Delaware

~~Delaware~~

27-1650905

(State or other jurisdiction of

Incorporation or Organization)

(I.R.S. Employer

Identification No.)

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

Chicago, IL 60606

(Address of principal executive offices)

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

(Registrant’s telephone number, including area code)

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

Title of Class	Trading Symbol	Name of Each Exchange on Which Registered
Common stock, par value $0.0001 per share	GOGO	NASDAQ Global Select Market
Preferred Stock Purchase Rights	GOGO	NASDAQ Global Select Market

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

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

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

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

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

As of ~~October~~April 30, ~~2017, 86,772,729~~2021, 109,609,821 shares of $0.0001 par value common stock were outstanding.

GogoInc.

~~Gogo Inc.~~

INDEX


			Page
Part I.		Financial Information
Item 1.		Financial Statements		2
		Unaudited Condensed Consolidated Balance Sheets		2
		Unaudited Condensed Consolidated Statements of Operations		3
		Unaudited Condensed Consolidated Statements of Comprehensive Loss		4
		Unaudited Condensed Consolidated Statements of Cash Flows		5
	Unaudited Condensed Consolidated Statements of Stockholders’ Equity (Deficit)	6
	Notes to Unaudited Condensed Consolidated Financial Statements		6	8
Item 2.		Management’s Discussion and Analysis of Financial Condition and Results of Operations		27	30
Item 3.		Quantitative and Qualitative Disclosures About Market Risk		47	41
Item 4.		Controls and Procedures		48	41

Part II.		Other Information
Item 1.		Legal Proceedings		49	42
Item 1A.		Risk Factors		49	43
Item 2.		Unregistered Sales of Equity Securities and Use of Proceeds		49	48
Item 3.		Defaults Upon Senior Securities		49	48
Item 4.		Mine Safety Disclosures		49	48
Item 5.		Other Information		49	48
Item 6.	Exhibits	~~Exhibits~~		49
Signatures			51	50

PART I. FINANCIAL INFORMATION

~~ITEM 1.~~

~~FINANCIAL STATEMENTS~~

ITEM 1. FINANCIAL STATEMENTS

Gogo Inc. and Subsidiaries

Unaudited Condensed Consolidated Balance Sheets

(in thousands, except share and per share data)


	September 30,			December 31,			March 31,			December 31,
	2017			2016			2021			2020
Assets
Current assets:
Cash and cash equivalents	$	222,378		$	117,302		$	455,152		$	435,345
Short-term investments		188,496			338,477

Total cash, cash equivalents and short-term investments		410,874			455,779
Accounts receivable, net of allowances of $729 and $499, respectively		112,029			73,743
Accounts receivable, net of allowances of $813 and $1,044, respectively								36,232			39,833
Inventories		48,621			50,266			28,560			28,114
Prepaid expenses and other current assets		20,414			24,942			9,625			8,934

Total current assets		591,938			604,730			529,569			512,226

Non-current assets:
Property and equipment, net		614,311			519,810			61,519			63,493
Intangible assets, net		90,661			85,175			51,128			52,693
Goodwill		620			620
Long-term restricted cash		6,873			7,773
Othernon-current assets		58,508			28,088

Operating lease right-of-use assets								32,473			33,690
Other non-current assets, net of allowances of $375 and $375, respectively								13,043			11,486
Totalnon-current assets		770,973			641,466			158,163			161,362

Total assets	$	1,362,911		$	1,246,196		$	687,732		$	673,588

Liabilities and Stockholders’ deficit
Liabilities and stockholders’ deficit
Current liabilities:
Accounts payable	$	23,845		$	31,689		$	11,322		$	11,013
Accrued liabilities		148,264			132,055			94,134			83,009
Accrued airline revenue share		16,714			15,521
Deferred revenue		39,062			32,722			3,759			3,113
Deferred airborne lease incentives		39,071			36,277
Current portion of capital leases		2,149			2,799

Current portion of long-term debt								-			341,000
Total current liabilities		269,105			251,063			109,215			438,135

Non-current liabilities:
Long-term debt		995,546			800,715			1,163,822			827,968
Deferred airborne lease incentives		121,588			135,879
Deferred tax liabilities		9,001			8,264
Non-current operating lease liabilities								36,354			38,018
Othernon-current liabilities		123,198			90,668			9,844			10,581

Totalnon-current liabilities		1,249,333			1,035,526			1,210,020			876,567

Total liabilities		1,518,438			1,286,589			1,319,235			1,314,702

Commitments and contingencies (Note 11)		—			—
Commitments and contingencies (Note 13)											-
Stockholders’ deficit
Common stock, par value $0.0001 per share; 500,000,000 shares authorized at September 30, 2017 and December 31, 2016; 87,000,688 and 86,529,907 shares issued at September 30, 2017 and December 31, 2016, respectively; and 86,772,729 and 86,295,870 shares outstanding at September 30, 2017 and December 31, 2016, respectively		9			9
Additionalpaid-in-capital		893,713			879,135
Common stock, par value $0.0001 per share; 500,000,000 shares authorized at March 31, 2021 and December 31, 2020; 97,158,550 and 91,086,191 shares issued at March 31, 2021 and December 31, 2020, respectively; and 92,071,085 and 85,990,499 shares outstanding at March 31, 2021 and December 31, 2020, respectively								9			9
Additional paid-in capital								1,080,305			1,088,590
Accumulated other comprehensive loss		(1,018	)		(2,163	)		(912	)		(1,013	)
Treasury stock, at cost								(98,857	)		(98,857	)
Accumulated deficit		(1,048,231	)		(917,374	)		(1,612,048	)		(1,629,843	)

Total stockholders’ deficit		(155,527	)		(40,393	)		(631,503	)		(641,114	)

Total liabilities and stockholders’ deficit	$	1,362,911		$	1,246,196		$	687,732		$	673,588

See the Notes to Unaudited Condensed Consolidated Financial Statements

Gogo Inc. and Subsidiaries

Unaudited Condensed Consolidated Statements of Operations

(in thousands, except per share amounts)


	For the Three Months						For the Nine Months						For the Three Months
	Ended September 30,						Ended September 30,						Ended March 31,
	2017			2016			2017			2016			2021			2020
Revenue:
Service revenue	$	153,347		$	129,099		$	453,918		$	375,406		$	59,355		$	57,726
Equipment revenue		19,527			18,168			57,162			61,146			14,514			13,201

Total revenue		172,874			147,267			511,080			436,552			73,869			70,927

Operating expenses:
Cost of service revenue (exclusive of items shown below)		67,854			56,365			201,794			164,615			14,095			11,007
Cost of equipment revenue (exclusive of items shown below)		15,326			10,527			41,623			36,752			8,282			8,511
Engineering, design and development		31,313			25,835			103,262			72,201			5,493			7,357
Sales and marketing		16,294			14,874			47,253			46,366			3,729			4,450
General and administrative		24,064			21,661			70,162			65,038			10,373			14,706
Depreciation and amortization		35,824			26,779			96,821			76,042			4,117			3,579

Total operating expenses		190,675			156,041			560,915			461,014			46,089			49,610

Operating loss		(17,801	)		(8,774	)		(49,835	)		(24,462	)
Operating income														27,780			21,317

Other (income) expense:
Interest income		(683	)		(852	)		(1,999	)		(1,064	)		(57	)		(578	)
Interest expense		27,585			24,848			81,754			58,701			29,294			31,143
Loss on extinguishment of debt		—			—			—			15,406
Adjustment of deferred financing costs		—			—			—			(792	)
Other (income) expense		228			34			322			(137	)

Loss on settlement of convertible notes														4,397			-
Other income														(5	)		(1	)
Total other expense		27,130			24,030			80,077			72,114			33,629			30,564

Loss before income taxes		(44,931	)		(32,804	)		(129,912	)		(96,576	)
Loss from continuing operations before income taxes														(5,849	)		(9,247	)
Income tax provision		350			469			945			997			35			141

Net loss from continuing operations														(5,884	)		(9,388	)
Net loss from discontinued operations, net of tax														(1,801	)		(75,390	)
Net loss	$	(45,281	)	$	(33,273	)	$	(130,857	)	$	(97,573	)	$	(7,685	)	$	(84,778	)

Net loss attributable to common stock per share—basic and diluted	$	(0.57	)	$	(0.42	)	$	(1.65	)	$	(1.24	)
Net loss attributable to common stock per share – basic and diluted:
Net loss from continuing operations													$	(0.07	)	$	(0.12	)
Net loss from discontinued operations														(0.02	)		(0.93	)
Net loss													$	(0.09	)	$	(1.05	)

Weighted average number of shares—basic and diluted		79,543			79,003			79,340			78,864

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

See the Notes to Unaudited Condensed Consolidated Financial Statements

Gogo Inc. and Subsidiaries

Unaudited Condensed Consolidated Statements of Comprehensive Loss

(in thousands)


	For the Three Months						For the Nine Months							For the Three Months
	Ended September 30,						Ended September 30,							Ended March 31,
	2017			2016			2017			2016				2021			2020
Net loss	$	(45,281	)	$	(33,273	)	$	(130,857	)	$	(97,573	)	$	(7,685	)	$	(84,778	)
Currency translation adjustments		655			(100	)		1,145			376

Currency translation adjustments, net of tax														101			(2,871	)
Comprehensive loss	$	(44,626	)	$	(33,373	)	$	(129,712	)	$	(97,197	)	$	(7,584	)	$	(87,649	)

See the Notes to Unaudited Condensed Consolidated Financial Statements

Gogo Inc. and Subsidiaries

Unaudited Condensed Consolidated Statements of Cash Flows

(in thousands)

   For the Nine Months
   Ended September 30,
   2017 2016
Operating activities:

Net loss
   $ (130,857 ) $ (97,573 )
Adjustments to reconcile net loss to cash provided by (used in) operating activities:

Depreciation and amortization
   96,821 76,042
Loss on asset disposals, abandonments and write-downs
   7,540 1,619
Deferred income taxes
   737 630
Stock-based compensation expense
   15,007 12,986
Loss of extinguishment of debt
   —   15,406
Amortization of deferred financing costs
   2,718 2,981
Accretion and amortization of debt discount and premium
   13,872 12,940
Adjustment of deferred financing costs
   —   (792 )
Changes in operating assets and liabilities:

Accounts receivable
   (38,130 ) 6,874
Inventories
   1,645 (14,653 )
Prepaid expenses and other current assets
   4,928 (18,106 )
Accounts payable
   (1,246 ) 2,174
Accrued liabilities
   20,521 2,750
Deferred airborne lease incentives
   11,722 8,635
Deferred revenue
   11,080 19,690
Deferred rent
   336 317
Accrued airline revenue share
   1,169 1,525
Accrued interest
   (17,742 ) 16,025
Othernon-current assets and liabilities
   (4,330 ) (4,322 )


Net cash provided by (used in) operating activities
   (4,209 ) 45,148


Investing activities:

Proceeds from the sale of property and equipment
   —   84
Purchases of property and equipment
   (190,479 ) (107,108 )
Acquisition of intangible assets—capitalized software
   (23,759 ) (21,586 )
Purchases of short-term investments
   (213,651 ) (278,961 )
Redemptions of short-term investments
   363,632 159,727
Other, net
   (2,486 ) 136


Net cash used in investing activities
   (66,743 ) (247,708 )


Financing activities:

Proceeds from the issuance of senior secured notes
   181,843 525,000
Payments on amended and restated credit agreement
   —   (310,132 )
Payment of issuance costs
   (3,602 ) (10,610 )
Payments on capital leases
   (2,340 ) (1,875 )
Stock-based compensation activity
   (429 ) 43


Net cash provided by financing activities
   175,472 202,426


Effect of exchange rate changes on cash
   556 (378 )
Increase (decrease) in cash and cash equivalents
   105,076 (512 )
Cash and cash equivalents at beginning of period
   117,302 147,342


Cash and cash equivalents at end of period
   $ 222,378 $ 146,830


Supplemental Cash Flow Information:

Cash paid for interest
   $ 86,359 $ 27,535
Cash paid for taxes
   35 291
Noncash Investing and Financing Activities:

Purchases of property and equipment in current liabilities
   $ 46,817 $ 31,062
Purchases of property and equipment paid by commercial airlines
   7,987 10,993
Purchases of property and equipment under capital leases
   1,174 1,531
Acquisition of intangible assets in current liabilities
   1,100 1,390
Asset retirement obligation incurred and adjustments
   778 (36 )

	For the Three Months
	Ended March 31,
	2021			2020
Operating activities from continuing operations:
Net loss	$	(5,884	)	$	(9,388	)
Adjustments to reconcile net loss to cash provided by operating activities:
Depreciation and amortization		4,117			3,579
(Gain) Loss on asset disposals, abandonments and write-downs		(100	)		74
Provision for expected credit losses		15		687
Deferred income taxes		95			45
Stock-based compensation expense		1,849			2,322
Amortization of deferred financing costs		1,703			1,419
Accretion and amortization of debt discount and premium		84			3,326
Loss on settlement of convertible notes		4,397
Changes in operating assets and liabilities:
Accounts receivable		3,586			4,220
Inventories		(446	)		(2,196	)
Prepaid expenses and other current assets		(375	)		(3,872	)
Contract assets		(1,886	)		(2,558	)
Accounts payable		292			6,108
Accrued liabilities		(10,424	)		(6,882	)
Deferred revenue		646			308
Accrued interest		27,559			26,413
Other non-current assets and liabilities		(654	)		285
Net cash provided by operating activities from continuing operations		24,574			23,890

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

Financing activities from continuing operations:
Proceeds from credit facility draw		-			22,000
Repurchase of convertible notes		-			(2,498	)
Payment of debt issuance costs		(550	)		-
Payments on financing leases		(124	)		-
Stock-based compensation activity		(2,646	)		(397	)
Net cash provided by (used in) financing activities from continuing operations		(3,320	)		19,105
Cash flows from discontinued operations:
Cash provided by (used in) operating activities		(748	)		14,137
Cash used in investing activities		0			(14,345	)
Cash used in financing activities		0			(247	)
Net cash used in discontinued operations		(748	)		(455	)

Effect of exchange rate changes on cash		3			51

Increase in cash, cash equivalents and restricted cash		19,807			41,715
Cash, cash equivalents and restricted cash at beginning of period		435,870			177,675
Cash, cash equivalents and restricted cash at end of period	$	455,677		$	219,390

Cash, cash equivalents and restricted cash at end of period	$	455,677		$	219,390
Less: current restricted cash		525			560
Less: non-current restricted cash		-			4,601
Cash and cash equivalents at end of period	$	455,152		$	214,229

Supplemental Cash Flow Information:
Cash paid for interest	$	31		$	66
Cash paid for taxes		1			1

See the Notes to Unaudited Condensed Consolidated Financial Statements

Gogo Inc. and Subsidiaries

Unaudited Condensed Consolidated Statements of Stockholders’ Equity (Deficit)

(in thousands, except share data)

For the Three Months Ended March 31, 2021

Accumulated

Additional

Other

Common Stock

Paid-In

Comprehensive

Accumulated

Treasury Stock

Shares

Par Value

Capital

Loss

Deficit

Shares

Amount

Total

Balance at January 1, 2021

85,990,499

$
9

$
1,088,590

$
(1,013
)

