condemnation events, subject to reduction to 50% and 0% if specified senior secured first lien net leverage ratio targets are met;

•

100% of the net cash proceeds of certain debt offerings; and

•

50% of annual excess cash flow (as defined in the 2021 Credit Agreement), subject to reduction to 25% and 0% if specified senior secured first lien net leverage ratio targets are met.

The 2021 Credit Agreement contains customary representations and warranties and customary affirmative and negative covenants. The negative covenants include restrictions on, among other things: incurrence of indebtedness or issuance of disqualified equity interests; incurrence or existence of liens; consolidations or mergers; activities of Gogo Inc. and any subsidiary holding a license issued by the Federal Communications Commission; investments, loans, advances, guarantees or acquisitions; asset sales; dividends or other distributions on equity; purchase, redemption or retirement of capital stock; payment or redemption of certain junior indebtedness; entry into other agreements that restrict the ability to incur liens securing the Facilities; and amendment of organizational documents; in each case subject to customary exceptions.

The Revolving Facility includes a financial covenant set at a maximum senior secured first lien net leverage ratio of 7.50:1.00, which will apply if the outstanding amount of loans and unreimbursed letter of credit drawings thereunder at the end of any fiscal quarter exceeds 35% of the aggregate of all commitments thereunder.

The 2021 Credit Agreement contains customary events of default, which, if any of them occurred, would permit or require the principal, premium, if any, and interest on all of the then outstanding obligations under the Facilities to be due and payable immediately and the commitments under the Revolving Facility to be terminated.

The proceeds of the Term Facility were used, together with cash on hand, (i) to redeem in full and pay the outstanding principal amount of the 2024 Senior Secured Notes together with accrued and unpaid interest and redemption premiums and to pay fees associated with the termination of the ABL Credit Agreement (collectively, the “Refinancing”), and (ii) to pay fees and expenses incurred in connection with the Refinancing and the Facilities (the “Transaction Costs”). The Revolving Facility will be available for working capital and general corporate purposes of the Company and its subsidiaries.

On April 30, 2021, Gogo Inc., the Borrower, and each direct and indirect wholly-owned U.S. restricted subsidiary of the Borrower (Gogo Inc. and such subsidiaries collectively, the “Guarantors”) entered into a guarantee agreement (the “Guarantee Agreement”) in favor of Morgan Stanley Senior Funding, Inc., as collateral agent (the “Collateral Agent”), whereby the Borrower and the Guarantors guarantee the obligations under the Facilities and certain other secured obligations as set forth in the Guarantee Agreement, and the Borrower and the Guarantors entered into a collateral agreement (the “Collateral Agreement”), in favor of the Collateral Agent, whereby the Borrower and the Guarantors grant a security interest in substantially all of their respective tangible and intangible assets (including the equity interests in each direct material wholly-owned U.S. restricted subsidiary owned by the Borrower or any Guarantor, and 65% of the equity interests in any non-U.S. subsidiary held directly by the Borrower or any Guarantor), subject to certain exceptions, to secure the obligations under the Facilities and certain other secured obligations as set forth in the Collateral Agreement.

2022 Convertible Notes

On November 21, 2018, we issued $215.0 million aggregate principal amount of 6.00% Convertible Senior Notes due 2022 (the “2022 Convertible Notes”) in private offerings to qualified institutional buyers, including pursuant to Rule 144A under the Securities Act, and in concurrent private placements. We granted an option to the initial purchasers to purchase up to an additional $32.3 million aggregate principal amount of 2022 Convertible Notes to cover over-allotments, of which $22.8 million was subsequently exercised during December 2018, resulting in a total issuance of $237.8 million aggregate principal amount of 2022 Convertible Notes.The 2022 Convertible Notes mature on May 15, 2022, unless earlier repurchased or converted into shares of our common stock under certain circumstances described below. Upon ~~maturity,~~conversion, we have the option to settle our obligation through cash, shares of common stock, or a combination of cash and shares of common stock. We pay interest on the 2022 Convertible Notes semi-annually in arrears on May 15 and November 15 of each year, beginning on May 15, 2019.

~~The~~Under the accounting standards applicable at the time of issuance, the $237.8 million of proceeds received from the issuance of the 2022 Convertible Notes was initially allocated between long-term debt (the liability component) at $188.7 million and additional

Gogo Inc. and Subsidiaries

Notes to Unaudited Condensed Consolidated Financial Statements – (Continued)

paid-in capital (the equity component) at $49.1 million, within the consolidated balance sheet. The fair value of the liability component was measured using rates determined for similar debt instruments without a conversion feature. The carrying amount of the equity component, representing the conversion option, was determined by deducting the fair value of the liability component from the aggregate face value of the 2022 Convertible Notes. If we or the note holders elect not to settle the ~~debt through conversion, we must settle the~~ 2022 Convertible Notes through conversion, at maturity we must repay the principal amount at face ~~value.~~value in cash. Therefore, the liability component will be accreted up to the face value of the 2022 Convertible Notes, which will result in additionalnon-cash interest expense being recognized in the consolidated statements of operations through the 2022 Convertible Notes maturity date (see Note ~~11,~~8, “Interest Costs,” for additional information). The effective interest rate on the 2022 Convertible Notes, including accretion of the notes to par and debt issuance cost amortization, was approximately 13.6%. The equity component will not be remeasured as long as it continues to meet the conditions for equity classification.

As of ~~March~~December 31, 2020, ~~and December 31, 2019,~~ the outstanding principal onamount of the 2022 Convertible Notes was $237.8 million, ~~on both dates,~~ the unaccreted debt discount was ~~$32.7~~$22.7 million ~~and $35.9 million, respectively,~~ and the net carrying amount of the liability component was ~~$205.0~~$215.1 million.

Upon adoption of ASU 2020-06 on January 1, 2021 (see Note 3, “Recent Accounting Pronouncements,” for more information), the 2022 Convertible Notes are accounted for as a single liability. The adoption of this standard resulted in the $49.1 million initially recorded to additional paid-in capital being reclassified and ~~$201.9~~recorded as an increase to long-term debt in the unaudited condensed consolidated balance sheets. Additionally, the $26.5 million ~~respectively.~~of accretion recognized life-to-date was reversed and recorded as a reduction to long-term debt and a reduction to accumulated deficit in the unaudited condensed consolidated balance sheets.

For the three-month period ended March 31, 2021, $1.0 million aggregate principal amount of 2022 Convertible Notes were converted by holders and settled through the issuance of 166,666 shares of common stock.

In addition, on March 17, 2021, we entered into separate, privately negotiated exchange agreements (the “March 2021 Exchange Agreements”) with certain holders of the 2022 Convertible Notes. Pursuant to the March 2021 Exchange Agreements, such holders exchanged a total of $28,235,000 aggregate principal amount of 2022 Convertible Notes for 5,121,811 shares of our common stock on March 24, 2021. The negotiated exchange rate under the March 2021 Exchange Agreements was 181.40 shares of common stock per $1,000 principal amount of the 2022 Convertible Notes, which resulted in a loss on settlement of $4.4 million, which is included in Other (income) expense in our unaudited condensed consolidated statements of operations for the three-month period ended March 31, 2021.

As of March 31, 2021, the outstanding principal amount of the 2022 Convertible Notes was $208.5 million.

On April 1, 2021, we entered into a privately negotiated exchange agreement (the “GTCR Exchange Agreement”) with an affiliate of funds managed by GTCR LLC (“GTCR”). Pursuant to the GTCR Exchange Agreement, GTCR exchanged $105,726,000 aggregate principal amount of 2022 Convertible Notes for 19,064,529 shares of our common stock on April 9, 2021. Following the consummation of the exchange, $102,788,000 aggregate principal amount of 2022 Convertible Notes remained outstanding.

We incurred approximately $8.1 million of issuance costs related to ~~the issuance of~~ the 2022 Convertible Notes, of which $6.4 million and $1.7 million were recorded to deferred financing costs and additionalpaid-in capital, respectively, in proportion to the allocation of the proceeds of the 2022 Convertible Notes. ~~The $6.4~~However, upon adoption of ASU 2020-06 on January 1, 2021, the $1.7 million that was initially recorded to additional paid-in capital was reclassified and recorded as deferred financing costs, ~~on our~~with catch-up amortization of $1.0 million recorded to accumulated deficit in the unaudited condensed consolidated balance ~~sheet is~~sheet. The deferred financing costs are being amortized over the term of the 2022 Convertible Notes using the effective interest method. Total amortization expense was $0.6 million and $0.4 million, respectively, for ~~each of~~ the ~~three month~~three-month periods ended March 31, ~~2020~~2021 and ~~2019.~~2020. Amortization expense is included in interest expense in the unaudited condensed consolidated statements of operations. As of March 31, ~~2020~~2021 and December 31, ~~2019,~~2020, the balance of unamortized deferred financing costs related to the 2022 Convertible Notes was ~~$4.1~~$2.5 million and ~~$4.5~~$2.7 million, respectively, and is included as a reduction to long-term debt in our unaudited condensed consolidated balance sheets. See Note 11, “Interest Costs,” for additional information.

Gogo Inc. and Subsidiaries

Notes to Unaudited Condensed Consolidated Financial Statements – (Continued)

The 2022 Convertible Notes had an initial conversion rate of 166.6667 shares of common stock per $1,000 principal amount of 2022 Convertible Notes, which is equivalent to an initial conversion price of approximately $6.00 per share of our common stock. Upon conversion, we currently expect to ~~deliver cash up to~~settle in shares for the ~~principal~~ amount of the 2022 Convertible Notes then outstanding. ~~With respect to any conversion value in excess of the principal amount, we currently expect to deliver shares of our common stock.~~ We may elect to deliver cash in lieu of all or a portion of such ~~shares.~~shares, and borrowings under the Revolving Facility are permitted to be used for this purpose. The shares of common stock subject to conversion are excluded from diluted earnings per share calculations under theif-converted method as their impact is anti-dilutive.

Holders may convert the 2022 Convertible Notes, at their option, in multiples of $1,000 principal amount at any time prior to January 15, 2022, but only in the following circumstances:

•

during any fiscal quarter beginning after the fiscal quarter ended December 31, 2018, if the last reported sale price of our common stock for at least 20 trading days (whether or not consecutive) during the last 30 consecutive trading days of the immediately preceding fiscal quarter is greater than or equal to 130% of the conversion price of the 2022 Convertible Notes on each applicable trading day (the “Stock Price Condition”);

•

during the 5-business day period following any 5 consecutive trading day period in which the trading price for the 2022 Convertible Notes is less than 98% of the product of the last reported sale price of our common stock and the conversion rate for the 2022 Convertible Notes on each such trading day (the “Notes Price Condition”); or

•

upon the occurrence of specified corporate events.

The Stock Price Condition was triggered for the periods from October 1, 2020 through December 31, 2018, if the last reported sale price of our common stock for at least 20 trading days (whether or not consecutive) during the last 30 consecutive trading days of the immediately preceding fiscal quarter is greater than or equal to 130% of the conversion price of the 2022 Convertible Notes on each applicable trading day;

during the five-business day period following any five consecutive trading day period in which the trading price for the 2022 Convertible Notes is less than 98% of the product of the last reported sale price of our common stock2020 and ~~the conversion rate for the 2022 Convertible Notes on each such trading day; or~~

~~upon the occurrence of specified corporate events.~~

~~Gogo Inc. and Subsidiaries~~

~~Notes to Unaudited Condensed Consolidated Financial Statements – (Continued)~~

~~None of the above events allowing for conversion prior to~~ January ~~15, 2022 occurred during the three month period ended~~1, 2021 through March 31, ~~2020 or the year ended December 31, 2019.~~2021. Regardless of whether any of the foregoing circumstances occurs, a holder may convert its 2022 Convertible Notes, in multiples of $1,000 principal amount, at any time on or after January 15, 2022 until the second scheduled trading day immediately preceding May 15, 2022.

In addition, if we undergo a fundamental change (as defined in the indenture governing the 2022 Convertible Notes), holders may, subject to certain conditions, require us to repurchase their 2022 Convertible Notes for cash at a price equal to 100% of the principal amount of the 2022 Convertible Notes to be purchased, plus any accrued and unpaid interest. In addition, following a make-whole fundamental change, we will increase the conversion rate in certain circumstances for a holder who elects to convert its 2022 Convertible Notes in connection with such make-whole fundamental change.

~~2020 Convertible Notes~~

On March 3, 2015, we issued $340.0 million aggregate principal amount of 3.75% Convertible Senior Notes due 2020 (the “2020 Convertible Notes”) in a private offering to qualified institutional buyers, pursuant to Rule 144A under the Securities Act. We granted an option to the initial purchasers to purchase up to an additional $60.0 million aggregate principal amount of 2020 Convertible Notes to cover over-allotments, of which $21.9 million was subsequently exercised during March 2015, resulting in a total issuance of $361.9 million aggregate principal amount of 2020 Convertible Notes. The 2020 Convertible Notes that were not repurchased prior to maturity, as described below, matured on March 1, 2020. We paid interest on the 2020 Convertible Notes semi-annually in arrears on March 1 and September 1 of each year from September 1, 2015 through March 1, 2020. In November 2018, in connection with the issuance of the 2022 Convertible Notes, we repurchased $199.9 million outstanding principal amount of the 2020 Convertible Notes at par value. As a result of the repurchase, the carrying value of the 2020 Convertible Notes was adjusted by $17.9 million to face value and included in the loss on extinguishment of debt in our consolidated statements of operations for the year ended December 31, 2018.

On April 18, 2019, we commenced a cash tender offer (the “Tender Offer”) to purchase any and all of the outstanding 2020 Convertible Notes for an amount equal to $1,000 per $1,000 principal amount of 2020 Convertible Notes purchased, plus accrued and unpaid interest from the last interest payment date on the 2020 Convertible Notes to, but not including, the date of payment for the 2020 Convertible Notes accepted in the Tender Offer. The Tender Offer expired on May 15, 2019, resulting in the purchase of $159.0 million of outstanding 2020 Convertible Notes. As a result of the Tender Offer, the carrying value of the 2020 Convertible Notes was adjusted by $8.5 million to face value and unamortized deferred financing costs of $0.6 million were expensed. These two items are included in the loss on extinguishment of debt in our consolidated statements of operations for the year ended December 31, 2019. During September 2019, we purchased an additional $0.5 million of outstanding 2020 Convertible Notes. The remaining $2.5 million of outstanding 2020 Convertible Notes matured on March 1, 2020 and we repaid the remaining outstanding aggregate principle amount of the 2020 Convertible Notes, plus accrued and unpaid interest, in order to satisfy our obligations in full and retire the securities.

~~The $361.9 million of proceeds received from the issuance of the 2020 Convertible Notes was initially allocated between long-term debt (the liability component) at $261.9 million and additionalpaid-in~~ capital (the equity component) at $100.0 million, within the consolidated balance sheet. The fair value of the liability component was measured using rates determined for similar debt instruments without a conversion feature. The carrying amount of the equity component, representing the conversion option, was determined by deducting the fair value of the liability component from the aggregate face value of the 2020 Convertible Notes. If we or the holders of 2020 Convertible Notes elected not to settle the debt through conversion, we were required to settle the 2020 Convertible Notes at face value. Therefore, the liability component was accreted up to the face value of the 2020 Convertible Notes, which resulted in additional~~non-cash~~ interest expense being recognized in the consolidated statements of operations (see Note 11, “Interest Costs,” for additional information). The effective interest rate on the 2020 Convertible Notes, including accretion of the notes to par and debt issuance cost amortization, was approximately 11.5%.

As noted above, the 2020 Convertible Notes were no longer outstanding upon maturity on March 1, 2020. As of December 31, 2019, the outstanding principal on the 2020 Convertible Notes and the net carrying amount of the liability component was $2.5 million and the unamortized debt discount was zero.

~~Gogo Inc. and Subsidiaries~~

~~Notes to Unaudited Condensed Consolidated Financial Statements – (Continued)~~

We incurred approximately $10.4 million of issuance costs related to the issuance of the 2020 Convertible Notes, of which $7.5 million and $2.9 million were recorded to deferred financing costs and additional~~paid-in~~ capital, respectively, in proportion to the allocation of the proceeds of the 2020 Convertible Notes. The $7.5 million recorded as deferred financing costs on our consolidated balance sheet was amortized over the term of the 2020 Convertible Notes using the effective interest method. As of December 31, 2019, the balance of unamortized deferred financing costs related to the 2020 Convertible Notes was zero. Total amortization expense of the deferred financing costs was $0.2 million for the three month period ended March 31, 2019 and is included in interest expense in the unaudited condensed consolidated statements of operations. See Note 11, “Interest Costs,” for additional information.

The 2020 Convertible Notes had an initial conversion rate of 41.9274 common shares per $1,000 principal amount of 2020 Convertible Notes, which was equivalent to an initial conversion price of approximately $23.85 per share of our common stock. The shares of common stock subject to conversion were excluded from diluted earnings per share calculations under the~~if-converted~~ ~~method as their impact was anti-dilutive.~~

Forward Transactions

In connection with the issuance of the 2020 Convertible Notes, we paid approximately $140 million to enter into prepaid forward stock repurchase transactions (the “Forward Transactions”) with certain financial institutions (the “Forward Counterparties”), pursuant to which we purchased approximately 7.2 million shares of common stock for settlement on or around the March 1, 2020 maturity date for the 2020 Convertible Notes, subject to the ability of each Forward Counterparty to elect to settle all or a portion of its Forward Transactions early.

On December 11, 2019, we entered into an amendment to one of the Forward Transactions (the “Amended and Restated Forward Transaction”) to extend the expected settlement date with respect to approximately 2.1 million shares of common stock held by one of the Forward Counterparties, JPMorgan Chase Bank, National Association (the “2022 Forward Counterparty”), to correspond with the May 15, 2022 maturity date for the 2022 Convertible Notes. In the future, we may request that the 2022 Forward Counterparty modify the settlement terms of the Amended and Restated Forward Transaction to provide that, in lieu of the delivery of the applicable number of shares of our common stock to us to settle a portion of the Amended and Restated Forward Transaction in accordance with its terms, the 2022 Forward Counterparty would pay to us the net proceeds from the sale by the 2022 Forward Counterparty (or its affiliate) of a corresponding number of shares of our common stock in a registered offering (which may include block sales, sales on the NASDAQ Global Select Market, sales in theover-the-counter market, sales pursuant to negotiated transactions or otherwise, at market prices prevailing at the time of sale or at negotiated prices). Any such sales could potentially decrease (or reduce the size of any increase in) the market price of our common stock. The 2022 Forward Counterparty is not required to effect any such settlement in cash in lieu of delivery of shares of our common stock and, if we request that the 2022 Forward Counterparty effect any such settlement, it will be entered into in the discretion of the 2022 Forward Counterparty on such terms as may be mutually agreed upon at the time. As a result of the Forward Transactions, total shareholders’ equity within our consolidated balance sheet was reduced by approximately $140 million. ~~During~~In March 2020, approximately 5.1 million shares of common stock were delivered to us in connection with the Forward ~~Transactions (as defined~~Transactions. The approximately 2.1 million shares of common stock remaining under the Amended and ~~described in Note 10, “Long-Term Debt~~Restated Forward Transaction are treated as retired shares for basic and ~~Other Liabilities”). We accounted for these shares as Treasury Stock and reclassified $98.9 million from AdditionalPaid-In~~ ~~Capital to Treasury Stock, at cost, in our unaudited condensed consolidated balance sheet.~~diluted EPS purposes although they remain legally outstanding.

~~Restricted Cash~~ - Our restricted cash balances were $5.2 million and $7.7 million, respectively, as of March 31, 2020 and December 31, 2019 and primarily consist of letters of credit. Certain of the letters of credit require us to maintain restricted cash accounts in a similar amount, and are issued for the benefit of the landlords at our current office locations in Chicago, IL, Bensenville, IL and Broomfield, CO.22

Gogo Inc. and Subsidiaries

Notes to Unaudited Condensed Consolidated Financial Statements – (Continued)

~~11.~~ On April 13, 2021, pursuant to the terms of the Amended and Restated Forward Transaction, the 2022 Forward Counterparty delivered approximately 1.5 million shares of common stock to Gogo Inc. Following settlement, 575,100 shares of common stock remain subject to the Amended and Restated Forward Transaction.

Restricted Cash

Our restricted cash balances were $0.5 million as of both March 31, 2021 and December 31, 2020, consisting of a letter of credit issued for the benefit of the landlord of our current office location in Broomfield, CO.

11.	Interest Costs

We capitalize a portion of our interest on funds borrowed during the active construction period of major capital projects. Capitalized interest is added to the cost of the underlying assets and amortized over the useful lives of the assets.

The following is a summary of our interest costs for the three month periods ended ~~Mach~~March 31, 2021 and 2020 ~~and 2019~~(in thousands):


	For the Three Months					For the Three Months
	Ended March 31,					Ended March 31,
	2020		2019			2021		2020
Interest costs charged to expense	$	26,429	$	26,531		$	27,507	$	26,398
Amortization of deferred financing costs		1,419		1,249			1,703		1,419
Accretion of debt discount		3,326		5,534			84		3,326
Amortization of debt premium		—		(760	)

Interest expense		31,174		32,554			29,294		31,143
Interest costs capitalized to property and equipment		—		4
Interest costs capitalized to software		89		125			112		89

Total interest costs	$	31,263	$	32,683		$	29,406	$	31,232

12.Leases

Operating and Financing Leases— We determine whether a contract contains a lease at contract inception. For leases subsequent to adoption of ASC 842, lease liabilities are calculated using a discount rate based on our incremental borrowing rate at lease commencement. We have operating lease agreements for certain facilities and equipment as well as tower space and base stations. Certain tower space leases have renewal option terms that have been deemed to be reasonably certain to be exercised. These renewal options extend a lease up to 20 years. We recognize operating lease expense on a straight-line basis over the lease term. As of March 31, ~~2020,~~2021, there ~~are~~were no significant leases which have not commenced.

The following is a summary of our lease expense included in the unaudited condensed consolidated statements of operations(in thousands):


	For the Three		For the Three		For the Three			For the Three
	Months Ended		Months Ended		Months Ended			Months Ended
	March 31, 2020		March 31, 2019		March 31, 2021			March 31, 2020
Operating lease cost	$	4,857	$	4,918	$	3,078	$	2,859
Financing lease cost
Financing lease cost:
Amortization of leased assets		91		205		3		-
Interest on lease liabilities		26		11		15		-

Total lease cost	$	4,974	$	5,134	$	3,096	$	2,859

Gogo Inc. and Subsidiaries

Notes to Unaudited Condensed Consolidated Financial Statements – (Continued)

Other information regarding our leases is as follows(in thousands, except lease terms and discount rates):


	For the Three			For the Three			For the Three			For the Three
	Months Ended			Months Ended			Months Ended			Months Ended
	March 31, 2020			March 31, 2019			March 31, 2021			March 31, 2020
Supplemental cash flow information
Cash paid for amounts included in measurement of lease liabilities:
Operating cash flows used in operating leases	$	5,700		$	6,117		$	3,382		$	3,115
Operating cash flows used in financing leases		26			11		$	15		$	-
Financing cash flows used in financing leases		247			125		$	124		$	-
Non-cash items:
Operating leases obtained		7,274			279		$	618		$	2,197
Financing leases obtained							$	-		$	-
Weighted average remaining lease term
Operating leases		8 years			9 years			7 years			8 years
Financing leases		2 years			1 year			2 years			-

Weighted average discount rate
Operating leases		9.4	%		10.3	%		10.5	%		10.2	%
Financing leases		8.3	%		8.7	%		16.5	%		-

Annual future minimum lease payments as of March 31, ~~2020~~2021 (in thousands):

   Operating    Financing
Years ending December 31,    Leases    Leases
2020 (period from April 1 to December 31)
   $ 12,456    $ 529
2021
   20,566    530
2022
   18,994    451
2023
   15,023    —
2024
   11,451    —
Thereafter
   56,550    —




Total future minimum lease payments
   135,040    1,510
Less: Amount representing interest
   (42,581 )    (124 )




Present value of net minimum lease payments
   $ 92,459    $ 1,386




Reported as of March 31, 2020

Accrued liabilities
   $ 9,484    $ 543
Non-current operating lease liabilities
   82,975    —
Othernon-current liabilities
   —      843




Total lease liabilities
   $ 92,459    $ 1,386

~~Arrangements with Commercial Airlines~~— Under the turnkey model, we account for equipment transactions as operating leases of space for our equipment on the aircraft. We may be responsible for the costs of installing and/or deinstalling the equipment. Under the turnkey model, the equipment transactions involve the transfer of legal title but do not meet sales recognition for accounting purposes because the risks and rewards of ownership are not fully transferred due to our continuing involvement with the equipment, the length of the term of our agreements with the airlines, and restrictions in the agreements regarding the airlines’ use of the equipment. Under this model, we refer to the airline as a “partner.”

