Document and Entity Information
Document and Entity Information - shares | 3 Months Ended | |
Mar. 31, 2021 | May 21, 2021 | |
Cover [Abstract] | ||
Entity Registrant Name | AEROCENTURY CORP | |
Entity Central Index Key | 0001036848 | |
Document Type | 10-Q | |
Document Period End Date | Mar. 31, 2021 | |
Amendment Flag | false | |
Current Fiscal Year End Date | --12-31 | |
Is Entity's Reporting Status Current? | Yes | |
Is Entity Emerging Growth Company? | false | |
Entity Filer Category | Non-accelerated Filer | |
Entity Small Business | true | |
Entity Shell Company | false | |
Entity Interactive Data Current | Yes | |
Entity Incorporation State Country Code | DE | |
Entity File Number | 001-13387 | |
Entity Common Stock, Shares Outstanding | 1,545,884 | |
Document Fiscal Period Focus | Q1 | |
Document Fiscal Year Focus | 2021 |
Condensed Consolidated Balance
Condensed Consolidated Balance Sheets (Unaudited) - USD ($) | Mar. 31, 2021 | Dec. 31, 2020 |
Assets: | ||
Cash and cash equivalents | $ 4,224,900 | $ 2,408,700 |
Cash and cash equivalents held for sale | 0 | 345,900 |
Restricted cash held for sale | 0 | 2,346,300 |
Accounts receivable | 310,300 | 256,600 |
Finance leases receivable, net of allowance for doubtful accounts of $2,324,000 and $1,503,000 at March 31, 2021 and December 31, 2020, respectively | 1,626,000 | 2,547,000 |
Aircraft held for lease, net of accumulated depreciation of $21,699,000 and $21,001,300 at March 31, 2021 and December 31, 2020, respectively | 56,085,400 | 45,763,100 |
Assets held for sale | 347,400 | 38,146,700 |
Property, equipment and furnishings, net of accumulated depreciation of $12,300 and $16,400 at March 31, 2021 and December 31, 2020, respectively | 11,700 | 14,900 |
Office lease right of use, net of accumulated amortization of $43,900 and $27,400 at March 31, 2021 and December 31, 2020, respectively | 125,900 | 142,400 |
Deferred tax asset | 3,400 | 1,150,900 |
Taxes receivable | 1,160,700 | 0 |
Prepaid expenses and other assets | 539,100 | 255,300 |
Total assets | 64,434,800 | 93,377,800 |
Liabilities: | ||
Accounts payable and accrued expenses | 215,300 | 367,700 |
Accrued payroll | 222,200 | 190,100 |
Notes payable and accrued interest, net of unamortized debt issuance costs of $780,900 | 0 | 88,793,200 |
Notes payable and accrued interest held for sale, net of unamortized debt issuance costs of $313,400 | 0 | 13,836,900 |
Derivative liability held for sale | 0 | 767,900 |
Derivative termination liability | 0 | 3,075,300 |
Lease liability | 151,000 | 172,000 |
Maintenance reserves | 2,099,900 | 2,000,600 |
Accrued maintenance costs | 0 | 46,100 |
Security deposits | 466,000 | 716,000 |
Unearned revenues | 549,000 | 1,027,400 |
Income taxes payable | 1,200 | 900 |
Total liabilities not subject to compromise | 3,704,600 | 110,994,100 |
Liabilities subject to compromise | 83,754,800 | 0 |
Total liabilities | 87,459,400 | 110,994,100 |
Commitments and contingencies (Note 10) | ||
Stockholders' Deficit: | ||
Preferred stock, $0.001 par value, 2,000,000 shares authorized, no shares issued and outstanding | 0 | 0 |
Common stock, $0.001 par value, 10,000,000 shares authorized, 1,545,884 shares outstanding at March 31, 2021 and December 31, 2020 | 1,800 | 1,800 |
Paid-in capital | 16,782,800 | 16,782,800 |
Accumulated deficit | (36,771,900) | (31,361,600) |
Accumulated other comprehensive loss | 0 | (2,000) |
Shareholders equity before treasury stock | (19,987,300) | (14,579,000) |
Treasury stock at cost, 213,332 shares at March 31, 2021 and December 31, 2020 | (3,037,300) | (3,037,300) |
Total stockholders' deficit | (23,024,600) | (17,616,300) |
Total liabilities and stockholders' deficit | $ 64,434,800 | $ 93,377,800 |
Condensed Consolidated Balanc_2
Condensed Consolidated Balance Sheets (Parenthetical) - USD ($) | Mar. 31, 2021 | Dec. 31, 2020 |
Assets: | ||
Finance lease receivable, allowance for doubtful accounts | $ 2,324,000 | $ 1,503,000 |
Aircraft and aircraft engines held for lease, accumulated depreciation | 21,699,000 | 21,001,300 |
Accumulated depreciation | 12,300 | 16,400 |
Accumulated amortization, office lease right of use | 43,900 | 27,400 |
Liabilities: | ||
Unamortized debt issuance costs | 0 | 780,900 |
Unamortized debt issuance costs | $ 0 | $ 313,400 |
Stockholders' Deficit: | ||
Preferred stock, par value | $ .001 | $ 0.001 |
Preferred stock, authorized | 2,000,000 | 2,000,000 |
Preferred stock, issued | 0 | 0 |
Preferred stock, outstanding | 0 | 0 |
Common stock, par value | $ .001 | $ 0.001 |
Common stock, authorized | 10,000,000 | 10,000,000 |
Common stock, outstanding | 1,545,884 | 1,545,884 |
Treasury stock | 213,332 | 213,332 |
Condensed Consolidated Statemen
Condensed Consolidated Statements of Operations (Unaudited) - USD ($) | 3 Months Ended | |
Mar. 31, 2021 | Mar. 31, 2020 | |
Revenues and Other Income: | ||
Operating lease revenue | $ 2,737,200 | $ 4,768,300 |
Finance lease revenue | 0 | 56,300 |
Net loss on disposal of assets | (201,700) | (24,200) |
Other loss | (1,300) | (23,200) |
Total income | 2,534,200 | 4,777,200 |
Expenses: | ||
Impairment in value of aircraft | 1,940,400 | 6,654,900 |
Interest | 1,914,700 | 6,012,900 |
Professional fees, general and administrative and other | 1,595,100 | 850,300 |
Bad debt expense | 821,000 | 1,170,000 |
Depreciation | 699,300 | 2,170,300 |
Salaries and employee benefits | 506,300 | 516,900 |
Insurance | 247,900 | 186,900 |
Maintenance | 145,000 | 80,200 |
Other taxes | 25,600 | 25,600 |
Total expenses | 7,895,300 | 17,668,000 |
Loss before income tax provision/(benefit) | (5,361,100) | (12,890,800) |
Income tax provision/(benefit) | 49,200 | (2,712,400) |
Net loss | $ (5,410,300) | $ (10,178,400) |
Loss Per Share: | ||
Basic | $ (3.50) | $ (6.58) |
Diluted | $ (3.50) | $ (6.58) |
Weighted Average Shares Used in Loss Per Share Computations: | ||
Basic | 1,545,884 | 1,545,884 |
Diluted | 1,545,884 | 1,545,884 |
Condensed Consolidated Statem_2
Condensed Consolidated Statements of Comprehensive Income (Unaudited) - USD ($) | 3 Months Ended | |
Mar. 31, 2021 | Mar. 31, 2020 | |
Statement of Comprehensive Income [Abstract] | ||
Net loss | $ (5,410,300) | $ (10,178,400) |
Other Comprehensive Loss: | ||
Unrealized losses on derivative instruments | 0 | (575,000) |
Reclassification of net unrealized losses on derivative instruments to interest expense | 2,600 | 1,318,400 |
Tax expense related to items of other comprehensive loss | (600) | (159,700) |
Other comprehensive income | 2,000 | 583,700 |
Total comprehensive loss | $ (5,408,300) | $ (9,594,700) |
Condensed Consolidated Statem_3
Condensed Consolidated Statements of Stockholders' Equity/(Deficit) (Unaudited) - USD ($) | Common Stock | Paid-in Capital | Retained Earnings/(Deficit) | Treasury Stock | Accumulated Other Comprehensive Loss | Total |
Beginning balance, shares at Dec. 31, 2019 | 1,545,884 | |||||
Beginning balance, amount at Dec. 31, 2019 | $ 1,800 | $ 16,782,800 | $ 10,882,100 | $ (3,037,300) | $ (1,370,800) | $ 23,258,600 |
Net loss | (10,178,400) | (10,178,400) | ||||
Accumulated other comprehensive income | 583,700 | 583,700 | ||||
Ending balance, shares at Mar. 31, 2020 | 1,545,884 | |||||
Ending balance, amount at Mar. 31, 2020 | $ 1,800 | 16,782,800 | 703,700 | (3,037,300) | (787,100) | 13,663,900 |
Beginning balance, shares at Dec. 31, 2020 | 1,545,884 | |||||
Beginning balance, amount at Dec. 31, 2020 | $ 1,800 | 16,782,800 | (31,361,600) | (3,037,300) | (2,000) | (17,616,300) |
Net loss | (5,410,300) | (5,410,300) | ||||
Accumulated other comprehensive income | 2,000 | 2,000 | ||||
Ending balance, shares at Mar. 31, 2021 | 1,545,884 | |||||
Ending balance, amount at Mar. 31, 2021 | $ 1,800 | $ 16,782,800 | $ (36,771,900) | $ (3,037,300) | $ 0 | $ (23,024,600) |
Condensed Consolidated Statem_4
Condensed Consolidated Statements of Cash Flows (Unaudited) - USD ($) | 3 Months Ended | |
Mar. 31, 2021 | Mar. 31, 2020 | |
Statement of Cash Flows [Abstract] | ||
Net cash used in operating activities | $ (176,700) | $ (624,500) |
Investing Activities: | ||
Proceeds from sale of aircraft and aircraft engines held for lease, net of re-sale fees | 10,850,700 | 0 |
Proceeds from sale of assets held for sale, net of re-sale fees | 0 | 3,104,800 |
Net cash provided by investing activities | 10,850,700 | 3,104,800 |
Financing Activities: | ||
Repayment of notes payable - MUFG Credit Facility and Drake Loan | (11,011,700) | (1,165,000) |
Repayment of notes payable - Nord Loans | (703,100) | (664,000) |
Issuance of notes payable - PPP Loan | 170,000 | 0 |
Debt issuance costs | (5,200) | (80,300) |
Net cash used in financing activities | (11,550,000) | (1,909,300) |
Net (decrease)/increase in cash, cash equivalents and restricted cash | (876,000) | 571,000 |
Cash, cash equivalents and restricted cash, beginning of period | 5,100,900 | 3,427,100 |
Cash, cash equivalents and restricted cash, end of period | 4,224,900 | 3,998,100 |
Total cash, cash equivalents and restricted cash shown in the statement of cash flows | $ 5,100,900 | $ 3,998,100 |
Condensed Consolidated Statem_5
Condensed Consolidated Statements of Cash Flows (Parenthetical) - USD ($) | 3 Months Ended | |
Mar. 31, 2021 | Mar. 31, 2020 | |
Statement of Cash Flows [Abstract] | ||
Interest paid | $ 186,500 | $ 1,722,500 |
Income taxes paid | $ 4,000 | $ 110,500 |
Organization and Summary of Sig
Organization and Summary of Significant Accounting Policies | 3 Months Ended |
Mar. 31, 2021 | |
Organization, Consolidation and Presentation of Financial Statements [Abstract] | |
Organization and Summary of Significant Accounting Policies | (a) The Company and Basis of Presentation AeroCentury Corp. (“AeroCentury”) is a Delaware corporation incorporated in 1997. AeroCentury together with its consolidated subsidiaries is referred to as the “Company.” In August 2016, AeroCentury formed two wholly-owned subsidiaries, ACY 19002 Limited (“ACY 19002”) and ACY 19003 Limited (“ACY 19003”) for the purpose of acquiring aircraft using a combination of cash and third-party financing (“UK LLC SPE Financing” or “special-purpose financing”) separate from AeroCentury’s credit facility (the “MUFG Credit Facility”). The UK LLC SPE Financing was repaid in full in February 2019 as part of a refinancing involving new non-recourse term loans totaling approximately $44.3 million (“Nord Loans”) made to ACY 19002, ACY 19003, and two other newly formed special-purpose subsidiaries of AeroCentury, ACY SN 15129 LLC (“ACY 15129”) and ACY E-175 LLC (“ACY E-175”), which were formed for the purpose of refinancing four of the Company’s aircraft using the Nord Loans. See Note 4(b) for more information about the Nord Loans. As discussed in Note 3(a), the Company sold its membership interest in ACY E-175 in March 2021. Financial information for AeroCentury and its consolidated subsidiaries is presented on a consolidated basis in accordance with accounting principles generally accepted in the United States of America (“GAAP”) for interim financial information, the instructions to Form 10-Q and Article 8 of Regulation S-X. Accordingly, they do not include all of the information and footnotes required by GAAP for complete financial statements. In the opinion of management, all adjustments (consisting of normal recurring accruals) considered necessary for a fair presentation have been included. Operating results for the three-month period ended March 31, 2021 are not necessarily indicative of the results that may be expected for the year ending December 31, 2021 or for any other period. All intercompany balances and transactions have been eliminated in consolidation. As discussed below, on March 29, 2021 (the “Petition Date”), AeroCentury and certain of its subsidiaries in the U.S. (collectively the "Debtors" and the "Debtors- in-Possession") filed voluntary petitions for relief (collectively, the "Petitions") under Chapter 11 of Title 11 ("Chapter 11") of the U.S. Bankruptcy Code (the "Bankruptcy Code") in the U.S. Bankruptcy Court for the District of Delaware (the "Bankruptcy Court"). The Chapter 11 cases (the "Chapter 11 Case") are being jointly administered under the caption In re: AeroCentury Corp., et al., Case No. 21-10636 Effective on the Petition date, the Company applied accounting standards applicable to reorganizations, Accounting Standards Codification 852 - Reorganizations, (b) Company Indebtedness As discussed in Note 4, on October 30, 2020, the lenders (“MUFG Lenders”) under the Company’s previous term loan facility (the “MUFG Loan”) sold the MUFG Loan and the $3.1 million obligation of the Company from termination of the two swaps (the “MUFG Swaps”) related to the MUFG Loan to Drake Asset Management Jersey Limited (“Drake”), and the Company and Drake entered into an amendment of the loan (as amended, the “Drake Loan Agreement”) under which, among other things, the cash component of interest due for March 2020 and thereafter for the term of the loan was capitalized. The Drake Loan Agreement had a stated maturity date of March 31, 2021 and is secured by a lien on substantially all of the Company’s assets but collection on or exercise or rights or remedies with the Drake Loan Agreement were stayed due to the Company’s Chapter 11 filing, as discussed below in Note 1(e), “ Automatic Stay. (c) Voluntary Petitions for Bankruptcy In connection with the impending maturity of the Company’s indebtedness owed to Drake (“Drake Indebtedness”) and the continuing economic impact from COVID-19, on March 29, 2021, the Debtors filed voluntary petitions for relief (collectively, the "Petitions") under Chapter 11 in the Bankruptcy Court. The Chapter 11 Cases are being jointly administered under the caption In re: AeroCentury Corp., et al., Case No. 21-10636 The Bankruptcy Court approved motions filed by the Debtors that were designed primarily to mitigate the impact of the Chapter 11 Case on the Company’s operations, customers and employees. Pursuant to orders entered by the Bankruptcy Court, the Debtors are authorized to conduct their business activities in the ordinary course, and among other things and subject to the terms and conditions of such orders: (i) pay employees’ wages and related obligations; (ii) pay certain taxes; (iii) continue to maintain certain customer programs; (iv) maintain their insurance program; (v) use cash collateral on an interim basis; and (vi) continue their cash management system. On April 22, 2021, the Bankruptcy Court entered an order authorizing and approving the funding of the Company’s Chapter 11 bankruptcy cases on a final basis. This final order authorizes the Company’s continued access to funding for its business operations and restructuring process, to the extent that such funding is available. On the same date, the Bankruptcy Court entered an order authorizing and approving marketing and sale procedures with respect to the sale of some or all of the Company’s assets. The Company’s court-supervised sale process requires any bids for its assets to be submitted by 5:00 p.m. on May 17. No third party qualified bids were received for the Company’s assets in the Court-approved marketing and sale process, so the proposed auction for assets will not be conducted, and the Company anticipates that the sale of the Drake Collateral will proceed under the terms of the stalking horse agreement. There were non-qualified third party bids received by the Company