$
(1,629,843
)

5,077,400

$
(98,857
)

$
(641,114
)
Net loss

-

-

-

-

(7,685
)

-

-

(7,685
)
Currency translation adjustments, net of tax

-

-

-

101

-

-

-

101

Stock-based compensation expense

-

-

7,927

-

-

-

-

7,927

Issuance of common stock upon exercise of stock options

177,646

-

458

-

-

-

-

458

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

602,826

-

-

-

-

-

-

-

Tax withholding related to vesting of restricted stock units

-

-

(3,220
)

-

-

-

-

(3,220
)
Issuance of common stock in connection with employee stock purchase plan

11,637

-

116

-

-

-

-

116

Settlement of convertible notes

5,288,477

-

33,857

-

-

-

-

33,857

Impact of the adoption of ASU 2020-06

-

-

(47,423
)

-

25,480

-

-

(21,943
)
Balance at March 31, 2021

92,071,085

$
9

$
1,080,305

$
(912
)

$
(1,612,048
)

5,077,400

$
(98,857
)

$
(631,503
)

For the Three Months Ended March 31, 2020

Accumulated

Additional

Other

Common Stock

Paid-In

Comprehensive

Accumulated

Treasury Stock

Shares

Par Value

Capital

Loss

Deficit

Shares

Amount

Total

Balance at January 1, 2020

88,240,877

$
9

$
979,499

$
(2,256
)

$
(1,376,142
)

-

$
-

$
(398,890
)
Net loss

-

-

-

-

(84,778
)

-

-

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

-

-

-

(2,871
)

-

-

-

(2,871
)
Stock-based compensation expense

-

-

3,995

-

-

-

-

3,995

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

522,490

-

-

-

-

-

-

-

Tax withholding related to vesting of restricted stock units

-

-

(682
)

-

-

-

-

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

87,681

-

285

-

-

-

-

285

Settlement of prepaid forward shares

(5,077,400
)

(1
)

98,858

-

-

5,077,400

(98,857
)

-

Impact of the adoption of ASU 2016-13

-

-

-

-

(3,665
)

-

-

(3,665
)
Balance at March 31, 2020

83,773,648

$
8

$
1,081,955

$
(5,127
)

$
(1,464,585
)

5,077,400

$
(98,857
)

$
(486,606
)

See the Notes to Unaudited Condensed Consolidated Financial Statements

~~1. Basis of Presentation~~

~~The Business—~~

Gogo Inc. and Subsidiaries

Notes to Unaudited Condensed Consolidated Financial Statements

1.	Basis of Presentation

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

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

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

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

Basis of Presentation— - The accompanying unaudited condensed consolidated financial statements and notes have been prepared in accordance with accounting principles generally accepted in the United States of America (“GAAP”) and in conformity with Article 10 of RegulationS-X promulgated under the Securities Act of 1933, as amended (the “Securities Act”). Accordingly, they do not include all of the information and notes required by GAAP for complete financial statements and should be read in conjunction with our annual audited consolidated financial statements and the notes thereto included in our Annual Report on Form10-K for the year ended December 31, ~~2016~~2020 as filed with the Securities and Exchange Commission (“SEC”) on ~~February 27, 2017~~March 11, 2021 (the ~~“2016~~“2020 10-K”). These unaudited condensed consolidated financial statements reflect, in the opinion of management, all material adjustments (which include normal recurring adjustments) necessary to fairly state, in all material respects, our financial position, results of operations and cash flows for the periods presented.

The results of operations and cash flows for the ~~nine~~three month period ended ~~September 30, 2017~~March 31, 2021 are not necessarily indicative of the results that may be expected for the fiscal year ending December 31, ~~2017.~~2021.

We have ~~one~~1 class of common stock outstanding as of ~~September 30, 2017~~March 31, 2021 and December 31, ~~2016.~~2020.

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

~~Under agreements with certain~~

2.	Discontinued Operations

As discussed in Note 1, “Basis of Presentation,” on December 1, 2020, we completed the sale of our ~~airline partners~~CA business to ~~upgrade our equipment on certain aircraft or decommission certain aircraft on which our equipment is installed, on a quarterly basis we reassess the useful life of the affected equipment.~~Intelsat. As a result ~~we shorten the useful lives~~ of the ~~affected equipment to be consistent with~~Transaction, the ~~estimated upgrade date or aircraft decommissioning date,~~CA business is reported for all periods as applicable. We also shorten the remaining amortization period for deferred airborne lease incentives for certain equipment on aircraft to be decommissioned. The change in estimated useful lives related to these events resulted in increases in depreciation expense of $8.6 million and $14.9 million, respectively, in the three and nine month periods ended September 30, 2017 and increases in the amortization of deferred airborne lease incentives, which reduced our cost of service revenue, of $1.3 million and $3.5 million, respectively, in the three and nine month periods ended September 30, 2017. As a result, net loss per basic and fully diluted share increased by $0.09 and $0.14, respectively, for the three and nine month periods ended September 30, 2017.

discontinued operations.

Gogo Inc. and Subsidiaries

Notes to Unaudited Condensed Consolidated Financial Statements – (Continued)

The following table summarizes the results of discontinued operations which are presented as Net loss from discontinued operations in our unaudited condensed consolidated statements of operations (in thousands):

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

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

Total other (income) expense		-			2,997

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

~~2. Recent Accounting Pronouncements~~

~~In May 2014,~~Gain on sale – Upon the ~~Financial Accounting Standards Board (“FASB”) issued Accounting Standards Update (“ASU”)2014-09,~~~~Revenue From Contracts With Customers~~ ~~(“ASU2014-09”).~~ This pronouncement outlines a single comprehensive model to use in accounting for revenue arising from contracts with customers and supersedes most current revenue recognition guidance. The core principleclosing of ~~ASU2014-09~~ ~~is that an entity recognizes revenue to depict~~ the ~~transfer~~Transaction on December 1, 2020, we received initial gross proceeds of ~~promised goods or services to customers in an amount that~~$386.3 million, which reflects the ~~consideration~~$400.0 million purchase price, adjusted for cash, debt, transaction expenses and working capital. The final purchase price remains subject to change due to customary post-closing purchase price adjustment procedures set forth in the purchase and sale agreement between Gogo and Intelsat that are not yet complete. In February 2021, Intelsat delivered a draft closing statement that would reduce the working capital portion of the purchase price computation by $9.4 million, which would result in Gogo returning to Intelsat $9.4 million of the ~~entity expects to be entitled~~initial gross proceeds. Gogo is reviewing Intelsat’s draft closing statement in ~~exchange for those goods or services. Additionally,~~accordance with the ~~FASB issued several amendments~~terms of the purchase and sale agreement. As this post-closing purchase price adjustment is not yet finalized and therefore represents a contingent gain, $9.4 million has been recorded as a deferred gain on sale included within Accrued liabilities. As a result, during December 2020, we recognized within Gain on sale of CA business a pretax gain on sale of $38.0 million, computed as the $386.3 million of initial gross proceeds less (i) the potential $9.4 million post-closing purchase price adjustment not yet finalized, (ii) the carrying value of the assets and liabilities transferred in the Transaction and (iii) Transaction-related costs.

Stock-based compensation – In August 2020, the compensation committee of our Board of Directors (the “Compensation Committee”) approved modifications to the ~~standard, including clarification on accounting for licenses~~vesting conditions and exercise periods of intellectual property and identifying performance obligations. This new guidance is effective for annual reporting periods beginning after December 15, 2017, including interim periods within the annual reporting periods; we will adopt this guidance as of January 1, 2018. We are continuing to evaluate our revenue contracts under the new guidance. Based on our preliminary understanding of the impact the adoption of this standard will have on our financial statements, we reassessed and now plan to adopt the standard using the modified retrospective method. Under the modified retrospective method, revenue and expenses that would have been recognized in the future will be recorded tooutstanding equity as a cumulative adjustment at the date of adoption. While we are continuing to evaluate the impact of the adoption of this guidance on our consolidated financial statements, we currently believe that the measurement and timing of recognition of revenue and related costs fromcompensation awards held by certain of our ~~customer contracts will be impacted~~then-current employees who became employees of Intelsat in the ~~following ways, primarily from our Airline Directed contracts inCA-NA~~Transaction. These modifications became effective upon the consummation of the Transaction. Pursuant to such modifications, the options and~~CA-ROW~~ ~~(cash flows~~ restricted stock units (“RSUs”) held by Intelsat employees generally vest on the earlier of (i) the original vesting date and ~~cash and cash equivalents will not be impacted):~~

~~Under~~(ii) November 30, 2021; provided that the ~~current revenue recognition standard, the sale ofCA-NA~~ ~~andCA-ROW~~ ~~airborne connectivity equipment~~employee does not ~~meet all~~voluntarily resign from and is not terminated for cause by Intelsat prior to such date. Certain of these awards vest based on conditions that are not classified as a service, market or performance condition and as a result such awards are classified as a liability. Other than mark-to-market accounting adjustments, all costs related to stock-based compensation for our prior employees who became employees of Intelsat in the ~~requirements for being~~Transaction were recognized as ~~a separate unit~~ of ~~accounting, resulting in the deferral of equipment revenue (and the related equipment cost) over the life of the contract. Under ASU2014-09,~~ we have concluded that the sale of airborne connectivity equipment for Airline Directed arrangements will represent a separate performance obligation as it is both capable of being distinct and distinct within the context of the arrangement. As such, the recognition of all airborne equipment revenue and related costs will be accelerated and recognized upon installation.

Our contracts with customers generate service revenue that varies based on usage of our service. Under the current revenue recognition standard, these revenues are recognized as services are provided. Under ASU~~2014-09,~~ our preliminary conclusion is that we will be required to use a variable consideration model which requires us to estimate (and constrain) variable service revenue, and allocate total contract consideration among all performance obligations. Additionally, estimates used in the recognition of revenue under the new standard will be updated as new facts and circumstances warrant, which may cause differences in the trend of revenue recognition as compared to that reported under the current standard.

We have assessed the treatment of costs to obtain or fulfill a contract with a customer, including costs to obtain Supplemental Type Certificates (“STCs”) issued by the FAA that are required to install our equipment on aircraft. Such costs are expensed as incurred under the current standard. Under ASU~~2014-09,~~ we have concluded that under our Airline Directed model these costs require capitalization and subsequent amortization over the anticipated service period. Conversely, STC costs incurred in connection with our airline partners operating under our Turnkey model are not subject to the same guidance and will continue to be expensed as incurred under ASU~~2014-09.~~

~~Penalties are recorded under the current standard when incurred. Under ASU2014-09,~~ ~~anticipated penalties will be accounted for as a reduction of revenue when or at the time the related performance obligation is satisfied.~~

~~The impact upon adoption of ASU2014-09~~ is subject to change based on new contracts or contractual amendments executed prior to the date of adoption, including contractual amendments that change and arrangement from a Turnkey model to an Airline Directed model. Such changes could have a significant effect on the transition adjustment recorded upon adoption of the new standard.December 31, 2020.

~~In March 2016, the FASB issued ASU2016-02,~~~~Leases~~ ~~(“ASU2016-02”),~~ ~~which introduces a lessee model that records most leases on the balance sheet. ASU2016-02~~ ~~also aligns certain underlying principles of the new lessor model with those in Accounting Standards Codification (“ASC”) 606,~~~~Revenue from Contracts with Customers~~~~(“ASC 606”), the FASB’s new revenue recognition standard. Furthermore, ASU2016-02~~ ~~eliminates the required use of bright-line tests used in current GAAP for determining lease classification. It also requires lessors to provide~~9

Gogo Inc. and Subsidiaries

Notes to Unaudited Condensed Consolidated Financial Statements – (Continued)

The following is a summary of our stock-based compensation expense by operating expense line contained within the results of discontinued operations (in thousands):

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

For additional information on our stock-based compensation plans, see Note 16, “Employee Retirement and Postretirement Benefits.”

Other Costs Classified to Discontinued Operations – During the three months ended March 31, 2021, we incurred $0.7 million of additional costs (exclusive of the stock-based compensation expense noted above) primarily due to employer-paid taxes arising from the exercise of stock options by former employees now employed by Intelsat.

~~additional transparency into their exposure to~~

3.	Recent Accounting Pronouncements

Accounting standards adopted:

On January 1, 2021, we adopted ASU2020-06, Debt with Conversion and Other Options (Subtopic 470-20) and Derivatives and Hedging – Contracts in Entity’s Own Equity (Subtopic 815-40): Accounting for Convertible Instruments and Contracts in an Entity’s Own Equity (“ASU 2020-06”).ASU 2020-06 simplifies the ~~changes in value~~accounting for certain convertible instruments by removing the separation models for convertible debt with a cash conversion feature or convertible instruments with a beneficial conversion feature. As a result, convertible debt instruments will be reported as a single liability instrument with no separate accounting for embedded conversion features. Additionally, ASU 2020-06 amends the diluted earnings per share calculation for convertible instruments by requiring the use of ~~their residual assets and how they manage that exposure. ASU2016-02~~the if-converted method. The treasury stock method is no longer available. This standard is effective ~~for annual reporting periods~~ beginning ~~after December 15, 2018, including interim periods within those annual reporting periods. We will adopt this as guidance as of~~on January 1, ~~2019 and we are currently evaluating the impact~~2022, with early adoption permitted. Adoption of the ~~adoption of this guidance on our consolidated financial statements.~~

~~In March 2016, the FASB issued ASU2016-04,~~~~Recognition of Breakage for Certain Prepaid Stored-Value Products~~ ~~(“ASU2016-04”),~~ which amends the guidance on extinguishing financial liabilities for certain prepaid stored-value products by requiring that entities that sell prepaid stored-value products recognize breakage proportionally as the prepaid stored-value product is being redeemed rather than immediately upon sale of the product. If an entity is unable to estimate breakage, the amount would be recognized when the likelihood becomes remote that the holder will exercise the remaining rights. Entities are required to reassess their estimates of breakage each reporting period. Any change in this estimate would be accounted for as a change in an accounting estimate. An entity that recognizes breakage is required to disclose the methodology used to recognize breakage and significant judgments made in applying the breakage methodology. ASU~~2016-04~~ ~~is effective for fiscal years beginning after December 15, 2017, including interim periods within those fiscal years, and early adoption is permitted. We can apply ASU2016-04~~ bystandard requires using either a modified retrospective ~~transition approach~~ or a full retrospective ~~transition~~ approach. We ~~will~~elected to early adopt ~~this as guidance~~ASU 2020-06 using the modified retrospective approach.