Under the turnkey model, the assets are recorded as airborne equipment on our unaudited condensed consolidated balance sheets, as noted in Note 7, “Composition of Certain Balance Sheet Accounts.” Any upfront equipment payments are accounted for as lease incentives and recorded as deferred airborne lease incentives on our unaudited condensed consolidated balance sheets and are recognized as a reduction of the cost of service revenue on a straight-line basis over the term of the agreement with the airline. We recognized $7.1 million and $9.0 million,

	Operating			Financing
Years ending December 31,	Leases			Leases
2021 (period from April 1 to December 31)	$	9,171		$	351
2022		11,973			428
2023		8,112			187
2024		6,274			-
2025		4,850			-
Thereafter		25,218			-
Total future minimum lease payments		65,598			966
Less: Amount representing interest		(21,046	)		(68	)
Present value of net minimum lease payments	$	44,552		$	898

Reported as of March 31, 2021
Accrued liabilities	$	8,198		$	318
Non-current operating lease liabilities		36,354			-
Other non-current liabilities		-			580
Total lease liabilities	$	44,552		$	898

~~Gogo Inc. and Subsidiaries~~

~~Notes to Unaudited Condensed Consolidated Financial Statements – (Continued)~~

13.	Commitments and Contingencies

respectively, for the three month periods ended March 31, 2020 and 2019 as a reduction to our cost of service revenue in our unaudited condensed consolidated statements of operations from the amortization of deferred airborne lease incentives. As of March 31, 2020, deferred airborne lease incentives of $30.7 million and $145.2 million, respectively, are included in current and~~non-current~~ liabilities in our unaudited condensed consolidated balance sheet. As of December 31, 2019, deferred airborne lease incentives of $26.6 million and $135.4 million, respectively, are included in current and~~non-current~~ ~~liabilities in our unaudited condensed consolidated balance sheet.~~

Under the turnkey model, the revenue share paid to our airline partners represents operating lease payments. They are deemed to be contingent rental payments, as the payments due to each airline are based on a percentage of our~~CA-NA~~ ~~andCA-ROW~~ service revenue generated from that airline’s passengers, which is unknown until realized. Therefore, we cannot estimate the lease payments due to an airline at the commencement of our contract with such airline. This rental expense is included in cost of service revenue and is partially offset by the amortization of the deferred airborne lease incentives discussed above. Such rental expenses totaled a net charge of $4.6 million and $3.7 million, respectively, for the three month periods ended March 31, 2020 and 2019.

~~13. Commitments and Contingencies~~

Contractual Commitments - We have agreements with vendors to provide us with transponder and teleport satellite services. These agreements vary in length and amount and as of March 31, 2020 commit us to purchase transponder and teleport satellite services totaling approximately $101.0 million in 2020 (April 1 through December 31), $129.9 million in 2021, $110.0 million in 2022, $90.8 million in 2023, $85.4 million in 2024 and $259.4 million thereafter.

We have agreements with various vendors under which we have remaining commitments to purchase satellite-based systems, certifications and development services. Such commitments will become payable as we receive the equipment or certifications, or as development services are provided.

~~Damages and Penalties -~~We have entered into a number of agreements with our airline partners that require us to provide a credit or pay penalties or liquidated damages to our airline partners on a per aircraft, per day or per hour basis if we are delayed in delivering our equipment, unable to install our equipment on aircraft by specified timelines or fail to comply with service level commitments. The maximum amount of future credits or payments we could be required to make under these agreements is uncertain because the amount of future credits or payments is based on certain variable inputs.

Indemnifications and Guarantees - In accordance with Delaware law, we indemnify our officers and directors for certain events or occurrences while the officer or director is, or was, serving at our request in such capacity. The maximum potential amount of future payments we could be required to make under this indemnification is uncertain and may be unlimited, depending upon circumstances. However, our Directors’ and Officers’ insurance does provide coverage for certain of these losses.

Gogo Inc. and Subsidiaries

Notes to Unaudited Condensed Consolidated Financial Statements – (Continued)

In the ordinary course of business, we may occasionally enter into agreements pursuant to which we may be obligated to pay for the failure of the performance of others, such as the use of corporate credit cards issued to employees. Based on historical experience, we believe that the risk of sustaining any material loss related to such guarantees is remote.

We have entered into a number of agreements ~~including our agreements with commercial airlines,~~ pursuant to which we indemnify the other party for losses and expenses suffered or incurred in connection with any patent, copyright, or trademark infringement or misappropriation claim asserted by a third party with respect to our equipment or services. The maximum potential amount of future payments we could be required to make under these indemnification agreements is uncertain and is typically not limited by the terms of the agreements.

~~Gogo Inc. and Subsidiaries~~

~~Notes to Unaudited Condensed Consolidated Financial Statements – (Continued)~~

was lifted in July 2019 when the U.S. Patent and Trademark Office determined that the petitioner had not met the standard of proof required to commence theinter partes review. Since the stay was lifted, discovery has been completed and motion practice continues. No date has been set for trial. We believe that the plaintiff’s claims are without merit and intend to continue to defend them vigorously. The outcome of this litigation is inherently uncertain. No amounts have been accrued for any potential losses under this matter, as we cannot reasonably predict the outcome of the litigation or any potential losses.

Securities Litigation - On June 27, 2018, a purported stockholder of the Company filed a putative class action lawsuit in the United States District Court for the Northern District of Illinois, Eastern Division styled Pierrelouis v. Gogo Inc., naming the Company, its former Chief Executive Officer and Chief Financial Officer, ~~and~~ its current Chief Financial Officer and its then-current President, Commercial Aviation as defendants purportedly on behalf of all purchasers of our securities from February 27, 2017 through May 4, 2018. The complaint asserts claims under Sections 10(b) and 20(a) of the Securities Exchange Act of 1934, as amended, and Rule10b-5 promulgated thereunder, alleging misrepresentations or omissions by us purporting to relate to ~~our 2Ku antenna’s~~the reliability of and installation and remediation ~~costs.~~costs associated with CA’s 2Ku antenna. The plaintiffs seek to recover from us and the individual defendants an unspecified amount of damages. In December 2018 the plaintiffs filed an amended complaint and in February 2019, we filed a motion to dismiss such amended complaint. In October 2019 the judge granted the motion to dismiss on two independent grounds, finding that plaintiffs failed to plausibly allege that defendants made materially false or misleading statements and that plaintiffs failed to plead with particularity that defendants acted with scienter. The amended complaint was dismissed without prejudice, and in December 2019, defendants filed a second amended complaint. In ~~February~~July 2020, plaintiffs filed a motion requesting leave to file a proposed third amendment complaint, which was granted by the Court. Plaintiffs proceeded to file the third amended complaint in July 2020 and we filed a motion to dismiss ~~such second amended complaint and that~~in September 2020. In April 2021, the Court denied our motion ~~is pending.~~to dismiss. We believe that the claims are without merit and intend to continue to defend them vigorously. In accordance with Delaware law, we will indemnify the individual named defendants for their defense costs and any damages they incur in connection with the suit. We have filed a claim with the issuer of our Directors’ and Officers’ insurance policy with respect to this suit. No amounts have been accrued for any potential losses under this matter, as we cannot reasonably predict the outcome of the litigation or any potential losses.

Derivative Litigation - On September 25, 2018 and September 26, 2018, two purported stockholders of the Company filed substantively identical derivative lawsuits in the United States District Court for the Northern District of Illinois, Eastern Division, styled Nanduri v. Gogo Inc. and Hutsenpiller v. Gogo Inc., respectively. Both lawsuits were purportedly brought derivatively on behalf of us and name us as a nominal defendant and name as defendants each member of the Company’s Board of Directors, its former Chief Executive Officer and Chief Financial Officer and its current Chief Executive Officer, Chief Financial Officer and President, Commercial Aviation. The complaints assert claims under Section 14(a) of the Securities Exchange Act of 1934, breach of fiduciary duty, unjust enrichment, and waste of corporate assets, and allege misrepresentations or omissions by us purporting to relate to ~~our~~the 2Ku antenna’s reliability and installation and remediation costs, as well as allegedly excessive bonuses, stock options, and other compensation paid to current Officers and Directors and excessive severance paid to former Officers. The two lawsuits were consolidated and ~~are~~were stayed ~~until~~pending a final disposition of the motion to dismiss in the class action suit. Since, as discussed above, the court in the class action suit denied the motion to dismiss, we expect the stay to be lifted and the litigation to resume. We believe that the claims are without merit and intend to defend them vigorously if the litigation resumes. The plaintiffs seek to recover, on our behalf, an unspecified amount of damages from the individual defendants. We have filed a claim with the issuer of our Directors’ and Officers’ insurance policy with respect to these suits. No amounts have been accrued for any potential costs under this matter, as we cannot reasonably predict the outcome of the litigation or any potential costs.

~~14.~~ 25

Gogo Inc. and Subsidiaries

Notes to Unaudited Condensed Consolidated Financial Statements – (Continued)

14.	Fair Value of Financial Assets and Liabilities

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 in active markets;

•

Level 2 - defined as observable inputs other than Level 1 prices 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.

~~Gogo Inc. and Subsidiaries~~

~~Notes to Unaudited Condensed Consolidated Financial Statements – (Continued)~~

Long-Term Debt:

~~Our~~As of March 31, 2021 and December 31, 2020, our financial assets and liabilities that are disclosed but not measured at fair value include the 2024 Senior Secured Notes and the 2022 ~~Convertible Notes, and, while outstanding, the 2020~~ Convertible Notes, which are reflected on the consolidated balance sheet at cost. The fair value measurements are classified as Level 2 within the fair value hierarchy since they are based on quoted market prices of our instruments in markets that are not active. We estimated the fair value of the 2024 Senior Secured Notes and the 2022 ~~Convertible Notes, and, while outstanding, the 2020~~ Convertible Notes by calculating the upfront cash payment a market participant would require to assume these obligations. The upfront cash payments used in the calculations of fair value on our March 31, ~~2020~~2021 unaudited condensed consolidated balance sheet, excluding any issuance costs, are the amount that a market participant would be willing to lend at March 31, ~~2020~~2021 to an entity with a credit rating similar to ours and that would allow such an entity to achieve sufficient cash inflows to cover the scheduled cash outflows under the 2024 Senior Secured Notes and the 2022 ~~Convertible Notes and, while outstanding, the 2020~~ Convertible Notes. The calculated fair value of each of the 2022 ~~Convertible Notes and, while outstanding, the 2020~~ Convertible Notes is correlated to our stock price and as a result, significant changes to our stock price could have a significant impact on ~~their~~the calculated fair values.

The fair value and carrying value of long-term debt as of March 31, ~~2020~~2021 and December 31, ~~2019~~2020 were as follows(in thousands):

											March 31, 2021						December 31, 2020
	March 31, 2020					December 31, 2019					Fair Value ⁽¹⁾		Carrying Value				Fair Value ⁽¹⁾		Carrying Value
	Fair Value *⁽¹⁾*		Carrying Value			Fair Value *⁽¹⁾*		Carrying Value
2024 Senior Secured Notes	$	731,000	$	921,310	⁽²⁾	$	982,000	$	921,137	⁽²⁾	$	1,026,000	$	973,623	⁽²	⁾	$	1,045,000	$	973,539	⁽²	⁾
2022 Convertible Notes		177,000		205,020	⁽³⁾		297,000		201,868	⁽³⁾	$	391,000	$	208,514			$	404,000	$	215,122	⁽³	⁾
2020 Convertible Notes		—		—			2,498		2,498

(1) Fair value amounts are rounded to the nearest million.

(2) Carrying value of the 2024 Senior Secured Notes reflects the unaccreted debt discount of $1.4 million and $1.5 million, respectively, as of March 31, 2021 and December 31, 2020. See Note 10, “Long-Term Debt and Other Liabilities,” for further information.

(3) Carrying value of the 2022 Convertible Notes reflects the unaccreted debt discount of $22.6 million as of December 31, 2020. See Note 10, “Long-Term Debt and Other Liabilities,” for further information.

~~(1)~~

15.

~~Fair value amounts are rounded to the nearest million, except for the 2020 Convertible Notes, as of December 31, 2019.~~Income Tax

~~(2)~~

Carrying value of the 2024 Senior Secured Notes reflects the unaccreted debt discount of $3.7 million and $3.9 million, respectively, as of March 31, 2020 and December 31, 2019. See Note 10, “Long-Term Debt and Other Liabilities,” for further information.

~~(3)~~

Carrying value of the 2022 Convertible Notes reflects the unaccreted debt discount of $32.7 million and $35.9 million, respectively, as of March 31, 2020 and December 31, 2019. See Note 10, “Long-Term Debt and Other Liabilities,” for further information.

~~We haveheld-to-maturity~~ ~~financial instruments where carrying value approximates fair value. There were no fair value adjustments to these financial instruments during the three month periods ended March 31, 2020 and 2019.~~

~~15. Income Tax~~

The effective income tax rates for continuing operations for the ~~three month~~three-month periods ended March 31, 2021 and 2020 ~~and 2019~~ were ~~(0.2)~~(0.6)% and ~~(1.2)~~(1.5)%, respectively. For the three month periods ended March 31, ~~2020~~2021 and ~~2019,~~2020, our income tax expense was not significant primarily due to the full valuation allowance against our net deferred tax assets.

We are subject to income taxation in the United States ~~various states within the United States, Canada, Switzerland, Japan, Mexico, Brazil, Singapore, the United Kingdom, Hong Kong, Australia, China, India, France, Germany~~ and ~~the Netherlands.~~Canada. With few exceptions, as of March 31, ~~2020,~~2021, we are no longer subject to U.S. federal, state, local or foreign examinations by tax authorities for years before ~~2016.~~2017.

We record penalties and interest relating to uncertain tax positions in the income tax provision line item in the unaudited condensed consolidated statement of operations. NoNaN penalties or interest related to uncertain tax positions were recorded for the ~~three month~~three-month periods ended March 31, ~~2020~~2021 and ~~2019.~~2020. As of March 31, ~~2020~~2021 and December 31, ~~2019,~~2020, we did not have a liability recorded for interest or potential penalties.

~~We do not expect a change in the unrecognized tax benefits within the next 12 months.~~26

~~16. Business Segments and Major Customers~~

~~We operate our business through three operating segments: Commercial Aviation North America, or“CA-NA,”~~ ~~Commercial Aviation Rest of World, or“CA-ROW,”~~ ~~and Business Aviation, or “BA.” See Note 1, “Basis of Presentation,” for further information regarding our segments.~~

Gogo Inc. and Subsidiaries

Notes to Unaudited Condensed Consolidated Financial Statements – (Continued)

~~The accounting policies~~As a result of the ~~operating segments are~~Refinancing and the ~~same~~exchange of certain outstanding 2022 Convertible Notes, we expect our interest expense to decrease. We will consider the decrease in interest expense as ~~those described in Note 2, “Summary of Significant Accounting Policies,” in our 201910-K.~~ ~~Intercompany transactions between segments are excluded as they are not included in management’s performance review~~we assess whether we need to maintain all, or part, of the ~~segments. For the three month periods ended March 31, 2020 and 2019,~~valuation allowance on our ~~foreign revenue accounted for less than 15% of our consolidated revenue. We do not segregate~~deferred tax assets between segments for internal reporting. Therefore, asset-related information has not been presented. Additionally, assets outside of the United States totaled less than 15% of our unaudited condensed consolidated assets as of March 31, 2020 and December 31, 2019, respectively. For our airborne assets, we consider only those assets installed in aircraft associated with international commercial airline partners to be owned outside of the United States.

Management evaluates performance and allocates resources to each segment based on reportable segment profit (loss), which is calculated internally as net income (loss) attributable to common stock before unallocated corporate costs, interest expense, interest income, income taxes, depreciation and amortization, and certain~~non-cash~~ items (including stock-based compensation expense, amortization of deferred airborne lease incentives, amortization of STC costs, impairment of long-lived assets, impairment of cost-basis investment and proceeds from litigation settlement) and other income (expense). Reportable segment profit (loss) is a measure of performance reported to the chief operating decision maker for purposes of making decisions about allocating resources to the segments and evaluating segment performance. In addition, reportable segment profit (loss) is included herein in conformity with ASC~~280-10,~~~~Segment Reporting~~. Management believes that reportable segment profit (loss) provides useful information for analyzing and evaluating the underlying operating results of each segment. However, reportable segment profit (loss) should not be considered in isolation or as a substitute for net income (loss) attributable to common stock or other measures of financial performance prepared in accordance with GAAP. Additionally, our computation of reportable segment profit (loss) may not be comparable to other similarly titled measures computed by other companies.

~~As noted in our 201910-K,~~ during the fourth quarter of 2019, we revised the presentation of our reportable segments’ operating results in order to exclude the impact of certain corporate costs from the calculation of total reportable segment profit (loss). As such, all amounts for the three month period ~~ended March 31, 2019 have been recast~~ending June 30, 2021.

Presently, We do 0t require a reserve for unrecognized tax benefits, nor do we foresee any change to ~~conform to~~that position during the ~~current year’s presentation. Beginning in 2020, we adopted a new allocation methodology for the ATG network costs utilizing aircraft online, pricing and usage for each ofCA-NA~~ ~~and BA. Under this new methodology, BA will continue to be allocated the majority of the ATG network costs.~~

~~Information regarding our reportable segments is as follows (~~~~in thousands~~):next 12 months.

   For the Three Months Ended
   March 31, 2020
   CA-NA    CA-ROW    BA    Total
Service revenue
   $ 73,828    $ 19,228    $ 57,726    $ 150,782
Equipment revenue
   6,308    14,184    13,201    33,693








Total revenue
   $ 80,136    $ 33,412    $ 70,927    $ 184,475








Reportable segment profit (loss)
   $ 15,883    $ (17,371 )    $ 35,854    $ 34,366








   For the Three Months Ended
   March 31, 2019
   CA-NA    CA-ROW    BA    Total
Service revenue
   $ 92,027    $ 19,772    $ 53,213    $ 165,012
Equipment revenue
   4,042    13,159    17,336    34,537








Total revenue
   $ 96,069    $ 32,931    $ 70,549    $ 199,549








Reportable segment profit (loss)
   $ 30,662    $ (18,193 )    $ 33,755    $ 46,224

~~Gogo Inc. and Subsidiaries~~

~~Notes to Unaudited Condensed Consolidated Financial Statements – (Continued)~~

~~A reconciliation of total reportable segment profit (loss) to the relevant consolidated amounts is as follows (~~~~in thousands~~):

   For the Three Months
   Ended March 31,
   2020    2019
CA-NA segment profit
   $ 15,883    $ 30,662
CA-ROW segment loss
   (17,371 )    (18,193 )
BA segment profit
   35,854    33,755




Total reportable segment profit
   34,366    46,224
Unallocated corporate costs⁽¹⁾
   (8,636 )    (8,333 )
Interest income
   606    1,149
Interest expense
   (31,174 )    (32,554 )
Depreciation and amortization
   (32,670 )    (30,749 )
Amortization of deferred airborne lease incentives
   7,071    8,953
Amortization of STC costs
   (807 )    (320 )
Stock-based compensation expense
   (3,995 )    (4,327 )
Impairment of long-lived assets
   (46,389 )    —
Impairment of cost-basis investment
   (3,000 )    —
Proceeds from litigation settlement
   —      3,215
Other income
   7    150




Loss before income taxes
   $ (84,621 )    $ (16,592 )

~~(1)~~

16.

~~Represents costs that are not directly attributable to the reportable segments, comprised primarily of the costs of corporate functions, including executive, legal, finance~~Employee Retirement and ~~human resources, but excluding stock-based compensation expense for those functions of $1.6 million and $1.5 million, respectively, for the three month periods ending March 31, 2020 and 2019.~~Postretirement Benefits

~~Major Customers and Airline Partnerships~~— Revenue earned from Delta Air Lines and its passengers accounted for approximately 28% and 29% of consolidated revenue, respectively, for the three month periods ended March 31, 2020 and 2019. Delta Air Lines accounted for approximately 16% and 11% of consolidated accounts receivable, respectively, as of March 31, 2020 and December 31, 2019.

~~17. Employee Retirement and Postretirement Benefits~~

Stock-Based Compensation —As of March 31, ~~2020,~~2021, we maintained three stock-based incentive compensation plans (“Stock Plans”), as well as an Employee Stock Purchase Plan (“ESPP”). See Note ~~12,~~14, “Stock-Based Compensation,” in our ~~2019~~2020 10-K for further information regarding these plans. Most of our equity grants are awarded on an annual basis.

Effective March 17, 2020, the performance-vesting conditions for all outstanding options to purchase shares of common stock and restricted stock units (“RSUs”) subject to both service and performance vesting requirements that were granted in 2017, 2018, and 2019 were eliminated. The performance modification resulted in the immediate issuance of 186,139 shares of common stock, corresponding to the portion of RSUs for which service-vesting dates had previously elapsed.

For the ~~three month~~three-month period ended March 31, ~~2020,~~2021, options to purchase ~~1,121,402~~26,726 shares of common stock were granted, nooptions to purchase 177,646 shares of common stock were exercised, 0 options to purchase shares of common stock were ~~exercised,~~forfeited and 0 options to purchase ~~25,747~~ shares of common stock ~~were forfeited, and~~expired. The fair value of the options ~~to purchase 1,906,849 shares of common stock expired.~~

~~For~~granted during the ~~three month~~three-month period ended March 31, ~~2020, 2,953,496 RSUs were granted, 752,342 RSUs vested (of~~2021 was approximately $0.2 million, which ~~186,139 were RSUs that fully and immediately vested in connection with the performance modification) and 87,138 RSUs were forfeited.~~will be recognized over a period of one year.

For the ~~three month~~three-month period ended March 31, ~~2020,~~2021, 2,106,134 RSUs were granted, 863,056 RSUs vested and 32,199 RSUs were forfeited. The fair value of the RSUs granted during the three-month period ended March 31, 2021 was approximately $19.5 million, which will be recognized over a period of four years.

For the three-month period ended March 31, 2021, 8,227 restricted shares vested and no shares were cancelled.