for certain subsets of the Company’s aircraft assets, and the Company is currently reviewing and evaluating those offers. With respect to any asset purchases proposed in such non-qualified bids that include Drake Collateral, the Company is consulting with Drake. (d) Debtors-In-Possession The Debtors are currently operating as debtors-in-possession under the jurisdiction of the Bankruptcy Court and in accordance with the applicable provisions of the Bankruptcy Code and orders of the Bankruptcy Court. In general, as debtors-in-possession under the Bankruptcy Code, the Debtors are authorized to continue to operate as an ongoing business but may not engage in transactions outside the ordinary course of business without the prior approval of the Bankruptcy Court. (e) Automatic Stay Subject to certain specific exceptions under the Bankruptcy Code, the Petitions automatically stayed most judicial or administrative actions against the Debtors and efforts by creditors to collect on or otherwise exercise rights or remedies with respect to Pre-petition obligations of the Debtors. Absent an order from the Bankruptcy Court, substantially all of the Debtors’ Pre-petition liabilities are subject to settlement under the Bankruptcy Code. (f) Borrowing Capacity and Availability At March 31, 2021, the Company had no borrowing capacity or availability under the Drake Loan Agreement. The filing of the Chapter 11 Case constituted a default, termination events and/or amortization event with respect to the Drake Indebtedness. As discussed in Note 3(a), in March 2021, the Company sold its ownership interest in ACY E-175 to Drake, and Drake assumed ACY E-175’s indebtedness under its Nord Loan. (g) Going Concern At March 31, 2021, the Company had total book assets of approximately $64.4 million and total liabilities of $87.4 million, resulting in a negative book equity of $23.0 million. The largest portion, $83.3 million, of the Company’s debt is owed to Drake Asset Management Jersey Limited (“Drake”) and was payable with accrued interest on March 31, 2021. The Company did not have the resources to meet its obligations to repay the Drake debt when due on March 31, 2021, which is a principal reason for its decision to file for protection under Chapter 11 of the bankruptcy code. It has also recognized that it requires additional funding to continue its operations, and that it has not identified a source for such funding to date. Although management plans include securing additional funding, it cannot conclude that it is probable that such plan will be achieved and mitigate the conditions that led to substantial doubt about the Company’s ability to continue as a going concern. The Company has suffered recurring losses from operations, is in default of its debt obligations under the Drake debt, and has a net capital deficiency. The Company’s poor financial position, including its poor short-term liquidity given the maturity of the Drake debt, the amount of liability under the Drake debt in relation to the fair value of the Company’s assets and the uncertainty of generating sufficient funds over the year after publication of its financial statements to continue operations have led the Company to conclude that there is substantial doubt about its ability to continue as a going concern. The accompanying condensed consolidated financial statements have been prepared assuming that the Company will continue as a going concern and contemplate the realization of assets and the satisfaction of liabilities in the normal course of business. The Company’s ability to continue as a going concern is contingent upon its ability to successfully implement a plan of reorganization, among other factors, and the realization of assets and the satisfaction of liabilities are subject to uncertainty. Further, any plan of reorganization could materially change the amounts of assets and liabilities reported in the accompanying condensed consolidated financial statements. The condensed consolidated financial statements presented in this Quarterly Report on Form 10-Q have been prepared on a going concern basis and do not include any adjustments that might arise as a result of uncertainties about the Company’s ability to continue as a going concern or as a consequence of its Chapter 11 filing. (h) Impact of COVID-19 In March 2020, the World Health Organization (“WHO”) declared the novel strain of coronavirus (“COVID-19”) a pandemic, and COVID-19 has continued to have wide-ranging impacts as the virus spreads globally (the “COVID-19 Pandemic”). The ongoing COVID-19 Pandemic has had an overwhelming effect on all forms of transportation globally, but most acutely for the airline industry. The combined effect of fear of infection during air travel and international and domestic travel restrictions has caused a dramatic decrease in passenger loads in all areas of the world, not just in those countries with active clusters of COVID-19, but in airline ticket net bookings (i.e. bookings made less bookings canceled) of flights as well. This has led to significant cash flow issues for airlines, including some of the Company’s customers. The Company permitted one of its customers, which leases two regional turboprop aircraft, to make reduced payments totaling approximately $0.3 million in the second and fourth quarters of 2020 as well as $0.4 million in the first quarter of 2021 and the customer paid the reduced amounts. In addition, two other customers, each of which leases an aircraft subject to a sales-type lease, did not make lease payments totaling approximately $1.0 million in 2020 and $0.9 million in the first quarter of 2021, and the Company and the customers are discussing remedies regarding the non-payment. As discussed in Note 2, the Company recorded a bad debt allowance of $821,000 related to one of the two sales-type finance leases during first quarter of 2021 as a result of its May 2021 agreement to sell the aircraft to the customer, which requires the approval of the Bankruptcy Court and which the Company expects to occur in the second quarter of 2021. The impact of the COVID-19 Pandemic has also led the Company to determine that there is uncertainty related to rent, interest and debt payments such that, as disclosed in Notes 4 and 5, the Company de-designated its interest rate swaps as hedges in March 2020 since the payments related to the swaps were deemed not probable to occur. Additionally, in December 2020, the Company determined that it was probable that certain future cash flows under its interest rate swaps would not occur, and the Company consequently reclassified accumulated other comprehensive income (“AOCI”) associated with such cash flows into interest expense. (i) Use of Estimates The Company’s condensed consolidated financial statements have been prepared in accordance with GAAP. The preparation of consolidated financial statements in conformity with GAAP requires management to make estimates and assumptions that affect the reported amounts of assets and liabilities and disclosures of contingent assets and liabilities at the date of the condensed consolidated financial statements and the reported amounts of revenues and expenses during the reporting period. Actual results could differ from those estimates. The Company bases its estimates on historical experience and on various other assumptions that are believed to be reasonable for making judgments that are not readily apparent from other sources. The most significant estimates with regard to these condensed consolidated financial statements are the residual values and useful lives of the Company’s long-lived assets, the current value of the Company’s assets held for sale, the amount and timing of future cash flows associated with each asset that are used to evaluate whether assets are impaired, accrued maintenance costs, accounting for income taxes, the assumptions used to value the Company’s derivative instruments, the valuation of the right of use asset and related lease liability associated with the Company’s office, and the amounts recorded as allowances for doubtful accounts. (j) Comprehensive Income/(Loss) The Company accounts for former interest rate cash flow hedges by reclassifying accumulated other comprehensive income into earnings in the periods in which the expected transactions occur or when it is probable that the hedged transactions will no longer occur, and are included in interest expense. (k) Finance Leases As of March 31, 2021, the Company had two sales-type leases secured by aircraft. Both leases contain lessee bargain purchase options at prices substantially below the subject asset’s estimated residual value at the exercise date for the option. Consequently, the Company classified each of these two leases as finance leases for financial accounting purposes. For such finance leases, the Company reports the discounted present value of (i) future minimum lease payments (including the bargain purchase option) and (ii) any residual value not subject to a bargain purchase option, as a finance lease receivable on its balance sheet, and accrues interest on the balance of the finance lease receivable based on the interest rate inherent in the applicable lease over the term of the lease. For each of the sales-type leases, the Company recognized as a gain or loss the amount equal to (i) the net investment in the sales-type lease plus any initial direct costs and lease incentives less (ii) the net book value of the subject aircraft at inception of the applicable lease. (l) Taxes As part of the process of preparing the Company’s condensed consolidated financial statements, management estimates income taxes in each of the jurisdictions in which the Company operates. This process involves estimating the Company’s current tax exposure under the most recent tax laws and assessing temporary differences resulting from differing treatment of items for tax and GAAP purposes. These differences result in deferred tax assets and liabilities, which are included in the balance sheet. In assessing the valuation of deferred tax assets, the Company considers whether it is more likely than not that some portion or all of the deferred tax assets will not be realized. The ultimate realization of deferred tax assets is dependent upon the generation of future taxable income or availability to carryback the losses to taxable income during periods in which those temporary differences become deductible. The Company considered several factors when analyzing the need for a valuation allowance including the Company's current three-year cumulative loss through December 31, 2020, the impacts of COVID-19 pandemic on the worldwide airline industry and the Company’s recent filing for protection under Chapter 11 of the bankruptcy code. Significant management judgment is required in determining the Company’s future taxable income for purposes of assessing the Company’s ability to realize any benefit from its deferred taxes. Based on its analysis, the Company has concluded that a valuation allowance is necessary for its U.S. deferred tax assets not supported by either future taxable income or availability of future reversals of existing taxable temporary differences and has recorded a valuation allowance of $1,126,100 for the three months ended March 31, 2021. Additionally, the Company has concluded that based on its analysis, some of its foreign net operating loss carrybacks are not expected to be realized based on limitations on the utilization of its foreign net operating losses, and therefore recorded a foreign tax expense of $54,300 for the reduced tax refund for the three months ended March 31, 2021. The Company accrues non-income based sales, use, value added and franchise taxes as other tax expense in the condensed consolidated statement of operations. (m) Revenue Recognition, Accounts Receivable and Allowance for Doubtful Accounts Revenue from leasing of aircraft assets pursuant to operating leases is recognized on a straight-line basis over the terms of the applicable lease agreements. Deferred payments are recorded as accrued rent when the cash rent received is lower than the straight-line revenue recognized. Such receivables decrease over the term of the applicable leases. Interest income is recognized on finance leases based on the interest rate implicit in the lease and the outstanding balance of the lease receivable. Maintenance reserves retained by the Company at lease-end are recognized as maintenance reserves revenue. In instances where collectability is not reasonably assured, the Company recognizes revenue as cash payments are received. The Company estimates and charges to income a provision for bad debts based on its experience with each specific customer, the amount and length of payment arrearages, and its analysis of the lessee’s overall financial condition. If the financial condition of any of the Company’s customers deteriorates, it could result in actual losses exceeding any estimated allowances. The Company had an allowance for doubtful accounts of $2,324,000 and $1,503,000 at March 31, 2021 and December 31, 2020, respectively. (n) Interest Rate Hedging During the first quarter of 2019, the Company entered into certain derivative instruments to mitigate its exposure to variable interest rates under the Nord Loan debt and a portion of the MUFG Indebtedness. Hedge accounting is applied to such a transaction only if specific criteria have been met, the transaction is deemed to be “highly effective” and the transaction has been designated as a hedge at its inception. Under hedge accounting treatment, generally, the effects of derivative transactions are recorded in earnings for the period in which the hedge transaction affects earnings. A change in value of a hedging instrument is reported as a component of other comprehensive income/(loss) and is reclassified into earnings in the period in which the transaction being hedged affects earnings. If at any time after designation of a cash flow hedge, such as those entered into by the Company, it is no longer probable that the forecasted cash flows will occur, hedge accounting is no longer permitted and a hedge is “de-designated.” After de-designation, if it is still considered reasonably possible that the forecasted cash flows will occur, the amount previously recognized in other comprehensive income/(loss) will continue to be reversed as the forecasted transactions affect earnings. However, if after de-designation it is probable that the forecasted transactions will not occur, amounts deferred in accumulated other comprehensive income/(loss) will be recognized in earnings immediately. As noted in Note 5, in October 2019 the Company became aware that, as a result of certain defaults under its MUFG Credit Facility, certain of the forecasted transactions related to its MUFG Credit Facility interest rate swaps were no longer probable of occurring and, hence, those swaps were de-designated from hedge accounting at that time. The two swaps related to the MUFG Credit Facility were terminated in March 2020 and the Company incurred a $3.1 million obligation in connection with such termination, payment of which was due no later than the March 31, 2021 maturity of the Drake Loan. As a result of the forecasted transaction being not probable to occur, accumulated other comprehensive loss of $1,167,700 related to the MUFG Swaps was recognized as interest expense in the first quarter of 2020. In March 2020, the Company determined that the future hedged interest payments related to its five remaining Nord Loan interest rate hedges (the “Nord Swaps”) were no longer probable of occurring, and consequently de-designated all five swaps from hedge accounting. Additionally, in December 2020, the Company determined that the interest cash flows that were associated with its three remaining swaps were probable of not occurring after February 2021. (o) Recent Accounting Pronouncements ASU 2016-13 The FASB issued ASU 2016-13, Financial Instruments – Credit Losses (Topic 326) . ASU 2019-12 In December 2019, the FASB issued ASU 2019-12, Income Taxes (Topic 740), FASB Staff Guidance on Effects of COVID-19 In April 2020, the FASB staff provided some relief from the unprecedented effect of the COVID-19 pandemic. Under this guidance, lessors may elect to treat lease concessions due to COVID-19 as if they arose from enforceable rights and obligations that existed in the lease contract, with the consequent effect that the concessions would not be treated as a lease modification which could require reclassification and remeasurement of the lease and to either recognize income during the deferral period or to treat deferred rent as variable rent during the period. Other guidance released in April 2020 provides that when hedge accounting is discontinued and it is probable that the forecasted transaction that had been hedged will occur beyond two months after its originally expected date as a result of the effects of COVID-19, the reporting entity may still defer recognizing related AOCI immediately and should defer recognition of such amounts until the forecasted transactions actually occur. The Company has elected to treat certain lease concessions to lessees as if they arose from rights initially in the lease contracts and so did not give rise to modifications of the leases, and to treat deferrals as variable rent during the period of the deferral, reducing income during such period. |