The cumulative impact of using the modified retrospective approach for the adoption of ASU 2020-06 on our unaudited condensed consolidated balance sheet as of January 1, ~~2018~~2021 is summarized below:


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

On January 1, 2021, we adopted Accounting Standards Update No. 2019-12 – Income Taxes (Topic 740) Simplifying the Accounting for Income Taxes (“ASU 2019-12”). The amendments in ASU 2019-12 eliminate certain exceptions to the incremental approach for intraperiod tax allocation and ~~we are currently evaluating the impact~~interim period income tax accounting for year-to-date losses that exceed projected losses. ASU 2019-12 also clarifies and simplifies other aspects of the ~~adoption~~accounting for income taxes. Adoption of this ~~guidance on our consolidated financial statements.~~

~~In August 2016, the FASB issued ASU2016-15,~~~~Classification of Certain Cash Receipts and Cash Payments~~ ~~(“ASU2016-15”),~~ ~~which amends ASC 230,~~~~Statement of Cash Flows~~, the FASB’s standards for reporting cash flows in general-purpose financial statements. The amendments address the diversity in practice related to the classification of certain cash receipts and payments including debt prepayment or debt extinguishment costs. ASU~~2016-15~~ is effective for fiscal years beginning after December 15, 2017, including interim periods within those fiscal years, and early adoption is permitted. We will adopt this guidance as of January 1, 2018 and we expect to apply this standard ~~using the full retrospective method. We do~~did not ~~believe adoption of this guidance will have a material effect on our cash flows as we have historically reported debt prepayment and debt extinguishment costs in a manner consistent with ASU2016-15.~~

~~In October 2016, the FASB issued ASU2016-16,~~~~Intra-Entity Transfers of Assets Other Than Inventory~~ ~~(“ASU2016-16”),~~ ~~which removes the prohibition in ASC 740,~~~~Income Taxes~~, against the immediate recognition of the current and deferred income tax effects of intra-entity transfers of assets other than inventory. This is intended to reduce the complexity of GAAP and diversity in practice related to the tax consequences of certain types of intra-entity asset transfers, particularly those involving intellectual property. ASU~~2016-16~~ is effective for annual reporting periods beginning after December 15, 2017, including interim periods within those annual reporting periods. We will adopt this guidance as of January 1, 2018 and we are currently evaluating the impact of the adoption of this guidance on our consolidated financial statements.

~~In November 2016, the FASB issued ASU2016-18,~~~~Restricted Cash – A Consensus of the FASB Emerging Issues Task Force~~~~, (“ASU2016-18”),~~ ~~which amends ASC 230,~~~~Statement of Cash Flows~~~~, to clarify guidance on the classification and presentation of restricted cash in the statement of cash flows. ASU2016-18~~ is effective for annual reporting periods beginning after December 15, 2017, including interim periods within those annual reporting periods. We will adopt this guidance as of January 1, 2018 and do not believe the adoption of this guidance will have a material impact on our unaudited condensed consolidated financial statements.

~~In January 2017, the FASB issued ASU2017-04,~~~~Simplifying the Test for Goodwill Impairment~~ ~~(“ASU2017-04”),~~ ~~which simplifies the accounting for goodwill impairments by eliminatingStep-2~~ ~~from the goodwill impairment test. ASU2017-04~~ is effective for annual reporting periods beginning after December 15, 2019 and early adoption is permitted for interim or annual goodwill impairment tests performed on testing dates after January 1, 2017. We will adopt this guidance as part of our annual goodwill impairment test in October 2017 and do not believe the adoption of this guidance will have a material impact on our consolidated financial statements.

~~In May 2017, the FASB issued ASU2017-09,~~~~Scope of Modification Accounting~~~~(“ASU2017-09”),~~ which amends the scope of modification accounting for share-based payment arrangements. The ASU provides guidance on the types of changes to the terms or conditions of share-based payment awards to which an entity would be required to apply modification accounting under ASC 718,~~Compensation – Stock Compensation~~~~.Specifically, an entity would not apply modification accounting if the fair value, vesting conditions, and classification of the awards are the same immediately before and after the modification. ASU2017-09~~ is effective for annual reporting periods beginning after December 15, 2017 and early adoption is permitted. We will adopt this guidance as of January 1, 2018 and do not believe the adoption of this guidance will have a material impact on our consolidated financial statements.

Gogo Inc. and Subsidiaries

Notes to Unaudited Condensed Consolidated Financial Statements – (Continued)

4.	Revenue Recognition

3. Remaining performance obligations

As of March 31, 2021, the aggregate amount of the transaction price in our contracts allocated to the remaining unsatisfied performance obligations was approximately $86 million. Approximately $84 million represents connectivity and entertainment service revenues which are recognized as services are provided, which is expected to occur through the remaining term of the contract. The remaining $2 million represents future equipment revenue that is expected to be recognized within the next year. We have excluded from this amount consideration from contracts that have an original duration of one year or less.

Disaggregation of revenue

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

	For the Three Months
	Ended March 31,
	2021		2020
Service revenue:
Connectivity	$	58,403	$	56,975
Entertainment and other		952		751
Total service revenue	$	59,355	$	57,726

Equipment revenue:
ATG	$	10,597	$	9,624
Satellite		3,703		3,374
Other	214			203
Total equipment revenue	$	14,514	$	13,201

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

Contract balances

Our current and non-current deferred revenue balances totaled $3.8 million and $3.1 million as of March 31, 2021 and December 31, 2020, respectively. Deferred revenue includes, among other things, fees paid for equipment and subscription connectivity products.

Our current and non-current contract asset balances totaled $14.1 million and $12.2 million as of March 31, 2021 and December 31, 2020, respectively. Contract assets represent the aggregate amount of revenue recognized in excess of billings primarily for certain sales programs.

Major Customers

NaN customer accounted for more than 10% of revenue during the three month periods ended March 31, 2021 and 2020 and 0 customer accounted for more than 10% of accounts receivable as of March 31, 2021 or December 31, 2020.

5.	Net Loss Per Share

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

The shares of common stock effectively repurchased in connection with the Forward Transactions (as defined and described in Note 8,10, “Long-Term Debt and Other Liabilities”) are considered participating securities requiring thetwo-class method to calculate basic and diluted earnings per share. Net earnings in future periods will be allocated between common shares and participating securities. In periods of a net loss, the shares associated with the Forward Transactions will not receive an allocation of losses, as the

Gogo Inc. and Subsidiaries

Notes to Unaudited Condensed Consolidated Financial Statements – (Continued)

counterparties to the Forward Transactions are not required to fund losses. ~~Accordingly,~~Additionally, the calculation of weighted average shares outstanding as of ~~September 30, 2017~~March 31, 2021 and ~~2016~~2020 excludes approximately ~~7.2~~2.1 million shares ~~that will be repurchased as a result of~~associated with the Forward Transactions.

As a result of the net loss for the ~~three and nine month~~three-month periods ended ~~September 30, 2017~~March 31, 2021 and ~~2016,~~2020, all of the outstanding shares of common stock underlying stock options, deferred stock units and restricted stock units were excluded from the computation of diluted shares outstanding because they were anti-dilutive.

The following table sets forth the computation of basic and diluted earnings per share for the three ~~and nine~~ month periods ended ~~September 30, 2017~~March 31, 2021 and ~~2016;~~2020; however, ~~because of~~for the ~~undistributed losses,~~reasons described above, the shares of common stock associated with the Forward Transactions are excluded from the computation of basic earnings per ~~share in 2017 and 2016 as undistributed losses are not allocated to these shares~~ (in thousands, except per share amounts):

													For the Three Months
	For the Three Months						For the Nine Months						Ended March 31,
	Ended September 30,						Ended September 30,						2021			2020
	2017			2016			2017			2016
Net loss from continuing operations													$	(5,884	)	$	(9,388	)
Net loss from discontinued operations														(1,801	)		(75,390	)
Net loss	$	(45,281	)	$	(33,273	)	$	(130,857	)	$	(97,573	)		(7,685	)		(84,778	)
Less: Participation rights of the Forward Transactions		—			—			—			—			-			-

Undistributed losses	$	(45,281	)	$	(33,273	)	$	(130,857	)	$	(97,573	)	$	(7,685	)	$	(84,778	)

Weighted-average common shares outstanding-basic and diluted		79,543			79,003			79,340			78,864			84,649			81,205

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

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

Net loss attributable to common stock per share-basic and diluted	$	(0.57	)	$	(0.42	)	$	(1.65	)	$	(1.24	)	$	(0.09	)	$	(1.05	)

6.	Inventories

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

Inventories as of ~~September 30, 2017~~March 31, 2021 and December 31, ~~2016, all of which were included within the BA segment,~~2020 were as follows (in thousands):


	September 30,		December 31,			March 31,		December 31,
	2017		2016			2021		2020
Work-in-process component parts	$	37,462	$	39,150	$	14,654	$	15,405
Finished goods		11,159		11,116		13,906		12,709

Total inventory	$	48,621	$	50,266	$	28,560	$	28,114

7.	Composition of Certain Balance Sheet Accounts

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

	March 31,		December 31,
	2021		2020
Contract assets	$	2,729	$	2,417
Restricted cash		525		525
Other		6,371		5,992
Total prepaid expenses and other current assets	$	9,625	$	8,934

Gogo Inc. and Subsidiaries

Notes to Unaudited Condensed Consolidated Financial Statements – (Continued)

~~5. Composition of Certain Balance Sheet Accounts~~

Property and equipment as of ~~September 30, 2017~~March 31, 2021 and December 31, ~~2016~~2020 were as follows (in thousands):


	September 30,			December 31,			March 31,			December 31,
	2017			2016			2021			2020
Office equipment, furniture, fixtures and other	$	45,230		$	49,529		$	11,309		$	10,986
Leasehold improvements		42,413			42,143			12,012			12,012
Airborne equipment		702,414			557,196
Network equipment		186,650			168,121			139,159			139,884
								162,480			162,882
		976,707			816,989
Accumulated depreciation		(362,396	)		(297,179	)		(100,961	)		(99,389	)

Property and equipment, net	$	614,311		$	519,810

Total property and equipment, net							$	61,519		$	63,493

Othernon-current assets as of ~~September 30, 2017~~March 31, 2021 and December 31, ~~2016~~2020 were as follows (in thousands):

   September 30,    December 31,
   2017    2016
Deferred cost of equipment revenue
   $ 40,493    $ 14,159
Deposits on satellite and airborne equipment
   8,371    10,800
Other
   9,644    3,129




Total othernon-current assets
   $ 58,508    $ 28,088

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

Accrued liabilities as of ~~September 30, 2017~~March 31, 2021 and December 31, ~~2016~~2020 were as follows (in thousands):

					March 31,		December 31,
	September 30,		December 31,		2021		2020
	2017		2016
Accrued interest					$	44,807	$	17,836
Employee compensation and benefits(1)	$	23,831	$	21,008		19,796		35,516
Airborne equipment and installation costs		35,459		22,442
Airborne partner related accrued liabilities		16,226		14,307
Accrued interest		22,694		40,436
Operating leases						8,198		8,089
Deferred gain on sale of CA business ⁽²⁾						9,400		9,400
Warranty reserve						2,400		2,400
Taxes						1,800		2,022
Other		50,054		33,862		7,733		7,746

Total accrued liabilities	$	148,264	$	132,055	$	94,134	$	83,009

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

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

Othernon-current liabilities as of ~~September 30, 2017~~March 31, 2021 and December 31, ~~2016~~2020 were as follows (in thousands):

   September 30,    December 31,
   2017    2016
Deferred revenue
   $ 67,048    $ 38,976
Deferred rent
   37,101    36,538
Asset retirement obligations
   9,935    8,527
Other
   9,114    6,627




Total othernon-current liabilities
   $ 123,198    $ 90,668

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

Gogo Inc. and Subsidiaries

Notes to Unaudited Condensed Consolidated Financial Statements – (Continued)

8.	Intangible Assets

Our intangible assets are comprised of both indefinite-lived and finite-lived intangible assets. Intangible assets with indefinite lives ~~and goodwill~~ are not ~~amortized, but~~amortized; rather, they are reviewed for impairment at least annually or whenever events or circumstances indicate the carrying value of the asset may not be recoverable. We perform our annual impairment tests of our indefinite-lived intangible assets ~~and goodwill~~ during the fourth quarter of each fiscal ~~year.~~year, and the results from the test performed in the fourth quarter of 2020 indicated no impairment. We also reevaluate the useful life of ~~the~~ indefinite-lived intangible assets each reporting period to determine whether events and circumstances continue to support an indefinite useful life. The results of our annual indefinite-lived intangible assets ~~and goodwill~~ impairment assessments in the fourth quarter of ~~2016~~2020 indicated no impairment.

~~Gogo Inc. and Subsidiaries~~

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

As of ~~September 30, 2017~~both March 31, 2021 and December 31, ~~2016,~~2020, our goodwill balance ~~all of which related to our BA segment,~~ was $0.6 million.

Our intangible assets, other than goodwill, as of ~~September 30, 2017~~March 31, 2021 and December 31, ~~2016~~2020 were as follows (in thousands, except for weighted average remaining useful life):


	Weighted																Weighted
	Average		As of September 30, 2017							As of December 31, 2016							Average	As of March 31, 2021							As of December 31, 2020
	Remaining		Gross					Net		Gross					Net		Remaining		Gross					Net		Gross					Net
	Useful Life		Carrying		Accumulated			Carrying		Carrying		Accumulated			Carrying		Useful Life		Carrying		Accumulated			Carrying		Carrying		Accumulated			Carrying
	(in years)		Amount		Amortization			Amount		Amount		Amortization			Amount		(in years)		Amount		Amortization			Amount		Amount		Amortization			Amount
Amortized intangible assets:
Software		2.2	$	140,818	$	(85,490	)	$	55,328	$	118,836	$	(70,127	)	$	48,709	2.3	$	50,357	$	(33,632)		$	16,725	$	50,029	$	(31,739)		$	18,290
Service customer relationship		2.5		8,081		(5,534	)		2,547		8,081		(4,773	)		3,308
Other intangible assets		1.3		1,500		(997	)		503		1,500		(682	)		818	8.0		1,500		-			1,500		1,500		-			1,500
Service customer relationships																			8,081		(8,081	)		-		8,081		(8,081	)		-
OEM and dealer relationships				6,724		(6,724	)		—		6,724		(6,667	)		57			6,724		(6,724	)		-		6,724		(6,724	)		-
Total amortized intangible assets																			66,662		(48,437)			18,225		66,334		(46,544)			19,790

Total amortized intangible assets				157,123		(98,745	)		58,378		135,141		(82,249	)		52,892
Unamortized intangible assets:

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

Total intangible assets			$	189,406	$	(98,745	)	$	90,661	$	167,424	$	(82,249	)	$	85,175		$	98,945	$	(48,437)		$	50,508	$	98,617	$	(46,544	)	$	52,073

Amortization expense was ~~$4.9~~$1.9 million and ~~$16.5~~$1.5 million, respectively, for the three ~~and nine~~ month periods ended ~~September 30, 2017,~~March 31, 2021 and ~~$6.0 million and $15.8 million, respectively, for the prior year periods.~~2020.

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

   Amortization
Years ending December 31,    Expense
2017 (period from October 1 to December 31)
   $ 7,137
2018
   $ 24,284
2019
   $ 14,427
2020
   $ 8,382
2021
   $ 2,425
Thereafter
   $ 1,723

	Amortization
Years ending December 31,	Expense
2021 (period from April 1 to December 31)	$	5,569
2022	$	4,911
2023	$	2,435
2024	$	894
2025	$	894
Thereafter	$	3,522

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

Gogo Inc. and Subsidiaries

Notes to Unaudited Condensed Consolidated Financial Statements – (Continued)

9.	Warranties

We provide warranties on parts and labor related to our products. Our warranty terms range from two to five years. Warranty reserves are established for costs that are estimated to be incurred after the sale, delivery and installation of the products under warranty. The warranty reserves are determined based on known product failures, historical experience and other available evidence, and are included in accrued liabilities in our unaudited condensed consolidated balance sheets. Our warranty reserve balance was ~~$2.7~~$2.4 million ~~and $2.6 million, respectively,~~ as of ~~September 30, 2017~~both March 31, 2021 and December 31, ~~2016.~~2020.