~~Gogo Inc. and Subsidiaries~~

~~Notes to Unaudited Condensed Consolidated Financial Statements – (Continued)~~

These shares are deemed issued as of the date of grant, but not outstanding until they vest.

For the ~~three month~~three-month period ended March 31, ~~2020, 124,996 Deferred Stock Units~~2021, 24,323 deferred stock units were granted and ~~26,508~~87,339 vested.

~~For~~ The fair value of the ~~three month~~deferred stock units granted during the three-month period ended March 31, ~~2020, 87,681~~2021 was approximately $0.2 million, which will be recognized over a period of one year.

For the three-month period ended March 31, 2021, 11,637 shares of common stock were issued under ~~the ESPP.~~

~~On April 29, 2020,~~ our ~~stockholders approved a stock option exchange program that, when commenced, will provide eligible employees (which includes all current employees and executive officers and excludes allnon-executive~~ ~~members of our board of directors) with the opportunity to exchange certain eligible options for a lesser number of replacement options, subject to certain terms and conditions.~~Employee Stock Purchase Plan.

The following is a summary of our stock-based compensation expense by operating expense line in the unaudited condensed consolidated statements of operations, excluding stock-based compensation expense for discontinued operations (in thousands):


	For the Three Months				For the Three Months
	Ended March 31,				Ended March 31,
	2020		2019		2021		2020
Cost of service revenue	$	477	$	428	$	31	$	33
Cost of equipment revenue		73		71		47		73
Engineering, design and development		753		774		107		156
Sales and marketing		752		970		148		329
General and administrative		1,940		2,084		1516		1,731

Total stock-based compensation expense	$	3,995	$	4,327	$	1,849	$	2,322

401(k) Plan— Under our 401(k) plan, all employees who are eligible to participate are entitled to maketax-deferred contributions, subject to Internal Revenue Service limitations. We match 100% of the employee’s first 4% of contributions made, subject to annual limitations. Our matching contributions were ~~$1.2~~$0.4 million and ~~$1.2~~$0.3 million, respectively, during the ~~three month~~three-month periods ended March 31, ~~2020~~2021 and ~~2019.~~2020.

17.	~~18.~~ Research and Development Costs

Expenditures for research and development are charged to expense as incurred and totaled ~~$15.7~~$5.5 million and ~~$14.1~~$7.4 million, respectively, during the ~~three month~~three-month periods ended March 31, ~~2020~~2021 and ~~2019.~~2020. Research and development costs are reported as ~~a component of~~ engineering, design and development expenses in our unaudited condensed consolidated statements of operations.

SPECIAL NOTE REGARDING FORWARD-LOOKING STATEMENTS

Certain statements in this report may constitute “forward-looking” statements within the meaning of the Private Securities Litigation Reform Act of 1995. These forward-looking statements include, without limitation, statements regarding our industry, business strategy, plans, goals and expectations concerning our market position, international expansion, future technologies, future operations, margins, profitability, future efficiencies, capital expenditures, liquidity and capital resources and other financial and operating information. When used in this discussion, the words “anticipate,” “assume,” “believe,” “budget,” “continue,” “could,” “estimate,” “expect,” “forecast,” “intend,” “may,” “plan,” “potential,” “predict,” “project,” “should,” “will,” “future” and the negative of these or similar terms and phrases are intended to identify forward-looking statements in this Quarterly Report on Form10-Q.

Forward-looking statements reflect our current expectations regarding future events, results or outcomes. These expectations may or may not be realized. Although we believe the expectations reflected in the forward-looking statements are reasonable, we can give you no assurance these expectations will prove to have been correct. Some of these expectations may be based upon assumptions, data or judgments that prove to be incorrect. Actual events, results and outcomes may differ materially from our expectations due to a variety of known and unknown risks, uncertainties and other factors. Although it is not possible to identify all of these risks and factors, they include, among others, the following:

~~the duration for which and the extent to which theCOVID-19~~ pandemic continues to impact demand for commercial and business aviation travel globally, including as a result of governmental restrictions on travel and business and social gatherings and overall economic conditions;
•
our ability to attract and retain customers and generate revenue from the provision of our connectivity and entertainment services;

~~the failure to successfully implement our cost reduction plan and other measures taken to mitigate the impact ofCOVID-19~~ ~~on our business and financial condition, including efforts to renegotiate contractual terms with certain suppliers and customers;~~
•
our reliance on our key OEMs and dealers for equipment sales;

the loss of, or failure to realize the anticipated benefits from, agreements with our airline partners or customers on a timely basis or any failure to renew any existing agreements upon expiration or termination including the results of our ongoing discussions with Delta Air Lines with respect to its transition to free service, which may involve a decision to pursue supplier diversification for its domestic mainline fleet;
•
our ability to develop and deploy Gogo 5G;

~~the failure to maintain airline and passenger satisfaction with our equipment or our service;~~
•
our ability to compete effectively with other current or future providers of in-flight connectivity services and other products and services that we offer, including on the basis of price and performance;

~~any inability to timely and efficiently deploy and operate our 2Ku service or implement our technology roadmap, including developing and deploying upgrades and installations ofour ATG-4 and~~ 2Ku technologies, Gogo 5G, any technology to which our ATG or satellite networks evolve and other new technologies, for any reason, including technological issues and related remediation efforts, changes in regulations or regulatory delays affecting us, or our suppliers, some of whom are single source, or the failure by our airline partners or customers to roll out equipment upgrades or new services or adopt new technologies in order to support increased demand and network capacity constraints, including as a result of airline partners shifting to~~a free-to-passenger business~~ ~~model;~~
•
the impact of the COVID-19 pandemic and the measures implemented to combat it;

~~the timing of deinstallation of our equipment from aircraft, including deinstallations resulting from aircraft retirements and other deinstallations permitted by certain airline contract provisions;~~
•
our ability to evaluate or pursue strategic opportunities;

~~the loss of relationships with original equipment manufacturers or dealers;~~
•
our reliance on third parties for equipment and services;

~~our ability to make our equipment factory linefit available on a timely basis;~~
•
our ability to recruit, train and retain highly skilled employees;

~~our ability to develop or purchase ATG and satellite network capacity sufficient to accommodate current and expected growth in passenger demand in North America and internationally as we expand;~~
•
the achievement of the anticipated benefits of the sale of the CA business or our ability to operate as a standalone business;

our reliance on third-party suppliers, some of whom are single source, for satellite capacity and other services and the equipment we use to provide services to commercial airlines and their passengers and business aviation customers;
•
the impact of adverse economic conditions;

~~unfavorable economic conditions in the airline industry and/or the economy as a whole;~~
•
a revocation of, or reduction in, our right to use licensed spectrum, the availability of other air-to-ground spectrum to a competitor or the repurposing by a competitor of other spectrum for air-to-ground use;

~~governmental action restricting trade with China or other foreign countries;~~
•
our use of open source software and licenses;

•

the availability of additional ATG spectrum in the United States or internationally;

•

the effects of service interruptions or delays, technology failures and equipment failures or malfunctions arising from defects or errors in our software or defects in or damage to our equipment;

our ability to expand our international or domestic operations, including our ability to grow our business with current and potential future airline partners and customers and the effect of shifts in business models, including a shift toward airlines providing free service to passengers;
•
the impact of assertions by third parties of infringement, misappropriation or other violations; our ability to innovate and provide products and services;

~~an inability to compete effectively with other current or future providers ofin-flight~~ ~~connectivity services and other products and services that we offer, including on the basis of price, service performance and linefit availability;~~
•
the impact of government regulation of the internet;

our ability to successfully develop and monetize new products and services, including those that were recently released, are currently being offered on a limited or trial basis, or are in various stages of development;
•
our possession and use of personal information;

our ability to certify and install our equipment and deliver our products and services, including newly developed products and services, on schedules consistent with our contractual commitments to customers;
•
the extent of expenses or liabilities resulting from litigation;

~~the failure of our equipment or material defects or errors in our software resulting in recalls or substantial warranty claims;~~
•
our ability to protect our intellectual property;

~~a revocation of, or reduction in, our right to use licensed spectrum, the availability of otherair-to-ground~~ ~~spectrum to a competitor or the repurposing by a competitor of other spectrum forair-to-ground~~ ~~use;~~
•
our substantial indebtedness, limitations and restrictions in the agreements governing our current and future indebtedness and our ability to service our indebtedness;

~~our use of open source software and licenses;~~

~~the effects of service interruptions or delays, technology failures and equipment failures or malfunctions arising from defects or errors in our software or defects in or damage to our equipment;~~
•
fluctuations in our operating results;

~~the limited operating history of ourCA-ROW~~ ~~segment;~~

~~contract changes and implementation issues resulting from decisions by airlines to transition from the turnkey model to the airline-directed model or vice versa;~~

~~increases in our projected capital expenditures due to, among other things, unexpected costs incurred in connection with theroll-out~~ ~~of our technology roadmap or our international expansion;~~

~~compliance with U.S. and foreign government regulations and standards, including those related to regulation of the Internet, includinge-commerce~~ or online video distribution changes, and the installation and operation of satellite equipment and our ability to obtain and maintain all necessary regulatory approvals to install and operate our equipment in the United States and foreign jurisdictions;

~~our, or our technology suppliers’, inability to effectively innovate;~~

~~obsolescence of, and our ability to access, parts, products, equipment and support services compatible with our existing products and technologies;~~

costs associated with defending existing or future intellectual property infringement, securities and derivative litigation and other litigation or claims and any negative outcome or effect of pending or future litigation;

~~our ability to protect our intellectual property;~~

~~breaches of the security of our information technology network, resulting in unauthorized access to our customers’ credit card information or other personal information;~~

~~our substantial indebtedness, including additional borrowings pursuant to the CARES Act, if any;~~

~~limitations and restrictions in the agreements governing our current and future indebtedness and our ability to service our indebtedness;~~

~~our ability to obtain additional financing for operations, or financing intended to refinance our existing indebtedness, on acceptable terms or at all, including any loans pursuant to the CARES Act;~~

~~fluctuations in our operating results;~~

~~our ability to attract and retain customers and to capitalize on revenue from our platform;~~

~~the demand for and market acceptance of our products and services;~~

~~changes or developments in the regulations that apply to us, our business and our industry, including changes or developments affecting the ability of passengers or airlines to use ourin-flight~~ ~~connectivity services;~~

a future act or threat of terrorism, cyber-security attack or other events that could result in adverse regulatory changes or developments as referenced above, or otherwise adversely affect our business and industry;

~~our ability to attract and retain qualified employees, including key personnel, including in light of recent furloughs and salary reductions;~~

~~the effectiveness of our marketing and advertising and our ability to maintain and enhance our brands;~~

~~our ability to manage our growth in a cost-effective manner and integrate and manage acquisitions;~~

~~compliance with anti-corruption laws and regulations in the jurisdictions in which we operate, including the Foreign Corrupt Practices Act and the (U.K.) Bribery Act 2010;~~

~~restrictions on the ability of U.S. companies to do business in foreign countries, including, among others, restrictions imposed by the U.S. Office of Foreign Assets Control;~~

~~difficulties in collecting accounts receivable;~~

~~our ability to successfully implement improvements to systems, operations, strategy and procedures needed to support our growth and to effectively evaluate and pursue strategic opportunities; and~~

~~other risks and factors listed under “Risk Factors” in our Annual Report on Form10-K~~ ~~for the year ended December 31, 2019, as filed with the Securities and Exchange Commission (“SEC”) on March 13, 2020 (the “201910-K”)~~ ~~and in Item 1A of this report.~~

•

the utilization of our tax losses; and other risks and factors listed under “Risk Factors” in our Annual Report on Form 10-K for the year ended December 31, 2020, as filed with the Securities and Exchange Commission (“SEC”) on March 11, 2021 (the “2020 10-K”) and in Item 1A of this report.

Any one of these factors or a combination of these factors could materially affect our financial condition or future results of operations and could influence whether any forward-looking statements contained in this report ultimately prove to be accurate. Our forward-looking statements are not guarantees of future performance, and you should not place undue reliance on them. All forward-looking statements speak only as of the date made and we undertake no obligation to update or revise publicly any forward-looking statements, whether as a result of new information, future events or otherwise.

In addition, while we do, from time to time, communicate with securities analysts, it is against our policy to disclose to them any materialnon-public information or other confidential information. Accordingly, stockholders should not assume that we agree with any statement or report issued by any analyst irrespective of the content of the statement or report. Thus, to the extent that reports issued by securities analysts contain any projections, forecasts, or opinions, such reports are not our responsibility.

ITEM 2.

MANAGEMENT’S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS

The following discussion and analysis is intended to help the reader understand our business, financial condition, results of operations, liquidity and capital resources. You should read this discussion in conjunction with our unaudited condensed consolidated interim financial statements and the related notes contained elsewhere in this Quarterly Report on Form10-Q. Unless the context otherwise indicates or requires, the terms “we,” “our,” “us,” “Gogo,” and the “Company,” as used in this report, refer to Gogo Inc. and its directly and indirectly owned subsidiaries as a combined entity, except where otherwise stated or where it is clear that the terms refer only to Gogo Inc. exclusive of its subsidiaries.

On December 1, 2020, we completed the previously announced sale of our commercial aviation (“CA”) business to a subsidiary of Intelsat Jackson Holdings S.A. (“Intelsat”) for a purchase price of $400 million in cash, subject to certain adjustments (the “Transaction”). As a result, all periods presented in our unaudited condensed consolidated financial statements and other portions of this Quarterly Report on Form 10-Q have been conformed to present the CA business as discontinued operations.

The statements in this discussion regarding industry outlook, our expectations regarding our future performance, liquidity and capital resources and othernon-historical statements in this discussion are forward-looking statements. These forward-looking statements are subject to numerous risks and uncertainties, including, but not limited to, the risks and uncertainties described under “Risk Factors” in the ~~2019~~2020 10-K and in Item 1A and “Special Note Regarding Forward-Looking Statements” in this report. Our actual results may differ materially from those contained in or implied by any forward-looking statements.

Our fiscal year ends December 31 and, unless otherwise noted, references to “years” or “fiscal” are for fiscal years ended December 31. See “—“— Results of Operations.”

Company Overview

Gogo ~~(“we,” “us,” “our”)~~ is the ~~global leader in providing~~world’s largest provider of broadband connectivity ~~solutions and wirelessin-flight~~ ~~entertainment to the aviation industry. We operate through the following three segments: Commercial Aviation North America, or“CA-NA,”~~ ~~Commercial Aviation Rest of World, or“CA-ROW,”~~ ~~and Business Aviation, or “BA.”~~

~~Services provided by ourCA-NA~~ ~~andCA-ROW~~ ~~businesses include Passenger Connectivity, which allows passengers to connect to the Internet from their personalWi-Fi-enabled~~ ~~devices; Passenger Entertainment, which offers passengers the opportunity to enjoy a broad selection ofin-flight~~ ~~entertainment options on their personalWi-Fi~~ ~~enabled devices; and Connected Aircraft Services (“CAS”), which offers airlines connectivity~~services for ~~various operations and currently include, among others, real-time credit card transaction processing, electronic flight bags and real-time weather information. Services are provided byCA-NA~~ ~~on commercial aircraft flying routes that generally begin and end within North America, which for this purpose includes the United States, Canada and Mexico.CA-ROW~~ ~~provides service on commercial aircraft operated by foreign-based commercial airlines and flights outside of North America for North American-based commercial airlines. The routes included in ourCA-ROW~~ ~~segment are those that begin and/or end outside of North America (as defined above) on which our international service is provided. BA providesin-flight~~ ~~Internet connectivity and other voice and data communications products and services and sells equipment forin-flight~~ ~~telecommunications to~~ the business aviation market. BAOur mission is to provide ground-like connectivity to every passenger on every flight around the globe, enabling superior passenger experiences and efficient flight operations. To accomplish our mission, we design, build and operate dedicated air-to-ground (“ATG”) networks, engineer, install and maintain in-flight systems of proprietary hardware and software, and deliver customizable connectivity and wireless entertainment services and global support capabilities to our aviation partners. Our services include ~~Gogo Biz, ourin-flight~~ ~~broadband service, Gogo Vision, ourin-flight~~ ~~entertainment service, and~~ satellite-based voice and data services made available through ~~our~~ strategic ~~alliances~~partnerships with satellite ~~companies.~~providers.

Our chief operating decision maker evaluates performance and business results for our operations, and makes resource and operating decisions, on a consolidated basis. As such, we do not present segment information in this Quarterly Report on Form 10-Q.

Impact ofCOVID-19 Pandemic

~~In December 2019, a novel strain of coronavirus(“COVID-19”)~~ ~~was reported in Wuhan, China, and the World Health Organization (the “WHO”) subsequently declared~~The COVID-19 ~~a “Public Health Emergency of International Concern.” TheCOVID-19~~ pandemic ~~has~~ caused a significant decline in ~~commercial~~international and domestic business ~~air~~aviation travel, which ~~has~~ materially and adversely affected our ~~business. Approximately 60% of our revenue comes from our two commercial airline segments,CA-NA~~ ~~andCA-ROW.~~ ~~Passenger traffic declined significantly~~business in ~~April 2020 compared to~~2020. Beginning in March 2020, resulting in an expected significant reduction in service revenue in April 2020 as compared to the monthly service revenue in the first quarter of 2020. The approximate remaining 40% of our revenue comes from our business ~~aviation segment, BA, which has also seen~~saw a sharp decrease in flight ~~activity. Additionally, since many business aircraft are flying less frequently, there was~~activity, as well as an increase in requests for~~one-month~~ account suspensions and ~~a significant decrease~~decreases in new plan ~~activations in April 2020 compared to March 2020.~~

~~In response to theCOVID-19~~ ~~pandemic and resulting developments,~~activations. Though we ~~developed, and~~ continue to ~~refine on an ongoing basis, a range~~see strong signs of ~~projections based on estimated market conditions, and have implemented measures to protect our employees, ensure~~recovery from the business has adequate liquidity and maintain the value of our business segments, while at the same time continuing to make the interest payments on our outstanding debt. These measures include, but are not limited to, the following:

•

~~Personnel actions~~ – We implemented several cost-cutting measures related to personnel, including implementing a hiring freeze, suspending 2020 merit salary increases and deferring the Chief Executive Officer’s 2019 bonus payout.

~~Additionally,~~lows we furloughed approximately 54% of our workforce and reduced compensation for most other employees, starting May 4, 2020. The furloughs impact approximately 600 employees across the entire company. The time and duration of the furloughs will vary based on workloadexperienced in individual departments. Salary reductions begin at 30% for the Chief Executive Officer, then 20% for the executive leadership team and reducing downward by staff level from there. In addition, the compensation for the members of our Board of Directors has been reduced by 30%. Certain types of employees, such as hourly workers, have not had their compensation reduced.

•

~~Renegotiating terms with suppliers, including satellite capacity providers;~~

~~Deferring purchases of capital equipment;~~

~~Delaying aircraft equipment installations;~~

~~Reducing marketing, travel and othernon-essential~~ ~~spend; and~~

~~Renegotiating terms with airline partners.~~

•

~~Financing~~~~– In March~~mid-April 2020, we ~~drew $22 million under the ABL Credit Facility.~~

•

~~Government assistance~~ – We applied for an $81 million grant and a $150 million loan under the recently enacted Coronavirus Aid, Relief, and Economic Security Act (the “CARES Act”). If we receive such assistance, we will be subject to certain restrictions and will be required to modify the personnel actions discussed above to comply with the terms of the government assistance. Additionally, receipt of funds may require the consent of a majority of the holders of the 2024 Senior Secured Notes or the consent of the lenders under the ABL Credit Agreement to amend the terms governing such indebtedness.

We expectCOVID-19 to continue to ~~have a significant negative~~negatively impact on our ~~revenue~~business and we are unable to predict how long or with what degree of severity that impact will continue. The ~~extent of the impact ofCOVID-19~~ on our CA and BA businesses and our financial and operational performance will depend on future developments, including the duration, spread and severity of the outbreak, the duration and geographic scope of related travel advisories and restrictions and the extent of the impact of~~COVID-19~~ on overall demand for commercial and business aviation travel, all of which are highly uncertain and cannot be predicted. We are unable to predict how long the pandemic and its negative impact will persist, what additional measures may be introduced by governments or private parties or what effect any such additional measures may have on air travel, our business partners and our business. Not only is the duration of the pandemic and future combative measures unknown, the overall situation is extremely fluid, and it is impossible to predict the timing of future material changes in the situation and whether the Company’s actions in response will be sufficient or successful.

~~Impairment assessments -~~We review our long-lived assets and indefinite-lived intangible assets for potential impairment whenever events indicate that the carrying amount of such assets may not be recoverable. We conducted a review as of March 31, 2020 in light of the~~COVID-19~~ ~~outbreak and its impact on air travel, and recorded an impairment charge with respect to certain long-lived assets. We are continuously monitoring theCOVID-19~~ ~~pandemic and its impact. If the~~ impact of the pandemic ~~exceeds management’s estimates,~~has varied across different parts of our customer base – for example corporate flight departments, charter operators and commercial aircraft (under the ATG Network Sharing Agreement) – and we ~~could incur additional material impairment charges in future periods. See Note 7, “Composition~~expect the pace of ~~Certain Balance Sheet Accounts,” for additional information on our long-lived assets and Note 8, “Intangible Assets,” for additional information on our indefinite-lived assets.~~

~~Credit Losses~~—We regularly evaluate our accounts receivable and contract assets for expected credit losses and recorded credit losses for the three month period ended March 31, 2020. We are continuously monitoring our assumptions usedrecovery to ~~determine our expected credit losses, including the impact of theCOVID-19~~ ~~pandemic, which could cause us to record additional material credit losses in future periods. See Note 9, “Composition of Certain Reserves and Allowances,” for additional information~~vary by customer type.

Factors and Trends Affecting Our Results of Operations

We believe that our operating and business performance is driven by various factors that affect the ~~commercial airline and~~ business aviation ~~industries,~~industry, including trends affecting the travel industry and trends affecting the customer bases that we target, as well as factors that affect wireless Internet service providers and general macroeconomic factors. Key factors that may affect our future performance include:

•

costs associated with the implementation of, and our ability to implement, on a timely basis, our technology roadmap, including upgrades to and installation of the ATG technologies we currently offer, Gogo 5G, and any other next generation or other new technology;

•

our ability to manage issues and related costs that may arise in connection with the implementation of our technology roadmap, including technological issues and related remediation efforts and failures or delays on the part of antenna and other equipment developers and providers, some of which are single source;

•

our ability to license additional spectrum and make other improvements to our network and operations as technology and user expectations change;

•

the number of aircraft in service in our markets, including consolidations or changes in fleet size by one or more of our large-fleet customers;

•

the economic environment and other trends that affect both business and leisure aviation travel, including the impact of COVID-19 on restrictions on and demand for air travel, as well as disruptions to supply chains and installations;

•

the extent of our customers’ adoption of our products and services, which is affected by, among other things, willingness to pay for the services that we provide, the quality and reliability of our products and services, changes in technology and competition from current competitors and new market entrants;

•

our ability to engage suppliers of equipment components and network services on a timely basis and on commercially reasonable terms;

•

changes in laws, regulations and interpretations affecting telecommunications services, including those affecting our ability to maintain our licenses for ATG spectrum in the United States, obtain sufficient rights to use additional ATG spectrum and/or other sources of broadband connectivity to deliver our services, expand our service offerings and manage our network; and

•

changes in laws, regulations and policies affecting our business or the business of our customers and suppliers, including changes that impact the design of our equipment and our ability to obtain required certifications for our equipment.