Aircraft Lease Assets
Aircraft Lease Assets | 3 Months Ended |
Mar. 31, 2021 | |
Aircraft Lease Assets [Abstract] | |
Aircraft Lease Assets | The Company’s leases are normally “triple net leases” under which the lessee is obligated to bear all costs, including tax, maintenance and insurance, on the leased assets during the term of the lease. In most cases, the lessee is obligated to provide a security deposit or letter of credit to secure its performance obligations under the lease, and in some cases, is required to pay maintenance reserves based on utilization of the aircraft, which reserves are available for qualified maintenance costs during the lease term and may or may not be refundable at the end of the lease. Typically, the leases also contain minimum return conditions, as well as an economic adjustment payable by the lessee (and in some instances by the lessor) for amounts by which the various aircraft or engine components are worse or better than a targeted condition set forth in the lease. Some leases contain renewal or purchase options, although the Company’s sales-type leases contain a bargain purchase option at lease end which the Company expects the lessees to exercise or require that the lessee purchase the aircraft at lease-end for a specified price. Because all of the Company’s leases transfer use and possession of the asset to the lessee and contain no other substantial undertakings by the Company, the Company has concluded that all of its lease contracts qualify for lease accounting. Certain lessee payments of what would otherwise be lessor costs (such as insurance and property taxes) are excluded from both revenue and expense. The Company evaluates the expected return on its leased assets by considering both the rents receivable over the lease term, any expected additional consideration at lease end, and the residual value of the asset at the end of the lease. In some cases, the Company depreciates the asset to the expected residual value because it expects to sell the asset at lease end; in other cases, it may expect to re-lease the asset to the same or another lessee and the depreciation term and related residual value will differ from the initial lease term and initial residual value. Residual value is estimated by considering future estimates provided by independent appraisers, although it may be adjusted by the Company based on expected return conditions or location, specific lessee considerations, or other market information. Three of the Company’s operating lease assets are subject to manufacturer residual value guarantees totaling approximately $13.7 million at the end of their lease terms in the second quarter of 2027. The Company considers the best market for re-leasing and/or selling its assets at the end of its leases, although it does not expect to retain ownership of the assets under sales-type leases given the lessees’ bargain purchase options or required purchase. (a) Assets Held for Lease At March 31, 2021 and December 31, 2020, the Company’s aircraft held for lease consisted of the following: March 31, 2021 December 31, 2020 Type Number owned % of net book value Number owned % of net book value Regional jet aircraft 7 70 % 4 67 % Turboprop aircraft 3 30 % 2 33 % March 31, 2021 December 31, 2020 Type Cost Accumulated depreciation Impairment losses Net Cost Accumulated depreciation Impairment losses Net Aircraft under operating leases $ 74,397,700 $ (21,699,000 ) $ (7,633,300 ) $ 45,065,400 $ 74,397,700 $ (21,001,300 ) $ (7,633,300 ) $ 45,763,100 Off-lease aircraft 56,364,200 (9,454,200 ) (35,890,000 ) 11,020,000 - - - - $ 130,761,900 $ (31,153,200 ) $ (43,523,300 ) $ 56,085,400 $ 74,397,700 $ (21,001,300 ) $ (7,633,300 ) $ 45,763,100 The Company did not purchase or sell any aircraft held for lease during the first quarter of 2021. As a result of its Chapter 11 filing in March 2021 and the Company’s consequent lack of authority to sell certain assets without the approval of the Bankruptcy Court, the Company reclassified four off-lease aircraft, comprised of three regional jet aircraft and one turboprop aircraft, from held for sale to held for lease. As discussed below, the Company has two turboprop aircraft that are being sold in parts and are held for sale in the ordinary course of its business. As of March 31, 2021, minimum future lease revenue payments receivable under non-cancelable operating leases were as follows: Years ending December 31 2021 $ 5,832,000 2022 7,320,100 2023 7,320,100 2024 5,843,800 2025 2,978,200 Thereafter 3,066,000 $ 32,360,200 The remaining weighted average lease term of the Company’s assets under operating leases was 26 months and 29 months at March 31, 2021 and December 31, 2020, respectively. (b) Sales-Type and Finance Leases The Company has two sales-type leases, which were substantially modified in January 2020 to reduce the amount of monthly payments and purchase option amounts due under the leases. Although the modifications would ordinarily have given rise to income or loss resulting from the changed term of the agreements, the lessee’s poor compliance with the lease terms has led the Company to value the sales-type leases at the fair value of the collateral and, as such, the modifications did not give rise to any effect on income other than that related to the collateral value of the financed aircraft. As a result of payment delinquencies by the two customers, the Company recorded bad debt allowances of $1,170,000 and $333,000 during the first and second quarters of 2020, respectively. During the first quarter of 2021, the Company recorded a bad debt allowance of $821,000 related to one of the two sales-type finance leases as a result of its May 2021 agreement to sell the aircraft to the customer, which requires the approval of the Bankruptcy Court and which the Company expects to occur in the second quarter of 2021. The two leases remain treated as sales-type leases. At March 31, 2021 and December 31, 2020, the net investment included in sales-type leases and direct financing leases receivable were as follows: March 31, 2021 December 31, 2020 Gross minimum lease payments receivable $ 4,038,000 $ 4,138,000 Less unearned interest (88,000 ) (88,000 ) Allowance for doubtful accounts (2,324,000 ) (1,503,000 ) Difference between minimum lease payments receivable and collateral value of leases - - Finance leases receivable $ 1,626,000 $ 2,547,000 As of March 31, 2021, minimum future payments receivable under finance leases were as follows: Years ending December 31 2021 $ 2,197,000 2022 1,284,000 2023 557,000 $ 4,038,000 The remaining weighted average lease term of the Company’s assets under sales-type and finance leases was 21 months and 25 months at March 31, 2021 and December 31, 2020, respectively. The following is a roll forward of the Company’s finance lease receivable allowance for doubtful accounts from December 31, 2020 to March 31, 2021: Balance, December 31, 2020 $ 1,503,000 Additions charged to expense 821,000 Balance, March 31, 2021 $ 2,324,000 |
Assets and Liabilities Held for
Assets and Liabilities Held for Sale | 3 Months Ended |
Mar. 31, 2021 | |
Property, Plant and Equipment Assets Held-for-sale Disclosure [Abstract] | |
Assets and Liabilities Held for Sale | As a result of its Chapter 11 filing in March 2021 and the Company’s consequent lack of authority to sell certain assets without the approval of the Bankruptcy Court, the Company reclassified four off-lease aircraft, comprised of three regional jet aircraft and one turboprop aircraft, from held for sale to held for lease. The Company has two turboprop aircraft that are being sold in parts and are held for sale in the ordinary course of its business. (a) ACY E-175 LLC In March 2021, the Company sold its 100% membership interest in ACY E-175 LLC, which owned three Embraer E-175 aircraft on lease to a U.S. regional airline. At December 31, 2020, the Company classified the assets and liabilities of ACY E-175 LLC as held for sale and recorded an impairment loss of $2,649,800. The table below sets for the assets and liabilities that were classified as held for sale at December 31, 2020: Cash and cash equivalents $ 345,900 Restricted cash 2,346,300 Aircraft 24,550,000 Notes payable and accrued interest, net of unamortized debt issuance costs of $313,400 13,836,900 Derivative liability 767,900 The pre-tax loss of ACY E-175 LLC was $1,976,200 and $2,950,300 for the year ended December 31, 2020 and quarter ended March 31, 2021, respectively. (b) Part-out Assets The Company owns two aircraft being sold in parts (“Part-out Assets”). During the first quarter of 2021, the Company received $34,400 in cash and accrued $44,200 in receivables related to the Part-out Assets. These amounts were accounted for as follows: $34,400 reduced accounts receivable for parts sales accrued in the fourth quarter of 2020; $38,900 reduced the carrying value of the parts; and $5,300 was recorded as gains in excess of the carrying value of the parts. During the first quarter of 2020, the Company received $175,500 in cash and accrued $77,300 in receivables for parts sales. These amounts were accounted for as follows: $117,400 reduced accounts receivable for parts sales accrued in the fourth quarter of 2019; $117,800 reduced the carrying value of the parts; and $17,600 was recorded as gains in excess of the carrying value of the parts. In May 2021, the Company agreed to sell most of the Part-out Assets for $290,000, and recorded an impairment loss of $1,940,400 in the first quarter of 2021. |
Notes Payable and Accrued Inter
Notes Payable and Accrued Interest | 3 Months Ended |
Mar. 31, 2021 | |
Notes Payable [Abstract] | |
Notes Payable and Accrued Interest | At March 31, 2021 and December 31, 2020, the Company’s notes payable and accrued interest consisted of the following. The Drake Loan and PPP Loan are included in liabilities subject to compromise at March 31, 2021 in the accompanying condensed consolidated balance sheet. March 31, 2021 December 31, 2020 Drake Loan, subject to compromise at March 31, 2021: Principal $ 79,439,900 $ 88,557,000 Unamortized debt issuance costs - (780,900 ) Accrued interest 744,500 739,000 Paycheck Protection Program Loans, subject to compromise at March 31, 2021: Principal 446,400 276,400 Accrued interest 2,600 1,700 $ 80,633,400 $ 88,793,200 Nord Loans held for sale: Principal $ - $ 14,091,300 Unamortized debt issuance costs - (313,400 ) Accrued interest - 59,000 $ - $ 13,836,900 (a) Drake Loan On October 30, 2020, the MUFG Lenders under the Company’s MUFG Loan sold the MUFG Loan and the $3.1 million obligation of the Company from termination of the MUFG Swaps to Drake, and the Company and Drake entered into the Drake Loan Agreement under which, among other things, the cash component of interest due for March 2020 and thereafter for the term of the loan will be capitalized. The Drake Indebtedness is secured by a first priority lien held by Drake, which lien is documented in an amended and restated mortgage and security agreement assigned to Drake, on all of the Company's assets, including the Company’s entire aircraft portfolio, other than two aircraft leased to Kenyan lessees and certain part-out assets. The Drake Indebtedness had a stated maturity date of March 31, 2021, but collection on or exercise of rights or remedies with the Drake Loan Agreement were stayed due to the Company’s Chapter 11 filing, as discussed in Note 1(e), “ Automatic Stay. (b) Nord Loans On February 8, 2019, the Company, through four wholly-owned subsidiary limited liability companies (“LLC Borrowers”), entered into a term loan agreement NordDeutsche Landesbank Girozentrale, New York Branch (“Nord”) that provided for six separate term loans (“Nord Loans”) with an aggregate principal amount of $44.3 million. Each of the Nord Loans is secured by a first priority security interest in a specific aircraft (“Nord Loan Collateral Aircraft”) owned by an LLC Borrower, the lease for such aircraft, and a pledge by the Company of its membership interest in each of the LLC Borrowers, pursuant to a Security Agreement among the LLC Borrowers and a security trustee, and certain pledge agreements. The interest rates payable under the Nord Loans varied by aircraft and were based on a fixed margin above either 30-day or 3-month LIBOR. The maturity of each Nord Loan varied by aircraft, with the first Nord Loan maturing in October 2020 and the last Nord Loan maturing in May 2025. The debt under the Nord Loans was expected to be fully amortized by rental payments received by the LLC Borrowers from the lessees of the Nord Loan Collateral Aircraft during the terms of their respective leases and remarketing proceeds. The Nord Loans included covenants that impose various restrictions and obligations on the LLC Borrowers, including covenants that require the LLC Borrowers to obtain Nord consent before they can take certain specified actions, and certain events of default. The Company was in compliance with all covenants under the Nord Loans at December 31, 2020. One of the Nord Loan Collateral Aircraft was sold in 2019 and two Nord Loan Collateral Aircraft were sold in 2020. The excess proceeds from the 2020 sales were held as restricted cash by ACY E-175. The restricted cash, the three aircraft held by ACY E-175 and ACY