10.	Long-Term Debt and Other Liabilities

Long-term debt as of ~~September 30, 2017~~March 31, 2021 and December 31, ~~2016~~2020 was as follows (in thousands):

   September 30,    December 31,
   2017    2016
Senior Secured Notes
   $ 706,277    $ 525,000
Convertible Notes
   306,462    292,024




Total debt
   1,012,739    817,024
Less deferred financing costs
   (17,193 )    (16,309 )




Total long-term debt
   $ 995,546    $ 800,715

~~Gogo Inc. and Subsidiaries~~

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

		March			December
		31, 2021			31, 2020
2024 Senior Secured Notes	$	973,623		$	973,539
2022 Convertible Notes		208,514			215,122
Total debt		1,182,137			1,188,661
Less deferred financing costs		(18,315	)		(19,693	)
Less current portion of long-term debt		-			(341,000	)
Total long-term debt	$	1,163,822		$	827,968

2024 Senior Secured Notes–

On ~~June 14, 2016~~April 25, 2019 (the “Issue Date”), Gogo Intermediate Holdings LLC (“GIH”) (a wholly owned subsidiary of Gogo Inc.) and Gogo Finance Co. Inc. (a wholly owned subsidiary of GIH) ~~(the“Co-Issuer”~~(“Gogo Finance” and, together with GIH, the “Issuers”), issued ~~$525~~$905 million aggregate principal amount of ~~12.500%~~9.875% senior secured notes due ~~2022~~2024 (the ~~“Original Senior Secured~~“Initial Notes”) under an ~~Indenture,~~indenture (the “Base Indenture”), dated as of ~~June 14, 2016 (the “Original Indenture”),~~April 25, 2019, among the Issuers, us, as guarantor, certain subsidiaries of GIH, as guarantors (the ~~“Subsidiary~~“Initial 2024 Subsidiary Guarantors” and, together with us, the ~~“Guarantors”~~“Initial 2024 Guarantors”), and U.S. Bank National Association, as trustee ~~(in such capacity, the~~(the “Trustee”) and as collateral agent ~~(in such capacity, the~~(the “Collateral Agent”). On ~~January~~May 3, ~~2017,~~2019, the Issuers, issued $65 million aggregate principal amount of additional senior secured notes due 2022 (the “January 2017 Additional Notes”). The January 2017 Additional Notes were issued at a price equal to 108% of their face value resulting in gross proceeds of $70.2 million. On September 20, 2017, the ~~Issuers, the~~Initial 2024 Guarantors and the Trustee entered into the first supplemental indenture (the ~~“Supplemental~~“First Supplemental Indenture”) to increase the amount of indebtedness that may be incurred under Credit Facilities (as defined in the 2024 Indenture) by GIH or its subsidiaries that are 2024 Guarantors (as defined below) by $20 million in aggregate principal amount. On March 6, 2020, the Issuers, the Initial 2024 Guarantors, Gogo Air International GmbH (an indirect subsidiary of GIH) (“Gogo International”) and the Trustee entered into a second supplemental indenture (the “Second Supplemental Indenture”) to add Gogo International as a guarantor under the 2024 Indenture. On July 31, 2020, the Issuers, the Initial 2024 Guarantors, Gogo International and Gogo Inflight Internet Canada Ltd., Gogo ATG LLC and Gogo CA Licenses LLC (collectively, the “Additional Guarantors” and, together with the ~~Original~~Initial 2024 Guarantors and Gogo International, the “2024 Guarantors”) and the Trustee entered into a third supplemental indenture (the “Third Supplemental Indenture”) to add the Additional Guarantors as guarantors under the 2024 Indenture. On November 9, 2020, the Company, the Issuers, the 2024 Guarantors and the Trustee entered into a fourth supplemental indenture (together with the Base Indenture, the ~~“Indenture”~~First Supplemental Indenture, the Second Supplemental Indenture and the Third Supplemental Indenture, the “2024 Indenture”) to ~~modify certain covenants, as discussed below.~~increase the amount of indebtedness under the Credit Facilities (as defined in the Base Indenture) that may be incurred by the Issuers or the Subsidiary Guarantors (as defined in the Base Indenture) by $50 million in aggregate principal amount. On ~~September 25, 2017,~~May 7, 2019, the Issuers issued ~~$100~~an additional $20 million aggregate principal amount of ~~additional~~9.875% senior secured notes due ~~2022~~2024 (the ~~“September 2017~~“2019 Additional Notes”). On November 13, 2020, the Issuers issued an additional $50 million aggregate principal amount of 2024 Senior Secured Notes (the “2020 Additional Notes” and, together with the Initial Notes and the 2019 Additional Notes, the “2024 Senior Secured Notes”). The ~~September 2017~~2024 Senior Secured Notes were offered and sold in transactions exempt from registration under the Securities Act. The Initial Notes were issued at a price equal to 99.512% of their face value, the 2019 Additional Notes were issued at a price equal to ~~113%~~100.5% of their face value, resulting in aggregate gross proceeds of ~~$113.0~~$920.7 million and the 2020 Additional Notes were issued at a price equal to 103.5% of their face value, resulting in aggregate gross proceeds of $51.8 million. Additionally, we received approximately ~~$2.9~~$0.1 million for interest that accrued from ~~July 1, 2017~~April 25, 2019 through ~~September 24, 2017, which will be paid out when we make~~May 7, 2019 with respect to the 2019 Additional Notes that was included in our ~~next~~ interest payment on November 1, 2019. On April 1, 2021, the Issuers elected to call for redemption in ~~January 2018. We refer to~~full all $975,000,000 aggregate principal amount outstanding of the ~~Original~~ 2024 Senior Secured Notes in accordance with the ~~January 2017 Additional~~terms of the 2024 Indenture. The Trustee delivered a notice of conditional full redemption to all registered holders of the 2024 Senior Secured Notes. The redemption was conditioned, among other things, upon the incurrence of indebtedness, pursuant to a new senior secured term loan and/or credit facility or from one or more other sources, in an amount satisfactory to the Issuers. The 2024 Senior Secured Notes were redeemed on May 1, 2021 (the “Redemption Date”), at a redemption price equal to 104.938% of the principal amount of the 2024 Senior Secured Notes redeemed plus accrued and unpaid interest to (but not including) the Redemption Date. The 2024 Senior Secured Notes were guaranteed on a senior secured basis by Gogo Inc. and all of GIH’s existing and future restricted subsidiaries (other than Gogo Finance), subject to

Gogo Inc. and Subsidiaries

Notes to Unaudited Condensed Consolidated Financial Statements – (Continued)

certain exceptions. The 2024 Senior Secured Notes and the ~~September 2017 Additional~~related guarantees were secured by second-priority liens on the ABL Priority Collateral (as defined below) and by first-priority liens on the Cash Flow Priority Collateral (as defined below), including pledged equity interests of the Issuers and all of GIH’s existing and future restricted subsidiaries guaranteeing the 2024 Senior Secured Notes, ~~collectively as~~except for certain excluded assets and subject to permitted liens. Upon the ~~“Senior Secured Notes.”~~closing of the Transaction, certain subsidiaries were released from their guarantees under the 2024 Indenture, and certain of the ABL Priority Collateral and Cash Flow Priority Collateral were released.

As ~~noted above, on September 20, 2017, the Issuers, the Guarantors~~of March 31, 2021 and the Trustee entered into the Supplemental Indenture to (i) increase the amount of additional secured indebtedness under Credit Facilities (as defined in the Indenture) that may be incurred by the Issuer and its Restricted Subsidiaries (as defined in the Indenture) under the Indenture by $100 million (from $75 million to $175 million in aggregate principal amount), (ii) permit the Issuer and its Restricted Subsidiaries to incur additional secured indebtedness in connection with vendor financing arrangements not to exceed $50 million in aggregate principal amount at any time outstanding and (iii) permit the Issuer and its Restricted Subsidiaries to make additional dividends or distributions to Gogo in an aggregate amount of up to $15 million during any twelve-month period to pay interest on any indebtedness or preferred stock with a maturity later than July 1, 2022. The Supplemental Indenture became effective immediately upon execution, following our receipt of consents from holders of a majority ofDecember 31, 2020, the outstanding principal amount of the Existing Notes (excluding Existing Notes held by the Issuers or any affiliates of the Issuers) to the Supplemental Indenture and amendments to the collateral agency agreement governing the Senior Secured Notes (the “Consent”). In connection with the Consent, GIH paid $1.4 million in fees (“Consent Fees”) to holders of Existing Notes who validly offered (and did not revoke) their consents prior to the expiration of the Consent.

~~As of September 30, 2017 and December 31, 2016, the outstanding principal amount of the~~2024 Senior Secured Notes was ~~$690.0~~$975 million for both periods, the unaccreted debt discount was $1.4 million and ~~$525.0~~$1.5 million, ~~respectively. The unamortized debt premium and Consent fees were $16.3 million as of September 30, 2017~~respectively, and the net carrying amount was ~~$706.3~~$973.6 million asand $973.5 million, respectively.

We used a portion of ~~September 30, 2017. The~~the net ~~carrying amount was $525.0 million as~~proceeds from the issuance of ~~December 31, 2016.~~

~~Interest on~~ the Initial Notes and the 2019 Additional Notes to fund the redemption of all the outstanding 2022 Senior Secured Notes ~~accrues~~(as defined below) and to repurchase $159 million aggregate principal amount of Gogo Inc.’s 3.75% Convertible Senior Notes due 2020 (the “2020 Convertible Notes”).

The maturity date of the 2024 Senior Secured Notes was May 1, 2024. The 2024 Senior Secured Notes bore interest at ~~the~~a rate of ~~12.500%~~9.875% per ~~annum and is~~year, payable ~~semi-annually~~semiannually in arrears on ~~July~~May 1 and ~~January~~November 1 ~~commencing~~of each year, beginning on ~~January~~November 1, 2017 (other than the January 2017 Additional Notes, for which interest payments commenced on July 1, 2017, and the September 2017 Additional Notes, for which interest payments will commence on January 1, 2018). The Senior Secured Notes mature on July 1, 2022. The January 2017 Additional Notes and September 2017 Additional Notes have the same terms as the Original Senior Secured Notes, except with respect to the issue date and issue price, and are treated as a single series for all purposes under the Indenture and the security documents that govern the Senior Secured Notes.2019.

We paid approximately ~~$11.4~~$22.6 million ~~$2.0 million and $2.5 million, respectively,~~ of ~~aggregate~~ origination fees and financing costs related to the issuance of the ~~Original~~2024 Senior Secured ~~Notes, the January 2017 Additional Notes and the September 2017 Additional~~ Notes, which have been accounted for as deferred financing costs. ~~Additionally, as noted above, we paid approximately $1.4 million of Consent fees, which offset the net carrying value of the Senior Secured Notes.~~ The deferred financing costs on our ~~unaudited condensed~~ consolidated balance sheet are being amortized over the contractual term of the 2024 Senior Secured Notes using the effective interest method. Total amortization expense was ~~$0.5~~$1.0 million and ~~$1.6~~$0.9 million, respectively, for the three ~~and nine~~ month periods ended ~~September 30, 2017,~~March 31, 2021 and ~~$0.4 million and $0.5 million, respectively, for~~2020. Amortization expense is included in interest expense in the ~~prior year periods.~~unaudited condensed consolidated statements of operations. As of ~~September 30, 2017~~March 31, 2021 and December 31, ~~2016,~~2020, the balance of unamortized deferred financing costs related to the 2024 Senior Secured Notes was ~~$13.2~~$15.5 million and ~~$11.2~~$16.6 million, respectively, and is included as a reduction to long-term debt in our unaudited condensed consolidated balance ~~sheet.~~sheets. See Note 9,11, “Interest ~~Costs”~~Costs,” for additional information.

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

•

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

•

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

•

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

•

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

•

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

•

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

Gogo Inc. and Subsidiaries

Notes to Unaudited Condensed Consolidated Financial Statements – (Continued)

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

effectively senior to all of the Issuers’ existing and future senior unsecured indebtedness and the Issuers’ indebtedness secured on a junior priority basis by the same collateral securing the Senior Secured Notes, if any, in each case to the extent of the value of the collateral securing the Senior Secured Notes;

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

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

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

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

~~The Senior Secured Notes are guaranteed, on a senior secured basis, by us and all of GIH’s existing and future domestic restricted subsidiaries (other than theCo-Issuer),~~ subject to certain exceptions. The Issuers’ obligations under the Senior Secured Notes are not guaranteed by Gogo International Holdings LLC, a subsidiary of ours that holds no material assets other than equity interests in our foreign subsidiaries. Each guarantee iswas a senior secured obligation of such 2024 Guarantor and ~~is:~~

was:

effectively senior to all of such Guarantor’s existing and future senior unsecured indebtedness and such Guarantor’s indebtedness secured on a junior priority basis by the same collateral, if any, securing the guarantee of such Guarantor, in each case to the extent of the value of the collateral securing such guarantee;

•

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

~~effectively senior~~

•

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

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

•

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

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

•

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

The Senior Secured Notes and the related guarantees are secured by first-priority liens, subject to permitted liens, on substantially all of the Issuers’ and the Guarantors’ assets, except for certain excluded assets, including pledged equity interests of the Issuers and all of our existing and future domestic restricted subsidiaries guaranteeing the Senior Secured Notes.

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

~~On or after July 1, 2019,~~The Issuers were able to redeem the ~~Issuers may, at their option, at any time or from time to time, redeem any of the~~2024 Senior Secured Notes, in whole or in ~~part. The~~part, at any time prior to May 1, 2021, at a redemption price equal to 100% of the principal amount of the 2024 Senior Secured Notes ~~will be~~redeemed plus the make-whole premium set forth in the 2024 Indenture as of, and accrued and unpaid interest, if any, to (but not including) the applicable redemption date.

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

~~Gogo Inc. and Subsidiaries~~

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

   Redemption
Year    Price
2019
   106.250 %
2020
   103.125 %
2021 and thereafter
   100.000 %

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

In addition, at any time prior to ~~July~~May 1, ~~2019,~~2021, the Issuers ~~may~~were able to redeem up to ~~35%~~40% of the aggregate principal amount of the 2024 Senior Secured Notes with the proceeds of certain equity offerings at a redemption price of ~~112.500%~~109.875% of the principal amount redeemed, plus accrued and unpaid interest, if any, to (but not including) the date of redemption;provided, however, that 2024 Senior Secured Notes representing at least ~~65%~~50% of the principal amount of the 2024 Senior Secured Notes ~~remain~~remained outstanding immediately after each such redemption.

The Issuers may redeem the Senior Secured Notes, in whole or in part, at any time prior to July 1, 2019, at a redemption price equal to 100% of the principal amount of the Senior Secured Notes redeemed plus the make-whole premium set forth in the Indenture as of, and accrued and unpaid interest, if any, to (but not including) the applicable redemption date.