Recent Developments

2021 Credit Agreement - On April 30, 2021, Gogo Inc. and Gogo Intermediate Holdings LLC (the “Borrower”), a direct wholly owned subsidiary of Gogo Inc., entered into a credit agreement (the “2021 Credit Agreement”) among Gogo, the Borrower, the lenders and issuing banks party thereto and Morgan Stanley Senior Funding, Inc., as administrative agent (the “Administrative Agent”), which provides for (i) a term loan credit facility (the “Term Loan Facility”) in an aggregate principal amount of $725 million, issued with a discount of 0.5%, and (ii) a revolving credit facility (the “Revolving Facility” and together with the Term Loan Facility, the “Facilities”) of up to $100 million, which includes a letter of credit sub-facility. The Term Loan Facility amortizes in quarterly installments equal to one percent of the aggregate initial principal amount thereof per annum, with the remaining balance payable upon final maturity of the Term Loan Facility on April 30, 2028. There are no amortization payments under the Revolving Facility, and all borrowings under the Revolving Facility mature on April 30, 2026. The Term Loan Facility bears annual interest at a floating rate measured by reference to, at the Borrower’s option, either (i) an adjusted London inter-bank offered rate (subject to a floor of 0.75%) plus an applicable margin of 3.75% or (ii) an alternate base rate plus an applicable margin of 2.75%. Loans outstanding under the Revolving Facility bear annual interest at a floating rate measured by reference to, at the Borrower’s option, either (i) an adjusted London inter-bank offered rate (subject to a floor of 0.00%) plus an applicable margin ranging from 3.25% to 3.75% per annum depending on the Borrower’s senior secured first lien net leverage ratio or (ii) an alternate base rate plus an applicable margin ranging from 2.25% to 2.75% per annum depending on the Borrower’s senior secured first lien net leverage ratio. Additionally, unused commitments under the Revolving Facility are subject to a fee ranging from 0.25% to 0.50% per annum depending on the Borrower’s senior secured first lien net leverage ratio. The proceeds of the Term Loan Facility were used, together with cash on hand, (i) to redeem in full and pay the outstanding principal amount of the senior secured notes due 2024 (the “2024 Notes”) together with accrued and unpaid interest and redemption premiums and to pay fees associated with the termination of the ABL Credit Agreement (collectively, the “Refinancing”), and (ii) to pay fees and expenses incurred in connection with the Refinancing and the Facilities (the “Transaction Costs”). The Revolving Facility will be available for working capital and general corporate purposes of the Company and its subsidiaries.

Redemption – On April 1, 2021, Gogo Intermediate Holdings LLC and Gogo Finance Co. Inc. (together, the “Issuers”) elected to call for redemption in full the $975 million aggregate principal amount outstanding of the 2024 Notes. The redemption was conditioned, among other things, upon the incurrence of indebtedness, pursuant to a new senior secured term loan and/or credit facility or from one or more other sources, in an amount satisfactory to the Issuers. On April 30, 2021, the Issuers irrevocably deposited, or caused to be irrevocably deposited, with U.S. Bank National Association, the trustee for the 2024 Notes (the “Trustee”), solely for the benefit of the holders of the 2024 Notes, cash in an amount sufficient to pay principal, premium and accrued interest on the 2024 Notes to, but not including, the date of redemption and all other sums payable under the indenture governing the 2024 Notes. The Trustee executed and delivered an acknowledgement of satisfaction, discharge and release, dated as of April 30, 2021, among other documents, with respect to the satisfaction and discharge of the indenture governing the 2024 Notes.

Convertible Note Exchanges - On March 17, 2021, we entered into separate, privately negotiated exchange agreements (the “March 2021 Exchange Agreements”) with certain holders of our 6% Convertible Senior Notes due 2022 (the “2022 Convertible Notes”). Pursuant to the March 2021 Exchange Agreements, such holders exchanged a total of $28,235,000 aggregate principal amount of 2022 Convertible Notes for 5,121,811 shares of our common stock on March 24, 2021. On April 1, 2021, we entered into a privately negotiated exchange agreement (the “GTCR Exchange Agreement”) with an affiliate of funds managed by GTCR LLC (“GTCR”). Pursuant to the GTCR Exchange Agreement, GTCR exchanged $105,726,000 aggregate principal amount of 2022 Convertible Notes for 19,064,529 shares of our common stock on April 9, 2021. In addition, pursuant to the terms of the GTCR

Exchange Agreement, on April 9, 2021, we entered into a registration rights agreement with Silver (Equity) Holdings, LP and Silver (XII) Holdings, LLC (together, the “GTCR Affiliates”), pursuant to which the~~COVID-19~~ ~~pandemic continues to impact demand for commercial~~ GTCR Affiliates and ~~business air travel globally, including as a result of governmental restrictions on travel and social gatherings and overall economic conditions;~~

~~the effectiveness of our cost reduction plan and other measures taken to mitigate the impact ofCOVID-19~~ ~~on our business and financial stability, including efforts to renegotiate contractual terms with suppliers, and the impact such actions~~their permitted transferees (the “GTCR Holders”) have ~~on our operations and long-term success;~~

~~costs associated with the implementation of, and our ability to implement on a timely basis our technology roadmap, upgrades and installation of ourATG-4~~ and 2Ku technologies, Gogo 5G, any technology to which our ATG or satellite networks evolve and other new technologies (including technological issues and related remediation efforts and failures or delays on the part of antenna and other equipment developers and providers, some of which are single source, or delays in obtaining STCs including as a result of any government shutdown), the potential licensing of additional spectrum, and the improvements to our network and operations as technology changes and we experience increasedbeen afforded customary demand and ~~network capacity constraints, including as a result of airline partners deciding to provide free service to passengers;~~

costs associated with, and our ability to execute, our continued international expansion, including our ability to obtain and comply with foreign telecommunications, aviation and other licenses and approvals necessary for our international operations;

~~our ability to obtain sufficient satellite capacity, including for heavily-trafficked areas, in the United States and internationally;~~

~~costs of satellite capacity in the United States and internationally, to which we may have to commit well in advance, including our ability to renegotiate the terms of such agreements in light of theCOVID-19~~ ~~pandemic;~~

~~the pace and extent of adoption of our service for use on domestic and international commercial aircraft by our current and new airline partners and customers;~~

the number of aircraft in service in our markets, including consolidation of the airline industry or changes in fleet size or bankruptcies by one or more of our commercial airline partners or BA large-fleet customers;

the extent of passengers’ and aviation partners’ adoption of our products and services, which is affected by, among other things, willingness to pay for the services that we provide, the quality and reliability of our products and services, changes in technology and competition from current competitors and new market entrants;

our ability to enter into and maintain long-term connectivity arrangements with airline partners and customers, which depends on numerous factors including the real or perceived availability, quality and price of our services and product offerings as compared to those offered by our competitors;

~~the impact of a change in business models and contract terms on the profitability of our connectivity agreements with airline partners, including as a result of changes in accounting standards;~~

~~the results of our ongoing discussions with Delta Air Lines (“Delta”)~~piggyback registration rights with respect to ~~its transition to free service, which may involve seeking to pursue supplier diversification for Delta’s domestic mainline fleet, and our ability to offset~~ the ~~impact~~shares of ~~any deinstalled aircraft through increased~~common stock held by the GTCR Affiliates as of the closing of April 9, 2021. The demand ~~and revenue;~~

~~our ability to engage suppliers~~rights of ~~equipment components and network services on a timely basis and on commercially reasonable terms;~~

~~continued demand for connectivity and proliferation ofWi-Fi~~ ~~enabled devices, including smartphones, tablets and laptops;~~

~~changes in domestic or foreign laws, regulations or policies that affect our business or~~ the ~~business~~GTCR Holders under the registration rights agreement are exercisable after the one year anniversary of ~~our customers and suppliers;~~

~~changes in laws, regulations and interpretations affecting telecommunications services, including those affecting our ability to maintain our licenses for ATG spectrum in~~ the ~~United States, obtain sufficient rights to use additional ATG spectrum and/or other sources~~date of ~~broadband connectivity to deliver our services, expand our service offerings and manage our network; and~~

~~changes in laws, regulations and interpretations affecting aviation, including, in particular, changes that impact~~ the ~~design of our equipment and our ability to obtain required certifications for our equipment.~~Exchange Agreement.

Key Business Metrics

Our management regularly reviews financial and operating metrics, including the following key operating metrics, ~~for theCA-NA,CA-ROW~~ ~~and BA reportable segments,~~ to evaluate the performance of our business and our success in executing our business plan, make decisions regarding resource allocation and corporate strategies, and evaluate forward-looking projections.

Commercial Aviation North America

   For the Three Months
   Ended March 31,
   2020    2019
Aircraft online (at period end)
   2,480    2,412
Satellite
   925    718
ATG
   1,555    1,694
Total aircraft equivalents (average during the period)
   2,554    2,519
Net annualized average monthly service revenue per aircraft equivalent (annualized ARPA) (in thousands)
   $ 99    $ 126
Commercial Aviation Rest of World

   For the Three Months
   Ended March 31,
   2020    2019
Aircraft online (at period end)
   833    641
Total aircraft equivalents (average during the period)
   737    550
Net annualized ARPA (in thousands)
   $ 97    $ 136

Business Aviation
		For the Three Months
		Ended March 31,
		2021		2020
Aircraft online (at period end)
ATG		5,892		5,713
Satellite		4,614		4,939
Average monthly connectivity service revenue per aircraft online
ATG	$	3,085	$	3,143
Satellite		239		223
Units Sold
ATG		135		125
Satellite		80		56
Average equipment revenue per unit sold (in thousands)
ATG	$	78	$	77
Satellite		46		60

•

~~Aircraft~~•

ATG aircraft online.We define ATG aircraft online as the total number of ~~commercial~~business aircraft onfor which ~~our equipment is installed and service has been made commercially available~~we provide ATG services as of the last day of each period presented. ~~We assign~~This number excludes aircraft to~~CA-NA~~ or~~CA-ROW~~ atreceiving ATG service as part of the ~~time of contract signing as follows: (i) all aircraft operated by North American airlines and under contract for~~ ATG or~~ATG-4~~ ~~service are assigned toCA-NA,~~ ~~(ii) all aircraft operated by North American airlines and under a contract for satellite service are assigned toCA-NA~~ or~~CA-ROW~~ based on whether the routes flown by such aircraft under the contract are anticipated to be predominantly within or outside of North America at the time the contract is signed, and (iii) all aircraft operated by~~non-North~~ ~~American airlines and under a contract are assigned toCA-ROW.~~Network Sharing Agreement with Intelsat.

~~All aircraft online for theCA-ROW~~ segment are equipped with our satellite equipment. We are aware that, beginning March 2020 and continuing through the date of this filing, our airline partners have parked a significant number of aircraft due to the impact of~~COVID-19~~ ~~on the aviation industry. We do not know the specific number of such parked aircraft. TheCA-NA~~ ~~andCA-ROW~~ aircraft online disclosed above as of March 31, 2020 still include such aircraft, which is consistent with our historical practice of not removing temporarily parked aircraft from the online count as those have historically been immaterial and temporary. Should the duration of the aircraft being parked extend deeper into 2020, we may revisit this methodology for counting aircraft online.•

•

~~Aircraft equivalents~~. We define aircraft equivalents for a segment as the number of commercial aircraft online (as defined above) multiplied by the percentage of flights flown by such aircraft within the scope of that segment, rounded to the nearest whole aircraft and expressed as an average of the~~month-end~~ figures for each month in the period. This methodology takes into account the fact that during a particular period certain aircraft may fly routes outside the scope of the segment to which they are assigned for purposes of the calculation of aircraft online.

•

~~Net annualized average monthly service revenue per aircraft equivalent~~ (“ARPA”). We define net annualized ARPA as the aggregate service revenue plus monthly service fees, some of which are reported as a reduction to cost of service revenue for that segment for the period, less revenue share expense and other transactional expenses which are included in cost of service revenue for that segment, divided by the number of months in the period, and further divided by the number of aircraft equivalents (as defined above) for that segment during the period, which is then annualized and rounded to the nearest thousand.

Business Aviation

   For the Three Months
   Ended March 31,
   2020    2019
Aircraft online (at period end)

Satellite
   4,939    5,135
ATG
   5,713    5,348
Average monthly service revenue per aircraft online

Satellite
   $ 223    $ 237
ATG
   3,143    3,071
Units Sold

Satellite
   56    130
ATG
   125    187
Average equipment revenue per unit sold (in thousands)

Satellite
   $ 60    $ 40
ATG
   77    61

•

Satellite aircraft online. We define satellite aircraft online as the total number of business aircraft for which we provide satellite services as of the last day of each period presented.

•

Average monthly connectivity service revenue per ATG aircraft online.We define average monthly connectivity service revenue per ATG aircraft online as the ~~total~~aggregate ATG connectivity service revenue for the period divided by the number of ~~business~~months in the period, divided by the number of ATG aircraft ~~for which we provide ATG services~~online during the period (expressed as an average of the ~~last day of~~month end figures for each ~~period presented.~~month in such period). Revenue share earned from the ATG Network Sharing Agreement with Intelsat is excluded from this calculation.

•

Average monthly service revenue per satellite aircraft online. We define average monthly service revenue per satellite aircraft online as the aggregate satellite service revenue for the period divided by the number of months in the period, divided by the number of satellite aircraft online during the period (expressed as an average of the~~month-end~~ month end figures for each month in such period).

•

~~Average monthly service revenue per ATG aircraft online.~~We define average monthly service revenue per ATG aircraft online as the aggregate ATG service revenue for the period divided by the number of months in the period, divided by the number of ATG aircraft online during the period (expressed as an average of the~~month-end~~ ~~figures for each month in such period).~~

•

Units sold. We define units sold as the number of ~~satellite~~ATG or ~~ATG~~satellite units for which we recognized revenue during the period.

•

Average equipment revenue per ATG unit sold. We define average equipment revenue per ATG unit sold as the aggregate equipment revenue from all ATG units sold during the period, divided by the number of ATG units sold.

•

Average equipment revenue per satellite unit sold. We define average equipment revenue per satellite unit sold as the aggregate equipment revenue earned from all satellite units sold during the period, divided by the number of satellite units sold.

•

~~Average equipment revenue per ATG unit sold.~~~~We define average equipment revenue per ATG unit sold as the aggregate equipment revenue from all ATG units sold during the period, divided by the number of ATG units sold.~~

Key Components of Consolidated Statements of Operations

There have been no material changes to our key components of unaudited condensed consolidated statements of operations ~~and segment profit (loss)~~ as described in “Management’s Discussion and Analysis of Financial Condition and Results of Operations” (“MD&A”) in our ~~2019~~2020 10-K.

Off-Balance Sheet Arrangements

We do not have any obligations that meet the definition of anoff-balance sheet arrangement.

Critical Accounting Policies and Estimates

Our discussion and analysis of our financial condition and results of operations are based on our unaudited condensed consolidated financial statements, which have been prepared in accordance with accounting principles generally accepted in the United States of America (“GAAP”). The preparation of our unaudited condensed consolidated financial statements and related disclosures ~~require~~requires us to make estimates, assumptions and judgments that affect the reported amount of assets, liabilities, revenue, costs and expenses, and related exposures. We base our estimates and assumptions on historical experience and other factors that we believe to be reasonable under the circumstances. In some instances, we could reasonably use different accounting estimates, and in some instances results could differ significantly from our estimates. We evaluate our estimates and assumptions on an ongoing basis. To the extent that there are differences between our estimates and actual results, our future financial statement presentation, financial condition, results of operations and cash flows will be affected.

We believe that the assumptions and estimates associated with revenue recognition, long-lived assets, indefinite-lived assets and stock-based compensation have the greatest potential impact on our unaudited condensed consolidated financial statements. Therefore, we consider these to be our critical accounting policies and estimates.

~~Revenue Recognition~~:

~~We account for revenue in accordance with Accounting Standards Codification Topic 606,~~~~Revenue from Contracts with Customers~~ ~~(“ASC 606”). OurCA-NA~~There have been no material changes to our critical accounting policies and~~CA-ROW~~ airline-directed contracts contain multiple performance obligations, which primarily include the sale of equipment, installation services, connectivity services and entertainment services. For these contracts, we account for each distinct good or service estimates as a separate performance obligation. We allocate the contract’s transaction price to each performance obligation using the relative standalone selling price, which is based on the actual selling price for any good or service sold separately to a similar class of customer, if available. To the extent a good or service is not sold separately, we use our best estimate of the standalone selling price and maximize the use of observable inputs. The primary method we use to estimate the standalone selling price is the expected cost-plus margin approach.

The contractual consideration used for allocation purposes includes connectivity and entertainment services, which may be based on a fixed monthly fee per aircraft or a variable fee based on the volume of connectivity activity, or a combination of both. Examples of variable consideration within our contracts include megabyte overages and~~pay-per-use~~ ~~sessions.~~

~~We constrain our estimates to reduce the probability of a significant revenue reversal in future periods, allocate variable consideration~~compared to the ~~identified performance obligations~~critical accounting policies and ~~recognize revenue~~estimates described in the period the services are provided. Our estimates are based on historical experience, anticipated future performance, market conditions and our best judgment at the time. For the three months ended March 31, 2020, our estimates included management’s best assumptions for the impact of~~COVID-19,~~ ~~which includes decreased flights and gross passenger opportunity (“GPO”).~~

A significant change in one or more of these estimates could affect our estimated contract value. For example, estimates of variable revenue within certain contracts require estimation of the number of sessions or megabytes that will be purchased over the contract term and the average revenue per connectivity session, which varies based on the connectivity options available to passengers on each airline. Estimated revenue under these contracts anticipates increases in take rates over time and assumes an average revenue per session consistent with our historical experience. Our estimated contract revenue may differ significantly from our initial estimates to the extent actual take rates and average revenue per session differ from our historical experience.

~~We regularly review and update our estimates, especially in light ofCOVID-19,~~ ~~and recognize adjustments under the cumulativecatch-up~~ ~~method. Any adjustments under this method are recorded as a cumulative adjustment in the period identified and revenue for future periods is recognized using the new adjusted estimate.~~

~~See Note 4, “Revenue Recognition,” for additional information.~~

~~Long-Lived Assets:~~

Our long-lived assets (other than goodwill and indefinite-lived assets which are separately tested for impairment) are reviewed for potential impairment whenever events indicate that the carrying amount of such assets may not be recoverable. Within the Commercial Aviation segment, certain certification and installation programs under some of our turnkey airline contracts are still in progress. Accordingly, we evaluate whether an indication of impairment exists for turnkey airline contracts based on our projected future cash flows associated with such contracts. We group certain long-lived assets by airline contract and by connectivity technology.

When an indication of impairment exists, we review long-lived assets for impairment by comparing the carrying value of the long-lived assets with the estimated future undiscounted cash flows expected to result from the use of the assets. If the future undiscounted cash flows are less than the carrying value, we then calculate an impairment loss equal to the difference between the long-lived asset’s carrying value and its estimated fair value following which the long-lived assets are written down to estimated fair value and the adjusted balance becomes the new cost basis and is depreciated (amortized) over the remaining useful life of the assets. We also periodically reassess the useful lives of our long-lived assets due to advances and changesMD&A in our ~~technologies.~~

Our impairment loss calculations contain uncertainties because they require management to make assumptions and to apply judgment to estimate future cash flows and long-lived asset fair values, including forecasting useful lives of the long-lived assets and selecting discount rates.

~~In light of theCOVID-19~~ outbreak and its impact on air travel, including decreased flights, decreased gross passenger opportunity and our airline partners’ temporary parking of a significant number of their aircraft, we conducted a review as of March 31, 2020 and determined that the carrying value for the asset groups related to three of our airline agreements for the CA business exceeded their estimated undiscounted cash flows, which triggered the need to estimate the fair value of these assets. For the airborne assets and~~right-of-use~~ ~~assets associated with the three airline agreements (the “impaired assets”), we recorded an impairment charge of $46.4 million for the three month period ended March 31, 2020.~~10-K.

~~Indefinite-Lived Intangible Assets:~~

Our indefinite-lived intangible assets consist of our FCC spectrum licenses. Indefinite-lived intangible assets are not amortized but are reviewed for impairment at least annually or whenever events indicate that the carrying amount of such assets may not be recoverable. We perform our annual impairment test during the fourth quarter of each fiscal year. We assess qualitative factors to determine the likelihood of impairment. Our qualitative analysis includes, but is not limited to, assessing the changes in macroeconomic conditions, regulatory environment, industry and market conditions or events, such as~~COVID-19,~~ ~~financial performance versus budget and any other events or circumstances specific to the FCC licenses. We believed the impact ofCOVID-19~~ could indicate that the carrying value of our FCC spectrum licenses may not be recoverable and as such we reviewed the FCC spectrum licenses for impairment as of March 31, 2020. If it is more likely than not that the fair value of the FCC spectrum licenses is greater than the carrying value, no further testing is required. Otherwise, we apply the quantitative impairment test method. In determining which quantitative approach is most appropriate, we consider the cost approach, market approach and income approach. We determined that the income approach, utilizing the Greenfield method, is the most appropriate way to value our indefinite-lived assets.

For the Greenfield method we estimate the value of our FCC spectrum licenses by calculating the present value of the cash flows of a hypothetical new market participant whose only assets are such licenses to determine the enterprise value of the entire company. It includes all necessary costs and expenses to build the company’s infrastructure during the~~start-up~~ period, projected revenue, and cash flows once the infrastructure is completed. Since there is no corroborating data available in the marketplace that would demonstrate a market participant’s experience in establishing an~~“air-to-ground”~~ business, we utilize our historic results and future projections as the underlying basis for the application of the Greenfield method. We follow the traditional discounted cash flow method, calculating the present value of a new market participant’s estimated debt free cash flows.

~~Our impairment calculations contain uncertainties, including the impact ofCOVID-19,~~ because they require management to make assumptions and to apply judgment to estimate future projected cash flows and estimated growth rates and discount rates, as well as new market participant assumptions. Estimates of future projected cash flows used in connection with the discounted cash flow analysis were consistent with the plans and estimates that we used to manage the business, including the impact of~~COVID-19,~~ although there was inherent uncertainty in these estimates. The discount rate used in the calculation was based on our weighted average cost of capital. Our assessment as of March 31, 2020 indicated no impairment.

~~We are continuously monitoring theCOVID-19~~ ~~pandemic and its impact. If the negative impact of the pandemic exceeds management’s estimates, we could incur material impairment charges in future periods.~~

~~Credit Losses~~:

~~We regularly evaluate our accounts receivable and contract assets for expected credit losses and on January 1, 2020 adopted ASC 326.~~

Our expected loss methodology for accounts receivable is developed using historical collection experience, current and future economic and market conditions and a review of the current status of each customer’s trade accounts receivables. Due to the short-term nature of such receivables, the estimated amount of accounts receivable that may not be collected is based on aging of the accounts receivable balances and the financial condition of customers. Additionally, specific allowance amounts are established to record the appropriate provision for customers that have a higher probability of default. Our monitoring activities include timely account reconciliation, dispute resolution, payment confirmation, consideration of each customer’s financial condition and macroeconomic conditions.

~~We apply a similar methodology towards our current andnon-current~~ contract asset balances. However, due to the inherent additional risk associated with a long-term receivable, an additional provision is applied towards contract asset balances that will diminish over time as the contract nears its expiration date.

The estimates used to determine the allowances are based on management’s assessment of anticipated payment, taking into account available historical and current information as well as management’s assessment of potential future developments.