E-175’s Nord Loans and derivative liability were classified as held for sale at December 31, 2020. During March 2021, the Company sold its interest in ACY E-175 and was released from any remaining guarantee obligations under the Nord Loan and interest swap obligations of the special-purpose subsidiary. (c) Paycheck Protection Program Loans On May 20, 2020, JetFleet Management Corp. (the “PPP Borrower”), a subsidiary of AeroCentury Corp., was granted a loan (the “PPP Loan”) from American Express National Bank in the aggregate amount of $276,353, pursuant to the Paycheck Protection Program (the “PPP”) under Division A, Title I of the CARES Act, which was enacted March 27, 2020. The PPP Loan, which was in the form of a Note dated May 18, 2020 issued by the PPP Borrower and is included in the Company's notes payable and accrued interest, matures on April 22, 2022 and bears interest at a rate of 1.00% per annum, payable in 18 monthly payments commencing on October 19, 2021. In February 2021, the Company was granted a second PPP Loan (“Second PPP Loan”) (collectively, with the initial PPP Loan, the “PPP Loans”) in the aggregate amount of $170,002. The Second PPP Loan, in the form of a Note dated February 11, 2021, matures on February 11, 2026 and bears interest at a rate of 1.00% per annum, payable in monthly payments commencing 30 days after the Small Business Administration has made its final determination that any part of the loan will not be forgiven. The applications for the PPP Loans required the Company to, in good faith, certify that the current economic uncertainty made the loan request necessary to support the ongoing operations of the Company. This certification further required the Company to take into account its current business activity and its ability to access other sources of liquidity sufficient to support ongoing operations in a manner that is not significantly detrimental to the business. The receipt of these funds, and the forgiveness of the loans attendant to these funds, is dependent on the Company having initially qualified for the loans and qualifying for the forgiveness of such loans based on its future adherence to the forgiveness criteria. The PPP Loans may be prepaid by the PPP Borrower at any time prior to maturity with no prepayment penalties. Funds from the PPP Loans may only be used for payroll costs and any payments of certain covered interest, lease and utility payments. The Company intends to use the entire PPP Loans for qualifying expenses. Under the terms of the PPP, certain amounts of the PPP Loans may be forgiven if they are used for qualifying expenses as described in the CARES Act. Although the Company expects that all or a significant portion of the PPP Loans will be forgiven, no assurance can be provided that the Company will obtain such forgiveness. |
Derivative Instruments
Derivative Instruments | 3 Months Ended |
Mar. 31, 2021 | |
Derivative Instruments and Hedging Activities Disclosure [Abstract] | |
Derivative Instruments | In the first quarter of 2019, the Company entered into eight fixed pay/receive variable interest rate swaps. The Company entered into the interest rate swaps in order to reduce its exposure to the risk of increased interest rates. The Company estimates the fair value of derivative instruments using a discounted cash flow technique and uses creditworthiness inputs that corroborate observable market data evaluating the Company’s and counterparties’ risk of non-performance. Valuation of the derivative instruments requires certain assumptions for underlying variables and the use of different assumptions would result in a different valuation. Management believes it has applied assumptions consistently during the period. The Company designated seven of its interest rate swaps as cash flow hedges upon entering into the swaps. Changes in the fair value of the hedged swaps were included in other comprehensive income/(loss), which amounts are reclassified into earnings in the period in which the transaction being hedged affected earnings (i.e., with future settlements of the interest rate swaps). One of the interest rate swaps was not eligible under its terms for hedge treatment and was terminated in 2019 when the associated asset was sold and the related debt was paid off. Changes in fair value of non-hedge derivatives are reflected in earnings in the periods in which they occur. (a) MUFG Swaps The two interest rate swaps entered into by AeroCentury (the “MUFG Swaps”) were intended to protect against the exposure to interest rate increases on $50 million of the Company’s MUFG Credit Facility debt prior to its sale to Drake during the fourth quarter of 2020. The MUFG Swaps had notional amounts totaling $50 million and were to extend through the maturity of the MUFG Credit Facility in February 2023. Under the ISDA agreement for these interest rate swaps, defaults under the MUFG Credit Facility give the swap counterparty the right to terminate the interest rate swaps with any breakage costs being the liability of the Company. In October 2019, the Company determined that it was no longer probable that forecasted cash flows for its two interest rate swaps with a nominal value of $50 million would occur as scheduled as a result of the Company’s defaults under the MUFG Credit Facility. Therefore, those swaps were no longer subject to hedge accounting and changes in fair market value thereafter were recognized in earnings as they occurred. As a result of the forecasted transaction being not probable to occur, accumulated other comprehensive loss of $1,167,700 related to the MUFG Swaps was recognized as interest expense in the first quarter of 2020. The two swaps related to the MUFG Credit Facility were terminated in March 2020 and the Company incurred a $3.1 million obligation, recorded as interest expense and derivative termination liability, in connection with such termination, payment of which was due no later than the March 31, 2021 maturity of the Drake Indebtedness. (b) Nord Swaps With respect to the interest rate swaps entered into by the LLC Borrowers (“the Nord Swaps”), the swaps were deemed necessary so that the anticipated cash flows of such entities, which arise entirely from the lease rents for the aircraft owned by such entities, would be sufficient to make the required Nord Loan principal and interest payments, thereby preventing default so long as the lessees met their lease rent payment obligations. The Nord Swaps were entered into by the LLC Borrowers and provided for reduced notional amounts that mirrored the amortization under the Nord Loans entered into by the LLC Borrowers, effectively converting each of the related Nord Loans from a variable to a fixed interest rate, ranging from 5.38% to 6.30%. Each of Nord Swaps extended for the duration of the corresponding Nord Loan. Two of the swaps had maturities in the four quarter of 2020 and were terminated when the associated assets were sold and the related debt was paid off. The other three LLC Swaps had maturities in 2025, but were sold in March 2021 as part of the Company’s sale of its membership interest in ACY E-175. As discussed in Note 4, in March 2020, the Company determined that the future hedged interest payments related to its Nord Swaps were no longer probable of occurring, as a result of lease payment defaults for the aircraft owned by ACY 19002 and ACY 19003 and conversations with the lessee for the three aircraft owned by ACY E-175 regarding likely rent concessions, and consequently de-designated all five Nord Swaps as hedges because the lease payments were used to service the Nord Loans associated with the swaps. As a result of de-designation, future changes in market value were recognized in ordinary income and AOCI was reclassified to ordinary income as the forecasted transactions occurred. In December 2020, the Company determined that the payments after February 2021 for the three remaining swaps were probable not to occur as a result of the Company’s agreement to sell its interest in ACY E-175 during the first quarter of 2021. Accumulated other comprehensive income of $2,600 and $48,100 related to the Nord Swaps was recognized as an expense in the first quarters of 2021 and 2020, respectively. The Company has reflected the following amounts in its net loss: For the Three Months Ended March 31, 2021 2020 Change in value of undesignated interest rate swaps $ (48,700 ) $ 1,908,300 Reclassification from other comprehensive income to interest expense 2,600 150,700 Reclassification from other comprehensive income to interest expense – forecasted transaction probable not to occur - 1,167,700 Included in interest expense $ 46,100 $ 3,226,700 The following amount was included in other comprehensive income/(loss), before tax: Loss on derivative instruments deferred into other comprehensive income/(loss) $ - $ (575,000 ) Reclassification from other comprehensive income to interest expense 2,600 150,700 Reclassification from other comprehensive income to interest expense – forecasted transaction probable not to occur - 1,167,700 Change in accumulated other comprehensive income $ 2,600 $ 743,400 |
Lease Right of Use Asset and Li
Lease Right of Use Asset and Liability | 3 Months Ended |
Mar. 31, 2021 | |
Leases [Abstract] | |
Lease Right of Use Asset and Liability | The Company was a lessee under a lease of the office space it occupies in Burlingame, California, which expired in June 2020. The lease also provided for two, successive one-year lease extension options for amounts that were substantially below the market rent for the property. The lease provided for monthly rental payments according to a fixed schedule of increasing rent payments. As a result of the below-market extension options, the Company determined that it was reasonably certain that it would extend the lease and, therefore, included such extended term in its calculation of the right of use asset (“ROU Asset”) and lease liability recognized in connection with the lease. In addition to a fixed monthly payment schedule, the office lease also included an obligation for the Company to make future variable payments for certain common areas and building operating and lessor costs, which have been and will be recognized as expense in the periods in which they are incurred. As a direct pass-through of applicable expense, such costs were not allocated as a component of the lease. Effective January 1, 2020, the Company reduced both the size of the office space leased and the amount of rent payable in the future. As such, the Company recognized a reduction in both the capitalized amount related to the surrendered office space and a proportionate amount of the liability associated with its future lease obligations. In January 2020, the Company recorded a loss of $160,000 related to the reduction in its ROU Asset, net of the reduction in its operating lease liability. In March 2020, the Company elected not to exercise the extension options for its office lease. The lease liability associated with the office lease was calculated at March 31, 2020 and December 31, 2019 by discounting the fixed, minimum lease payments over the remaining lease term, including the below-market extension periods, at a discount rate of 7.25%, which represents the Company’s estimate of the incremental borrowing rate for a collateralized loan for the type of underlying asset that was the subject of the office lease at the time the lease liability was evaluated. As a result of non-exercise of its extension option, the Company reduced the lease liability to reflect only the three remaining rent payments in the second quarter of 2020. In July 2020, the lease for the Company’s office lease was extended for one month to July 31, 2020 at a rate of $10,000. The Company signed a lease for a smaller office suite in the same building effective August 1, 2020. The lease provides for a term of 30 months expiring on January 31, 2023, at a monthly base rate of approximately $7,400, with no rent due during the first six months. The Company recognized an ROU asset and lease liability of $169,800, both of which were non-cash items and are not reflected in the condensed consolidated statement of cash flows. No cash was paid at the inception of the lease, and a discount rate of 3% was used, based on the interest rates available on secured commercial real estate loans available at the time. At March 31, 2021, the weighted average discount rate was 3% and the weighted average remaining lease term was 22 months. The Company estimates that the maturities of operating lease base rent of its office space were as follows as of March 31, 2021 and December 31, 2020: March 31, 2021 December 31, 2020 2021 $ 59,100 $ 81,300 2022 88,700 88,700 2023 7,400 7,400 155,200 177,400 Discount (4,200 ) (5,400 ) Lease liability $ 151,000 $ 172,000 During the quarter ended March 31, 2021, the Company recognized amortization, finance costs and other expense related to the office lease as follows: Fixed rental expense during the quarter $ 17,700 Variable lease expense 6,500 Total lease expense during the quarter $ 24,200 |
Fair Value Measurements
Fair Value Measurements | 3 Months Ended |
Mar. 31, 2021 | |
Fair Value Disclosures [Abstract] | |