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

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

Gogo Inc. and Subsidiaries

Notes to Unaudited Condensed Consolidated Financial Statements – (Continued)

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

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

If we or the Issuers ~~undergo~~underwent specific types of change of control accompanied by a downgrade in the rating of the 2024 Senior Secured Notes prior to ~~July~~May 1, ~~2022,~~2024, GIH iswas required to make an offer to repurchase for cash all of the 2024 Senior Secured Notes at a repurchase price equal to 101% of the principal amount thereof, plus accrued and unpaid interest, if any, to (but not including) the payment date.

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

ABL Credit Facility

On August 26, 2019, Gogo Inc., GIH and Gogo Finance (together GIH and Gogo Finance are referred to as the “ABL Borrowers”) entered into a credit agreement (the “ABL Credit Agreement”) among the ABL Borrowers, the other loan parties party thereto, the lenders party thereto, JPMorgan Chase Bank, N.A., as administrative agent (the “Administrative Agent”), and Morgan Stanley Senior Funding, Inc., as syndication agent, which provided for an asset-based revolving credit facility (the “ABL Credit Facility”) of up to $30 million, subject to borrowing base availability, and includes letter of credit and swingline sub-facilities. On April 30, 2021, the ABL Borrowers terminated the ABL Credit Agreement and all commitments thereunder.

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

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

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

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

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

Gogo Inc. and Subsidiaries

Notes to Unaudited Condensed Consolidated Financial Statements – (Continued)

restrictions on the ability to pay dividends or make other distributions on equity, make or repay certain loans, create or incur certain liens or guarantee certain indebtedness; asset sales; sale-leaseback transactions; swap agreements; consolidations or mergers; amendment of certain material documents; certain regulatory matters; Canadian pension plans; and affiliate transactions. The negative covenants were subject to customary exceptions and also permitted dividends and other distributions on equity, investments, permitted acquisitions and payments or redemptions of indebtedness upon satisfaction of the “payment conditions.” The payment conditions were deemed satisfied upon Specified Availability (as defined in the ABL Credit Agreement) on the date of the designated action and Specified Availability for the prior 30-day period exceeding agreed-upon thresholds, the absence of the occurrence and continuance of any default and, in certain cases, pro forma compliance with a fixed charge coverage ratio of no less than 1.10 to 1.00.

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

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

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

On November 30, ~~2017, no event~~2020, the Issuers entered into a limited consent to the ABL Credit Agreement with the financial institutions listed on the signature pages thereof and JPMorgan Chase Bank, N.A., as administrative agent, pursuant to which the Lenders (as defined in the ABL Credit Agreement) provided consent to the consummation of the Transaction.

2021 Credit Agreement

On April 30, 2021, Gogo Inc. and GIH (“the Borrower”) entered into a credit agreement (the “2021 Credit Agreement”) among Gogo, the Borrower, the lenders and issuing banks party thereto and Morgan Stanley Senior Funding, Inc., as administrative agent (the “Administrative Agent”), which provides for (i) a term loan credit facility (the “Term Loan Facility”) in an aggregate principal amount of $725 million, issued with a discount of 0.5%, and (ii) a revolving credit facility (the “Revolving Facility” and together with the Term Loan Facility, the “Facilities”) of up to $100 million, which includes a letter of credit sub-facility. The Term Loan Facility amortizes in nominal quarterly installments equal to one percent of the aggregate initial principal amount thereof per annum, with the remaining balance payable upon final maturity of the Term Loan Facility on April 30, 2028. There are 0 amortization payments under the Revolving Facility, and all borrowings under the Revolving Facility mature on April 30, 2026.

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

Loans outstanding under the Revolving Facility bear annual interest at a floating rate measured by reference to, at the Borrower’s option, either (i) an adjusted London inter-bank offered rate (subject to a floor of 0.00%) plus an applicable margin ranging from 3.25% to 3.75% per annum depending on the Borrower’s senior secured first lien net leverage ratio or (ii) an alternate base rate plus an applicable margin ranging from 2.25% to 2.75% per annum depending on the Borrower’s senior secured first lien net leverage ratio. Additionally, unused commitments under the Revolving Facility are subject to a fee ranging from 0.25% to 0.50% per annum depending on the Borrower’s senior secured first lien net leverage ratio.

The Facilities may be prepaid at the Borrower’s option at any time without premium or penalty (other than customary breakage costs and except during the first six months following the closing of the Facilities during which certain prepayments of the Term Loan Facility are subject to a prepayment premium), subject to minimum principal payment amount requirements.

Gogo Inc. and Subsidiaries

Notes to Unaudited Condensed Consolidated Financial Statements – (Continued)

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

•

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

•

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

•

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

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

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

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

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

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

2022 Convertible Notes–

On ~~March 3, 2015,~~November 21, 2018, we issued ~~$340.0~~$215.0 million aggregate principal amount of ~~3.75%~~6.00% Convertible Senior Notes due ~~2020~~2022 (the ~~“Convertible~~“2022 Convertible Notes”) in a private ~~offering~~offerings to qualified institutional buyers, including pursuant to Rule 144A under the Securities ~~Act.~~Act, and in concurrent private placements. We granted an option to the initial purchasers to purchase up to an additional ~~$60.0~~$32.3 million aggregate principal amount of 2022 Convertible Notes to cover over-allotments, of which ~~$21.9~~$22.8 million was subsequently exercised during ~~March 2015,~~December 2018, resulting in a total issuance of ~~$361.9~~$237.8 million aggregate principal amount of 2022 Convertible Notes.The 2022 Convertible Notes mature on ~~March 1, 2020,~~May 15, 2022, unless earlier repurchased or converted into shares of our common stock under certain circumstances described below. Upon ~~maturity,~~conversion, we have the option to settle our obligation through cash, shares of common stock, or a combination of cash and shares of common stock. We pay interest on the 2022 Convertible Notes semi-annually in arrears on ~~March 1~~May 15 and ~~September 1~~November 15 of each ~~year. Interest payments began~~year, beginning on ~~September 1, 2015.~~May 15, 2019.

~~The $361.9~~Under the accounting standards applicable at the time of issuance, the $237.8 million of proceeds received from the issuance of the 2022 Convertible Notes was initially allocated between long-term debt (the liability component) at ~~$261.9~~$188.7 million and additional~~paid-in-capital~~

Gogo Inc. and Subsidiaries

Notes to Unaudited Condensed Consolidated Financial Statements – (Continued)

paid-in capital (the equity component) at ~~$100.0~~$49.1 million, within the consolidated balance sheet. The fair value of the liability component was measured using rates determined for similar debt instruments without a conversion feature. The carrying amount of the equity component, representing the conversion option, was determined by deducting the fair value of the liability component from the aggregate face value of the 2022 Convertible Notes. If we or the note holders elect not to settle the ~~debt~~2022 Convertible Notes through conversion, at maturity we must ~~settle~~repay the ~~Convertible Notes~~principal amount at face ~~value.~~value in cash. Therefore, the liability component will be accreted up to the face value of the 2022 Convertible Notes, which will result in additionalnon-cash interest expense being recognized in the ~~unaudited condensed~~ consolidated statements of operations through the 2022 Convertible Notes maturity date (see Note 9,8, “Interest ~~Costs”~~Costs,” for additional information). The effective interest rate on the 2022 Convertible Notes, including accretion of the notes to par and debt issuance cost amortization, was approximately ~~11.5%~~13.6%. The equity component will not be remeasured as long as it continues to meet the conditions for equity classification.

As of ~~September 30, 2017 and~~ December 31, ~~2016,~~2020, the outstanding principal onamount of the 2022 Convertible Notes was ~~$361.9~~$237.8 million, the ~~unamortized~~unaccreted debt discount was ~~$55.4~~$22.7 million ~~and $69.9 million, respectively,~~ and the net carrying amount of the liability component was ~~$306.5~~$215.1 million.

Upon adoption of ASU 2020-06 on January 1, 2021 (see Note 3, “Recent Accounting Pronouncements,” for more information), the 2022 Convertible Notes are accounted for as a single liability. The adoption of this standard resulted in the $49.1 million initially recorded to additional paid-in capital being reclassified and ~~$292.0~~recorded as an increase to long-term debt in the unaudited condensed consolidated balance sheets. Additionally, the $26.5 million ~~respectively.~~of accretion recognized life-to-date was reversed and recorded as a reduction to long-term debt and a reduction to accumulated deficit in the unaudited condensed consolidated balance sheets.

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

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

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

On April 1, 2021, we entered into a privately negotiated exchange agreement (the “GTCR Exchange Agreement”) with an affiliate of funds managed by GTCR LLC (“GTCR”). Pursuant to ~~Unaudited Condensed Consolidated Financial Statements – (Continued)~~

the GTCR Exchange Agreement, GTCR exchanged $105,726,000 aggregate principal amount of 2022 Convertible Notes for 19,064,529 shares of our common stock on April 9, 2021. Following the consummation of the exchange, $102,788,000 aggregate principal amount of 2022 Convertible Notes remained outstanding.

We incurred approximately ~~$10.4~~$8.1 million of issuance costs related to the ~~issuance of the~~2022 Convertible Notes, of which ~~$7.5~~$6.4 million and ~~$2.9~~$1.7 million were recorded to deferred financing costs and additionalpaid-in capital, respectively, in proportion to the allocation of the proceeds of the 2022 Convertible Notes. ~~The $7.5~~However, upon adoption of ASU 2020-06 on January 1, 2021, the $1.7 million that was initially recorded to additional paid-in capital was reclassified and recorded as deferred financing costs, ~~on our~~with catch-up amortization of $1.0 million recorded to accumulated deficit in the unaudited condensed consolidated balance ~~sheet is~~sheet. The deferred financing costs are being amortized over the term of the 2022 Convertible Notes using the effective interest method. Total amortization expense ~~of the deferred financing costs~~ was ~~$0.4~~$0.6 million and ~~$1.1~~$0.4 million, respectively, for the ~~three and nine months~~three-month periods ended ~~September 30, 2017,~~March 31, 2021 and ~~$0.4 million and $1.0 million, respective, for the prior year periods.~~2020. Amortization expense is included in interest expense in the unaudited condensed consolidated statements of operations. As of ~~September 30, 2017~~March 31, 2021 and December 31, ~~2016,~~2020, the balance of unamortized deferred financing costs related to the 2022 Convertible Notes was ~~$4.0~~$2.5 million and ~~$5.1~~$2.7 million, respectively, and is included as a reduction to long-term debt in our unaudited condensed consolidated balance sheets. See Note 9,11, “Interest ~~Costs”~~Costs,” for additional information.

Gogo Inc. and Subsidiaries

Notes to Unaudited Condensed Consolidated Financial Statements – (Continued)

The 2022 Convertible Notes had an initial conversion rate of ~~41.9274~~166.6667 shares of common ~~shares~~stock per $1,000 principal amount of 2022 Convertible Notes, which is equivalent to an initial conversion price of approximately ~~$23.85~~$6.00 per share of our common stock. Upon conversion, we currently expect to ~~deliver cash up to~~settle in shares for the ~~principal~~ amount of the 2022 Convertible Notes then outstanding. ~~With respect to any conversion value in excess of the principal amount, we currently expect to deliver shares of our common stock.~~ We may elect to deliver cash in lieu of all or a portion of such ~~shares.~~shares, and borrowings under the Revolving Facility are permitted to be used for this purpose. The shares of common stock subject to conversion are excluded from diluted earnings per share calculations under theif-converted method as their impact is anti-dilutive.

Holders may convert the 2022 Convertible Notes, at their option, in multiples of $1,000 principal amount at any time prior to ~~December 1, 2019,~~January 15, 2022, but only in the following circumstances:

during any fiscal quarter beginning after the fiscal quarter ended June 30, 2015, if the last reported sale price of our common stock for at least 20 trading days (whether or not consecutive) during the last 30 consecutive trading days of the immediately preceding fiscal quarter is greater than or equal to 130% of the conversion price of the Convertible Notes on each applicable trading day;

•

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

~~during the five business day period following any five~~

•

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

•

upon the occurrence of specified corporate events.

The Stock Price Condition was triggered for the ~~Convertible Notes is less than 98% of the product of the last reported sale price of our common stock~~periods from October 1, 2020 through December 31, 2020 and ~~the conversion rate for the Convertible Notes on each such trading day; or~~

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

~~None of the above events allowing for conversion prior to December~~January 1, ~~2019 occurred during the three and nine month periods ended September 30, 2017.~~2021 through March 31, 2021. Regardless of whether any of the foregoing circumstances occurs, a holder may convert its 2022 Convertible Notes, in multiples of $1,000 principal amount, at any time on or after ~~December 1, 2019~~January 15, 2022 until ~~maturity.~~the second scheduled trading day immediately preceding May 15, 2022.

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

Forward Transactions

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

On December 11, 2019, we entered into an amendment to one of the Forward Transactions (the “Amended and Restated Forward Transaction”) to extend the expected settlement date with respect to approximately 2.1 million shares of common stock held by one of the Forward Counterparties, JPMorgan Chase Bank, National Association (the “2022 Forward Counterparty”), to correspond with the May 15, 2022 maturity date for the 2022 Convertible Notes. In the future, we may request that the 2022 Forward Counterparty modify the settlement terms of the Amended and Restated Forward Transaction to provide that, in lieu of the delivery of the applicable number of shares of our common stock to us to settle a portion of the Amended and Restated Forward Transaction in accordance with its terms, the 2022 Forward Counterparty would pay to us the net proceeds from the sale by the 2022 Forward Counterparty (or its affiliate) of a corresponding number of shares of our common stock in a registered offering (which may include block sales, sales on the NASDAQ Global Select Market, sales in the over-the-counter market, sales pursuant to negotiated transactions or otherwise, at market prices prevailing at the time of sale or at negotiated prices). Any such sales could potentially decrease (or reduce the size of any increase in) the market price of our common stock. The 2022 Forward Counterparty is not required to effect any such settlement in cash in lieu of delivery of shares of our common stock and, if we request that the 2022 Forward Counterparty effect any such settlement, it will be entered into in the discretion of the 2022 Forward Counterparty on such terms as may be mutually agreed upon at the time. As a result of the Forward Transactions, total shareholders’ equity within our ~~unaudited condensed~~ consolidated balance sheet was reduced by approximately $140 million. ~~Approximately 7.2~~In March 2020, approximately 5.1 million shares of common stock ~~that will be effectively repurchased through~~were delivered to us in connection with the Forward ~~Transactions~~Transactions. The approximately 2.1 million shares of common stock remaining under the Amended and Restated Forward Transaction are treated as retired shares for basic and diluted EPS purposes although they remain legally outstanding.

Gogo Inc. and Subsidiaries

Notes to Unaudited Condensed Consolidated Financial Statements – (Continued)

~~Amended and Restated Senior Term Facility~~–On July 30, 2014, GIH, Gogo Business Aviation LLC, f/k/a Aircell Business Aviation Services LLC (“GBA”), and Gogo LLC, as borrowers (collectively, the “Borrowers”), entered into an Amendment and Restatement Agreement (the “Amendment”)April 13, 2021, pursuant to the ~~Credit Agreement dated as~~terms of June 21, 2012 and amended on April 4, 2013 (the “Amended Senior Term Facility”) among the Borrowers, the lenders named therein, and Morgan Stanley Senior Funding, Inc., as Administrative Agent and Collateral Agent. We refer to the Amendment and the Amended Senior Term Facility collectively as the “Amended and Restated Senior Term Facility.”