~~For the three months ended March 31, 2020, we also considered the current and estimated future economic and market conditions resulting from theCOVID-19~~ ~~pandemic in the determination of our estimated credit losses.~~

As such, we recorded a noncash cumulative effect adjustment to retained earnings of $3.7 million as a result of the adoption of ASC 326 for estimated credit losses. During the three month period ended March 31, 2020 we recorded an additional $6.8 million of additional estimated credit losses, which was primarily the result of~~COVID-19.~~ One international airline partner in particular accounted for approximately 70% of our credit losses during the three month period ended March 31, 2020. Subsequent to March 31, 2020, such airline partner’s financial condition continued to deteriorate and we expect to record additional credit losses during the three month period ending June 30, 2020.

~~We are continuously monitoring our assumptions used to determine our expected credit losses, including the impact of theCOVID-19~~ ~~pandemic, which could cause us to record additional material credit losses in future periods.~~

Recent Accounting Pronouncements

See Note 3, “Recent Accounting Pronouncements,” to our unaudited condensed consolidated financial statements for additional information.

Results of Operations

The following table sets forth, for the periods presented, certain data from our unaudited condensed consolidated statements of operations. The information contained in the table below should be read in conjunction with our unaudited condensed consolidated financial statements and related notes.

Gogo Inc. and Subsidiaries

Unaudited Condensed Consolidated ~~Statement~~Statements of Operations ~~Data~~

(in ~~thousands)~~thousands, except per share amounts)


	For the Three Months							For the Three Months
	Ended March 31,							Ended March 31,
	2020			2019				2021			2020
Revenue:
Service revenue	$	150,782		$	165,012		$	59,355		$	57,726
Equipment revenue		33,693			34,537			14,514			13,201

Total revenue		184,475			199,549			73,869			70,927

Operating expenses:
Cost of service revenue (exclusive of items shown below)		70,755			68,121			14,095			11,007
Cost of equipment revenue (exclusive of items shown below)		26,040			29,731			8,282			8,511
Engineering, design and development		22,863			24,728			5,493			7,357
Sales and marketing		9,652			12,318			3,729			4,450
General and administrative		27,166			22,454			10,373			14,706
Impairment of long-lived assets		46,389			—
Depreciation and amortization		32,670			30,749			4,117			3,579

Total operating expenses		235,535			188,101			46,089			49,610

Operating income (loss)		(51,060	)		11,448

Operating income								27,780			21,317
Other (income) expense:
Interest income		(606	)		(1,149	)		(57	)		(578	)
Interest expense		31,174			32,554			29,294			31,143
Other (income) expense		2,993			(3,365	)

Loss on settlement of convertible notes								4,397			-
Other expense								(5	)		(1	)
Total other expense		33,561			28,040			33,629			30,564

Loss before income taxes		(84,621	)		(16,592	)
Income tax provision (benefit)		157			207

Loss from continuing operations before income taxes								(5,849	)		(9,247	)
Income tax provision								35			141
Net loss from continuing operations								(5,884	)		(9,388	)
Net loss from discontinued operations, net of tax								(1,801	)		(75,390	)
Net loss	$	(84,778	)	$	(16,799	)	$	(7,685	)	$	(84,778	)

Three Months Ended March 31, ~~2020~~2021 and ~~2019~~2020

Revenue:

Revenue ~~by segment~~ and percent change for the ~~three month~~three-month periods ended March 31, ~~2020~~2021 and ~~2019~~2020 were as follows(in thousands, except for percent change):

   For the Three Months    % Change
   Ended March 31,    2020 over
   2020    2019    2019
Service Revenue:

CA-NA
   $ 73,828    $ 92,027    (19.8 )%
BA
   57,726    53,213    8.5 %
CA-ROW
   19,228    19,772    (2.8 )%






Total Service Revenue
   $ 150,782    $ 165,012    (8.6 )%






Equipment Revenue:

CA-NA
   $ 6,308    $ 4,042    56.1 %
BA
   13,201    17,336    (23.9 )%
CA-ROW
   14,184    13,159    7.8 %






Total Equipment Revenue
   $ 33,693    $ 34,537    (2.4 )%






Total Revenue:

CA-NA
   $ 80,136    $ 96,069    (16.6 )%
BA
   70,927    70,549    0.5 %
CA-ROW
   33,412    32,931    1.5 %






Total Revenue
   $ 184,475    $ 199,549    (7.6 )%

		For the Three Months			% Change
		Ended March 31,			2021 over
	2021		2020		2020
Service revenue	$	59,355	$	57,726		2.8	%
Equipment revenue		14,514		13,201		9.9	%
Total revenue	$	73,869	$	70,927		4.1	%

~~Commercial Aviation North America:~~

~~CA-NA~~ ~~revenue decreased~~Revenue increased to ~~$80.1~~$73.9 million for the ~~three month~~three-month period ended March 31, ~~2020,~~2021, as compared with ~~$96.1~~$70.9 million for the prior-year period, due to ~~a decrease~~increases in service revenue ~~offset in part by~~and equipment revenue.

Service revenue increased to $59.4 million for the three-month period ended March 31, 2021, as compared with $57.7 million for the prior-year period, primarily due to an increase in ~~equipment revenue.~~ATG aircraft online and the revenue share earned from the ATG Network Sharing Agreement with Intelsat.

~~A summary of the components ofCA-NA’s~~ ~~service~~Equipment revenue increased to $14.5 million for the three-month period ended March 31, 2021, as compared with $13.2 million for the prior-year period, primarily due to increases in the number of ATG units sold, with 135 units sold during the three ~~month~~months ended March 31, 2021, as compared with 125 units for the prior-year period.

We expect service and equipment revenue to increase in the future as additional ATG aircraft come online.

Cost of Revenue:

Cost of revenue and percent change for the three-month periods ended March 31, 2021 and 2020 ~~and 2019 is~~were as follows(in thousands, except for percent change):

   For the Three Months    % Change
   Ended March 31,    2020 over
   2020    2019    2019
Connectivity revenue⁽¹⁾
   $ 68,869    $ 79,818    (13.7 )%
Entertainment and CAS revenue
   4,959    12,209    (59.4 )%






Total service revenue
   $ 73,828    $ 92,027    (19.8 )%

	For the Three Months				% Change
	Ended March 31,				2021 over
	2021		2020		2020
Cost of service revenue	$	14,095	$	11,007		28.1	%
Cost of equipment revenue	$	8,282	$	8,511		(2.7	)%

~~(1)~~

~~Includesnon-session~~ ~~related revenue~~

Cost of ~~$2.2 million and $1.4 million, respectively, for the three month periods ended March 31, 2020 and 2019.~~

~~CA-NA~~ service revenue ~~decreased~~increased to ~~$73.8~~$14.1 million for the ~~three month~~three-month period ended March 31, ~~2020,~~2021, as compared with ~~$92.0~~$11.0 million for the prior-year period, primarily due to an increase in ATG network costs as these costs are no longer shared with the divested CA business.

We expect cost of service revenue to increase over time, primarily due to service revenue growth and increasing ATG network costs associated with Gogo 5G.

Cost of equipment revenue decreased to $8.3 million for the three-month period ended March 31, 2021, as compared with $8.5 million for the prior-year period, primarily due to lower overhead costs and changes in product mix, partially offset by an increase in ATG units sold.

We expect that our cost of equipment revenue will vary with changes in equipment revenue and unit sold.

Engineering, Design and Development Expenses:

Engineering, design and development expenses decreased to $5.5 million for the three-month period ended March 31, 2021, as compared with $7.4 million for the prior-year period, primarily due to a decrease in ~~Connectivity revenue~~Gogo 5G development costs.

We expect engineering, design and ~~Entertainment and CAS revenue.~~

~~Connectivity revenue decreased~~development expenses to $68.9 million for the three month period ended March 31, 2020, as compared with $79.8 million for the prior-year period primarily due to the full impact of American Airlines switching to the airline-directed model, the deinstallation of Gogo equipment from certain American Airlines aircraft during 2018 and the first half of 2019 and the impact of~~COVID-19,~~ ~~which includes a decrease in flights and gross passenger opportunity (“GPO”).~~

~~CA-NA~~ Entertainment and CAS revenue decreased to $5.0 million for the three month period ended March 31, 2020 as compared with $12.2 million for the prior-year period primarily due to the recognition of product development-related revenue for one of our airline partners in the first quarter of 2019 and the impact of~~COVID-19.~~

Net annualized ARPA decreased to $99 thousand for the three month period ended March 31, 2020, as compared with $126 thousand for the prior-year period primarily due to the full impact of American Airlines’ switch to the airline-directed model, product development-related revenue in the first quarter of 2019 and the impact of~~COVID-19,~~ ~~which includes a decrease in flights and GPO. The connectivity take rate, which is the number of sessions expressed~~remain flat or increase slightly as a percentage of ~~passengers, decreased to 13.3% for the three month period ended March 31, 2020, as compared with 13.9% for the prior-year period primarily due to the impact ofCOVID-19.~~

Equipment revenue increased to $6.3 million for the three month period ended March 31, 2020, as compared with $4.0 million for the prior-year period, primarily due to more installations under the airline-directed model.

~~We anticipate that~~ service revenue ~~forCA-NA~~ ~~will~~in the near term, driven by Gogo 5G development costs, and decrease ~~significantly during the three month period ending June 30, 2020 as compared with the three month period ended March 31, 2020~~ as a ~~result of the impact ofCOVID-19,~~ ~~which includes a decrease in flights and GPO.~~

~~Additionally, we and some of our airline partners plan to delay the installation of our equipment as a result ofCOVID-19,~~ ~~and, as a result, we anticipate significant declines in our equipment revenue during the three month period ending June 30, 2020 as compared with the three month period ended March 31, 2020.~~

~~Business Aviation:~~

BA revenue increased to $70.9 million for the three month period ended March 31, 2020, as compared with $70.5 million for the prior-year period, due to an increase in service revenue offset in part by a decrease in equipment revenue.

BA service revenue increased to $57.7 million for the three month period ended March 31, 2020, as compared with $53.2 million for the prior-year period primarily due to additional customers subscribing to our Gogo Biz (ATG) service offset in part by a decrease in the number of satellite customers. The number of ATG aircraft online increased 6.8% to 5,713 as of March 31, 2020, as compared with 5,348 as of March 31, 2019.

BA equipment revenue decreased to $13.2 million for the three month period ended March 31, 2020, as compared with $17.3 million for the prior-year period due primarily to decrease in the number of ATG and satellite units sold.

~~In April 2020,COVID-19~~ began to impact our BA segment, which included a decrease in flights, suspension of subscriptions and fewer activations. We do not currently anticipate nearly as significant of an impact on our BA segment as our~~CA-NA~~ or~~CA-ROW~~ ~~segments but anticipate service and equipment revenues to decline during the three month period ending June 30, 2020, as compared with the three month period ended March 31, 2020.~~

~~Commercial Aviation Rest of World:~~

~~CA-ROW~~ revenue increased to $33.4 million for the three month period ended March 31, 2020, as compared with $32.9 million for the prior-year period, due to an increase in equipment revenue offset in part by a decrease in service revenue.

~~CA-ROW~~ equipment revenue increased to $14.2 million for the three month period ended March 31, 2020, as compared with $13.2 million for the prior-year period due to an increase in spare parts sold under the airline-directed model, offset in part by fewer installations under the airline-directed model.

~~CA-ROW~~ ~~service revenue decreased to $19.2 million for the three month period ended March 31, 2020, as compared with $19.8 million for the prior-year period, primarily due to the impact ofCOVID-19,~~ ~~which includes a decrease in flights and GPO, partially offset by an increase in aircraft equivalents. Net annualized ARPA for theCA-ROW~~ segment decreased to $97 thousand for the three month period ended March 31, 2020, as compared with $136 thousand for the prior-year period due to an increase in aircraft online from new airline partners and the impact of~~COVID-19,~~ ~~which includes a decrease in flights and GPO.~~

~~We anticipate that service revenue forCA-ROW~~ ~~will decrease significantly during the three month period ending June 30, 2020 as compared with the three month period ended March 31, 2020 as a result of the impact ofCOVID-19,~~ ~~which includes a decrease in flights and GPO.~~

~~Additionally, our airline partners have significantly delayed the installation of our equipment as a result ofCOVID-19,~~ ~~and, as a result, we anticipate significant declines in our equipment revenue during the three month period ending June 30, 2020 as compared with the three month period ended March 31, 2020.~~

~~Cost of Service Revenue:~~

~~Cost~~percentage of service revenue ~~by segment and percent change for~~over the ~~three month periods ended March 31, 2020 and 2019 were~~long term as ~~follows~~~~(in thousands, except for percent change)~~:

   For the Three Months    % Change
   Ended March 31,    2020 over
   2020    2019    2019
CA-NA
   $ 40,065    $ 36,425    10.0 %
BA
   11,007    13,052    (15.7 )%
CA-ROW
   19,683    18,644    5.6 %






Total
   $ 70,755    $ 68,121    3.9 %

~~CA-NA~~ ~~cost~~the level of service revenue increased to $40.1 million for the three month period ended March 31, 2020, as compared with $36.4 million for the prior-year period due to increases in satellite service fees, less amortization of deferred airborne lease incentives and an increase in allocated ATG network costs, partially offset by a decrease in revenue share and operational costs.

BA cost of service revenue decreased to $11.0 million for the three month period ended March 31, 2020, as compared with $13.1 million for the prior-year period, primarily due to allocated ATG network costs.

~~CA-ROW~~ cost of service revenue increased to $19.7 million for the three month period ended March 31, 2020, as compared with $18.6 million for the prior-year period primarily due to an increase in satellite and network feesinvestment decreases and revenue ~~share.~~increases.

~~A significant portion ofCA-NA~~ ~~andCA-ROW~~ cost of service revenue are satellite service fees which are relatively fixed in nature. We are currently in discussions with certain of our satellite service providers to reduce our satellite service charges as a result of the lower utilization from decreased flights and GPO resulting from~~COVID-19.~~

~~We expect cost of service revenue for BA to increase over time, primarily due to increasing ATG network costs associated with Gogo 5G.~~

~~Cost of Equipment Revenue:~~

~~Cost of equipment revenue by segment and percent change for the three month periods ended March 31, 2020 and 2019 were as follows~~~~(in thousands, except for percent change)~~:

   For the Three Months    % Change
   Ended March 31,    2020 over
   2020    2019    2019
CA-NA
   $ 5,682    $ 1,591    257.1 %
BA
   8,511    11,398    (25.3 )%
CA-ROW
   11,847    16,742    (29.2 )%






Total
   $ 26,040    $ 29,731    (12.4 )%

~~Cost of equipment revenue decreased to $26.0 million for the three month period ended March 31, 2020, as compared with $29.7 million for the prior-year period.~~

~~The increase inCA-NA~~ for the three month period ended March 31, 2020, as compared with the prior-year period was due to more installations under the airline-directed model during 2020 as compared with the prior-year period.

~~BA cost of equipment decreased for the three month period ended March 31, 2020 as compared with the prior-year period, due to a decrease in equipment revenue and changes in product mix.~~

~~The decrease inCA-ROW~~ ~~during the three month period was due to fewer installations under airline-directed model, offset in part by an increase in the sale of spare parts.~~

~~We expect thatCA-NA~~ ~~andCA-ROW~~ cost of equipment revenue will decrease significantly during the three month period ending June 30, 2020 as compared with the three month period ended March 31, 2020 due to the delays in airline equipment installations, as noted above. BA equipment revenue will vary with changes in equipment revenue.

~~Engineering, Design and Development Expenses:~~

Engineering, design and development (“EDD”) expenses decreased to $22.9 million for the three month period ended March 31, 2020, as compared with $24.7 million for the prior-year period due to decreased STC and project-related spend in~~CA-NA~~ ~~andCA-ROW,~~ ~~offset in part by increased Gogo 5G network development costs at BA.~~

~~As noted in Note 2, “Impact ofCOVID-19~~ Pandemic,” we implemented various expense management and personnel actions to manage our costs. We are actively working with our vendors and evaluating projects. The personnel actions, which include furloughs and salary reductions, began May 4, 2020.

Sales and Marketing Expenses:

Sales and marketing expenses decreased to ~~$9.7~~$3.7 million for the ~~three month~~three-month period ended March 31, ~~2020,~~2021, as compared with ~~$12.3~~$4.5 million for the prior-year period, primarily due to decreased travel, advertising, and personnel ~~and advertising expenses in all three segments. Consolidated~~expenses.

We expect sales and marketing expenses to remain relatively flat as a percentage of ~~total consolidated~~ service ~~revenue was 6.4% for the three month period ended March 31, 2020, as compared with 7.5% for the prior-year period.~~ revenue.

General and Administrative Expenses:

General and administrative expenses ~~increased~~decreased to ~~$27.2~~$10.4 million for the ~~three month~~three-month period ended March 31, ~~2020,~~2021, as compared with ~~$22.5~~$14.7 million for the prior-year period, primarily due to ~~allowances for credit losses of approximately $6.8 million, which was primarily driven by the impact ofCOVID-19~~ ~~on one international airline partner in particular, offset in part by reductions in legal fees. Consolidated~~lower outside services costs and decreased personnel expenses.

We expect general and administrative expenses to decrease as a percentage of ~~total consolidated~~ service revenue ~~was 18.0%~~over time as we identify efficiencies and drive down costs and as the business grows given the fixed cost nature of this category.

Depreciation and Amortization:

Depreciation and amortization expense increased to $4.1 million for the ~~three month~~three-month period ended March 31, ~~2020,~~2021, as compared with ~~13.6% for the prior-year period.~~

As noted above in Critical Accounting Policies and Estimates, subsequent to March 31, 2020, such airline partner’s financial condition continued to deteriorate and we expect to record additional credit losses during the three month period ending June 30, 2020. We are continuously monitoring our assumptions used to determine our expected credit losses, including the impact of the~~COVID-19~~ ~~pandemic, which could cause us to record additional material credit losses in future periods. As noted in Note 2, “Impact ofCOVID-19~~ Pandemic,” we implemented various expense management and personnel actions to manage our costs. We are actively working with our vendors and evaluating projects. The personnel actions, which include furloughs and salary reductions, began May 4, 2020.

~~Segment Profit (Loss):~~

~~CA-NA’s~~ ~~segment profit decreased to $15.9 million for the three month period ended March 31, 2020, as compared with $30.7~~$3.6 million for the prior-year period, primarily due to the ~~changes as discussed above.~~

BA’s segment profit increased to $35.9 million for the three month period ended March 31, 2020, as compared with $33.8 million for the prior-year period, primarily due to the changes as discussed above.

~~CA-ROW’s~~ ~~segment loss decreased to $17.4 million for the three month period ended March 31, 2020, as compared with $18.2 million for the prior-year period, primarily due to the changes as discussed above.~~

Unallocated corporate costs increased to $10.3 million for the three month period ended March 31, 2020, as compared with $9.8 million for the prior-year period. Unallocated corporate costs are primarily included within general and administrative expenses.

~~Impairment of Long-Lived Assets:~~

We recorded an impairment charge of $46.4 million for the three month period ended March 31, 2020 for the impaired assets related to three of our airline agreements for the CA business, while we had no such charges in the prior year. See Note 7, “Composition of Certain Balance Sheet Accounts” for additional information.

~~Depreciation and Amortization:~~

Depreciation and amortization expense increased to $32.7 million for the three month period ended March 31, 2020, as compared with $30.7 million for the prior-year period due to additional aircraft under the turnkey model and increased amortization of capitalized software.

We expect that our depreciation and amortization expense will ~~vary~~increase in the future ~~depending upon the number of installations under the turnkey model.~~as we launch our Gogo 5G network.

Other (Income) Expense:

Other (income) expense and percent change for the ~~three month~~three-month periods ended March 31, ~~2020~~2021 and ~~2019~~2020 were as follows(in thousands, except for percent change):


	For the Three Months						% Change			For the Three Months						% Change
	Ended March 31,						2020 over			Ended March 31,						2021 over
	2020			2019			2019			2021			2020			2020
Interest income	$	(606	)	$	(1,149	)		(47.3	)%	$	(57	)	$	(578	)		(90.1	)%
Interest expense		31,174			32,554			(4.2	)%		29,294			31,143			(5.9	)%
Loss on settlement of convertible notes											4,397			-		nm		%
Other expense		2,993			(3,365	)		n/a			(5)			(1)		nm		%

Total	$	33,561		$	28,040			19.7	%	$	33,629		$	30,564			10.0	%

Total other expense increased to $33.6 million for the ~~three month~~three-month period ended March 31, ~~2020,~~2021, as compared with ~~$28.0~~$30.6 million for the prior-year period, primarily due ~~primarily~~ to the ~~$3.0 million impairment~~loss on settlement of convertible notes, partially offset by a ~~cost-based investment~~decrease in the current year while the prior year had no such activity. The three month period ended March 31, 2019 included $3.2 million in proceeds from a litigation settlement, while the current year had no such activity.interest expense.

We expect our ~~full-year 2020~~ interest expense to ~~be down slightly~~decrease in the future as ~~compared with 2019, primarily due to the reduction in interest expense related to the 2022 Senior Secured Notes, which were redeemed in full in May 2019, the partial repurchase~~a result of the ~~2020~~refinancing and the conversions and exchanges of 2022 Convertible Notes ~~in April 2019~~that have occurred to date and the maturity or earlier conversion of the remaining ~~outstanding principal amount of 2020~~2022 Convertible Notes in March 2020. These decreases will be partially offset by higher average debt outstanding from the issuances of the 2024 Senior Secured Notes in April and May 2019, the drawdown of the ABL Credit Facility in March 2020 and the associated accretion expense and amortization of deferred financing costs.Notes. See Note 10, “Long-Term Debt and Other ~~Liabilities,” in~~Liabilities” to our unaudited condensed consolidated financial statements for additional information.

Income Taxes:

The effective income tax rates for the ~~three month~~three-month periods ended March 31, 2021 and 2020 ~~and 2019~~ were ~~(0.2)~~(0.6)% and ~~(1.2)~~(1.5)%, respectively. For the ~~three month~~three-month periods ended March 31, ~~2020~~2021 and ~~2019,~~2020, our income tax expense was not significant primarily due to the full valuation allowance against our net deferred tax assets.

We expect our income tax provision to increase in future periods to the extent we become profitable.

Non-GAAP Measures

In our discussion below, we discuss ~~certainnon-GAAP~~ ~~financial measurements, including~~ Adjusted EBITDA ~~Free Cash Flow~~ and ~~Unlevered~~ Free Cash Flow, as defined ~~below.~~below, which are non-GAAP financial measures. Management uses Adjusted EBITDA ~~Free Cash Flow~~ and ~~Unlevered~~ Free Cash Flow for business planning purposes, including managing our business against internally projected results of operations and measuring our performance and liquidity. These supplemental performance measures also provide another basis for comparingperiod-to-period results by excluding potential differences caused by~~non-operational~~ non-

operational and unusual ornon-recurring items. These supplemental performance ~~measurements~~measures may vary from and may not be comparable to similarly titled measures used by other companies. Adjusted EBITDA ~~Free Cash Flow~~ and ~~Unlevered~~ Free Cash Flow are not recognized measurements under accounting principles generally accepted in the United States, or GAAP; when analyzing our performance with Adjusted EBITDA or liquidity with ~~Free Cash Flow or Unlevered~~ Free Cash Flow, as applicable, investors should (i) evaluate each adjustment in our reconciliation to the corresponding GAAP measure, and the explanatory footnotes regarding those adjustments, (ii) use Adjusted EBITDA in addition to, and not as an alternative to, net loss attributable to common stock as a measure of operating results and (iii) use Free Cash Flow ~~or Unlevered Free Cash Flow~~ in addition to, and not as an alternative to, consolidated net cash provided by (used in) operating activities when evaluating our liquidity.