Fair Value Measurements | Fair value is defined as the exchange price that would be received for an asset or paid to transfer a liability (an exit price) in the principal or most advantageous market for the asset or liability in an orderly transaction between market participants on the measurement date. Valuation techniques used to measure fair value must maximize the use of observable inputs and minimize the use of unobservable inputs, to the extent possible. The fair value hierarchy under GAAP is based on three levels of inputs. Level 1 - Quoted prices in active markets for identical assets or liabilities. Level 2 - Inputs other than Level 1 that are observable, either directly or indirectly, such as quoted prices for similar assets or liabilities; quoted prices in markets that are not active; or other inputs that are observable or can be corroborated by observable market data for substantially the full term of the assets or liabilities. Level 3 - Unobservable inputs that are supported by little or no market activity and that are significant to the fair value of the assets or liabilities. Assets and Liabilities Measured and Recorded at Fair Value on a Recurring Basis The Company estimates the fair value of derivative instruments using a discounted cash flow technique and has used creditworthiness inputs that corroborate observable market data evaluating the Company’s and counterparties’ risk of non-performance. As of March 31, 2021, the Company had no interest rate swaps. In the quarter ended March 31, 2021, $48,700 was realized through the income statement as a decrease in interest expense. As of December 31, 2020, the Company measured the fair value of its interest rate swaps of $14,091,300 (notional amount) based on Level 2 inputs, due to the usage of inputs that can be corroborated by observable market data. The interest rate swaps had a net fair value liability of $767,900 as of December 31, 2020. In the year ended December 31, 2020, $1,979,800 was realized through the income statement as an increase in interest expense. The following table shows, by level within the fair value hierarchy, the Company’s assets and liabilities at fair value on a recurring basis as of March 31, 2021 and December 31, 2020: March 31, 2021 December 31, 2020 Total Level 1 Level 2 Level 3 Total Level 1 Level 2 Level 3 Derivatives $ - - $ - - $ (767,900 ) $ - $ (767,900 ) $ - Total $ - $ - $ - $ - $ (767,900 ) $ - $ (767,900 ) $ - There were no transfers into or out of Level 3 during the same periods. Assets Measured and Recorded at Fair Value on a Nonrecurring Basis The Company determines fair value of long-lived assets held and used, such as aircraft and aircraft engines held for lease and these and other assets held for sale, by reference to independent appraisals, quoted market prices (e.g., offers to purchase) and other factors. The independent appraisals utilized the market approach which uses recent sales of comparable assets, making appropriate adjustments to reflect differences between them and the subject property being analyzed. Certain assumptions are used in the management’s estimate of the fair value of aircraft including the adjustments made to comparable assets, identifying market data of similar assets, and estimating cost to sell. These are considered Level 3 within the fair value hierarchy. An impairment charge is recorded when the Company believes that the carrying value of an asset will not be recovered through future net cash flows and that the asset’s carrying value exceeds its fair value. During the first quarter of 2021, the Company recorded an impairment loss of $1,940,400 on its two assets held for sale, based on expected sales proceeds, which had an aggregate fair value of $347,400. Based on expected sales proceeds, the Company recorded impairment losses totaling $6,654,900 on four of its assets held for sale in the first quarter of 2020, which had an aggregate fair value of $15,828,200. The following table shows, by level within the fair value hierarchy, the Company’s assets at fair value on a nonrecurring basis as of March 31, 2021 and December 31, 2020: Assets Written Down to Fair Value Total Losses March 31, 2021 December 31, 2020 For the Three Months Ended March 31, Level Level Total 1 2 3 Total 1 2 3 2021 2020 Assets held for lease $ 43,124,000 $ - $ - $ 43,124,000 $ 32,650,000 $ - $ - $ 32,650,000 $ - $ - Assets held for sale 347,400 - - 347,400 38,041,600 - - 38,041,600 1,940,400 6,654,900 Total $ 43,471,400 $ - $ - $ 43,471,400 $ 70,691,600 $ - $ - $ 70,691,600 $ 1,940,400 $ 6,654,900 There were no transfers into or out of Level 3 during the same periods. Fair Value of Other Financial Instruments The Company’s financial instruments, other than cash and cash equivalents, consist principally of finance leases receivable, amounts borrowed under the Drake Loan, notes payable under special-purpose financing, its derivative termination liability and its derivative instruments. The fair value of accounts receivable, accounts payable and the Company’s maintenance reserves and accrued maintenance costs approximates the carrying value of these financial instruments because of their short-term maturity. The fair value of finance lease receivables approximates the carrying value as discussed in Note 1( k) Borrowings under the Company’s Drake Loan bear floating rates of interest that reset periodically to a market benchmark rate plus a credit margin. The Company believes the effective interest rate under the Drake Loan approximates current market rates, and therefore that the outstanding principal and accrued interest of $89,296,000 at December 31, 2020 approximates its fair values on such date. The fair value of the Company’s outstanding balance of its Drake Loan is categorized as a Level 3 input under the GAAP fair value hierarchy. Pursuant to rules related to its bankruptcy filing, the Company reported the liability of the Drake Loan as subject to compromise at the amount expected to be allowed. The Company believes the effective interest rate under the Nord Loans approximated current market rates for such indebtedness at the dates of the condensed consolidated balance sheets, and therefore that the outstanding principal and accrued interest of $0 and $14,150,300 approximate their fair values at March 31, 2021 and December 31, 2020, respectively. Such fair value is categorized as a Level 3 input under the GAAP fair value hierarchy. As discussed in Note 2(b), as a result of payment delinquencies by the Company’s two customers of aircraft subject to sales-type finance leases, the Company recorded a bad debt allowance of $821,000 during the first quarter of 2021. The finance lease receivable for one of its finance leases is valued at its collateral value under the practical expedient alternative, and the second is valued at the expected cash flow from the expected sale during the second quarter of 2021. There were no transfers in or out of assets or liabilities measured at fair value under Level 3 during the three months ended March 31, 2021 or 2020. |
Liabilities Subject to Compromi
Liabilities Subject to Compromise | 3 Months Ended |
Mar. 31, 2021 | |
Liabilities Subject to Compromise Disclosures [Abstract] | |
Liabilities Subject to Compromise | The accompanying unaudited condensed consolidated balance sheet as of March 31, 2021 includes amounts classified as liabilities subject to compromise, which represents pre-petition liabilities the Company anticipates will be allowed as claims in the Chapter 11 Cases. These amounts represent the Debtors’ current estimate of known or potential obligations to be resolved in connection with the Chapter 11 Cases and may differ from actual settlement amounts. The Company will continue to evaluate these liabilities throughout the Chapter 11 process and adjust amounts as necessary. Such adjustments could be material and will be recorded in reorganization items, net in the accompanying unaudited condensed statements of operations. The following table summarizes liabilities subject to compromise at March 31, 2021: Accrued maintenance costs $ 46,100 Drake Loan: Principal 79,439,900 Accrued interest 744,500 Paycheck Protection Program Loan: Principal 446,400 Accrued interest 2,600 Derivative termination liability 3,075,300 $ 83,754,800 |
Reorganization Items, Net
Reorganization Items, Net | 3 Months Ended |
Mar. 31, 2021 | |
Reorganization Items [Abstract] | |
Reorganization Items, Net | The Debtors will incur costs associated with the reorganization, including professional and consulting fees. Charges associated with the Chapter 11 Cases will be recorded as reorganization items in the Company’s condensed consolidated statements of operations. The Company incurred no such expenses during the three months ended March 31, 2021. |
Commitments and Contingencies
Commitments and Contingencies | 3 Months Ended |
Mar. 31, 2021 | |
Commitments and Contingencies Disclosure [Abstract] | |
Commitments and Contingencies | In the ordinary course of the Company’s business, the Company may be subject to lawsuits, arbitrations and administrative proceedings from time to time. The Company believes that the outcome of any existing or known threatened proceedings, even if determined adversely, should not have a material adverse effect on the Company's business, financial condition, liquidity or results of operations. |
Income Taxes
Income Taxes | 3 Months Ended |
Mar. 31, 2021 | |
Income Tax Disclosure [Abstract] | |
Income Taxes | The Company recorded income tax expense of $49,200 in the first quarter of 2021, or negative 0.92% of pre-tax loss, compared to $2.7 million income tax benefit, or 21.0% of pre-tax loss in the first quarter of 2020. The difference in the effective federal income tax rate from the normal statutory rate in the first quarter of 2021 was primarily related to the recording of a valuation on U.S. deferred tax assets. In assessing the valuation of deferred tax assets, the Company considers whether it is more likely than not that some portion or all of the deferred tax assets will not be realized. The ultimate realization of deferred tax assets is dependent upon the generation of future taxable income or availability to carryback the losses to taxable income during periods in which those temporary differences become deductible. The Company considered several factors when analyzing the need for a valuation allowance including the Company's current five-year cumulative loss through March 31, 2021, the impacts of COVID-19 pandemic on the worldwide airline industry and the Company’s recent filing for protection under Chapter 11 of the bankruptcy code. Based on this analysis, the Company has concluded that a valuation allowance is necessary for its U.S. deferred tax assets not supported by either future taxable income or availability of future reversals of existing taxable temporary differences and has recorded a valuation allowance of $1,126,100 for the three months ended March 31, 2021. Additionally, the Company has concluded that based on its analysis, some of its foreign net operating loss carrybacks are not expected to be realized based on limitations on the utilization of its foreign net operating losses, and therefore recorded a foreign tax expense of $54,300 for the reduced tax refund for the three months ended March 31, 2021. |
Condensed Combined Debtor-in-Po
Condensed Combined Debtor-in-Possession Financial Information | 3 Months Ended |
Mar. 31, 2021 | |
Condensed Financial Information Disclosure [Abstract] | |
Condensed Combined Debtor-in-Possession Financial Information | The following financial statements represent the unaudited condensed combined financial statements of the Debtors. The results of the non-debtor entities are not included in these financial statements. Intercompany transactions among the Debtors have been eliminated in the following financial statements. Intercompany transactions among the Debtor and non-debtor entities have not been eliminated in the following financial statements. The Debtors Condensed Combined Balance Sheet March 31, 2021 (Unaudited) Assets: Cash and cash equivalents $ 3,755,000 Accounts receivable 286,100 Due from non-debtor affiliates 350,900 Finance leases receivable, net of allowance for doubtful accounts of $2,324,000 1,626,000 Aircraft held for lease, net of accumulated depreciation of $21,699,000 56,085,400 Assets held for sale 347,400 Property, equipment and furnishings, net of accumulated depreciation of $12,300 11,700 Office lease right of use, net of accumulated amortization of $43,900 125,900 Investment in non-debtor subsidiaries 3,610,600 Prepaid expenses and other assets 562,000 Total assets $ 66,761,000 Liabilities: Accounts payable $ 133,500 Payable to non-debtor subsidiaries 2,422,000 Accrued payroll 209,400 Lease liability 151,000 Maintenance reserves 2,099,900 Security deposits 466,000 Unearned revenues 549,000 Total liabilities not subject to compromise 6,030,800 Liabilities subject to compromise 83,754,800 Total liabilities 89,785,600 Total stockholders’ deficit attributable to the Debtors (23,024,600 ) Total liabilities and stockholders’ deficit $ 66,761,000 The Debtors Condensed Combined Statements of Operations For the Three Months Ended March 31, 2021 (Unaudited) Revenues and other income: Operating lease revenue $ 1,987,200 Net loss on disposal of assets (2,473,200 ) Other loss (1,700 ) (487,700 ) Expenses: Impairment in value of aircraft 1,940,400 Interest 1,844,700 Professional fees, general and administrative and other 1,632,100 Bad debt expense 821,000 Depreciation 699,300 Salaries and employee benefits 464,300 Insurance 247,900 Maintenance 145,000 Other taxes 25,600 7,820,300 Loss before income taxes and equity in earnings of non-debtor entities (8,308,000 ) Income tax provision 49,200 Equity in earnings of non-debtor entities 2,946,900 Net loss $ (5,410,300 ) The Debtors Condensed Combined Statements of Cash Flows For the Three Months Ended March 31, 2021 (Unaudited) Net cash used in operating activities $ (577,200 ) Investing activity- Proceeds from sale of aircraft and aircraft engines held for lease, net of re-sale fees 13,246,000 Net cash provided by investing activity 13,246,000 Financing activities: Repayment of notes payable – MUFG Credit Facility and Drake Loan (11,011,700 ) Issuance of notes payable – PPP Loan 170,000 Net cash used in financing activities (10,841,700 ) Net increase in cash, cash equivalents and restricted cash 1,827,100 Cash, cash equivalents and restricted cash, beginning of period 1,927,900 Cash, cash equivalents and restricted cash, end of period $ 3,755,000 |
Subsequent Events
Subsequent Events | 3 Months Ended |
Mar. 31, 2021 | |
Subsequent Events [Abstract] | |
Subsequent Events | The Company’s court-supervised sale process required any bids for its assets to be submitted by 5:00 p.m. on May 17. No third party qualified bids were received for the Company’s assets in the Court-approved marketing and sale process, so the proposed auction for assets will not be conducted, and the Company anticipates that the sale of the Drake Collateral will proceed under the terms of the stalking horse agreement. There were non-qualified third party bids received by the Company for certain subsets of the Company’s aircraft assets, and the Company is currently reviewing and evaluating those offers. With respect to any asset purchases proposed in such non-qualified bids that include Drake Collateral, the Company is consulting with Drake. In May 2021, the Company agreed to sell most of the Part-out Assets for $290,000, and recorded an impairment loss of $1,940,400 in the first quarter of 2021. |
Organization and Summary of S_2
Organization and Summary of Significant Accounting Policies (Policies) | 3 Months Ended |
Mar. 31, 2021 | |
Organization, Consolidation and Presentation of Financial Statements [Abstract] | |
The Company and Basis of Presentation | AeroCentury Corp. (“AeroCentury”) is a Delaware corporation incorporated in 1997. AeroCentury together with its consolidated subsidiaries is referred to as the “Company.” In August 2016, AeroCentury formed two wholly-owned subsidiaries, ACY 19002 Limited (“ACY 19002”) and ACY 19003 Limited (“ACY 19003”) for the purpose of acquiring aircraft using a combination of cash and third-party financing (“UK LLC SPE Financing” or “special-purpose financing”) separate from AeroCentury’s credit facility (the “MUFG Credit Facility”). The UK LLC SPE Financing was repaid in full in February 2019 as part of a refinancing involving new non-recourse term loans totaling approximately $44.3 million (“Nord Loans”) made to ACY 19002, ACY 19003, and two other newly formed special-purpose subsidiaries of AeroCentury, ACY SN 15129 LLC (“ACY 15129”) and ACY E-175 LLC (“ACY E-175”), which were formed for the purpose of refinancing four of the Company’s aircraft using the Nord Loans. See Note 4(b) for more information about the Nord Loans. As discussed in Note 3(a), the Company sold its membership interest in ACY E-175 in March 2021. Financial information for AeroCentury and its consolidated subsidiaries is presented on a consolidated basis in accordance with accounting principles generally accepted in the United States of America (“GAAP”) for interim financial information, the instructions to Form 10-Q and Article 8 of Regulation S-X. Accordingly, they do not include all of the information and footnotes required by GAAP for complete financial statements. In the opinion of management, all adjustments (consisting of normal recurring accruals) considered necessary for a fair presentation have been included. Operating results for the three-month period ended March 31, 2021 are not necessarily indicative of the results that may be expected for the year ending December 31, 2021 or for any other period. All intercompany balances and transactions have been eliminated in consolidation. As discussed below, on March 29, 2021 (the “Petition Date”), AeroCentury and certain of its subsidiaries in the U.S. (collectively the "Debtors" and the "Debtors- in-Possession") filed voluntary petitions for relief (collectively, the "Petitions") under Chapter 11 of Title 11 ("Chapter 11") of the U.S. Bankruptcy Code (the "Bankruptcy Code") in the U.S. Bankruptcy Court for the District of Delaware (the "Bankruptcy Court"). The Chapter 11 cases (the "Chapter 11 Case") are being jointly administered under the caption In re: AeroCentury Corp., et al., Case No. 21-10636 Effective on the Petition date, the Company applied accounting standards applicable to reorganizations, Accounting Standards Codification 852 - Reorganizations, |