~~On June 14, 2016, the outstanding principal balance of $287.7 million, together with accrued and unpaid interest, was paid in full, and~~ the Amended and Restated ~~Senior Term Facility was terminated in accordance with its terms on such date (subject~~Forward Transaction, the 2022 Forward Counterparty delivered approximately 1.5 million shares of common stock to ~~the survival~~Gogo Inc. Following settlement, 575,100 shares of provisions expressly stated therein to survive the termination thereof). Additionally, we paid the voluntary prepayment premium of 3.0%, or $8.6 million, and wrote off all of the remaining unamortized deferred financing costs of $6.8 million. Both of these items are included in loss on extinguishment of debt in our unaudited condensed consolidated financial statements. See Note 6, “Long-Term Debt and Other Liabilities,” in our 2016~~10-K~~ ~~for additional information on the Amended and Restated Senior Term Facility.~~

~~We paid $22.2 million of loan origination fees and financing costs related~~common stock remain subject to the Amended and Restated Senior Term Facility, all but $4.1 million of which were accounted for as deferred financing costs. Total amortization expense of the deferred financing costs was $1.4 million for the nine month period ended September 30, 2016. Amortization expense is included in interest expense in the unaudited condensed consolidated statements of operations. As noted above, deferred financing costs related to the Amended and Restated Senior Term Facility were written off as of June 14, 2016.Forward Transaction.

Restricted Cash -

Our restricted cash balances were ~~$7.4~~$0.5 million ~~and $7.9 million, respectively,~~ as of ~~September 30, 2017~~both March 31, 2021 and December 31, ~~2016 and primarily consist~~2020, consisting of ~~letters~~a letter of ~~credit. Certain of the letters of~~ credit ~~require us to maintain restricted cash accounts in a similar amount, and are~~ issued for the benefit of the ~~landlords at~~landlord of our current office ~~locations~~location in ~~Chicago, IL, Bensenville, IL and~~ Broomfield, CO.

11.	Interest Costs

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

The following is a summary of our interest costs for the three ~~and nine~~ month periods ended ~~September 30, 2017~~March 31, 2021 and ~~2016~~2020 (in thousands):


	For the Three Months					For the Nine Months					For the Three Months
	Ended September 30,					Ended September 30,					Ended March 31,
	2017			2016		2017			2016		2021		2020
Interest costs charged to expense	$	21,936		$	19,598	$	65,164		$	42,780	$	27,507	$	26,398
Amortization of deferred financing costs		919			818		2,718			2,981		1,703		1,419
Accretion of debt discount on Convertible Notes		4,945			4,432		14,438			12,940
Amortization of debt premium on Senior Secured Notes		(215	)		—		(566	)		—

Accretion of debt discount												84		3,326
Interest expense		27,585			24,848		81,754			58,701		29,294		31,143
Interest costs capitalized to property and equipment		9			34		15			187
Interest costs capitalized to software		193			279		804			961		112		89

Total interest costs	$	27,787		$	25,161	$	82,573		$	59,849	$	29,406	$	31,232

~~10. Leases~~

~~Arrangements with Commercial Airlines~~12.Leases

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

The following is a summary of our ~~airline partners, we place our equipment on commercial aircraft operated by~~lease expense included in the ~~airlines for the purpose~~unaudited condensed consolidated statements of ~~delivering the Gogo service to passengers on the aircraft. There are currently two types of commercial airline arrangements: Turnkey and Airline Directed.~~operations (in thousands):

	For the Three			For the Three
	Months Ended			Months Ended
	March 31, 2021			March 31, 2020
Operating lease cost	$	3,078	$	2,859
Financing lease cost:
Amortization of leased assets		3		-
Interest on lease liabilities		15		-
Total lease cost	$	3,096	$	2,859

Gogo Inc. and Subsidiaries

Notes to Unaudited Condensed Consolidated Financial Statements – (Continued)

~~Under the Turnkey model, we account for equipment transactions~~Other information regarding our leases is as operating leases of space for our equipment on the aircraft. We may be responsible for the costs of installing and/or deinstalling the equipment. The majority of the equipment transactions involve the transfer of legal title but do not meet sales recognition for accounting purposes because the risksfollows (in thousands, except lease terms and rewards of ownership are not fully transferred due to our continuing involvement with the equipment, the length of the term of our agreements with the airlines, and restrictions in the agreements regarding the airlines’ use of the equipment. Under the Turnkey model, we refer to our relationship with the airline as a “partner”.discount rates):

Under the Turnkey model, the assets are recorded as airborne equipment on our unaudited condensed consolidated balance sheets, as noted in Note 5, “Composition of Certain Balance Sheet Accounts.” Any upfront equipment payments are accounted for as lease incentives and recorded as deferred airborne lease incentives on our unaudited condensed consolidated balance sheets and are recognized as a reduction of the cost of service revenue on a straight-line basis over the term of the agreement with the airline. We recognized $10.1 million and $28.1 million, respectively, for the three and nine month periods ended September 30, 2017, and $7.8 million and $20.7 million, respectively, for the prior year periods as a reduction to our cost of service revenue in our unaudited condensed consolidated statements of operations. As of September 30, 2017, deferred airborne lease incentives of $39.1 million and $121.6 million, respectively, are included in current and~~non-current~~ liabilities in our unaudited condensed consolidated balance sheet. As of December 31, 2016, deferred airborne lease incentives of $36.3 million and $135.9 million, respectively, are included in current and~~non-current~~ liabilities in our unaudited condensed consolidated balance sheet. The decrease in our deferred airborne lease incentives is due primarily to the transition in the accounting treatment for one of our airline agreements from a Turnkey model in the prior year period to an Airline Directed model in the first quarter of 2017 due to specific provisions elected by the airline.

Under the Turnkey model, the revenue share paid to our airline partners represents operating lease payments. They are deemed to be contingent rental payments, as the payments due to each airline are based on a percentage of our~~CA-NA~~ ~~andCA-ROW~~ service revenue generated from that airline’s passengers, which is unknown until realized. Therefore, we cannot estimate the lease payments due to an airline at the commencement of our contract with such airline. This rental expense is included in cost of service revenue and is partially offset by the amortization of the deferred airborne lease incentives discussed above. Such rental expenses totaled a net charge of $7.7 million and $26.9 million, respectively, for the three and nine month periods ended September 30, 2017, and $10.1 million and $32.3 million, respectively, for the prior year periods.

~~A contract with one of our airline partners requires us to provide the airline partner with a cash rebate of $1.8 million in June 2018.~~

Under the Airline Directed model, which we have historically used on a limited basis, equipment transactions qualify for sale treatment due to the specific provisions of the agreement. When all the recognition conditions are met for the equipment, the sale is recognized as equipment revenue. When equipment and services are not separable, equipment revenue is deferred and recognized over the service period. Under the Airline Directed model, we refer to our relationship with the airline as a “customer”. For more information see Note 2, “Summary of Significant Accounting Policies” in our 2016~~10-K.~~

~~Leases and Cell Site Contracts~~— We have lease agreements relating to certain facilities and equipment, which are considered operating leases. Rent expense for such operating leases was $3.0 million and $9.0 million, respectively, for the three and nine month periods ended September 30, 2017, and $3.0 million and $8.9 million, respectively, for the prior year periods. Additionally, we have operating leases with wireless service providers for tower space and base station capacity on a volume usage basis (“cell site leases”), some of which provide for minimum annual payments. Our cell site leases generally provide for an initial noncancelable term with various renewal options. Total cell site rental expense was $2.3 and $7.0 million, respectively, for the three and nine month periods ended September 30, 2017, and $2.3 million and $7.0 million, respectively, for the prior year periods.

~~Gogo Inc. and Subsidiaries~~

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

	For the Three			For the Three
	Months Ended			Months Ended
	March 31, 2021			March 31, 2020
Supplemental cash flow information
Cash paid for amounts included in measurement of lease liabilities:
Operating cash flows used in operating leases	$	3,382		$	3,115
Operating cash flows used in financing leases	$	15		$	-
Financing cash flows used in financing leases	$	124		$	-
Non-cash items:
Operating leases obtained	$	618		$	2,197
Financing leases obtained	$	-		$	-
Weighted average remaining lease term
Operating leases		7 years			8 years
Financing leases		2 years			-

Weighted average discount rate
Operating leases		10.5	%		10.2	%
Financing leases		16.5	%		-

Annual future minimum ~~obligations for operating leases for each of the next five years and thereafter, other than the arrangements we have with our commercial airline partners, as of September 30, 2017, are as follows (~~~~in thousands~~):

   Operating
Years ending December 31,    Leases
2017 (period from October 1 to December 31)
   $ 5,005
2018
   $ 18,832
2019
   $ 17,765
2020
   $ 15,718
2021
   $ 15,478
Thereafter
   $ 95,693

~~Equipment Leases~~ – We lease certain computer and network equipment under capital leases, for which interest has been imputed with annual interest rates in an approximate range of 8% to 14%. As of September 30, 2017 and December 31, 2016 the computer equipment leases were classified as part of office equipment, furniture, and fixtures and other in our unaudited condensed consolidated balance sheet at a gross cost of $5.1 million and $3.9 million, respectively. As of September 30, 2017 and December 31, 2016, the network equipment leases were classified as part of network equipment in our unaudited condensed consolidated balance sheet at a gross cost of $7.5 million and $7.5 million, respectively. Annual future minimum obligations under capital leases for each of the next five years and thereafter, as of September 30, 2017, are as follows (~~in thousands~~):

   Capital
Years ending December 31,    Leases
2017 (period from October 1 to December 31)
   $ 947
2018
   2,030
2019
   1,016
2020
   34
Thereafter
   —


Total minimum lease payments
   4,027
Less: Amount representing interest
   (401 )


Present value of net minimum lease payments
   $ 3,626

~~The $3.6 million present value of net minimum~~ lease payments as of ~~September 30, 2017 has a current portion of $2.1 million included~~ March 31, 2021 (in ~~the current portion of long-term debt and capital leases and anon-current~~ ~~portion of $1.5 million included in othernon-current~~ ~~liabilities.~~thousands):

~~11. Commitments and Contingencies~~

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

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

13.	Commitments and Contingencies

Contractual Commitments - We have agreements with vendors to provide us with transponder and teleport satellite services. These agreements vary in length and amount and as of September 30, 2017 commit us to purchase transponder and teleport satellite services totaling approximately $21.4 million in 2017 (October 1 through December 31), $75.6 million in 2018, $81.9 million in 2019, $86.2 million in 2020, $75.9 million in 2021 and $303.0 million thereafter.

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

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

~~Gogo Inc. and Subsidiaries~~

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

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

Gogo Inc. and Subsidiaries

Notes to Unaudited Condensed Consolidated Financial Statements – (Continued)

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

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

~~12.~~ Linksmart Litigation - On April 20, 2018, Linksmart Wireless Technology, LLC filed suit against Gogo Inc., Gogo LLC, our former subsidiary and the entity that operated our CA business (“Gogo LLC”), and eight CA airline partners in the U.S. District Court for the Central District of California alleging that CA’s redirection server and login portal infringe a patent owned by the plaintiff. The suits seek an unspecified amount of damages. Intelsat is required under its contracts with these airlines, which it assumed in the Transaction, to indemnify them for defense costs and any liabilities resulting from the suit. The Court has stayed the suits against the airline customers pending resolution of the suit against Gogo. Linksmart has also filed suit against other defendants asserting the same patent. Following the filing by one of those defendants of a petition to commence an inter partes review against the asserted patent in the U.S. Patent and Trademark Office, the Court stayed the litigation against such other defendant, Gogo Inc. and Gogo LLC, but such stay was lifted in July 2019 when the U.S. Patent and Trademark Office determined that the petitioner had not met the standard of proof required to commence the inter partes review. Since the stay was lifted, discovery has been completed and motion practice continues. No date has been set for trial. We believe that the plaintiff’s claims are without merit and intend to continue to defend them vigorously. The outcome of this litigation is inherently uncertain. No amounts have been accrued for any potential losses under this matter, as we cannot reasonably predict the outcome of the litigation or any potential losses.

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

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

Gogo Inc. and Subsidiaries

Notes to Unaudited Condensed Consolidated Financial Statements – (Continued)

14.	Fair Value of Financial Assets and Liabilities

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

•

Level 1 - defined as observable inputs such as quoted prices in active markets;

•

Level 2 - defined as observable inputs other than Level 1 prices such as quoted prices for similar assets or liabilities, quoted prices in markets that are not active, or inputs that are observable or can be corroborated by observable market data for substantially the full term of the assets or liabilities; and

•

Level 3 - defined as unobservable inputs in which little or no market data exists, therefore requiring an entity to develop its own assumptions.

Long-Term Debt:

~~Our~~As of March 31, 2021 and December 31, 2020, our financial assets and liabilities that are disclosed but not measured at fair value include the 2024 Senior Secured Notes and the 2022 Convertible Notes, which are reflected on the ~~unaudited condensed~~ consolidated balance sheet at cost. The fair value measurements are classified as Level 2 within the fair value hierarchy since they are based on quoted market prices of our instruments in markets that are not active. We estimated the fair value of the 2024 Senior Secured Notes and the 2022 Convertible Notes by calculating the upfront cash payment a market participant would require to assume these obligations. The upfront cash ~~payment~~payments used in the calculations of fair value on our ~~September 30, 2017~~March 31, 2021 unaudited condensed consolidated balance sheet, excluding any issuance costs, isare the amount that a market participant would be willing to lend at ~~September 30, 2017~~March 31, 2021 to an entity with a credit rating similar to ours and that would allow such an entity to achieve sufficient cash inflows to cover the scheduled cash outflows under the 2024 Senior Secured Notes and the 2022 Convertible Notes. The calculated fair value of ~~our~~each of the 2022 Convertible Notes is ~~highly~~ correlated to our stock price and as a result, significant changes to our stock price could have a significant impact on the calculated fair ~~value of our Convertible Notes.~~values.

The fair value and carrying value of long-term debt as of ~~September 30, 2017~~March 31, 2021 and December 31, ~~2016~~2020 were as follows(in thousands):

   September 30, 2017 December 31, 2016
   Fair
Value ⁽¹⁾    Carrying
Value Fair
Value ⁽¹⁾    Carrying
Value
Senior Secured Notes
   $ 788,000    $ 706,277 ⁽²⁾ $ 572,000    $ 525,000
Convertible Notes
   333,000    306,462 ⁽³⁾ 275,000    292,024 ⁽³⁾

	March 31, 2021						December 31, 2020
	Fair Value ⁽¹⁾		Carrying Value				Fair Value ⁽¹⁾		Carrying Value

2024 Senior Secured Notes	$	1,026,000	$	973,623	⁽²	⁾	$	1,045,000	$	973,539	⁽²	⁾
2022 Convertible Notes	$	391,000	$	208,514			$	404,000	$	215,122	⁽³	⁾

~~(1)~~

~~Fair value amounts are rounded to the nearest million.~~

~~(2)~~

~~Carrying value of the Senior Secured Notes includes unamortized debt premium and Consent Fees of $16.3~~

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

(2) Carrying value of the 2024 Senior Secured Notes reflects the unaccreted debt discount of $1.4 million ~~as of September 30, 2017. See Note 8, “Long-Term Debt and Other Liabilities,” for further information.~~

~~(3)~~

Carrying value of the Convertible Notes excludes unamortized debt discount of $55.4 million and $69.9 million, respectively, as of September 30, 2017 and December 31, 2016. See Note 8, “Long-Term Debt and Other Liabilities,” for further information.