Definition and Reconciliation ofNon-GAAP Measures

EBITDA represents net loss attributable to common stock before interest expense, interest income, income taxes and depreciation and amortization expense.

Adjusted EBITDA represents EBITDA adjusted for (i) stock-based compensation expense included in the results of continuing operations, (ii) ~~amortization~~the results of ~~deferred airborne lease incentives,~~discontinued operations, including stock-based compensation expense, (iii) ~~amortization~~loss on settlement of ~~STC~~convertible notes and (iv) separation costs ~~(iv) impairment~~related to the sale of ~~long-lived assets, (v) impairment of cost-basis investment and (vi) proceeds from litigation settlement.~~ CA.Our management believes that the use of Adjusted EBITDA eliminates items that management believes have less bearing on our operating performance, thereby highlighting trends in our core business which may not otherwise be apparent. It also provides an assessment of controllable expenses, which are indicators management uses to determine whether current spending decisions need to be adjusted in order to meet financial goals and achieve optimal financial performance.

We believe that the exclusion of stock-based compensation expense from Adjusted EBITDA is appropriate given the significant variation in expense that can result from using the Black-Scholes model to determine the fair value of such compensation. The fair value of our stock options is determined using the Black-Scholes model and varies based on fluctuations in the assumptions used in this model, including inputs that are not necessarily directly related to the performance of our business, such as the expected volatility, the risk-free interest rate and the expected life of the options. Therefore, we believe that the exclusion of this cost provides a clearer view of the operating performance of our business. Further, stock option grants made at a certain price and point in time do not necessarily reflect how our business is performing at any particular time. While we believe that investors should have information about any dilutive effect of outstanding options and the cost of that compensation, we also believe that stockholders should have the ability to consider our performance using anon-GAAP financial measure that excludes these costs and that management uses to evaluate our business.

We believe ~~that~~it is useful for an understanding of our operating performance to exclude the ~~exclusion~~results of ~~the amortization of deferred airborne lease incentives and amortization of STC costs~~our discontinued operations from Adjusted EBITDA is useful as it allows an investor to view operating performance across time periods in a manner consistent with how management measures reportable segment profit and loss (see Note 16, “Business Segments and Major Customers,” for a descriptionbecause they are not part of ~~reportable segment profit (loss) in~~ our unaudited condensed consolidated financial statements). Management evaluates reportable segment profit and loss in this manner, excluding the amortization of deferred airborne lease incentives and amortization of STC costs, because such presentation reflects operating decisions and activities from the current period, without regard to the prior period decisions or the business model applicable to various connectivity agreements.ongoing operations.

We believe ~~that~~it is useful for an understanding of our operating performance to exclude the ~~exclusion~~loss on settlement of ~~the impairment of long-lived assets~~convertible notes from Adjusted EBITDA ~~is appropriate~~ because of the~~non-recurring~~ infrequently occurring nature of ~~the activity to our operating performance.~~

~~We believe that the exclusion of the impairment of cost-basis investment from Adjusted EBITDA is appropriate because of thenon-operating~~ ~~andnon-recurring~~ ~~nature of the~~this activity.

We believe ~~that~~it is useful for an understanding of our operating performance to exclude separation costs related to the ~~exclusion~~sale of ~~litigation proceeds~~CA from Adjusted EBITDA ~~is appropriate as~~because of the non-recurring nature of this is~~non-recurring~~ ~~in nature and represents an infrequent financial benefit to our operating performance.~~activity.

We also present Adjusted EBITDA as a supplemental performance measure because we believe that this measure provides investors, securities analysts and other users of our financial statements with important supplemental information with which to evaluate our performance and to enable them to assess our performance on the same basis as management.

Free Cash Flow represents net cash provided by ~~(used in)~~ operating activities, less purchases of property and equipment and the acquisition of intangible assets. We believe that Free Cash Flow provides meaningful information regarding ~~the Company’s~~our liquidity.

~~Unlevered Free Cash Flow~~ represents Free Cash Flow adjusted for cash interest payments and interest income. We believe that Unlevered Free Cash Flow provides an additional view of the Company’s liquidity, excluding the impact of our capital structure.

Gogo Inc. and Subsidiaries

Reconciliation of GAAP toNon-GAAP Measures

(in thousands, except per share amounts)

(unaudited)

   For the Three Months
   Ended March 31,
   2020    2019
Adjusted EBITDA:

Net loss attributable to common stock (GAAP)
   $ (84,778 )    $ (16,799 )
Interest expense
   31,174    32,554
Interest income
   (606 )    (1,149 )
Income tax provision
   157    207
Depreciation and amortization
   32,670    30,749




EBITDA
   (21,383 )    45,562
Stock-based compensation expense
   3,995    4,327
Amortization of deferred airborne lease incentives
   (7,071 )    (8,953 )
Amortization of STC costs
   807    320
Impairment of long-lived assets
   46,389    —
Impairment of cost-basis investment
   3,000    —
Proceeds from litigation settlement
   —      (3,215 )




Adjusted EBITDA
   $ 25,737    $ 38,041




Unlevered Free Cash Flow:

Net cash provided by (used in) operating activities (GAAP)⁽¹⁾
   $ 38,027    $ (6,156 )
Consolidated capital expenditures⁽¹⁾
   (15,310 )    (27,711 )




Free cash flow
   22,717    (33,867 )
Cash paid for interest⁽¹⁾
   66    46,163
Interest income⁽²⁾
   (606 )    (1,149 )




Unlevered free cash flow
   $ 22,177    $ 11,147

~~(1)~~

Gogo Inc.

and Subsidiaries

Reconciliation of GAAP to Non-GAAP Measures

(in thousands, unaudited)

		For the Three Months
		Ended March 31,
		2021			2020
Adjusted EBITDA:
Net loss attributable to common stock (GAAP)	$	(7,685	)	$	(84,778	)
Interest expense		29,294			31,143
Interest income		(57	)		(578	)
Income tax provision		35			141
Depreciation and amortization		4,117			3,579
EBITDA		25,704			(50,493	)
Stock-based compensation expense		1,849			2,322
Loss from discontinued operations		1,801			75,390
Loss on settlement of convertible notes		4,397			-
Separation costs related to CA sale		145			-
Adjusted EBITDA	$	33,896		$	27,219

Free Cash Flow:
Net cash provided by operating activities (GAAP) ⁽¹⁾	$	24,574		$	23,890
Consolidated capital expenditures ⁽¹⁾		(702	)		(876	)
Free cash flow	$	23,872		$	23,014

(1) See unaudited condensed consolidated statements of cashflows

~~See unaudited condensed consolidated statements of cash flows.~~

~~(2)~~

~~See unaudited condensed consolidated statements of operations.~~

Material limitations ofNon-GAAP measures

Although EBITDA and Adjusted EBITDA ~~Free Cash Flow and Unlevered Free Cash Flow~~ are measurements frequently used by investors and securities analysts in their evaluations of companies, EBITDA and Adjusted EBITDA ~~Free Cash Flow and Unlevered Free Cash Flow~~ each have limitations as an analytical tool, and you should not consider them in isolation or as a substitute for, or more meaningful than, amounts determined in accordance with GAAP.

Some of these limitations include:

~~EBITDA and Adjusted EBITDA do not reflect interest income or expense;~~
•
EBITDA and Adjusted EBITDA do not reflect interest income or expense;

•

EBITDA and Adjusted EBITDA do not reflect cash requirements for our income taxes;

•

EBITDA and Adjusted EBITDA do not reflect depreciation and amortization, which are significant and unavoidable operating costs given the level of capital expenditures needed to maintain our business;

•

Adjusted EBITDA does not reflect non-cash components of employee compensation;

•

Adjusted EBITDA does not reflect the results of discontinued operations;

•

Adjusted EBITDA does not reflect the separation costs related to the sale of CA;

•

Adjusted EBITDA does not reflect the loss on settlement of convertible notes;

•

Free Cash Flow does not represent the total increase or decrease in our cash balance for the period; and

•

since other companies in our or related industries may calculate these measures differently from the way we do, their usefulness as comparative measures may be limited.

~~EBITDA and Adjusted EBITDA do not reflect cash requirements for our income taxes;~~

~~EBITDA and Adjusted EBITDA do not reflect depreciation and amortization, which are significant and unavoidable operating costs given the level of capital expenditures needed to maintain our business;~~

~~Adjusted EBITDA does not reflectnon-cash~~ ~~components of employee compensation;~~

~~Free Cash Flow and Unlevered Free Cash Flow do not represent the total increase or decrease in our cash balance for the period; and~~

~~since other companies in our or related industries may calculate these measures differently from the way we do, their usefulness as comparative measures may be limited.~~

Liquidity and Capital Resources

The following table presents a summary of our cash flow activity for the periods set forth below(in thousands):

							For the Three Months
	For the Three Months Ended March 31,						Ended March 31,
	2020			2019			2021			2020
Net cash provided by (used in) operating activities	$	38,027		$	(6,156	)
Net cash provided by (used in) investing activities		(15,221	)		11,707
Continuing operations cash flow activity:
Net cash provided by operating activities							$	24,574		$	23,890
Net cash used in investing activities								(702	)		(876	)
Net cash provided by (used in) financing activities		18,858			(740	)		(3,320	)		19,105
Discontinued operations cash flow activity								(748	)		(455	)
Effect of foreign exchange rate changes on cash		51			(276	)		3			51

Net increase in cash, cash equivalents and restricted cash		41,715			4,535
Net decrease in cash, cash equivalents and restricted cash								19,807			41,715
Cash, cash equivalents and restricted cash at the beginning of period		177,675			191,116			435,870			177,675

Cash, cash equivalents and restricted cash at the end of period	$	219,390		$	195,651		$	455,677		$	219,390


Supplemental information:
Cash, cash equivalents and restricted cash at the end of period	$	219,390		$	195,651		$	455,677		$	219,390
Less: current restricted cash		560			1,535			525			560
Less:non-current restricted cash		4,601			5,426			-			4,601

Cash and cash equivalents at the end of the period	$	214,229		$	188,690		$	455,152		$	214,229

We have historically financed our growth and cash needs primarily through the issuance of common stock,non-convertible debt, senior convertible preferred stock, convertible debt, ~~term~~credit facilities and cash from operating activities. We continually evaluate our ongoing capital needs in light of increasing demand for our services, capacity requirements, evolving user expectations regarding the in-flight connectivity experience, evolving technologies in our industry and related strategic, operational and technological opportunities. We actively consider opportunities to raise additional capital in the public and private markets utilizing one or more of the types of capital raising transactions through which we have historically financed our growth and cash needs, as well as other means of capital raising not previously used by us.

In April 2020, we applied for an $81 million grant and a $150 million loan under the Coronavirus Aid, Relief, and Economic Security Act (the “CARES Act”). If granted, the grant and the loan would be required to be secured by collateral to be determined. Any receipt of funds under the CARES Act may also require the consent of a majority of the holders of the 2024 Senior Secured Notes and the consent of the lenders under the ABL Credit Agreement to amend the terms governing such indebtedness to, among other things, permit the incurrence of additional indebtedness or granting of liens, which we may not be able to obtain on a timely basis or on terms acceptable to us, if at all. To the extent that we were able to obtain a grant and/or loan under the CARES Act (if at all), we would be subject to certain restrictions, including, but not limited to, requirements to maintain certain levels of service and employment (which would require bringing back furloughed employees), limits on certain executive compensation and limits on the use of the funds granted. In addition, we would likely be obligated to issue warrants to the U.S. Department of the Treasury to purchase shares of our common stock.

Liquidity:

~~As disclosed elsewhere in this report, the extent of the impact ofCOVID-19~~ on the CA and BA businesses and our financial and operational performance will depend on future developments, including the duration, spread and severity of the outbreak, the duration and geographic scope of related travel advisories and restrictions and the extent of the impact of~~COVID-19~~ on overall demand for commercial and business aviation travel, all of which are highly uncertain and cannot be predicted. If our airline partners continue to experience significantly reduced demand for passenger traffic for an extended period, our liquidity and financial condition may be materially adversely affected. The extent to which the outbreak affects our liquidity and financial condition will depend in part on our ability to successfully implement various measures intended to reduce expenses and/or conserve cash, including:

Personnel actions, including the implementation of a hiring freeze, suspending 2020 merit salary increases, deferring the CEO’s bonus payout, a furlough of approximately 54% of our workforce and a reduction in compensation for most other employees;

~~Expense management, including deferring purchases of capital equipment, delaying equipment installations, renegotiating agreements with suppliers, reducing othernon-essential~~ ~~spend and renegotiating with our airline partners;~~

~~In March 2020, we drew $22 million under the ABL Credit Facility; and~~

~~Applying for assistance under the CARES Act.~~

~~See “Risk Factors —~~Our business is highly dependent on the airline industry, which is itself affected by factors beyond the airlines’ control, including the novel strain of coronavirus first identified in Wuhan, China. The airline industry is highly competitive and sensitive to changing economic conditions.”

Excluding the impact of our initial public offering, other debt and equity offerings and our prior credit ~~facility, the 2022 Convertible Notes, the 2020 Convertible Notes, the 2024 Senior Secured Notes, the 2022 Senior Secured Notes and the ABL Credit Facility,~~facilities, to date we have not generated positive cash flows on a consolidated basis. However, based on our current plans, including the ~~measures outlined in our response toCOVID-19,~~consummation of the Refinancing, we believe that our cash and cash equivalents and cash flows provided by operating activities will be sufficient to meet our operating obligations, including our committed capital expenditure requirements, for at least the next twelve months. ~~As detailed in Note 10, “Long-Term Debt and Other Liabilities,” in March 2020, in order to enhance our liquidity in response to the uncertainty in the global markets resulting from theCOVID-19~~ ~~pandemic, we drew $22.0 million from our previously undrawn revolving ABL Credit Facility. Our intent is to continue to access the capital markets to refinance our future debt obligations on anas-needed~~ ~~basis.~~

The ~~2024 Indenture and the ABL~~2021 Credit Agreement ~~contain~~contains covenants that limit the ability of GIH and its subsidiaries to incur additional indebtedness. Further, market conditions and/or our financial performance may limit our access to additional sources of equity or debt financing, or our ability to pursue potential strategic alternatives. As a result, we may be unable to finance growth of our business to the extent that our cash, cash equivalents and short-term investments and cash generated through operating activities prove insufficient or we are unable to raise additional financing through the issuance of ~~additional~~ equity, permitted incurrences of debt by(by us or by GIH and its ~~subsidiaries,~~subsidiaries), or the pursuit of potential strategic alternatives.

For additional information on the ~~2024 Senior Secured Notes, the ABL~~2021 Credit ~~Facility, the 2022 Senior Secured Notes, the 2022 Convertible Notes and the 2020 Convertible Notes,~~Agreement, see Note 10, “Long-Term Debt and Other Liabilities,” to our unaudited condensed consolidated financial statements.

Cash flows provided by ~~(used in)~~ Operating Activities:

The following table presents a summary of our cash flows from operating activities for the periods set forth below(in thousands):

							For the Three Months
	For the Three Months Ended March 31,						Ended March 31,
	2020			2019			2021			2020
Net loss	$	(84,778	)	$	(16,799	)	$	(5,884	)	$	(9,388	)
Non-cash charges and credits		98,706			42,468			12,160			11,452
Changes in operating assets and liabilities		24,099			(31,825	)		18,298			21,826

Net cash provided by (used in) operating activities	$	38,027		$	(6,156	)

Net cash provided by operating activities							$	24,574		$	23,890

For the ~~three month~~three-month period ended March 31, ~~2020,~~2021, net cash provided by operating activities was ~~$38.0~~$24.6 million as compared with net cash ~~used in~~provided by operating activities of ~~$6.2~~$23.9 million in the prior-year period. The principal contributors to the year-over-year change in operating cash flows were:

~~A $55.9 million increase in cash flows related to operating assets and liabilities resulting from:~~
•
A $4.2 million improvement in net loss and non-cash charges and credits, as noted above under “-Results of Operations.”

•

A $3.5 million decrease in cash flows related to operating assets and liabilities resulting from:

A decrease in cash flows due to changes in accounts payable and accrued liabilities primarily due to the timing of payments.

Partially offset by an increase in cash flows due to the following:

▪

Changes in prepaid expenses due to the timing of payments;

▪

Changes in inventories primarily due to the timing of inventory purchases; and

▪

Changes in accrued interest primarily due to additional debt outstanding resulting from the 2020 Additional Notes issued in November 2020.

~~An increase in cash flows due to the following:~~

~~Changes in accrued interest due to changes in the timing of payments as compared to the prior-year;~~

~~Changes inCA-NA’s~~ ~~and BA’s accounts payable due primarily to the timing of payments;~~

~~Changes in BA’s accounts receivable due primarily to the timing of collections;~~

~~Changes inCA-ROW’s~~ ~~and BA’s accrued liabilities due primarily to the timing of payments; and~~

~~Changes inCA-NA’s~~ ~~deferred airborne lease proceeds due to more installations under the turnkey model in the current year as compared with the prior year~~

~~Offset in part by a decrease in cash flows due to the following:~~

~~Changes inCA-ROW’s~~ ~~accounts receivable due to a larger reduction in accounts receivable balances in the first quarter of 2019 as compared with the first quarter of 2020;~~

~~Changes inCA-NA’s~~ ~~and BA’s inventories due to the timing of inventory purchases; and~~

~~Changes inCA-NA’s~~ ~~deferred revenue due primarily to the timing of customer payments.~~

~~An $11.7 million increase in net lossand non-cash charges~~ ~~and credits, primarily due to a decreasein CA-NA reportable~~ ~~segment profit offset in part by an increase in BA reportable segment profit and a decreasein CA-ROW reportable~~ ~~segment loss, as noted above under “—Results of Operations.”~~

Cash flows provided by (used in) Investing Activities:

Cash used in investing activities is primarily for capital expenditures related to ~~airborne equipment,~~ cell site construction, software development, and data center upgrades. See “— Capital Expenditures” below. Additionally, cash used in investing activities includes net changes in our short-term investments of a cash inflow of $39.3 million for the three month period ended March 31, 2019, while no such activity occurred in the current year as we no longer hold any short-term investments.

Cash flows provided by (used in) Financing Activities:

Cash used in financing activities for the three-month period ended March 31, 2021 was $3.3 million primarily due to stock-based compensation activities.

Cash provided by financing activities for the three month period ended March 31, 2020 was ~~$18.9~~$19.1 million primarily due to the $22.0 million of proceeds from the ABL Credit Facility offset in part by the repayment on maturity of the outstanding $2.5 million in aggregate principal amount of the 2020 Convertible Notes on March 1, 2020.

Cash used in financing activities for the three month period ended March 31, 2019 was $0.7 million primarily due to deferred financing costs associated with the issuances of the 2024 Senior Secured Notes, which occurred in April and May 2019, and financing lease payments.

Capital Expenditures

Our operations ~~continue to~~ require ~~significant~~ capital expenditures ~~primarily for technology development, equipment and capacity expansion. Capital expenditures for theCA-NA~~ ~~andCA-ROW~~ segments include the purchase of airborne equipment for the turnkey model, which correlates directly to the roll out and/or upgrade of service to our airline partners’ fleets. Capital spending is also associated with ~~the expansion of~~ our ATG ~~and satellite~~ network and data centers. We capitalize software development costs related to network technology ~~solutions, the Gogo platform and new product/service offerings.~~solutions. We also capitalize costs related to the build out of our office locations.

Capital expenditures for the three month periods ended March 31, 2021 and 2020 ~~and 2019~~ were ~~$15.3~~$0.7 million and ~~$27.7~~$0.9 million, respectively. ~~The decrease in capital expenditures was primarily due to a decrease in airborne equipment purchases as well as a decrease in capitalized software.~~

We expect that our ~~airborne-related~~ capital expenditures will vary in the future depending ~~upon~~on the ~~number~~timing of ~~installations under the turnkey model. Network-related~~network-related capital expenditures ~~and investments in capitalized software will increase over time~~ as we build out Gogo ~~5G.~~5G and further invest in capitalized software.

Other

~~Contractual Commitments:~~ We have agreements with vendors to provide us with transponder and teleport satellite services that vary in length and amount. See Note 13, “Commitments and Contingencies,” to our unaudited condensed consolidated financial statements for additional information.

Leases and Cell Site Contracts:We have lease agreements relating to certain facilities and equipment, which are considered operating leases. See Note 12, “Leases,” to our unaudited condensed consolidated financial statements for additional information.

~~The revenue share paid to our airline partners represents operating lease payments and is deemed to be contingent rental payments, as the payments due to each airline are based on a percentage of ourCA-NA~~ ~~andCA-ROW~~ service revenue generated from that airline’s passengers, which is unknown until realized. As such, we cannot estimate the lease payments due to an airline at the commencement of our contract with such airline. Rental expense related to the arrangements with commercial airlines included in cost of service revenue is primarily comprised of these revenue share payments offset by the amortization of the deferred airborne lease incentive discussed above. See Note 12, “Leases,” to our unaudited condensed consolidated financial statements for additional information.

Indemnifications and Guarantees: In accordance with Delaware law, we indemnify our officers and directors for certain events or occurrences while the officer or director is, or was, serving at our request in such capacity. The maximum potential amount of future payments we could be required to make under this indemnification is uncertain and may be unlimited, depending upon circumstances. However, our Directors’ and Officers’ insurance does provide coverage for certain of these losses.

In the ordinary course of business, we may occasionally enter into agreements pursuant to which we may be obligated to pay for the failure of performance of others, such as the use of corporate credit cards issued to employees. Based on historical experience, we believe that the risk of sustaining any material loss related to such guarantees is remote.

ITEM 3.

Quantitative and Qualitative Disclosures About Market Risk

Our exposure to market risk is currently confined to our cash and cash equivalents, short-term investments and ~~our~~ debt. We have not used derivative financial instruments for speculation or trading purposes. The primary objectives of our investment activities are to preserve our capital for the purpose of funding operations while ~~at the same time~~ maximizing the income we receive from our investments without significantly increasing risk. To achieve these objectives, our investment policy allows us to maintain a portfolio of cash equivalents and short-term investments through a variety of securities, including U.S. Treasury securities, U.S. government agency securities, and money market funds. Our cash and cash equivalents as of both March 31, ~~2020~~2021 and December 31, ~~2019 primarily~~2020 included amounts in bank deposit accounts and money market ~~funds.~~funds, and we did not have any short-term investments as of either such date. We believe that a change in average interest rates would not affect our interest income and results of operations by a material amount.

The risk inherent in our market risk sensitive instruments and positions is the potential loss arising from interest rates as discussed below. The sensitivity analyses presented do not consider the effects that such adverse changes may have on the overall economic activity, nor do they consider additional actions we may take to mitigate our exposure to such changes. Actual results may differ.

Interest:Our earnings are affected by changes in interest rates due to the impact those changes have on interest income generated from our cash, cash equivalents and short-term investments. Our cash and cash equivalents as of both March 31, ~~2020~~2021 and December 31, ~~2019~~2020 included amounts in bank deposit accounts and money market funds. We believe we have minimal interest rate risk as a 10% decrease in the average interest rate on our portfolio would have reduced interest income for the ~~three month~~three-month periods ended March 31, 2021 and 2020 ~~and 2019~~ by an immaterial ~~amount.~~amounts.