Company Indebtedness | As discussed in Note 4, on October 30, 2020, the lenders (“MUFG Lenders”) under the Company’s previous term loan facility (the “MUFG Loan”) sold the MUFG Loan and the $3.1 million obligation of the Company from termination of the two swaps (the “MUFG Swaps”) related to the MUFG Loan to Drake Asset Management Jersey Limited (“Drake”), and the Company and Drake entered into an amendment of the loan (as amended, the “Drake Loan Agreement”) under which, among other things, the cash component of interest due for March 2020 and thereafter for the term of the loan was capitalized. The Drake Loan Agreement had a stated maturity date of March 31, 2021 and is secured by a lien on substantially all of the Company’s assets but collection on or exercise or rights or remedies with the Drake Loan Agreement were stayed due to the Company’s Chapter 11 filing, as discussed below in Note 1(e), “ Automatic Stay. |
Voluntary Petitions for Bankruptcy | In connection with the impending maturity of the Company’s indebtedness owed to Drake (“Drake Indebtedness”) and the continuing economic impact from COVID-19, on March 29, 2021, the Debtors filed voluntary petitions for relief (collectively, the "Petitions") under Chapter 11 in the Bankruptcy Court. The Chapter 11 Cases are being jointly administered under the caption In re: AeroCentury Corp., et al., Case No. 21-10636 The Bankruptcy Court approved motions filed by the Debtors that were designed primarily to mitigate the impact of the Chapter 11 Case on the Company’s operations, customers and employees. Pursuant to orders entered by the Bankruptcy Court, the Debtors are authorized to conduct their business activities in the ordinary course, and among other things and subject to the terms and conditions of such orders: (i) pay employees’ wages and related obligations; (ii) pay certain taxes; (iii) continue to maintain certain customer programs; (iv) maintain their insurance program; (v) use cash collateral on an interim basis; and (vi) continue their cash management system. On April 22, 2021, the Bankruptcy Court entered an order authorizing and approving the funding of the Company’s Chapter 11 bankruptcy cases on a final basis. This final order authorizes the Company’s continued access to funding for its business operations and restructuring process, to the extent that such funding is available. On the same date, the Bankruptcy Court entered an order authorizing and approving marketing and sale procedures with respect to the sale of some or all of the Company’s assets. The Company’s court-supervised sale process requires any bids for its assets to be submitted by 5:00 p.m. on May 17. No third party qualified bids were received for the Company’s assets in the Court-approved marketing and sale process, so the proposed auction for assets will not be conducted, and the Company anticipates that the sale of the Drake Collateral will proceed under the terms of the stalking horse agreement. There were non-qualified third party bids received by the Company for certain subsets of the Company’s aircraft assets, and the Company is currently reviewing and evaluating those offers. With respect to any asset purchases proposed in such non-qualified bids that include Drake Collateral, the Company is consulting with Drake. |
Debtors-In-Possession | The Debtors are currently operating as debtors-in-possession under the jurisdiction of the Bankruptcy Court and in accordance with the applicable provisions of the Bankruptcy Code and orders of the Bankruptcy Court. In general, as debtors-in-possession under the Bankruptcy Code, the Debtors are authorized to continue to operate as an ongoing business but may not engage in transactions outside the ordinary course of business without the prior approval of the Bankruptcy Court. |
Automatic Stay | Subject to certain specific exceptions under the Bankruptcy Code, the Petitions automatically stayed most judicial or administrative actions against the Debtors and efforts by creditors to collect on or otherwise exercise rights or remedies with respect to Pre-petition obligations of the Debtors. Absent an order from the Bankruptcy Court, substantially all of the Debtors’ Pre-petition liabilities are subject to settlement under the Bankruptcy Code. |
Borrowing Capacity and Availability | At March 31, 2021, the Company had no borrowing capacity or availability under the Drake Loan Agreement. The filing of the Chapter 11 Case constituted a default, termination events and/or amortization event with respect to the Drake Indebtedness. As discussed in Note 3(a), in March 2021, the Company sold its ownership interest in ACY E-175 to Drake, and Drake assumed ACY E-175’s indebtedness under its Nord Loan. |
Going Concern | At March 31, 2021, the Company had total book assets of approximately $64.4 million and total liabilities of $87.4 million, resulting in a negative book equity of $23.0 million. The largest portion, $83.3 million, of the Company’s debt is owed to Drake Asset Management Jersey Limited (“Drake”) and was payable with accrued interest on March 31, 2021. The Company did not have the resources to meet its obligations to repay the Drake debt when due on March 31, 2021, which is a principal reason for its decision to file for protection under Chapter 11 of the bankruptcy code. It has also recognized that it requires additional funding to continue its operations, and that it has not identified a source for such funding to date. Although management plans include securing additional funding, it cannot conclude that it is probable that such plan will be achieved and mitigate the conditions that led to substantial doubt about the Company’s ability to continue as a going concern. The Company has suffered recurring losses from operations, is in default of its debt obligations under the Drake debt, and has a net capital deficiency. The Company’s poor financial position, including its poor short-term liquidity given the maturity of the Drake debt, the amount of liability under the Drake debt in relation to the fair value of the Company’s assets and the uncertainty of generating sufficient funds over the year after publication of its financial statements to continue operations have led the Company to conclude that there is substantial doubt about its ability to continue as a going concern. The accompanying condensed consolidated financial statements have been prepared assuming that the Company will continue as a going concern and contemplate the realization of assets and the satisfaction of liabilities in the normal course of business. The Company’s ability to continue as a going concern is contingent upon its ability to successfully implement a plan of reorganization, among other factors, and the realization of assets and the satisfaction of liabilities are subject to uncertainty. Further, any plan of reorganization could materially change the amounts of assets and liabilities reported in the accompanying condensed consolidated financial statements. The condensed consolidated financial statements presented in this Quarterly Report on Form 10-Q have been prepared on a going concern basis and do not include any adjustments that might arise as a result of uncertainties about the Company’s ability to continue as a going concern or as a consequence of its Chapter 11 filing. |
Impact of COVID-19 | In March 2020, the World Health Organization (“WHO”) declared the novel strain of coronavirus (“COVID-19”) a pandemic, and COVID-19 has continued to have wide-ranging impacts as the virus spreads globally (the “COVID-19 Pandemic”). The ongoing COVID-19 Pandemic has had an overwhelming effect on all forms of transportation globally, but most acutely for the airline industry. The combined effect of fear of infection during air travel and international and domestic travel restrictions has caused a dramatic decrease in passenger loads in all areas of the world, not just in those countries with active clusters of COVID-19, but in airline ticket net bookings (i.e. bookings made less bookings canceled) of flights as well. This has led to significant cash flow issues for airlines, including some of the Company’s customers. The Company permitted one of its customers, which leases two regional turboprop aircraft, to make reduced payments totaling approximately $0.3 million in the second and fourth quarters of 2020 as well as $0.4 million in the first quarter of 2021 and the customer paid the reduced amounts. In addition, two other customers, each of which leases an aircraft subject to a sales-type lease, did not make lease payments totaling approximately $1.0 million in 2020 and $0.9 million in the first quarter of 2021, and the Company and the customers are discussing remedies regarding the non-payment. As discussed in Note 2, the Company recorded a bad debt allowance of $821,000 related to one of the two sales-type finance leases during first quarter of 2021 as a result of its May 2021 agreement to sell the aircraft to the customer, which requires the approval of the Bankruptcy Court and which the Company expects to occur in the second quarter of 2021. The impact of the COVID-19 Pandemic has also led the Company to determine that there is uncertainty related to rent, interest and debt payments such that, as disclosed in Notes 4 and 5, the Company de-designated its interest rate swaps as hedges in March 2020 since the payments related to the swaps were deemed not probable to occur. Additionally, in December 2020, the Company determined that it was probable that certain future cash flows under its interest rate swaps would not occur, and the Company consequently reclassified accumulated other comprehensive income (“AOCI”) associated with such cash flows into interest expense. |
Use of Estimates | The Company’s condensed consolidated financial statements have been prepared in accordance with GAAP. The preparation of consolidated financial statements in conformity with GAAP requires management to make estimates and assumptions that affect the reported amounts of assets and liabilities and disclosures of contingent assets and liabilities at the date of the condensed consolidated financial statements and the reported amounts of revenues and expenses during the reporting period. Actual results could differ from those estimates. The Company bases its estimates on historical experience and on various other assumptions that are believed to be reasonable for making judgments that are not readily apparent from other sources. The most significant estimates with regard to these condensed consolidated financial statements are the residual values and useful lives of the Company’s long-lived assets, the current value of the Company’s assets held for sale, the amount and timing of future cash flows associated with each asset that are used to evaluate whether assets are impaired, accrued maintenance costs, accounting for income taxes, the assumptions used to value the Company’s derivative instruments, the valuation of the right of use asset and related lease liability associated with the Company’s office, and the amounts recorded as allowances for doubtful accounts. |
Comprehensive Income/(Loss) | The Company accounts for former interest rate cash flow hedges by reclassifying accumulated other comprehensive income into earnings in the periods in which the expected transactions occur or when it is probable that the hedged transactions will no longer occur, and are included in interest expense. |
Finance Leases | As of March 31, 2021, the Company had two sales-type leases secured by aircraft. Both leases contain lessee bargain purchase options at prices substantially below the subject asset’s estimated residual value at the exercise date for the option. Consequently, the Company classified each of these two leases as finance leases for financial accounting purposes. For such finance leases, the Company reports the discounted present value of (i) future minimum lease payments (including the bargain purchase option) and (ii) any residual value not subject to a bargain purchase option, as a finance lease receivable on its balance sheet, and accrues interest on the balance of the finance lease receivable based on the interest rate inherent in the applicable lease over the term of the lease. For each of the sales-type leases, the Company recognized as a gain or loss the amount equal to (i) the net investment in the sales-type lease plus any initial direct costs and lease incentives less (ii) the net book value of the subject aircraft at inception of the applicable lease. |
Taxes | As part of the process of preparing the Company’s condensed consolidated financial statements, management estimates income taxes in each of the jurisdictions in which the Company operates. This process involves estimating the Company’s current tax exposure under the most recent tax laws and assessing temporary differences resulting from differing treatment of items for tax and GAAP purposes. These differences result in deferred tax assets and liabilities, which are included in the balance sheet. In assessing the valuation of deferred tax assets, the Company considers whether it is more likely than not that some portion or all of the deferred tax assets will not be realized. The ultimate realization of deferred tax assets is dependent upon the generation of future taxable income or availability to carryback the losses to taxable income during periods in which those temporary differences become deductible. The Company considered several factors when analyzing the need for a valuation allowance including the Company's current three-year cumulative loss through December 31, 2020, the impacts of COVID-19 pandemic on the worldwide airline industry and the Company’s recent filing for protection under Chapter 11 of the bankruptcy code. Significant management judgment is required in determining the Company’s future taxable income for purposes of assessing the Company’s ability to realize any benefit from its deferred taxes. Based on its analysis, the Company has concluded that a valuation allowance is necessary for its U.S. deferred tax assets not supported by either future taxable income or availability of future reversals of existing taxable temporary differences and has recorded a valuation allowance of $1,126,100 for the three months ended March 31, 2021. Additionally, the Company has concluded that based on its analysis, some of its foreign net operating loss carrybacks are not expected to be realized based on limitations on the utilization of its foreign net operating losses, and therefore recorded a foreign tax expense of $54,300 for the reduced tax refund for the three months ended March 31, 2021. The Company accrues non-income based sales, use, value added and franchise taxes as other tax expense in the condensed consolidated statement of operations. |