~~Gogo Inc.~~ and ~~Subsidiaries~~$1.5 million, respectively, as of March 31, 2021 and December 31, 2020. See Note 10, “Long-Term Debt and Other Liabilities,” for further information.

(3) Carrying value of the 2022 Convertible Notes ~~to Unaudited Condensed Consolidated Financial Statements – (Continued)~~

reflects the unaccreted debt discount of $22.6 million as of December 31, 2020. See Note 10, “Long-Term Debt and Other Liabilities,” for further information.

15.	~~We haveheld-to-maturity~~ ~~financial instruments where carrying value approximates fair value. There were no fair value adjustments to these financial instruments during 2017 and 2016.~~ ~~13.~~ Income Tax

The effective income tax rates for continuing operations for the three-month periods ended March 31, 2021 and 2020 were (0.6)% and (1.5)%, respectively. For the three ~~and nine~~ month periods ended ~~September 30, 2017 was (0.8%)~~March 31, 2021 and ~~(0.7%), respectively, and (1.4%) and (1.0%), respectively, for the prior year periods. Income~~2020, our income tax expense ~~recorded in each period~~ was ~~similar, with differences inpre-tax~~ income causing the change in the effective tax rate. The difference between our effective tax rates and the U.S. federal statutory rate of 35% for the three and nine month periods ended September 30, 2017 and 2016 wasnot significant primarily due to the ~~recording of a~~full valuation allowance against our net deferred tax assets.

We are subject to income taxation in the United States ~~various states within the United States, Canada, Switzerland, Japan, Mexico, Brazil, Singapore, the United Kingdom, Hong Kong, Australia, China, France~~ and ~~Germany.~~Canada. With few exceptions, as of ~~September 30, 2017,~~March 31, 2021, we are no longer subject to U.S. federal, state, local or foreign examinations by tax authorities for years before ~~2013.~~2017.

We record penalties and interest relating to uncertain tax positions in the income tax provision line item in the unaudited condensed consolidated statement of operations. NoNaN penalties or interest related to uncertain tax positions were recorded for the ~~three and nine month~~three-month periods ended ~~September 30, 2017~~March 31, 2021 and ~~2016.~~2020. As of ~~September 30, 2017~~March 31, 2021 and December 31, ~~2016,~~2020, we did not have a liability recorded for interest or potential penalties.

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

~~14. Business Segments and Major Customers~~

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

~~The accounting policies of the operating segments are the same as those described in Note 2, “Summary of Significant Accounting Policies,” in our 201610-K.~~ Intercompany transactions between segments are excluded as they are not included in management’s performance review of the segments. We currently do not generate a material amount of foreign revenue. We do not segregate assets between segments for internal reporting. Therefore, asset-related information has not been presented. We do not disclose assets outside of the United States as these assets are not material as of September 30, 2017 and December 31, 2016. For our airborne assets, we consider only those assets installed in aircraft associated with international commercial airline partners to be owned outside of the United States.

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

Gogo Inc. and Subsidiaries

Notes to Unaudited Condensed Consolidated Financial Statements – (Continued)

As a result of the Refinancing and the exchange of certain outstanding 2022 Convertible Notes, we expect our interest expense to decrease. We will consider the decrease in interest expense as we assess whether we need to maintain all, or part, of the valuation allowance on our deferred tax assets for the three month period ending June 30, 2021.

Presently, We do 0t require a reserve for unrecognized tax benefits, nor do we foresee any change to that position during the next 12 months.

~~Information regarding our reportable segments is as follows (~~~~in thousands~~):

   For the Three Months Ended
   September 30, 2017
   CA-NA    CA-ROW    BA    Total
Service revenue
   $ 94,436    $ 15,687    $ 43,224    $ 153,347
Equipment revenue
   1,291    953    17,283    19,527








Total revenue
   $ 95,727    $ 16,640    $ 60,507    $ 172,874








Segment profit (loss)
   $ 15,966    $ (24,110 )    $ 21,329    $ 13,185








   For the Three Months Ended
   September 30, 2016
   CA-NA    CA-ROW    BA    Total
Service revenue
   $ 88,534    $ 7,235    $ 33,330    $ 129,099
Equipment revenue
   2,191    360    15,617    18,168








Total revenue
   $ 90,725    $ 7,595    $ 48,947    $ 147,267








Segment profit (loss)
   $ 14,509    $ (19,924 )    $ 20,655    $ 15,240








   For the Nine Months Ended
   September 30, 2017
   CA-NA    CA-ROW    BA    Total
Service revenue
   $ 290,260    $ 38,243    $ 125,415    $ 453,918
Equipment revenue
   5,234    2,756    49,172    57,162








Total revenue
   $ 295,494    $ 40,999    $ 174,587    $ 511,080








Segment profit (loss)
   $ 43,316    $ (82,068 )    $ 72,646    $ 33,894








   For the Nine Months Ended
   September 30, 2016
   CA-NA    CA-ROW    BA    Total
Service revenue
   $ 261,751    $ 17,213    $ 96,442    $ 375,406
Equipment revenue
   8,708    731    51,707    61,146








Total revenue
   $ 270,459    $ 17,944    $ 148,149    $ 436,552








Segment profit (loss)
   $ 46,966    $ (62,945 )    $ 59,895    $ 43,916

~~Gogo Inc. and Subsidiaries~~

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

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

   For the Three Months    For the Nine Months
   Ended September 30,    Ended September 30,
   2017    2016    2017    2016
CA-NA segment profit
   $ 15,966    $ 14,509    $ 43,316    $ 46,966
CA-ROW segment loss
   (24,110 )    (19,924 )    (82,068 )    (62,945 )
BA segment profit
   21,329    20,655    72,646    59,895








Total segment profit
   13,185    15,240    33,894    43,916
Interest income
   683    852    1,999    1,064
Interest expense
   (27,585 )    (24,848 )    (81,754 )    (58,701 )
Depreciation and amortization
   (35,824 )    (26,779 )    (96,821 )    (76,042 )
Amortization of deferred airborne lease incentives⁽¹⁾
   10,121    7,765    28,099    20,650
Stock-based compensation expense
   (5,283 )    (5,000 )    (15,007 )    (12,986 )
Adjustment to deferred financing costs
   —      —      —      792
Loss of extinguishment of debt
   —      —      —      (15,406 )
Other income (expense)
   (228 )    (34 )    (322 )    137








Loss before income taxes
   $ (44,931 )    $ (32,804 )    $ (129,912 )    $ (96,576 )

~~(1)~~

16.

~~Amortization of deferred airborne lease incentive relates to ourCA-NA~~

Employee Retirement and~~CA-ROW~~ ~~segments. See Note 10, “Leases,” for further information.~~ Postretirement Benefits

~~Major Customers and Airline Partnerships~~— During the three and nine month periods ended September 30, 2017 and 2016, no customer accounted for more than 10% of our consolidated revenue. One airline partner, under the Turnkey model, accounted for approximately 19% and 18% of consolidated accounts receivable as of September 30, 2017 and December 31, 2016, respectively. Two customers, under the Airline Directed model, collectively accounted for approximately 22% of consolidated accounts receivable as of September 30, 2017 while no customer accounted for more than 10% of consolidated accounts receivable as of December 31, 2016.

Revenue earned through Delta Air Lines and American Airlines accounted for approximately 47% of consolidated revenue for both the three and nine month periods ended September 30, 2017, and 50% for both the prior year periods.

~~15. Employee Retirement and Postretirement Benefits~~

Stock-Based Compensation —As of ~~September 30, 2017,~~March 31, 2021, we ~~had~~maintained three stock-based ~~employee~~incentive compensation plans (“Stock Plans”), as well as an Employee Stock Purchase Plan (“ESPP”). See Note ~~11,~~14, “Stock-Based Compensation,” in our ~~2016~~2020 10-K for further information regarding these plans. Most of our equity grants are awarded on an annual basis. ~~The annual grants occurred in the first quarter of 2017 whereas they had occurred in the second quarter in prior years.~~

For the ~~nine month~~three-month period ended ~~September 30, 2017,~~March 31, 2021, options to purchase ~~1,992,595~~26,726 shares of common stock ~~(of which 527,850 are options that contain a market condition, in addition to the time-based vesting requirements)~~ were granted, options to purchase ~~48,662~~177,646 shares of common stock were exercised, 0 options to purchase ~~315,140 (of which 33,620 options contain a market condition)~~ shares of common stock were forfeited and 0 options to purchase ~~265,024~~ shares of common stock expired. The fair value of the options granted during the three-month period ended March 31, 2021 was approximately $0.2 million, which will be recognized over a period of one year.

For the ~~nine month~~three-month period ended ~~September 30, 2017, 875,166 Restricted Stock Units (“RSUs”) (of which 228,840 are~~March 31, 2021, 2,106,134 RSUs ~~that contain a market condition, in addition to the time-based vesting requirements)~~ were granted, ~~368,506~~863,056 RSUs vested and ~~196,167~~32,199 RSUs ~~(of~~were forfeited. The fair value of the RSUs granted during the three-month period ended March 31, 2021 was approximately $19.5 million, which ~~27,940 contained~~will be recognized over a ~~market condition) were forfeited.~~period of four years.

For the ~~nine month~~three-month period ended ~~September 30, 2017, 92,910~~March 31, 2021, 8,227 restricted shares ~~of restricted stock~~vested and no shares were ~~granted and 98,988 shares vested.~~cancelled. These shares are deemed issued as of the date of grant, but not outstanding until they vest.

For the ~~nine month~~three-month period ended ~~September 30, 2017, 60,972 DSUs~~March 31, 2021, 24,323 deferred stock units were granted and ~~none were released.~~87,339 vested. The fair value of the deferred stock units granted during the three-month period ended March 31, 2021 was approximately $0.2 million, which will be recognized over a period of one year.

For the ~~nine month~~three-month period ended ~~September 30, 2017, 117,471~~March 31, 2021, 11,637 shares of common stock were issued under ~~the employee stock purchase plan.~~

~~Gogo Inc. and Subsidiaries~~

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

our Employee Stock Purchase Plan.

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


	For the Three Months				For the Nine Months				For the Three Months
	Ended September 30,				Ended September 30,				Ended March 31,
	2017		2016		2017		2016		2021		2020
Cost of service revenue	$	542	$	446	$	1,332	$	1,142	$	31	$	33
Cost of equipment revenue		49		34		136		78		47		73
Engineering, design and development		897		970		2,801		2,432		107		156
Sales and marketing		1,305		1,498		3,473		3,799		148		329
General and administrative		2,490		2,052		7,265		5,535		1516		1,731

Total stock-based compensation expense	$	5,283	$	5,000	$	15,007	$	12,986	$	1,849	$	2,322

401(k) Plan— Under our 401(k) plan, all employees who are eligible to participate are entitled to maketax-deferred contributions, subject to Internal Revenue Service limitations. We match 100% of the employee’s first 4% of contributions made, subject to annual limitations. Our matching contributions were ~~$1.2~~$0.4 million and ~~$4.0~~$0.3 million, respectively, ~~for~~during the ~~three and nine month~~three-month periods ended ~~September 30, 2017,~~March 31, 2021 and ~~$1.1 million and $3.1 million, respectively, for the prior year periods.~~2020.

17.	~~16.~~ Research and Development Costs

Expenditures for research and development are charged to expense as incurred and totaled ~~$18.6~~$5.5 million and ~~$57.9~~$7.4 million, respectively, ~~for~~during the ~~three and nine month~~three-month periods ended ~~September 30, 2017,~~March 31, 2021 and ~~$11.8 million and $34.5 million, respectively, for the prior year periods.~~2020. Research and development costs are reported as ~~a component of~~ engineering, design and development expenses in our unaudited condensed consolidated statements of operations.

~~17. Canadian ATG Spectrum License~~

On July 17, 2012, Industry Canada issued to our Canadian subsidiary a subordinate license that allows us to use the Canadian ATG spectrum of which SkySurf Canada Communications Inc. (“SkySurf”) is the primary licensee. On July 24, 2012 we entered into a subordinate license agreement (the “License Agreement”) with SkySurf and on August 14, 2012 the agreement commenced. The License Agreement provides for our exclusive rights to use SkySurf’s ATG spectrum licenses in Canada. For additional information, see Note 16, “Canadian ATG Spectrum License,” in our 2016~~10-K.~~

~~Amortization expense for theone-time~~ ~~payment for each of the next five years and thereafter is estimated to be as follows~~~~(in thousands~~):

   Canadian
ATG
Spectrum
Years ending December 31,    Amortization
2017 (period from October 1 to December 31)
   $ 26
2018
   $ 104
2019
   $ 104
2020
   $ 104
2021
   $ 104
Thereafter
   $ 1,632

Amortization expense totaled less than $0.1 million during the three month periods ended September 30, 2017 and 2016 and $0.1 million during the nine month periods ended September 30, 2017 and 2016.

The monthly payments are expensed as incurred and totaled approximately $0.3 million and $0.9 million, respectively, during the three and nine month periods ended September 30, 2017, and $0.3 million and $0.9 million, respectively, for the prior year periods.