Inflation:We do not believe that inflation has had a material effect on our results of operations. However, there can be no assurance that our business will not be affected by inflation in the future.

~~Seasonality:~~Our results of operations for any interim period are not necessarily indicative of those for any other interim period for the entire year because the demand for air travel, including business travel, is subject to significant seasonal fluctuations. We generally expect overall passenger opportunity to be greater in the second and third quarters compared to the rest of the year due to an increase in leisure travel offset in part by a decrease in business travel during the summer months and holidays. We expect seasonality of the air transportation business to continue, which may affect our results of operations in any one period.

ITEM 4.

Controls and Procedures

(a)

~~(a)~~ Evaluation of Disclosure Controls and Procedures

Management, with the participation of our Chief Executive Officer and the Chief Financial Officer, evaluated the effectiveness of the design and operation of the Company’s disclosure controls and procedures (as defined inRules 13a-15(e) and15d-15(e) of the Securities Exchange Act of 1934, as amended) as of March 31, ~~2020.~~2021. Based upon this evaluation, our Chief Executive Officer and the Chief Financial Officer have concluded that our disclosure controls and procedures were effective as of March 31, ~~2020.~~2021.

(b)

~~(b)~~ Changes in Internal Control over Financial Reporting

There have been no changes to our internal control over financial reporting in connection with the evaluation required by Rules13a-15(f) and15d-15(f) under the Exchange Act during the most recent fiscal quarter that have materially affected, or are reasonably likely to materially affect, our internal control over financial reporting.

~~PART II. OTHER INFORMATION~~

PART II.
OTHER INFORMATION

ITEM 1.

Legal Proceedings

Contractual Commitments - We have agreements with various vendors under which we have remaining commitments to purchase satellite-based systems, certifications and development services. Such commitments will become payable as we receive the equipment or certifications, or as development services are provided.

Indemnifications and Guarantees - In accordance with Delaware law, we indemnify our officers and directors for certain events or occurrences while the officer or director is, or was, serving at our request in such capacity. The maximum potential amount of future payments we could be required to make under this indemnification is uncertain and may be unlimited, depending upon circumstances. However, our Directors’ and Officers’ insurance does provide coverage for certain of these losses.

We have entered into a number of agreements pursuant to which we indemnify the other party for losses and expenses suffered or incurred in connection with any patent, copyright, or trademark infringement or misappropriation claim asserted by a third party with respect to our equipment or services. The maximum potential amount of future payments we could be required to make under these indemnification agreements is uncertain and is typically not limited by the terms of the agreements.

Linksmart Litigation - On April 20, 2018, Linksmart Wireless Technology, LLC filed suit against usGogo Inc., Gogo LLC, our former subsidiary and the entity that operated our CA business (“Gogo LLC”), and eight ~~of our~~CA airline partners in the U.S. District Court for the Central District of California alleging that ~~our~~CA’s redirection server and login portal infringe a patent owned by the plaintiff. The suits seek an unspecified amount of damages. ~~We are~~Intelsat is required under ~~our~~its contracts with these airlines, which it assumed in the Transaction, to indemnify them for defense costs and any liabilities resulting from the suit. The Court has stayed the suits against ~~our~~the airline customers pending resolution of the suit against Gogo. Linksmart has also filed suit against other defendants asserting the same patent. Following the filing by one of those defendants of a petition to commence aninter partes review against the asserted patent in the U.S. Patent and Trademark Office, the Court stayed the litigation against such other defendant, Gogo Inc. and Gogo LLC, but such stay was lifted in July 2019 when the U.S. Patent and Trademark Office determined that the petitioner had not met the standard of proof required to commence theinter partes review. Since the stay was lifted, discovery has been completed and motion practice continues. No date has been set for trial. We believe that the plaintiff’s claims are without merit and intend to continue to defend them vigorously. The outcome of this litigation is inherently uncertain. No amounts have been accrued for any potential losses under this matter, as we cannot reasonably predict the outcome of the litigation or any potential losses.

President, Commercial Aviation. The complaints assert claims under Section 14(a) of the Securities Exchange Act of 1934, breach of fiduciary duty, unjust enrichment, and waste of corporate assets, and allege misrepresentations or omissions by us purporting to relate to ~~our~~the 2Ku antenna’s reliability and installation and remediation costs, as well as allegedly excessive bonuses, stock options, and other compensation paid to current Officers and Directors and excessive severance paid to former Officers. The two lawsuits were consolidated and ~~are~~were stayed ~~until~~pending a final disposition of the motion to dismiss in the class action suit. Since, as discussed above, the court in the class action suit denied the motion to dismiss, we expect the stay to be lifted and the litigation to resume.

We believe that the claims are without merit and intend to defend them ~~vigorously if the litigation resumes.~~vigorously. The plaintiffs seek to recover, on our behalf, an unspecified amount of damages from the individual defendants. We have filed a claim with the issuer of our Directors’ and Officers’ insurance policy with respect to these suits. No amounts have been accrued for any potential costs under this matter, as we cannot reasonably predict the outcome of the litigation or any potential costs.

From time to time we may become involved in ~~other~~ legal proceedings arising in the ordinary course of our business. We cannot predict with certainty the ~~potential for or~~ outcome of any litigation or the potential for future litigation. Regardless of the outcome of any particular litigation and the merits of any particular claim, litigation can have a material adverse impact on our company due to, among other reasons, any injunctive relief granted, which could inhibit our ability to operate our business, amounts paid as damages or in settlement of any such matter, diversion of management resources and defense costs.


ITEM 1A.	Risk Factors

“Item 1A. Risk Factors” of our Form10-K includes a discussion of our risk factors. The information presented below updates, and should be read in conjunction with, the risk factors and information disclosed in our ~~Form~~2020 10-K. Except as set forth below, there have been no material changes to the risk factors previously disclosed in our ~~201910-K.~~2020 10-K.

TheCOVID-19 pandemic and the measures implemented to combat it ~~are having,~~have had, and ~~are likely to~~may continue to have, a material adverse effect on our business. Moreover, the longer the pandemic persists, the more material the ultimate effects are likely to be. It is likely that there will be future negative effects that we cannot presently predict, including near term effects.

In December 2019, a novel strain of coronavirus(“COVID-19”) was reported in Wuhan, China, and the World Health Organization (the “WHO”) subsequently declaredCOVID-19 a “Public Health Emergency of International Concern.” On March 13, 2020, the U.S. government declared a national emergency and on March 19, 2020, the U.S. Department of State issued a global Level 4 “do not travel” advisory advising U.S. citizens to avoid all international travel due to the global impact ofCOVID-19. The U.S. government has also implemented enhanced screenings, mandatory quarantine requirements and other travel restrictions in connection with theCOVID-19 pandemic, including restrictions on travel from Asia, Europe, Mexico and Canada, and many foreign and U.S. state governments have instituted similar measures (including travel restrictions to and within the European Union) and declared states of emergency. At ~~least 42~~various points, most states ~~the District of Columbia~~ and ~~Puerto Rico~~U.S. territories have issued instructions for their residents to stay home or “shelter in place” and to avoid anynon-essential travel for varied durations of time and may lift, have lifted or will be lifting or easing these instructions at varied times, often with certain restrictions still in place. In addition,depending on the results of any easing or lifting of instructions and other restrictions, federal, state or local governments or authorities may determine to reinstate, enhance or enforce the same or other instructions or restrictions in the future.Governments,non-governmental organizations and entities in the private sector have also issued and may continue to issuenon-binding advisories or recommendations regarding air travel or other social distancing measures, including limitations on the number of persons that should be present at public gatherings.

TheCOVID-19 pandemic ~~has~~ caused a significant decline in international and domestic ~~commercial and~~ business aviation travel, which ~~has~~ materially and adversely affected our ~~business. Passenger traffic on commercial airlines using Gogo’s service declined significantly~~business in ~~April~~2020. Beginning in March 2020, compared to March 2020. Our airline partners have significantly reduced capacity in response to the reduced demand, both by taking a significant number of aircraft out of service and by reducing the number of flights flown by aircraft that remain in service and we are unable to predict how long such capacity reductions will continue. Our BAour business ~~has also seen~~saw a sharp decrease in flight activity, ~~which has resulted in~~as well as an increase in requests for~~one-month~~ account suspensions, an increase in downgrades to pay-as-you-go plans, and a ~~significant~~ decrease in new plan ~~activations~~activations. Though we continue to see strong signs of recovery from the lows we experienced in ~~April~~mid-April 2020, ~~as compared~~there can be no assurance that such recovery will continue at the current pace. The impact of the pandemic has varied across different parts of our customer base – for example corporate flight departments, charter operators and commercial aircraft (under the ATG Network Sharing Agreement) – and we expect the pace of recovery to ~~March 2020.~~vary by type of customer. The negative impact of COVID-19 on demand for commercial air travel could have an adverse effect on the revenue share payable to us by Intelsat under the ATG Network Sharing Agreement.

We expectCOVID-19 to continue to negatively impact our ~~CA and BA businesses~~business and we are unable to predict how long or with what degree of severity that impact will continue. The extent of the impact ofCOVID-19 on our financial and operational performance will depend on future developments, including the duration, spread and severity of the outbreak, the timetable for administering and efficacy of vaccines, the duration and geographic scope of related travel advisories and restrictions and the extent of the impact ofCOVID-19 on overall demand for commercial and business aviation travel, all of which are highly uncertain and cannot be predicted. If our airline partners continue to experience significantly reduced demand for passenger traffic, or continue to keep a significant number of aircraft out of service, for an extended period, our business, results of operations, liquidity and financial condition may be materially adversely affected.

In addition to directly impacting demand for air travel,COVID-19 and related restrictions may have a material and adverse impact on other aspects of our business, including:

•

delays and difficulties in completing installations on certain aircraft; and

•

limitations on our ability to market and grow our business and to promote technological innovation.

~~enhanced risk~~In addition, COVID-19 could have an adverse effect on our supply chain. Many manufacturers of electronic components reduced their capacity in response to the reduced demand that accompanied the pandemic. While manufacturers have begun to increase manufacturing capacity as demand recovers from the impact of COVID, demand has exceeded supply in certain areas, and shortages of electronic components have occurred. We have experienced longer lead times and encountered delays in obtaining electronic components used in the airborne equipment that we manufacture. While we believe that we have adequate inventory or will be able to acquire sufficient electronic components to meet customer demand as currently forecasted, a continued shortage of electronic components could cause product delays or ~~defaults in payments by airline partners and other third parties due to liquidity constraints that extend in some cases to bankruptcy;~~shortages.

~~delays and difficulties in completing installations on certain aircraft;~~

~~delays or shortages in our supply chain;~~

~~our competitive position, including with respect to connectivity providers that do not operate exclusively in the aviation industry; and~~

~~limitations on our ability to market and grow our business and to promote technological innovation.~~

At this time we are also not able to predict whether theCOVID-19 pandemic will result in long-term changes to business practices and consumer behavior, with such changes including but not limited to a long-term reduction in travel as a result of increased usage of “virtual” and “teleconferencing” products a general reluctance to travel by consumers and the impact on demand and capacity, which could result from government mandates on commercial aviation service including, for instance, any requirement for passengers to wear masks while traveling or any limitation on the number of seats that can be occupied on an aircraft to allow for social distancing. Each of these factors could have a material impact on our business. .The full extent of the ongoing impact ofCOVID-19 on our longer-term operational and financial performance will depend on future developments, many of which are outside of our control.

~~The extent~~We may be unsuccessful or delayed in developing and deploying Gogo 5G or other next generation technologies.

We are currently developing a next generation ATG network using 5G technology and unlicensed spectrum which we intend to ~~which the outbreak affects our future earnings~~deploy on a nationwide basis in 2022. Gogo 5G will be capable of working with different spectrums and liquidity will depend in part on our ability to implement various measures intended to reduce expenses and/or conserve cash, which themselves may have negative consequences with respect to our business and operations. In April 2020, we applied for an $81 million grant and a $150 million loan under the Coronavirus Aid, Relief, and Economic Security Act (the “CARES Act”), but wesupporting different next generation technologies. There can ~~provide~~be no assurance that we will receive the grant or loan in the amounts for which we applied, or at all. If we do accept relief under the CARES Act, we will be subject to certain restrictions, including, but not limited to, requirements to maintain employment levels through September 30, 2020, requirements to issue warrants for our common stock to the U.S. Treasury Department and certain limitations on executive compensation. The substance and duration of these restrictions may materially affect our operations, and we may not be successful in managing this impact. In addition, effective May 4, 2020, we furloughed approximately 54% of our workforce and implemented various reductions in compensation for other active employees, including salary reductions. Such actions could adversely affect employee morale, reduce overall productivity, lead to departures of key personnel or otherwise adversely impact normal operations. We may also be unsuccessful in amending contracts with certain suppliers and service providers, including satellite service providers. We are implementing and may consider other cost-saving measures, such as delaying aircraft equipment installations, deferring purchases of capital equipment, freezing new hires, reducing marketing and travel expenses and eliminating~~non-essential~~ ~~spend. There can be no assurances that any of the cost-saving measures described above,~~launch Gogo 5G or any other ~~actions, will successfully mitigate~~next generation technology in sufficient time to meet growing user expectations regarding the ~~impact ofCOVID-19~~ ~~or the related decrease in demand for commercial air travel.~~

~~We are unable~~in-flight connectivity experience and to predict how long these conditions will persist, what additional measures may be introduced by governments or private parties or what effect any such additional measures may have on air travel and our business. Furthermore, not only is the duration of the pandemic and future measures taken to combat it presently unknown, the overall situation is extremely fluid, and it is impossible to predict the timing of future material changeseffectively compete in the situation. It therefore is impossible to predict whether any such unknown future developments will occur in the near, medium or long term, and depending on the duration of the pandemic, such negative developments may occur over the entirety of the event.

~~Our~~ business ~~is highly dependent on the airline industry, which is itself affected by factors beyond the airlines’ control, includingCOVID-19.~~ ~~The airline industry is highly competitive and sensitive to changing economic conditions.~~

Our business is directly affected by the number of passengers flying on commercial aircraft, the financial condition of the airlines and other economic factors. If consumer demand for air travel declines, including due to environmental concerns or regulation, increased use of technology such as videoconferencing for business travelers, or the number of flights shrinkaviation market, due to, among other ~~reasons, reductions~~things, risks associated with: (i) our failure to design and develop a technology that provides the features and performance we require; (ii) integrating the solution with our existing ATG network; (iii) the availability of adequate spectrum; (iv) the failure of spectrum to perform as expected; (v) the failure of equipment and software to perform as expected; (vi) problems arising in ~~capacity by airlines,~~ the ~~number of passengers available~~manufacturing process; (vii) our ability to ~~use the Gogo service will be reduced, which may have a material adverse effect~~negotiate contracts with suppliers on ~~our business and results of operations. Unfavorable general economic conditions~~acceptable commercial and other ~~events that are beyond~~terms; (viii) our reliance on single-source suppliers for the ~~airlines’ control, including higher unemployment rates, higher interest rates, reduced stock prices, reduced consumer~~development and ~~business spending, outbreaks~~manufacturing of ~~communicable diseases~~the core elements of the network and ~~terrorist attacks~~on other suppliers to provide certain components and services; and (ix) delays in obtaining or ~~threats could also have a material adverse effect on~~failures to obtain the ~~airline industry. In particular,~~required regulatory approvals for installation and operation of such equipment and the~~COVID-19~~ ~~outbreak has resulted in widespread and prolonged global travel restrictions, the taking of a significant number of aircraft out~~ provision of service ~~by our airline partners and~~to passengers. As disclosed above in this Item 1A under the ~~suspension of certain commercial flights by all of our airline partners, which has had, and is expected to continue to have, an adverse impact on our business. See~~caption “—TheCOVID-19 pandemic and the measures implemented to combat it ~~are having,~~have had, and ~~are likely to~~may continue to have, a material adverse effect on our business,” manufacturing capacity is lagging behind demand as the economy recovers from COVID-19, andwe have experienced longer lead times and encountered delays in obtaining certain electronic components used in our business. ~~Moreover, the longer the pandemic persists, the more material the ultimate effects are likely~~A supplier of a Gogo 5G component has identified a manufacturing issue with respect to ~~be. It~~such component which has necessitated manufacturing process revisions and additional testing which is ~~likely that there will be future negative effects~~scheduled to occur in May 2021. We believe that we ~~cannot presently predict, including near term effects.~~”

~~A general reduction or shift~~can accommodate the supplier’s current expectations for the delivery date for this component without affecting our service launch, but the resulting compression in ~~discretionary spending~~our schedule could also result in decreased demand for leisure and business travel and lead to a reduction in airline flights offered and the number of passengers flying. Consolidation within the airline industry could also adversely affectlimit our ~~relationships with our existing airline partners or lead to Gogo-equipped aircraft being taken out of service.~~

~~Further, unfavorable economic conditions, including conditions associated withCOVID-19,~~ ~~could also limit airlines’~~ ability to ~~counteract~~preserve the current schedule should other significant issues arise. If Gogo 5G or any ~~increased fuel, labor~~other next generation technology fails to perform as expected or ~~other costs through raised prices. Our airline partners operate in a highly competitive business market and,~~its commercial availability is significantly delayed as ~~a result, continue~~compared to ~~face pressure on offerings and pricing. These unfavorable conditions and~~ the competitiveness of the air travel industry could cause one or more of our airline partners to reduce expenditures on passenger services including deployment of the Gogo service, to be unable to pay the amounts due under our contracts with them in a timely manner or at all or to file for bankruptcy. If one or more of our airline partners were to file for bankruptcy, bankruptcy laws could give them rights to terminate and/or renegotiate their contracts with us, as well as reduce their total fleet size and capacity and/or their total number of flights. For example, due to market conditions caused by the~~COVID-19~~ pandemic, the financial condition of one of the Company’s international airline partners already has deteriorated so significantly that it accounted for approximately 70% of the $6.8 million expected credit loss provision recorded during the three months ended March 31, 2020. Furthermore,timelines we expect to record additional credit losses relating to such airline partner during the three month period ending June 30, 2020. Any of these aforementioned events or circumstances may have a material adverse effect onestablish, our business, ~~prospects,~~ financial condition and results of ~~operations.~~

We recorded an impairment charge on certain long-lived assets on March 31, 2020; we could incur additional losses in future periods due to impairment of long-lived assets and goodwill and other intangible assets as a result of the~~COVID-19~~ ~~pandemic or other circumstances.~~

In accordance with applicable accounting standards, we are required to test our indefinite-lived intangible assets for impairment on an annual basis, or more frequently where there is an indication of impairment. In addition, we are required to test long-lived assets for impairment where there is any indication that an assetoperations may be ~~impaired. We believed that the impact of theCOVID-19~~ ~~pandemic on our business could be such an indication for both indefinite-lived and long-lived assets and tested such assets for impairment as of March 31, 2020.~~materially adversely affected.

~~Our review of our indefinite-lived intangible assets for impairment, including the impact of theCOVID-19~~ ~~pandemic, indicated that there were no impairments as of March 31, 2020.~~

~~Our review of our long-lived assets, including the impact of theCOVID-19~~ pandemic, indicated that carrying values related to three of our airline agreements for the CA business exceeded their estimated undiscounted cash flows, which triggered the need to estimate the fair value of these assets. Fair value reflects our best estimate of the discounted cash flows of the impaired assets. For the airborne assets and~~right-of-use~~ assets associated with the three airline agreements (the “impaired assets”), we recorded an impairment charge of $46.4 million for the three month period ended March 31, 2020, reflecting the difference between the carrying value and the estimated fair value of the impaired assets.

~~The risk of future additional material impairments has been significantly heightened as result of the effects of theCOVID-19~~ pandemic on our business and we can provide no assurance that a material impairment loss of long-lived assets or goodwill and other intangible assets will not occur in a future period. Other circumstances that could require us to recognize impairments in the future include, among other factors, tight credit markets, government regulatory changes, decline in the fair values of certain tangible or intangible assets, unfavorable trends in historical or forecasted results of operations and cash flows and an uncertain economic environment, as well as other uncertainties. The value of our equipment could also be impacted in future periods by changes in supply and demand for our services. An impairment loss could have a material adverse effect on our financial condition and results of operations.

We may need additional financing to execute our business plan or new initiatives and we expect that we will need additional financing to refinance or repay our existing indebtedness at maturity; we may not be able to secure additional financing on acceptable terms, or at all.

As of March 31, 2020, our total cash and cash equivalents totaled $214.2 million. However, to date, excluding the impact of financing activities, we have not generated positive cash flows on a consolidated basis. As a result, we may require additional financing at some point in the future to fully execute our business plan, including our technology roadmap, international or domestic expansion plans or other changes. In addition, as a result of the effects of~~COVID-19,~~ we may require additional financing to fund our continuing operations. Our success may depend on our ability to raise such additional financing on reasonable terms and on a timely basis. The amount and timing of our capital needs will depend in part on the resources required to develop our next generation ATG solution, the extent of deployment of 2Ku and our next generation ATG service, the rate of customer penetration, the adoption of our service by airline partners and other factors described in our annual, quarterly or current report filings with the Securities and Exchange Commission that may adversely affect our business. In addition, we may actively consider from time to time other significant technological, strategic and operational initiatives. In order to execute on any of these initiatives, we may require additional financing. Furthermore, we expect that we will require additional financing to refinance, or repay at maturity, our indebtedness, including $237.8 million of 2022 Convertible Notes (as defined below) that mature on May 15, 2022. Conditions in the economy and the financial markets may make it more difficult for us to obtain necessary additional capital or financing on acceptable terms, or at all. In addition, our ability to obtain additional financing for working capital, capital expenditures, acquisitions, debt service requirements or general corporate purposes is also limited by the indenture governing the 2024 Senior Secured Notes (as defined below), as amended, and the ABL Credit Agreement (as defined below). As of March 31, 2020, within our existing debt facilities, Gogo Intermediate Holdings LLC and its subsidiaries would have been able to incur approximately $17 million of additional indebtedness of capital leases and borrowing under the ABL Credit Agreement. Though the CARES Act, and other future legislation that may be passed by the U.S. government, may provide for additional potential sources of liquidity, we cannot be assured that we will receive such funding on acceptable terms, or at all. If we do receive funding from the U.S. government, we may be subject to additional restrictions or limitations, including limitations on the use of such funds. See “—~~TheCOVID-19~~ pandemic, and the measures implemented to combat it, are having, and are likely to continue to have, a material adverse effect on our business. Moreover, the longer the pandemic persists, the more material the ultimate effects are likely to be. It is likely that there will be future negative effects that we cannot presently predict, including near term effects.” If we cannot secure sufficient additional financing, we may be forced to forego strategic opportunities or delay, scale back or eliminate additional service deployment, operations and investments or employ unplanned internal cost savings measures any of which could have a material adverse effect on our business prospects, financial condition and results of operations.

We and our subsidiaries have substantial debt and may incur substantial additional debt in the future, which could adversely affect our financial health, reduce our profitability, limit our ability to obtain financing in the future and pursue certain business opportunities and reduce the value of your investment.