Revenue Recognition, Accounts Receivable and Allowance for Doubtful Accounts | Revenue from leasing of aircraft assets pursuant to operating leases is recognized on a straight-line basis over the terms of the applicable lease agreements. Deferred payments are recorded as accrued rent when the cash rent received is lower than the straight-line revenue recognized. Such receivables decrease over the term of the applicable leases. Interest income is recognized on finance leases based on the interest rate implicit in the lease and the outstanding balance of the lease receivable. Maintenance reserves retained by the Company at lease-end are recognized as maintenance reserves revenue. In instances where collectability is not reasonably assured, the Company recognizes revenue as cash payments are received. The Company estimates and charges to income a provision for bad debts based on its experience with each specific customer, the amount and length of payment arrearages, and its analysis of the lessee’s overall financial condition. If the financial condition of any of the Company’s customers deteriorates, it could result in actual losses exceeding any estimated allowances. The Company had an allowance for doubtful accounts of $2,324,000 and $1,503,000 at March 31, 2021 and December 31, 2020, respectively. |
Interest Rate Hedging | During the first quarter of 2019, the Company entered into certain derivative instruments to mitigate its exposure to variable interest rates under the Nord Loan debt and a portion of the MUFG Indebtedness. Hedge accounting is applied to such a transaction only if specific criteria have been met, the transaction is deemed to be “highly effective” and the transaction has been designated as a hedge at its inception. Under hedge accounting treatment, generally, the effects of derivative transactions are recorded in earnings for the period in which the hedge transaction affects earnings. A change in value of a hedging instrument is reported as a component of other comprehensive income/(loss) and is reclassified into earnings in the period in which the transaction being hedged affects earnings. If at any time after designation of a cash flow hedge, such as those entered into by the Company, it is no longer probable that the forecasted cash flows will occur, hedge accounting is no longer permitted and a hedge is “de-designated.” After de-designation, if it is still considered reasonably possible that the forecasted cash flows will occur, the amount previously recognized in other comprehensive income/(loss) will continue to be reversed as the forecasted transactions affect earnings. However, if after de-designation it is probable that the forecasted transactions will not occur, amounts deferred in accumulated other comprehensive income/(loss) will be recognized in earnings immediately. As noted in Note 5, in October 2019 the Company became aware that, as a result of certain defaults under its MUFG Credit Facility, certain of the forecasted transactions related to its MUFG Credit Facility interest rate swaps were no longer probable of occurring and, hence, those swaps were de-designated from hedge accounting at that time. The two swaps related to the MUFG Credit Facility were terminated in March 2020 and the Company incurred a $3.1 million obligation in connection with such termination, payment of which was due no later than the March 31, 2021 maturity of the Drake Loan. As a result of the forecasted transaction being not probable to occur, accumulated other comprehensive loss of $1,167,700 related to the MUFG Swaps was recognized as interest expense in the first quarter of 2020. In March 2020, the Company determined that the future hedged interest payments related to its five remaining Nord Loan interest rate hedges (the “Nord Swaps”) were no longer probable of occurring, and consequently de-designated all five swaps from hedge accounting. Additionally, in December 2020, the Company determined that the interest cash flows that were associated with its three remaining swaps were probable of not occurring after February 2021. |
Recent Accounting Pronouncements | ASU 2016-13 The FASB issued ASU 2016-13, Financial Instruments – Credit Losses (Topic 326) . ASU 2019-12 In December 2019, the FASB issued ASU 2019-12, Income Taxes (Topic 740), FASB Staff Guidance on Effects of COVID-19 In April 2020, the FASB staff provided some relief from the unprecedented effect of the COVID-19 pandemic. Under this guidance, lessors may elect to treat lease concessions due to COVID-19 as if they arose from enforceable rights and obligations that existed in the lease contract, with the consequent effect that the concessions would not be treated as a lease modification which could require reclassification and remeasurement of the lease and to either recognize income during the deferral period or to treat deferred rent as variable rent during the period. Other guidance released in April 2020 provides that when hedge accounting is discontinued and it is probable that the forecasted transaction that had been hedged will occur beyond two months after its originally expected date as a result of the effects of COVID-19, the reporting entity may still defer recognizing related AOCI immediately and should defer recognition of such amounts until the forecasted transactions actually occur. The Company has elected to treat certain lease concessions to lessees as if they arose from rights initially in the lease contracts and so did not give rise to modifications of the leases, and to treat deferrals as variable rent during the period of the deferral, reducing income during such period. |
Aircraft Lease Assets (Tables)
Aircraft Lease Assets (Tables) | 3 Months Ended |
Mar. 31, 2021 | |
Aircraft Lease Assets [Abstract] | |
Aircraft and aircraft engines held for lease | March 31, 2021 December 31, 2020 Type Number owned % of net book value Number owned % of net book value Regional jet aircraft 7 70 % 4 67 % Turboprop aircraft 3 30 % 2 33 % March 31, 2021 December 31, 2020 Type Cost Accumulated depreciation Impairment losses Net Cost Accumulated depreciation Impairment losses Net Aircraft under operating leases $ 74,397,700 $ (21,699,000 ) $ (7,633,300 ) $ 45,065,400 $ 74,397,700 $ (21,001,300 ) $ (7,633,300 ) $ 45,763,100 Off-lease aircraft 56,364,200 (9,454,200 ) (35,890,000 ) 11,020,000 - - - - $ 130,761,900 $ (31,153,200 ) $ (43,523,300 ) $ 56,085,400 $ 74,397,700 $ (21,001,300 ) $ (7,633,300 ) $ 45,763,100 |
Minimum future lease revenue payments receivable | Years ending December 31 2021 $ 5,832,000 2022 7,320,100 2023 7,320,100 2024 5,843,800 2025 2,978,200 Thereafter 3,066,000 $ 32,360,200 |
Net investment included in finance leases and direct financing leases receivable | March 31, 2021 December 31, 2020 Gross minimum lease payments receivable $ 4,038,000 $ 4,138,000 Less unearned interest (88,000 ) (88,000 ) Allowance for doubtful accounts (2,324,000 ) (1,503,000 ) Difference between minimum lease payments receivable and collateral value of leases - - Finance leases receivable $ 1,626,000 $ 2,547,000 |
Minimum future payments receivable under finance leases | Years ending December 31 2021 $ 2,197,000 2022 1,284,000 2023 557,000 $ 4,038,000 |
Changes in allowance for doubtful accounts | Balance, December 31, 2020 $ 1,503,000 Additions charged to expense 821,000 Balance, March 31, 2021 $ 2,324,000 |
Assets and Liabilities Held f_2
Assets and Liabilities Held for Sale (Tables) | 3 Months Ended |
Mar. 31, 2021 | |
Property, Plant and Equipment Assets Held-for-sale Disclosure [Abstract] | |
Assets and liabilities held for sale | Cash and cash equivalents $ 345,900 Restricted cash 2,346,300 Aircraft 24,550,000 Notes payable and accrued interest, net of unamortized debt issuance costs of $313,400 13,836,900 Derivative liability 767,900 |
Notes Payable and Accrued Int_2
Notes Payable and Accrued Interest (Tables) | 3 Months Ended |
Mar. 31, 2021 | |
Notes Payable [Abstract] | |
Notes payable and accrued interest | March 31, 2021 December 31, 2020 Drake Loan, subject to compromise at March 31, 2021: Principal $ 79,439,900 $ 88,557,000 Unamortized debt issuance costs - (780,900 ) Accrued interest 744,500 739,000 Paycheck Protection Program Loans, subject to compromise at March 31, 2021: Principal 446,400 276,400 Accrued interest 2,600 1,700 $ 80,633,400 $ 88,793,200 Nord Loans held for sale: Principal $ - $ 14,091,300 Unamortized debt issuance costs - (313,400 ) Accrued interest - 59,000 $ - $ 13,836,900 |
Derivative Instruments (Tables)
Derivative Instruments (Tables) | 3 Months Ended |
Mar. 31, 2021 | |
Derivative Instruments and Hedging Activities Disclosure [Abstract] | |
Amounts in income and other comprehensive income amounts | The Company has reflected the following amounts in its net loss: For the Three Months Ended March 31, 2021 2020 Change in value of undesignated interest rate swaps $ (48,700 ) $ 1,908,300 Reclassification from other comprehensive income to interest expense 2,600 150,700 Reclassification from other comprehensive income to interest expense – forecasted transaction probable not to occur - 1,167,700 Included in interest expense $ 46,100 $ 3,226,700 The following amount was included in other comprehensive income/(loss), before tax: Loss on derivative instruments deferred into other comprehensive income/(loss) $ - $ (575,000 ) Reclassification from other comprehensive income to interest expense 2,600 150,700 Reclassification from other comprehensive income to interest expense – forecasted transaction probable not to occur - 1,167,700 Change in accumulated other comprehensive income $ 2,600 $ 743,400 |
Lease Right of Use Asset and _2
Lease Right of Use Asset and Liability (Tables) | 3 Months Ended |
Mar. 31, 2021 | |
Leases [Abstract] | |
Estimated future minimum lease commitments | March 31, 2021 December 31, 2020 2021 $ 59,100 $ 81,300 2022 88,700 88,700 2023 7,400 7,400 155,200 177,400 Discount (4,200 ) (5,400 ) Lease liability $ 151,000 $ 172,000 |
Amortization, finance costs and other expenses | Fixed rental expense during the quarter $ 17,700 Variable lease expense 6,500 Total lease expense during the quarter $ 24,200 |
Fair Value Measurements (Tables
Fair Value Measurements (Tables) | 3 Months Ended |
Mar. 31, 2021 | |
Fair Value Disclosures [Abstract] | |
Assets and liabilities measured and recorded at fair value on a recurring basis | March 31, 2021 December 31, 2020 Total Level 1 Level 2 Level 3 Total Level 1 Level 2 Level 3 Derivatives $ - - $ - - $ (767,900 ) $ - $ (767,900 ) $ - Total $ - $ - $ - $ - $ (767,900 ) $ - $ (767,900 ) $ - |
Assets measured and recorded at fair value on a nonrecurring basis | Assets Written Down to Fair Value Total Losses March 31, 2021 December 31, 2020 For the Three Months Ended March 31, Level Level Total 1 2 3 Total 1 2 3 2021 2020 Assets held for lease $ 43,124,000 $ - $ - $ 43,124,000 $ 32,650,000 $ - $ - $ 32,650,000 $ - $ - Assets held for sale 347,400 - - 347,400 38,041,600 - - 38,041,600 1,940,400 6,654,900 Total $ 43,471,400 $ - $ - $ 43,471,400 $ 70,691,600 $ - $ - $ 70,691,600 $ 1,940,400 $ 6,654,900 |
Liabilities Subject to Compro_2
Liabilities Subject to Compromise (Tables) | 3 Months Ended |
Mar. 31, 2021 | |
Liabilities Subject to Compromise Disclosures [Abstract] | |
Liabilities subject to compromise | Accrued maintenance costs $ 46,100 Drake Loan: Principal 79,439,900 Accrued interest 744,500 Paycheck Protection Program Loan: Principal 446,400 Accrued interest 2,600 Derivative termination liability 3,075,300 $ 83,754,800 |
Condensed Combined Debtor-in-_2
Condensed Combined Debtor-in-Possession Financial Information (Tables) | 3 Months Ended |
Mar. 31, 2021 | |
Condensed Financial Information Disclosure [Abstract] | |
Condensed Combined Balance Sheet | The Debtors Condensed Combined Balance Sheet March 31, 2021 (Unaudited) Assets: Cash and cash equivalents $ 3,755,000 Accounts receivable 286,100 Due from non-debtor affiliates 350,900 Finance leases receivable, net of allowance for doubtful accounts of $2,324,000 1,626,000 Aircraft held for lease, net of accumulated depreciation of $21,699,000 56,085,400 Assets held for sale 347,400 Property, equipment and furnishings, net of accumulated depreciation of $12,300 11,700 Office lease right of use, net of accumulated amortization of $43,900 125,900 Investment in non-debtor subsidiaries 3,610,600 Prepaid expenses and other assets 562,000 Total assets $ 66,761,000 Liabilities: Accounts payable $ 133,500 Payable to non-debtor subsidiaries 2,422,000 Accrued payroll 209,400 Lease liability 151,000 Maintenance reserves 2,099,900 Security deposits 466,000 Unearned revenues 549,000 Total liabilities not subject to compromise 6,030,800 Liabilities subject to compromise 83,754,800 Total liabilities 89,785,600 Total stockholders’ deficit attributable to the Debtors (23,024,600 ) Total liabilities and stockholders’ deficit $ 66,761,000 |
Condensed Combined Statements of Operations | The Debtors Condensed Combined Statements of Operations For the Three Months Ended March 31, 2021 (Unaudited) Revenues and other income: Operating lease revenue $ 1,987,200 Net loss on disposal of assets (2,473,200 ) Other loss (1,700 ) (487,700 ) Expenses: Impairment in value of aircraft 1,940,400 Interest 1,844,700 Professional fees, general and administrative and other 1,632,100 Bad debt expense 821,000 Depreciation 699,300 Salaries and employee benefits 464,300 Insurance 247,900 Maintenance 145,000 Other taxes 25,600 7,820,300 Loss before income taxes and equity in earnings of non-debtor entities (8,308,000 ) Income tax provision 49,200 Equity in earnings of non-debtor entities 2,946,900 Net loss $ (5,410,300 ) |
Condensed Combined Statements of Cash Flows | The Debtors Condensed Combined Statements of Cash Flows For the Three Months Ended March 31, 2021 (Unaudited) Net cash used in operating activities $ (577,200 ) Investing activity- Proceeds from sale of aircraft and aircraft engines held for lease, net of re-sale fees 13,246,000 Net cash provided by investing activity 13,246,000 Financing activities: Repayment of notes payable – MUFG Credit Facility and Drake Loan (11,011,700 ) Issuance of notes payable – PPP Loan 170,000 Net cash used in financing activities (10,841,700 ) Net increase in cash, cash equivalents and restricted cash 1,827,100 Cash, cash equivalents and restricted cash, beginning of period 1,927,900 Cash, cash equivalents and restricted cash, end of period $ 3,755,000 |
Organization and Summary of S_3
Organization and Summary of Significant Accounting Policies (Details Narrative) - USD ($) | 3 Months Ended | |
Mar. 31, 2021 | Dec. 31, 2020 | |
Organization, Consolidation and Presentation of Financial Statements [Abstract] | ||
Assets | $ 64,434,800 | $ 93,377,800 |
Liabilities | 87,459,400 | 110,994,100 |