As of March 31, ~~2020,~~2021, we had total consolidated indebtedness of approximately ~~$1,184.8 million,~~$1.2 billion, including ~~$925.0~~$975.0 million outstanding of our 9.875% senior secured notes due 2024 (the “2024 Senior Secured Notes”), ~~$237.8~~and $208.5 million outstanding of the 2022 Convertible Notes. As of May 1, 2021, following the Refinancing and our ~~6.00% convertible senior notes due 2022 (the “2022 Convertible Notes”) and $22.0~~entry into the Facilities, we had total consolidated indebtedness of approximately $828 million, including $725 million outstanding under the Term Loan Facility and $103 million aggregate principal amount outstanding of our asset-based revolving credit facility (the “ABL Credit Facility”) pursuant to the credit agreement, dated as of August 26, 2019 (the “ABL Credit Agreement”). Subject to certain limitations set forth in the indenture governing the 2024 Senior Secured Notes, as amended, and the ABL Credit Agreement, we2022 Convertible Notes.

We and our subsidiaries may incur additional debt in the future, including up to $100.0 million, under the Revolving Facility, which could increase the risks described below and lead to other risks.

The amount of our debt or such other obligations could have important consequences for holders of our common stock, including, but not limited to:

•	a substantial portion of our cash flow from operations must be dedicated to the payment of principal and interest on our indebtedness, thereby reducing the funds available to us for other purposes;
•	our ability to obtain additional financing for working capital, capital expenditures, acquisitions, debt service requirements or general corporate purposes is limited, and our ability to satisfy our obligations with respect to our indebtedness may be impaired in the future;
•	we may be at a competitive disadvantage compared to our competitors with less debt or with comparable debt at more favorable interest rates and which, as a result, may be better positioned to withstand economic downturns;
•	our ability to refinance indebtedness may be limited or the associated costs may increase;
•	our ability to engage in acquisitions without raising additional equity or obtaining additional debt financing may be impaired in the future;
•	it may be more difficult for us to satisfy our obligations to our creditors, resulting in possible defaults on and acceleration of such indebtedness;

•	we may be more vulnerable to general adverse economic and industry conditions; and
•	our flexibility to adjust to changing market conditions and our ability to withstand competitive pressures could be limited, or we may be prevented from making capital investments that are necessary or important to our operations in general, growth strategy and efforts to improve operating margins of our business units.

our ability to obtain additional financing for working capital, capital expenditures, acquisitions, debt service requirements or general corporate purposes is limited, and our ability to satisfy our obligations with respect to our indebtedness may be impaired in the future;

we may be at a competitive disadvantage compared to our competitors with less debt or with comparable debt at more favorable interest rates, or which are subject to fewer limitations or restrictions, and which, as a result, may be better positioned to withstand economic downturns;

~~our ability to refinance indebtedness may be limited or the associated costs may increase;~~

~~our ability to engage in acquisitions without raising additional equity or obtaining additional debt financing may be impaired in the future;~~

~~it may be more difficult for us to satisfy our obligations to our creditors, resulting in possible defaults on and acceleration of such indebtedness;~~

~~we may be more vulnerable to general adverse economic and industry conditions; and~~

our flexibility to adjust to changing market conditions and our ability to withstand competitive pressures could be limited, or we may be prevented from making capital investments that are necessary or important to our operations in general, growth strategy and efforts to improve operating margins of our business units.

In addition, in April 2020, we applied for a $150 million loan under the CARES Act, which, if received, may subject us to certain restrictions, including, but not limited to, requirements to maintain employment levels through September 30, 2020, requirements to issue warrants for our common stock to the U.S. Treasury Department and certain limitations on executive compensation. The substance and duration of these restrictions may materially affect our operations, and we may not be successful in managing this impact.

We may have future capital needs and may not be able to obtain additional financing to fund our capital needs on acceptable terms, or at all.

We have from time to time evaluated, and we continue to evaluate, our potential capital needs in light of increasing demand for our services, limitations on bandwidth capacity and performance and generally evolving technology in our industry. ~~Additionally, in response to the travel restrictions, decreased demand for our services and other effects ofCOVID-19,~~ ~~we are currently evaluating our capital needs and liquidity position. In connection with our response toCOVID-19,~~ ~~and due to other factors in the future, we~~We may ~~seek to~~ utilize one or more types of capital raising in order to fund any initiative in this regard, including the issuance of new equity securities and new debt securities, including debt securities convertible into our common stock. ~~We may also seek to issue such securities to service providers and vendors, in lieu of cash, in order to manage liquidity restraints.~~ Since our IPO, we have obtained debt financing through our entry into our previous credit ~~facility,~~facilities, issuances of convertible notes and issuances of senior secured notes. Excluding the impact of such financing activities, we have not generated positive cash flows on a consolidated basis, and our ability to do so will depend in large part on our ability to increase revenue and manage costs in each of our three business segments. In addition, our ability to generate positive cash flows from operating activities and the extent and timing of certain capital and other necessary expenditures are subject to numerous variables, such as costs related to ~~international expansion and~~ execution of our current technology roadmap, including continuing development and deployment of ~~our 2Ku and ATG systems,~~Gogo 5G and other ~~potential~~ future technologies. The market conditions and the macroeconomic conditions that affect the markets in which we operate ~~ournon-investment~~ ~~grade rating, our substantial indebtedness, the availability of assets as collateral for loans or other indebtedness and other factors, including the impact ofCOVID-19,~~ could have a material adverse effect on our ability to secure financing on acceptable terms, if at all. We may be unable to secure additional financing on favorable terms or at all or our operating cash flow may be insufficient to satisfy our financial obligations under the indenture governing the ~~2024 Senior Secured Notes, the indenture governing the~~ 2022 Convertible Notes, the ~~ABL Credit Agreement~~Facilities and other indebtedness outstanding from time to time. ~~Our liquidity has been, and may in the future be, negatively affected by the risk factors discussed in Item 1A. Risk Factors in the 201910-K,~~ ~~as updated by this Quarterly Report on Form10-Q,~~ ~~including risks related to future results arising from theCOVID-19~~ pandemic. If our liquidity is materially diminished, we may not be able to timely pay our debts and obligations as they become due, or otherwise comply with the covenants under the agreements and instruments governing our debt or with other material provisions of our contractual obligations.

Our ability to obtain additional financing for working capital, capital expenditures, acquisitions, debt service requirements or general corporate purposes is limited by the indenture governing the 2024 Senior Secured Notes and the ABL Credit Agreement, and additional covenants, restrictions, limitations and provisions could become binding on us as we continue to seek additional liquidity in response to the~~COVID-19~~ pandemic. As of March 31, 2020, within our existing debt facilities, the remaining permitted indebtedness for Gogo Intermediate Holdings LLC (a wholly owned subsidiary of Gogo Inc.) and its subsidiaries was approximately $17 million of capital leases and borrowings under the ABL2021 Credit Agreement. In the future, if our subsidiaries are in compliance with certain incurrence ratios or other covenant exceptions set forth in the ~~indenture governing the 2024 Senior Secured Notes and in the ABL~~2021 Credit Agreement, our subsidiaries may be able to incur additional indebtedness, which indebtedness may be secured or unsecured, the incurrence of which may increase the risks created by our current substantial indebtedness. ~~Neither the indenture governing the 2024 Senior Secured Notes nor the ABL~~Events beyond our control can affect our ability to comply with these requirements. The 2021 Credit Agreement ~~prohibits~~also limits the ability of Gogo Inc. ~~from incurring~~to incur additional indebtedness under ~~any~~certain circumstances ~~but they do limit~~and limits the amount of cash that our subsidiaries may dividend, transfer or otherwise distribute to us, including cash distributed to us to pay interest on the 2022 Convertible Notes or to pay interest on other indebtedness incurred by us, including indebtedness or preferred stock incurred to refinance, replace, renew or refund the 2022 Convertible Notes.us.

The terms of any additional financing ~~including any financing obtained through the CARES Act,~~ may further limit our financial and operating flexibility. Our ability to satisfy our financial obligations will depend upon our future operating performance, the availability of credit generally, economic conditions and financial, business and other factors, many of which are beyond our control. Furthermore, if financing is not available when needed, or is not available on acceptable terms, we may be unable to take advantage of business opportunities or respond to competitive pressures, any of which may have a material adverse effect on our business, financial condition and results of operations. Even if we are able to obtain additional financing, we may be required to use the proceeds from any such financing to repay a portion of our outstanding debt.

If we raise additional funds or seek to reduce our current levels of indebtedness through further issuances of equity, convertible debt securities or other securities convertible into equity, our existing stockholders could suffer significant dilution in their percentage ownership of our company. In addition, any new securities we issue could have rights, preferences and privileges senior to those of holders of our common stock, and we may grant holders of such securities rights with respect to the governance and operations of our business. If we are unable to obtain adequate financing or financing on terms satisfactory to us, if and when we require it, our ability to grow or support our business and to respond to business challenges could be significantly limited.

Servicing our debt requires a significant amount of cash, and we may not have sufficient cash flow from our business to pay our substantial debt.

Our ability to make scheduled payments of the principal of, to pay interest on or to refinance our indebtedness depends on our future performance, which is subject to economic, financial, competitive and other factors beyond our control. Our business may not generate cash flow from operations in the future sufficient to satisfy our obligations under our existing indebtedness and any future indebtedness we may incur and to make necessary capital expenditures. If we are unable to generate such cash flow, we may be required to adopt one or more alternatives, such as reducing or delaying investments or capital expenditures, selling assets, refinancing or obtaining additional equity capital on terms that may be onerous or highly dilutive. Our ability to refinance existing indebtedness or future indebtedness will depend on the capital markets and our financial condition at such time. We may not be able to engage in any of these activities on desirable terms or at all, and such alternative measures may not be successful and may not permit us to meet our scheduled debt service obligations, which could result in a default on existing indebtedness or future indebtedness.

We cannot make assurances that we will be able to refinance any of our indebtedness or obtain additional financing, particularly because of our high levels of debt and the debt incurrence restrictions imposed by the agreements and instruments governing our debt. In the absence of such sources of capital, we could face substantial liquidity problems and might be required to dispose of material assets or operations to meet our debt service and other obligations. The 2021 Credit Agreement restricts our ability to dispose of assets

and how we use the proceeds from any such dispositions.

The agreements and instruments governing our debt contain restrictions and limitations that could significantly impact our ability to operate our business.

The 2021 Credit Agreement contains covenants that, among other things, limit the ability of our subsidiaries and, in certain circumstances, us to:

•

incur additional debt;

•

pay dividends, redeem stock or make other distributions;

•

make certain investments;

•

create liens;

•

transfer or sell assets;

•

merge or consolidate with other companies; and

•

enter into certain transactions with our affiliates.

Our ability to comply with the covenants and restrictions contained in the 2021 Credit Agreement may be affected by economic, financial and industry conditions beyond our control. Our failure to comply with obligations under the agreements and instruments governing our indebtedness may result in an event of default under such agreements and instruments. We cannot be certain that we will have funds available to remedy these defaults. A default, if not cured or waived, may permit acceleration of our indebtedness. If our indebtedness is accelerated, we cannot be certain that we will have sufficient funds available to pay the accelerated indebtedness or have the ability to refinance the accelerated indebtedness on terms favorable to us or at all. All of these covenants and restrictions could affect our ability to operate our business, may limit our ability in the future to satisfy currently outstanding obligations and may limit our ability to take advantage of potential business opportunities as they arise.

An increase in interest rates would increase the cost of servicing our indebtedness and could reduce our profitability.

Our debt outstanding under the Term Loan Facility bears interest, and any indebtedness under our Revolving Facility would bear interest, at variable rates. As a result, increases in interest rates would increase the cost of servicing our debt and could materially reduce our profitability and cash flows.

Any indebtedness under our 2021 Credit Agreement may bear interest at rates that use the London inter-bank offered rate (“LIBOR”). The upcoming cessation of the availability of LIBOR may adversely affect our business, financial position, results of operations and cash flows. On July 27, 2017, the United Kingdom's Financial Conduct Authority (the “FCA”), which regulates LIBOR, announced that it intends to stop encouraging or compelling banks to submit LIBOR quotations after 2021 (the “FCA Announcement”). The FCA Announcement indicates that the continuation of LIBOR on the current basis is not guaranteed after 2021 and, based on the foregoing, it appears likely that LIBOR will be discontinued or modified before the end of 2021. On March 5, 2021, the ICE Benchmark Administration, which administers LIBOR, and FCA announced that all LIBOR settings will either cease to be provided by any administrator, or no longer be representative immediately after December 31, 2021, for all non-U.S. dollar LIBOR settings and one-week and two-month U.S. dollar LIBOR settings, and immediately after June 30, 2023 for the remaining U.S. dollar LIBOR settings (the “LIBOR Announcement”). It is not possible to predict the effect that the LIBOR Announcement, the discontinuation of LIBOR or the establishment of alternative reference rates may have on LIBOR, but financial products with interest rates tied to LIBOR may be adversely affected. Once LIBOR ceases to be published, it is uncertain whether it will continue to be viewed as an acceptable market benchmark, what rate or rates may become accepted alternatives to LIBOR or what the effect of any such changes in views or alternatives may be on the markets for LIBOR-indexed financial instruments.

Indebtedness under the Facilities is secured by substantially all of our assets. As a result of these security interests, such assets would only be available to satisfy claims of our general creditors or to holders of our equity securities if we were to become insolvent to the extent the value of such assets exceeded the amount of our secured indebtedness and other obligations. In addition, the existence of these security interests may adversely affect our financial flexibility.

Indebtedness under the Facilities is secured by a lien on substantially all of our assets. Accordingly, if an event of default were to occur under the 2021 Credit Agreement, to the extent amounts were outstanding under the Facilities, the lenders party to the 2021 Credit Agreement would have a prior right to our assets, to the exclusion of our general creditors in the event of our bankruptcy, insolvency, liquidation, or reorganization. In that event, our assets would first be used to repay in full all indebtedness and other obligations under the indenture governing the 2021 Credit Agreement, resulting in all or a portion of our assets being unavailable to satisfy the claims of our unsecured indebtedness. Only after satisfying the claims of our unsecured creditors and our subsidiaries’

unsecured creditors would any amount be available for our equity holders. The pledge of these assets and other restrictions may limit our flexibility in raising capital for other purposes. Because substantially all of our assets are pledged under these financing arrangements, our ability to incur additional secured indebtedness or to sell or dispose of assets to raise capital may be impaired, which could have an adverse effect on our financial flexibility.

We may not have sufficient cash flow or the ability to raise the funds necessary to settle conversions of the 2022 Convertible Notes, to repay the 2022 Convertible Notes at maturity or to purchase the 2022 Convertible Notes upon a fundamental change.

Holders of the 2022 Convertible Notes will have the right to require us to purchase their 2022 Convertible Notes upon the occurrence of a fundamental change at a purchase price equal to 100% of the principal amount of the 2022 Convertible Notes to be purchased, plus accrued and unpaid interest, if any, to, but not including, the fundamental change purchase date. In addition, in the event the conditional conversion feature of the 2022 Convertible Notes remains triggered, holders of the 2022 Convertible Notes are entitled to convert the 2022 Convertible Notes at any time during specified periods at their option. The 2022 Convertible Notes became eligible for conversion at the election of holders on October 1, 2020 and are currently convertible until at least June 30, 2021. Upon conversion of the 2022 Convertible Notes, we will be required to make cash payments in respect of the 2022 Convertible Notes being converted, unless we elect to deliver solely shares of our common stock to settle such conversion (other than cash in lieu of any fractional share). Moreover, we will be required to repay the 2022 Convertible Notes in cash on May 15, 2022, their maturity date, unless earlier converted or repurchased. We may not have enough available cash or be able to obtain financing at the time we are required to make purchases of 2022 Convertible Notes surrendered therefor or repay the 2022 Convertible Notes at maturity or upon 2022 Convertible Notes being converted. While we have reserved a portion of the net proceeds from the issuance of the 2022 Convertible Notes to fund a portion of future interest payments on the 2022 Convertible Notes, the amount of such funds, together with funds up-streamed from subsidiaries and from other potential sources of liquidity (if any) may not be adequate to fund any future liquidity shortfall. See “—We may have future capital needs and may not be able to obtain additional financing to fund our capital needs on acceptable terms, or at all.”

Our failure to purchase 2022 Convertible Notes as required by the indenture governing the 2022 Convertible Notes or to pay cash payable upon future conversions of the 2022 Convertible Notes as required by the indenture governing the 2022 Convertible Notes would constitute a default under the indenture governing the 2022 Convertible Notes. A default under the indenture governing the 2022 Convertible Notes or the fundamental change itself could also lead to a default under the agreements and instruments governing our other indebtedness and the acceleration of amounts outstanding thereunder, including the 2021 Credit Agreement. If the repayment of the related indebtedness were to be accelerated after any applicable notice or grace periods, we may not have sufficient funds to repay the indebtedness and purchase the 2022 Convertible Notes or make cash payments upon conversions thereof. A default under the indenture governing the 2022 Convertible Notes may have a material adverse effect on our financial condition and results of operations and could cause us to become bankrupt or otherwise insolvent.

A downgrade, suspension or withdrawal of the rating assigned by a rating agency to us, our subsidiaries or our indebtedness, if any, could cause our cost of capital to increase.

Our Term Loan has been rated by nationally recognized rating agencies and may in the future be rated by additional rating agencies. We cannot assure you that any rating assigned will remain for any given period of time or that a rating will not be lowered or withdrawn entirely by a rating agency if, in that rating agency’s judgment, circumstances relating to the basis of the rating, such as adverse changes in our business, so warrant. Any future lowering of ratings may make it more difficult or more expensive for us to obtain additional debt financing.

ITEM 2.

Unregistered Sales of Equity Securities and Use of Proceeds

Sales of Unregistered Securities

~~None.~~The information disclosed in Item 3.02 of the Company’s Form 8-K filed on March 18, 2021 (File Number 001-35975), Form 8-K/A filed on March 23, 2021 (File Number 001-35975) and Form 8-K filed on April 13, 2021 (File Number 001-35975) is incorporated by reference herein.

Use of Proceeds from Public Offering of Common Stock

None.

ITEM 3.

Defaults Upon Senior Securities

None.

ITEM 4.

Mine Safety Disclosures

None.

ITEM 5.

Other Information

None.

ITEM 6.

Exhibits


Exhibit Number		Description of Exhibits

~~4.11~~ 4.1		~~Second Supplemental Indenture,~~Registration Rights Agreement, dated as of April 9, 2021, by and among Gogo Inc., Silver (XII) Holdings, LLC and Silver (Equity) Holdings, LP (incorporated by reference to Exhibit 10.2 to Form 8-K filed on April 14, 2021 (File Number 001-35975))

4.2		Amendment to the Registration Rights Agreement, dated as of April 9, 2021, by and between Gogo Inc. (f/k/a AC HoldCo Inc.) and Thorndale Farm Gogo, LLC (as assignee to the interests of the Thorne Investors, as defined therein) (incorporated by reference to Exhibit 10.3 to Form 8-K filed on April 14, 2021 (File Number 001-35975))

10.1		Exchange Agreement, dated as of April 1, 2021, by and between Gogo Inc. and Silver (XII) Holdings, LLC (incorporated by reference to Exhibit 10.1 to Form 8-K filed on April 14, 2021 (File Number 001-35975))

10.2		Commitment Letter, dated as of March ~~6, 2020,~~31, 2021, by and among Gogo ~~Air International GmbH,~~Inc., Morgan Stanley Senior Funding, Inc., Credit Suisse AG, Cayman Islands Branch, Credit Suisse Loan Funding LLC, Deutsche Bank AG New York Branch and Deutsche Bank Securities Inc.

10.3		Credit Agreement, dated as of April 30, 2021, among Gogo Inc., Gogo Intermediate Holdings LLC, ~~Gogo Finance Co. Inc., each of~~ the ~~other guarantors~~lenders and issuing banks party thereto and ~~U.S. Bank National Association,~~Morgan Stanley Senior Funding, Inc., as ~~trustee~~administrative agent (incorporated by reference to Exhibit 10.1 to Form 8-K filed on May 3, 2021 (File Number 001-35975))

~~10.1.43†~~ 10.4		~~Amendment #6 to the Unified~~ ~~In-Flight~~ ~~Connectivity Hardware, Services and Maintenance~~Guarantee Agreement, ~~effective~~dated as of ~~December~~ ~~5, 2019, between~~April 30, 2021, among Gogo Inc., Gogo Intermediate Holdings LLC and ~~American Airlines,~~certain of its subsidiaries, and Morgan Stanley Senior Funding, Inc., as collateral agent. (incorporated by reference to Exhibit 10.2 to Form 8-K filed on May 3, 2021 (File Number 001-35975))

~~10.1.44†~~ 10.5		~~Amendment #7 to the Unified~~ ~~In-Flight~~ ~~Connectivity Hardware, Services and Maintenance~~Collateral Agreement, ~~effective~~dated as of ~~December~~ ~~27, 2019, between~~April 30, 2021, among Gogo Inc., Gogo Intermediate Holdings LLC and ~~American Airlines,~~certain of its subsidiaries, and Morgan Stanley Senior Funding, Inc., as collateral agent (incorporated by reference to Exhibit 10.3 to Form 8-K filed on May 3, 2021 (File Number 001-35975))

~~31.1~~ 10.6#		Director Compensation Policy, effective March 4, 2021

31.1		Certification of Chief Executive Officer pursuant to Exchange Act Rules13a-14(a) and15d-14(a), as adopted pursuant to Section 302 of the Sarbanes-Oxley Act of 2002

31.2		Certification of Chief Financial Officer pursuant to Exchange Act Rules13a-14(a) and15d-14(a), as adopted pursuant to Section 302 of the Sarbanes-Oxley Act of 2002

32.1 *		Certification of Chief Executive Officer pursuant to 18 U.S.C. Section 1350, as adopted pursuant to Section 906 of the Sarbanes-Oxley Act of 2002

32.2 *		Certification of Chief Financial Officer pursuant to 18 U.S.C. Section 1350, as adopted pursuant to Section 906 of the Sarbanes-Oxley Act of 2002



101.INS		Inline XBRL Instance Document – The instance document does not appear in the interactive data file because its XBRL tags are embedded within the Inline XBRL document

101.SCH		Inline XBRL Taxonomy Extension Schema Document

101.CAL		Inline XBRL Taxonomy Extension Calculation Linkbase Document

101.LAB		Inline XBRL Taxonomy Extension Labels Linkbase Document

101.PRE		Inline XBRL Taxonomy Extension Presentation Linkbase Document

101.DEF		Inline XBRL Taxonomy Extension Definition Linkbase Document

104		Cover Page Interactive Data File (formatted as Inline XBRL and contained in Exhibit 101)

#	Indicates management contract or compensatory plan or arrangement.

This certification accompanies the Form10-Q to which it relates, is not deemed filed with the Securities and Exchange Commission and is not to be incorporated by reference into any filing of the Registrant under the Securities Act of 1933, as amended, or the Securities Exchange Act of 1934, as amended (whether made before or after the date of the Form10-Q), irrespective of any general incorporation language contained in such filing.

†	~~Certain provisions of this exhibit have been omitted pursuant to Item 601 (b)(10)(iv) of RegulationS-K.~~

SIGNATURES

Pursuant to the requirements of the Securities and Exchange Act of 1934, as amended, the registrant has duly caused this report to be signed on its behalf by the undersigned thereunto duly authorized.

						Gogo Inc.
Date: May 6, 2021						~~Gogo Inc.~~
~~Date: May 11, 2020~~

						/s/ Oakleigh Thorne
						Oakleigh Thorne
						President and Chief Executive Officer
						(Principal Executive Officer)

						/s/ Barry Rowan
						Barry Rowan
						Executive Vice President and Chief Financial Officer
						(Principal Financial Officer)

Large accelerated filer

Accelerated filer

Non-accelerated filer

~~Non-accelerated~~ ~~filer~~

Smaller reporting company

Emerging growth company