Negative book equity | (23,024,600) | |
Valuation allowance | 1,126,100 | |
Foreign tax expense | 54,300 | |
Allowance for doubtful accounts | $ 2,324,000 | $ 1,503,000 |
Aircraft Lease Assets (Details)
Aircraft Lease Assets (Details) - Unit | Mar. 31, 2021 | Dec. 31, 2020 |
Regional Jet Aircraft | ||
Number owned | 7 | 4 |
Percentage of net book value | 70.00% | 67.00% |
Turboprop Aircraft | ||
Number owned | 3 | 2 |
Percentage of net book value | 30.00% | 33.00% |
Aircraft Lease Assets (Details
Aircraft Lease Assets (Details 1) - USD ($) | 3 Months Ended | 12 Months Ended | |
Mar. 31, 2021 | Dec. 31, 2021 | Dec. 31, 2020 | |
Cost | $ 130,761,900 | $ 74,397,700 | |
Accumulated depreciation | (31,153,200) | (21,001,300) | |
Impairment losses | (43,523,300) | $ (7,633,300) | |
Net | 56,085,400 | 45,763,100 | |
Aircraft Under Operating Leases | |||
Cost | 74,397,700 | 74,397,700 | |
Accumulated depreciation | (21,699,000) | (21,001,300) | |
Impairment losses | (7,633,300) | (7,633,300) | |
Net | 45,065,400 | 45,763,100 | |
Off-lease Aircraft | |||
Cost | 56,364,200 | 0 | |
Accumulated depreciation | (9,454,200) | 0 | |
Impairment losses | (35,890,000) | $ 0 | |
Net | $ 11,020,000 | $ 0 |
Aircraft Lease Assets (Detail_2
Aircraft Lease Assets (Details 2) | Mar. 31, 2021USD ($) |
Aircraft Lease Assets [Abstract] | |
2021 | $ 5,832,000 |
2022 | 7,320,100 |
2023 | 7,320,100 |
2024 | 5,843,800 |
2025 | 2,978,200 |
Thereafter | 3,066,000 |
Total | $ 32,360,200 |
Aircraft Lease Assets (Detail_3
Aircraft Lease Assets (Details 3) - USD ($) | Mar. 31, 2021 | Dec. 31, 2020 |
Aircraft Lease Assets [Abstract] | ||
Gross minimum lease payments receivable | $ 4,038,000 | $ 4,138,000 |
Less unearned interest | (88,000) | (88,000) |
Allowance for doubtful accounts | (2,324,000) | (1,503,000) |
Difference between minimum lease payments receivable and collateral value of leases | 0 | 0 |
Finance leases receivable | $ 1,626,000 | $ 2,547,000 |
Aircraft Lease Assets (Detail_4
Aircraft Lease Assets (Details 4) | Mar. 31, 2021USD ($) |
Aircraft Lease Assets [Abstract] | |
2021 | $ 2,197,000 |
2022 | 1,284,000 |
2023 | 557,000 |
Total | $ 4,038,000 |
Aircraft Lease Assets (Detail_5
Aircraft Lease Assets (Details 5) - USD ($) | 3 Months Ended | |
Mar. 31, 2021 | Mar. 31, 2020 | |
Aircraft Lease Assets [Abstract] | ||
Allowance for doubtful accounts, beginning | $ 1,503,000 | |
Additions charged to expense | 821,000 | $ 1,170,000 |
Allowance for doubtful accounts, ending | $ 2,324,000 |
Aircraft Lease Assets (Detail_6
Aircraft Lease Assets (Details Narrative) | Mar. 31, 2021 | Dec. 31, 2020 |
Aircraft Lease Assets [Abstract] | ||
Remaining weighted average lease term | 26 months | 29 months |
Assets and Liabilities Held f_3
Assets and Liabilities Held for Sale (Details) - USD ($) | Mar. 31, 2021 | Dec. 31, 2020 |
Property, Plant and Equipment Assets Held-for-sale Disclosure [Abstract] | ||
Cash and cash equivalents held for sale | $ 0 | $ 345,900 |
Restricted cash held for sale | 2,346,300 | |
Aircraft | 24,550,000 | |
Notes payable and accrued interest, net of unamortized debt issuance costs of $313,400 | 13,836,900 | |
Derivative liability | $ 767,900 |
Notes Payable and Accrued Int_3
Notes Payable and Accrued Interest (Details) - USD ($) | Mar. 31, 2021 | Dec. 31, 2020 |
Unamortized debt issuance costs | $ 0 | $ (780,900) |
Notes payable and accrued interest | 80,633,400 | 88,793,200 |
Drake Loan | ||
Principal | 79,439,900 | 88,557,000 |
Unamortized debt issuance costs | 0 | (780,900) |
Accrued interest | 744,500 | 739,000 |
Paycheck Protection Program Loans (Subject to Compromise) | ||
Principal | 446,400 | 276,400 |
Accrued interest | 2,600 | 1,700 |
Nord Loans Held for Sale | ||
Principal | 0 | 14,091,300 |
Unamortized debt issuance costs | 0 | (313,400) |
Accrued interest | 0 | 59,000 |
Notes payable and accrued interest | $ 0 | $ 13,836,900 |
Derivative Instruments (Details
Derivative Instruments (Details) - USD ($) | 3 Months Ended | |
Mar. 31, 2021 | Mar. 31, 2020 | |
Derivative Instruments and Hedging Activities Disclosure [Abstract] | ||
Change in value of undesignated interest rate swaps | $ (48,700) | $ 1,908,300 |
Reclassification from other comprehensive income to interest expense | 2,600 | 150,700 |
Reclassification from other comprehensive income to interest expense - forecasted transaction probable not to occur | 0 | 1,167,700 |
Included in interest expense | 46,100 | 3,226,700 |
Loss on derivative instruments deferred into other comprehensive income/(loss) | 0 | (575,000) |
Reclassification from other comprehensive income to interest expense | 2,600 | 150,700 |
Reclassification from other comprehensive income to interest expense - forecasted transaction probable not to occur | 0 | 1,167,700 |
Change in accumulated other comprehensive income | $ 2,600 | $ 743,400 |
Lease Right of Use Asset and _3
Lease Right of Use Asset and Liability (Details) - USD ($) | Mar. 31, 2021 | Dec. 31, 2020 |
Leases [Abstract] | ||
2021 | $ 59,100 | $ 81,300 |
2022 | 88,700 | 88,700 |
2023 | 7,400 | 7,400 |
Total lease liability payments due | 155,200 | 177,400 |
Discount | (4,200) | (5,400) |
Lease liability | $ 151,000 | $ 172,000 |
Lease Right of Use Asset and _4
Lease Right of Use Asset and Liability (Details 1) | 3 Months Ended |
Mar. 31, 2021USD ($) | |
Leases [Abstract] | |
Fixed rental expense during the quarter | $ 17,700 |
Variable lease expense | 6,500 |
Total lease expense during the quarter | $ 24,200 |
Lease Right of Use Asset and _5
Lease Right of Use Asset and Liability (Details Narrative) | Mar. 31, 2021 |
Leases [Abstract] | |
Weighted average discount rate | 3.00% |
Weighted average remaining lease term | 22 months |
Fair Value Measurements (Detail
Fair Value Measurements (Details) - USD ($) | Mar. 31, 2021 | Dec. 31, 2020 |
Total | $ 0 | $ (767,900) |
Level 1 | ||
Total | 0 | 0 |
Level 2 | ||
Total | 0 | (767,900) |
Level 3 | ||
Total | 0 | 0 |
Derivative | ||
Liabilities at fair value | 0 | (767,900) |
Derivative | Level 1 | ||
Liabilities at fair value | 0 | 0 |
Derivative | Level 2 | ||
Liabilities at fair value | 0 | (767,900) |
Derivative | Level 3 | ||
Liabilities at fair value | $ 0 | $ 0 |
Fair Value Measurements (Deta_2
Fair Value Measurements (Details 1) - USD ($) | 3 Months Ended | ||
Mar. 31, 2021 | Mar. 31, 2020 | Dec. 31, 2020 | |
Assets held for lease | $ 43,124,000 | $ 32,650,000 | |
Assets held for sale | 347,400 | 38,041,600 | |
Total | 43,471,400 | 70,691,600 | |
Losses on assets held for lease | 0 | $ 0 | |
Losses on assets held for sale | 1,940,400 | 6,654,900 | |
Total losses | 1,940,400 | $ 6,654,900 | |
Level 1 | |||
Assets held for lease | 43,124,000 | 32,650,000 | |
Assets held for sale | 347,400 | 38,041,600 | |
Total | 43,471,400 | 70,691,600 | |
Level 2 | |||
Assets held for lease | 0 | 0 | |
Assets held for sale | 0 | 0 | |
Total | 0 | 0 | |
Level 3 | |||
Assets held for lease | 0 | 0 | |
Assets held for sale | 0 | 0 | |
Total | $ 0 | $ 0 |
Fair Value Measurements (Deta_3
Fair Value Measurements (Details Narrative) - USD ($) | 3 Months Ended | 12 Months Ended | |
Mar. 31, 2021 | Mar. 31, 2020 | Dec. 31, 2020 | |
Fair Value Disclosures [Abstract] | |||
Increase (decrease) in interest expense | $ (48,700) | $ 1,979,800 | |
Notional amount of interest rate swaps | 14,091,300 | ||
Impairment losses | 1,940,400 | $ 6,654,900 | |
Principal and accrued interest | $ 0 | $ 14,150,300 |
Liabilities Subject to Compro_3
Liabilities Subject to Compromise (Details) - USD ($) | Mar. 31, 2021 | Dec. 31, 2020 |
Liabilities subject to compromise | $ 83,754,800 | $ 0 |
Accrued Maintenance Costs | ||
Liabilities subject to compromise | 46,100 | |
Drake Loan (Principal) | ||
Liabilities subject to compromise | 79,439,900 | |
Drake Loan (Accrued Interest) | ||
Liabilities subject to compromise | 744,500 | |
Paycheck Protection Program Loan (Principal) | ||
Liabilities subject to compromise | 446,400 | |
Paycheck Protection Program Loan (Accrued Interest) | ||
Liabilities subject to compromise | 2,600 | |
Derivative Termination Liability | ||
Liabilities subject to compromise | $ 3,075,300 |
Income Taxes (Details Narrative
Income Taxes (Details Narrative) - USD ($) | 3 Months Ended | |
Mar. 31, 2021 | Mar. 31, 2020 | |
Income Tax Disclosure [Abstract] | ||
Income tax provision/(benefit) | $ 49,200 | $ (2,712,400) |
Income tax rate | (0.92%) | 21.00% |
Foreign tax expense | $ 54,300 |
Condensed Combined Debtor-in-_3
Condensed Combined Debtor-in-Possession Financial Information (Details) - USD ($) | Mar. 31, 2021 | Dec. 31, 2020 | Mar. 31, 2020 | Dec. 31, 2019 |
Assets: | ||||
Cash and cash equivalents | $ 4,224,900 | $ 2,408,700 | $ 1,746,200 | |
Accounts receivable | 310,300 | 256,600 | ||
Finance leases receivable, net of allowance for doubtful accounts of $2,324,000 | 1,626,000 | 2,547,000 | ||
Aircraft held for lease, net of accumulated depreciation of $21,699,000 | 56,085,400 | 45,763,100 | ||
Assets held for sale | 347,400 | 38,146,700 | ||
Property, equipment and furnishings, net of accumulated depreciation of $12,300 | 11,700 | 14,900 | ||
Office lease right of use, net of accumulated amortization of $43,900 | 125,900 | 142,400 | ||
Prepaid expenses and other assets | 539,100 | 255,300 | ||
Total assets | 64,434,800 | 93,377,800 | ||
Liabilities: | ||||
Accrued payroll | 222,200 | 190,100 | ||
Lease liability | 151,000 | 172,000 | ||
Maintenance reserves | 2,099,900 | 2,000,600 | ||
Security deposits | 466,000 | 716,000 | ||
Unearned revenues | 549,000 | 1,027,400 | ||
Total liabilities not subject to compromise | 3,704,600 | 110,994,100 | ||
Liabilities subject to compromise | 83,754,800 | 0 | ||
Total liabilities | 87,459,400 | 110,994,100 | ||
Total stockholders' deficit attributable to the Debtors | (23,024,600) | (17,616,300) | $ 13,663,900 | $ 23,258,600 |
Total liabilities and stockholders' deficit | 64,434,800 | $ 93,377,800 | ||
Debtors | ||||
Assets: | ||||
Cash and cash equivalents | 3,755,000 | |||
Accounts receivable | 286,100 | |||
Due from non-debtor affiliates | 350,900 | |||
Finance leases receivable, net of allowance for doubtful accounts of $2,324,000 | 1,626,000 | |||
Aircraft held for lease, net of accumulated depreciation of $21,699,000 | 56,085,400 | |||
Assets held for sale | 347,400 | |||
Property, equipment and furnishings, net of accumulated depreciation of $12,300 | 11,700 | |||
Office lease right of use, net of accumulated amortization of $43,900 | 125,900 | |||
Investment in non-debtor subsidiaries | 3,610,600 | |||
Prepaid expenses and other assets | 562,000 | |||
Total assets | 66,761,000 | |||
Liabilities: | ||||
Accounts payable | 133,500 | |||
Payable to non-debtor subsidiaries | 2,422,000 | |||
Accrued payroll | 209,400 | |||
Lease liability | 151,000 | |||
Maintenance reserves | 2,099,900 | |||
Security deposits | 466,000 | |||
Unearned revenues | 549,000 | |||
Total liabilities not subject to compromise | 6,030,800 | |||
Liabilities subject to compromise | 83,754,800 | |||
Total liabilities | 89,785,600 | |||
Total stockholders' deficit attributable to the Debtors | (23,024,600) | |||
Total liabilities and stockholders' deficit | $ 66,761,000 |
Condensed Combined Debtor-in-_4
Condensed Combined Debtor-in-Possession Financial Information (Details) (Parenthetical) - USD ($) | Mar. 31, 2021 | Dec. 31, 2020 |
Assets: | ||
Finance lease receivable, allowance for doubtful accounts | $ 2,324,000 | $ 1,503,000 |
Aircraft and aircraft engines held for lease, accumulated depreciation | 21,699,000 | 21,001,300 |
Accumulated depreciation | 12,300 | 16,400 |
Accumulated amortization, office lease right of use | 43,900 | $ 27,400 |
Debtors | ||
Assets: | ||
Finance lease receivable, allowance for doubtful accounts | 2,324,000 | |
Aircraft and aircraft engines held for lease, accumulated depreciation | 21,699,000 | |
Accumulated depreciation | 12,300 | |
Accumulated amortization, office lease right of use | $ 43,900 |
Condensed Combined Debtor-in-_5
Condensed Combined Debtor-in-Possession Financial Information (Details 1) - USD ($) | 3 Months Ended | |
Mar. 31, 2021 | Mar. 31, 2020 | |
Revenues and Other Income: | ||
Operating lease revenue | $ 2,737,200 | $ 4,768,300 |
Net loss on disposal of assets | (201,700) | (24,200) |
Other loss | (1,300) | (23,200) |
Total income | 2,534,200 | 4,777,200 |
Expenses: | ||
Impairment in value of aircraft | 1,940,400 | 6,654,900 |
Interest | 1,914,700 | 6,012,900 |
Professional fees, general and administrative and other | 1,595,100 | 850,300 |
Bad debt expense | 821,000 | 1,170,000 |
Depreciation | 699,300 | 2,170,300 |
Salaries and employee benefits | 506,300 | 516,900 |
Insurance | 247,900 | 186,900 |
Maintenance | 145,000 | 80,200 |
Other taxes | 25,600 | 25,600 |
Total expenses | 7,895,300 | 17,668,000 |
Loss before income taxes and equity in earnings of non-debtor entities | (5,361,100) | (12,890,800) |
Income tax provision | 49,200 | (2,712,400) |
Net loss | (5,410,300) | $ (10,178,400) |
Debtors | ||
Revenues and Other Income: | ||
Operating lease revenue | 1,987,200 | |
Net loss on disposal of assets | (2,473,200) | |
Other loss | (1,700) | |
Total income | (487,700) | |
Expenses: | ||
Impairment in value of aircraft | 1,940,400 | |
Interest | 1,844,700 | |
Professional fees, general and administrative and other | 1,632,100 | |
Bad debt expense | 821,000 | |
Depreciation | 699,300 | |
Salaries and employee benefits | 464,300 | |
Insurance | 247,900 | |
Maintenance | 145,000 | |
Other taxes | 25,600 | |
Total expenses | 7,820,300 | |
Loss before income taxes and equity in earnings of non-debtor entities | (8,308,000) | |
Income tax provision | 49,200 | |
Equity in earnings of non-debtor entities | 2,946,900 | |
Net loss | $ (5,410,300) |
Condensed Combined Debtor-in-_6
Condensed Combined Debtor-in-Possession Financial Information (Details 2) - USD ($) | 3 Months Ended | |
Mar. 31, 2021 | Mar. 31, 2020 | |
Net cash used in operating activities | $ (176,700) | $ (624,500) |
Investing Activities: | ||
Proceeds from sale of aircraft and aircraft engines held for lease, net of re-sale fees | 10,850,700 | 0 |
Net cash provided by investing activities | 10,850,700 | 3,104,800 |
Financing Activities: | ||
Repayment of notes payable - MUFG Credit Facility and Drake Loan | (11,011,700) | (1,165,000) |
Issuance of notes payable - PPP Loan | 170,000 | 0 |
Debt issuance costs | (5,200) | (80,300) |
Net cash used in financing activities | (11,550,000) | (1,909,300) |
Net increase in cash, cash equivalents and restricted cash | (876,000) | 571,000 |
Cash, cash equivalents and restricted cash, beginning of period | 5,100,900 | 3,427,100 |
Cash, cash equivalents and restricted cash, end of period | 4,224,900 | $ 3,998,100 |
Debtors | ||
Net cash used in operating activities | (577,200) | |
Investing Activities: | ||
Proceeds from sale of aircraft and aircraft engines held for lease, net of re-sale fees | 13,246,000 | |
Net cash provided by investing activities | 13,246,000 | |
Financing Activities: | ||
Repayment of notes payable - MUFG Credit Facility and Drake Loan | (11,011,700) | |
Issuance of notes payable - PPP Loan | 170,000 | |
Net cash used in financing activities | (10,841,700) | |
Net increase in cash, cash equivalents and restricted cash | 1,827,100 | |
Cash, cash equivalents and restricted cash, beginning of period | 1,927,900 | |
Cash, cash equivalents and restricted cash, end of period | $ 3,755,000 |