SPECIAL NOTE REGARDING FORWARD-LOOKING STATEMENTS

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

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

~~the loss of, or failure to realize benefits from, agreements with our airline partners or any failure to renew any existing agreements upon expiration or termination;~~

•

our ability to attract and retain customers and generate revenue from the provision of our connectivity and entertainment services;

~~the failure to maintain airline satisfaction with our equipment or our service;~~

•

our reliance on our key OEMs and dealers for equipment sales;

any inability to timely and efficiently deploy our 2Ku service or develop and deploy our next-generation ATG solution or other components of our technology roadmap for any reason, including regulatory delays or failures, or delays on the part of any of our suppliers, some of whom are single source, or the failure by our airline partners to roll out equipment upgrades or new services or adopt new technologies in order to support increased network capacity demands;

•

our ability to develop and deploy Gogo 5G;

~~the timing of deinstallation of our equipment from aircraft, including deinstallations resulting from aircraft retirements and other deinstallations permitted by certain airline contract provisions;~~

•

our ability to compete effectively with other current or future providers of in-flight connectivity services and other products and services that we offer, including on the basis of price and performance;

~~the loss of relationships with original equipment manufacturers or dealers;~~

•

the impact of the COVID-19 pandemic and the measures implemented to combat it;

~~our ability to develop or purchase ATG and satellite network capacity sufficient to accommodate current and expected growth in passenger demand in North America and internationally as we expand;~~

•

our ability to evaluate or pursue strategic opportunities;

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

•

our reliance on third parties for equipment and services;

~~unfavorable economic conditions in the airline industry and/or the economy as a whole;~~

•

our ability to recruit, train and retain highly skilled employees;

~~our ability to expand our international or domestic operations, including our ability to grow our business with current and potential future airline partners;~~

•

the achievement of the anticipated benefits of the sale of the CA business or our ability to operate as a standalone business;

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

•

the impact of adverse economic conditions;

our ability to successfully develop and monetize new products and services such as Gogo Vision and Gogo TV, including those that were recently released, are currently being offered on a limited or trial basis, or are in various stages of development;

•

a revocation of, or reduction in, our right to use licensed spectrum, the availability of other air-to-ground spectrum to a competitor or the repurposing by a competitor of other spectrum for air-to-ground use;

our ability to certify and install our equipment and deliver our products and services, including newly developed products and services, on schedules consistent with our contractual commitments to customers;

•

our use of open source software and licenses;

~~the failure of our equipment or material defects or errors in our software resulting in recalls or substantial warranty claims;~~

•

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

~~a revocation of, or reduction in, our right to use licensed spectrum, the availability of otherair-to-ground~~ ~~spectrum to a competitor or the repurposing by a competitor of other spectrum forair-to-ground~~ ~~use;~~

•

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

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

•

the impact of assertions by third parties of infringement, misappropriation or other violations; our ability to innovate and provide products and services;

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

•

the impact of government regulation of the internet;

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

•

our possession and use of personal information;

~~contract changes and implementation issues resulting from decisions by airlines to transition from the Turnkey model to the Airline Directed model;~~

•

the extent of expenses or liabilities resulting from litigation;

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

•

our ability to protect our intellectual property;

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

•

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

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

~~costs associated with defending pending or future intellectual property infringement and other litigation or claims;~~

•

fluctuations in our operating results;

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

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

~~any negative outcome or effects of future litigation;~~

~~our substantial indebtedness;~~

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

~~our ability to obtain additional financing on acceptable terms or at all;~~

~~fluctuations in our operating results;~~

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

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

~~changes or developments in the regulations that apply to us, our business and our industry, including changes or developments affecting the ability of passengers or airlines to use ourin-flight~~ ~~connectivity services, including the recent U.S. and U.K. bans on the use of certain personal devices such as laptops and tablets on certain aircraft flying certain routes;~~

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

~~our ability to attract and retain qualified employees, including key personnel;~~

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

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

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

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

~~difficulties in collecting accounts receivable;~~

~~our ability to successfully implement our new enterprise resource planning system and other improvements to systems and procedures needed to support our growth; and~~

~~other risks and factors listed under “Risk Factors” in our Annual Report on Form10-K~~ ~~for the year ended December 31, 2016 as filed with the Securities Exchange Commission (“SEC”) on February 27, 2017 (the “201610-K”)~~ ~~and in Item 1A of our Quarterly Report on Form10-Q~~ ~~for the quarter ended March 31, 2017 as filed with the SEC on May 4, 2017.~~

•

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

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

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

ITEM 2.

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

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

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

The statements in this discussion regarding industry outlook, our expectations regarding our future performance, liquidity and capital resources and othernon-historical statements in this discussion are forward-looking statements. These forward-looking statements are subject to numerous risks and uncertainties, including, but not limited to, the risks and uncertainties described under “Risk Factors” in the ~~2016~~2020 10-K and in Item 1A ~~in this Quarterly Report on Form10-Q,~~and in “Special Note Regarding Forward-Looking Statements” in this report. Our actual results may differ materially from those contained in or implied by any forward-looking statements.

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

Company Overview

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

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

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

Impact of COVID-19 Pandemic

The COVID-19 pandemic caused a significant decline in international and domestic business aviation travel, which materially and adversely affected our business in 2020. Beginning in March 2020, our business saw a sharp decrease in flight activity, as well as an increase in requests for account suspensions and decreases in new plan activations. Though we continue to see strong signs of recovery from the lows we experienced in mid-April 2020, we expect COVID-19 to continue to negatively impact our business and we are unable to predict how long or with what degree of severity that impact will continue. The impact of the pandemic has varied across different parts of our customer base – for example corporate flight departments, charter operators and commercial aircraft (under the ATG Network Sharing Agreement) – and we expect the pace of recovery to vary by customer type.

Factors and Trends Affecting Our Results of Operations

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

~~costs associated with the implementation of, and our ability to implement on a timely basis, our technology roadmap, upgrades and installation of ourATG-4,~~ 2Ku, next generation ATG and other new technologies (including failures or delays on the part of antenna and other equipment developers and providers, some of which are single source, or delays in obtaining STCs), the~~roll-out~~ of our satellite services, the use of unlicensed spectrum, the potential licensing of additional spectrum, and the implementation of improvements to our network and operations as technology changes and we experience increased network capacity constraints;

•

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

costs associated with, and our ability to execute, our international expansion, including modifications of our network to accommodate satellite technology, development and implementation of new satellite-based technologies, the availability of satellite capacity, costs of satellite capacity to which we may have to commit well in advance, and, our ability to obtain and comply with foreign telecommunications, aviation and other licenses and approvals necessary for our international operations;

•

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

~~costs associated with managing a rapidly growing company;~~

•

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

~~costs associated with, and our ability to obtain, sufficient capacity for heavily-trafficked areas in the United States, the costs of which we may have to commit to well in advance;~~

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

•

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

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

•

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

~~the economic environment and other trends that affect both business and leisure travel;~~

•

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

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

•

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

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

•

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

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

~~changes in domestic or foreign laws, regulations or policies resulting from the 2016 elections that affect our business or the business of our customers and suppliers;~~

changes in laws, regulations and interpretations affecting aviation, including, in particular, changes that impact the design of our equipment and our ability to obtain required certifications for our equipment and changes that affect the ability of passengers and airlines to utilize our~~in-flight~~ ~~connectivity services, including the recent U.S. and U.K. bans on the use of certain personal devices, such as laptops and tablets, on certain airlines flying certain routes.~~

•

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

Recent Developments

2021 Credit Agreement - On ~~September 20, 2017,~~April 30, 2021, Gogo Inc. and Gogo Intermediate Holdings LLC ~~(“GIH”~~(the “Borrower”) (a, a direct wholly owned subsidiary of Gogo Inc., entered into a credit agreement (the “2021 Credit Agreement”) among Gogo, the Borrower, the lenders and ~~Gogo Finance Co.~~issuing banks party thereto and Morgan Stanley Senior Funding, Inc. ~~(a wholly owned subsidiary of GIH)~~, as administrative agent (the~~“Co-Issuer”~~ ~~and, together with GIH, the “Issuers”~~ “Administrative Agent”), ~~certain subsidiaries~~which provides for (i) a term loan credit facility (the “Term Loan Facility”) in an aggregate principal amount of ~~GIH, as guarantors (the “Subsidiary Guarantors” and, together~~$725 million, issued with ~~us, the “Guarantors”)~~a discount of 0.5%, and ~~U.S. Bank National Association, as trustee (in such capacity, the “Trustee”) entered into the first supplemental indenture~~(ii) a revolving credit facility (the ~~“Supplemental Indenture”~~“Revolving Facility” and together with the ~~Original Indenture,~~Term Loan Facility, the ~~“Indenture”~~“Facilities”) to modify certain covenants, as discussed below. On September 25, 2017, the Issuers issued $100 million aggregate principal amount of additional senior secured notes due 2022 (the “September 2017 Additional Notes”). The September 2017 Additional Notes were issued at a price equal to 113% of their face value resulting in gross proceeds of $113.0 million. Additionally, we received approximately $2.9 million for interest that accrued from July 1, 2017 through September 24, 2017, which will be paid out when we make our next interest payment in January 2018. We refer to the Original Senior Secured Notes, the January 2017 Additional Notes and the September 2017 Additional Notes collectively as the “Senior Secured Notes.”

As noted above, on September 20, 2017, the Issuers, the Guarantors and the Trustee entered into the Supplemental Indenture to (i) increase the amount of additional secured indebtedness under Credit Facilities (as defined in the Indenture) that may be incurred by the Issuer and its Restricted Subsidiaries (as defined in the Indenture) under the Indenture by $100 million (from $75 million to $175 million in aggregate principal amount), (ii) permit the Issuer and its Restricted Subsidiaries to incur additional secured indebtedness in connection with vendor financing arrangements not to exceed $50 million in aggregate principal amount at any time outstanding and (iii) permit the Issuer and its Restricted Subsidiaries to make additional dividends or distributions to Gogo in an aggregate amount of up to ~~$15~~$100 million, ~~during any twelve-month period~~which includes a letter of credit sub-facility. The Term Loan Facility amortizes in quarterly installments equal to ~~pay~~one percent of the aggregate initial principal amount thereof per annum, with the remaining balance payable upon final maturity of the Term Loan Facility on April 30, 2028. There are no amortization payments under the Revolving Facility, and all borrowings under the Revolving Facility mature on April 30, 2026. The Term Loan Facility bears annual interest at a floating rate measured by reference to, at the Borrower’s option, either (i) an adjusted London inter-bank offered rate (subject to a floor of 0.75%) plus an applicable margin of 3.75% or (ii) an alternate base rate plus an applicable margin of 2.75%. Loans outstanding under the Revolving Facility bear annual interest at a floating rate measured by reference to, at the Borrower’s option, either (i) an adjusted London inter-bank offered rate (subject to a floor of 0.00%) plus an applicable margin ranging from 3.25% to 3.75% per annum depending on ~~any indebtedness~~the Borrower’s senior secured first lien net leverage ratio or ~~preferred stock~~(ii) an alternate base rate plus an applicable margin ranging from 2.25% to 2.75% per annum depending on the Borrower’s senior secured first lien net leverage ratio. Additionally, unused commitments under the Revolving Facility are subject to a fee ranging from 0.25% to 0.50% per annum depending on the Borrower’s senior secured first lien net leverage ratio. The proceeds of the Term Loan Facility were used, together with ~~a maturity later than July 1, 2022. The Supplemental Indenture became effective immediately upon execution, following our receipt of consents from holders of a majority of~~cash on hand, (i) to redeem in full and pay the outstanding principal amount of the ~~Existing~~senior secured notes due 2024 (the “2024 Notes”) together with accrued and unpaid interest and redemption premiums and to pay fees associated with the termination of the ABL Credit Agreement (collectively, the “Refinancing”), and (ii) to pay fees and expenses incurred in connection with the Refinancing and the Facilities (the “Transaction Costs”). The Revolving Facility will be available for working capital and general corporate purposes of the Company and its subsidiaries.

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

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

Exchange Agreement, on April 9, 2021, we entered into a registration rights agreement with Silver (Equity) Holdings, LP and Silver (XII) Holdings, LLC (together, the “GTCR Affiliates”), pursuant to which the GTCR Affiliates and their permitted transferees (the “GTCR Holders”) have been afforded customary demand and piggyback registration rights with respect to the shares of common stock held by the ~~Issuers or any affiliates~~GTCR Affiliates as of the Issuers) to the Supplemental Indenture and amendments to the collateral agency agreement governing the Senior Secured Notes (the “Consent”). In connection with the Consent, GIH paid $1.4 million in fees (“Consent Fees”) to holdersclosing of ~~Existing Notes who validly offered (and did not revoke) their consents prior to the expiration~~April 9, 2021. The demand rights of the ~~Consent.~~

~~See Note 8, “Long-Term Debt and Other Liabilities” for additional information on~~GTCR Holders under the ~~September 2017 Additional Notes.~~

~~Summary Financial Information~~

~~Consolidated revenue increased 17.4% and 17.1% to $172.9 million and $511.1 million, respectively, for~~registration rights agreement are exercisable after the ~~three and nine month periods ended September 30, 2017, as compared with $147.3 million and $436.6 million, respectively, for~~one year anniversary of the ~~prior year periods. For~~date of the ~~three and nine month periods ended September 30, 2017, theCA-NA~~ segment had 2,859 and 2,816, respectively, aircraft equivalents providing the Gogo service as compared with 2,663 and 2,599, respectively, for the prior year periods. As of September 30, 2017, the BA segment had 5,474 aircraft online with satellite systems, including our first 2Ku equipped aircraft in BA, and 4,567 ATG systems online as compared with 5,473 and 3,974, respectively, as of September 30, 2016. For the three and nine month periods ended September 30, 2017, the~~CA-ROW~~ ~~segment had 295 and 250, respectively, aircraft equivalents as compared with 209 and 193, respectively, for the prior year periods.~~Exchange Agreement.

Key Business Metrics

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

Commercial Aviation North America

   For the Three Months For the Nine Months
   Ended September 30, Ended September 30,
   2017 2016 2017 2016
Aircraft online (at period end)
   2,817 2,629 2,817 2,629
Total aircraft equivalents (average during the period)
   2,859 2,663 2,816 2,599
Satellite
   252 55 201 55
ATG
   2,607 2,608 2,615 2,544
Average monthly service revenue per aircraft equivalent (ARPA) (in thousands)
   $ 11.1 $ 11.1 $ 11.6 $ 11.3
Satellite (in thousands)
   $ 18.4 —   $ 19.1 —
ATG (in thousands)
   $ 10.4 —   $ 11.0 —
Gross passenger opportunity (GPO) (in thousands)
   110,792 108,351 314,880 298,812
Total average revenue per session (ARPS)
   $ 10.49 $ 11.46 $ 10.83 $ 12.43
Connectivity take rate
   7.5 % 6.5 % 7.8 % 6.4 %
Commercial Aviation Rest of World

   For the Three Months For the Nine Months
   Ended September 30, Ended September 30,
   2017 2016 2017 2016
Aircraft online (at period end)
   352 256 352 256
Total aircraft equivalents (average during the period)
   295 209 250 193
ARPA (in thousands)
   $ 18.8 $ 14.5 $ 18.3 $ 12.8

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

•

~~Aircraft~~

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

•

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

•

~~Average monthly service revenue per aircraft equivalent~~ (“ARPA”). We define ARPA as the aggregate service revenue plus monthly service fees, some of which are reported as a reduction to cost of service revenue for that segment for the period divided by the number of months in the period, and further divided by the number of aircraft equivalents (as defined above) for that segment during the period. Satellite ARPA is calculated based on satellite revenue and satellite aircraft equivalents, within that segment. ATG ARPA is calculated based on ATG revenue and ATG aircraft equivalents.

• ~~Gross passenger opportunity~~~~(“GPO”)~~.~~We define GPO as the aggregate number of passengers who board commercial aircraft on which Gogo service has been available at any time during the period presented~~.When actual passenger counts are available directly from our airline partners, we aggregate such counts across flights on Gogo-equipped aircraft. When not available directly from our airline partners, we estimate GPO. Estimated GPO is calculated by first estimating the number of flights occurring on each Gogo-equipped aircraft, then multiplying by the number of seats on that aircraft, and finally multiplying by a seat factor that is determined from historical information provided to us in arrears by our airline partners. The estimated number of flights is derived from real-time flight information provided to our~~front-end~~ systems by Air Radio Inc. (ARINC), direct airline feeds and supplementary third-party data sources. These aircraft-level estimates are then aggregated with any available airline-provided passenger counts to obtain total GPO.

•

~~Total average revenue per session~~~~(“ARPS”). We define ARPS as revenue from Passenger Connectivity, excludingnon-session~~ related revenue, divided by the total number of sessions during the period. A session, or a “use” of Passenger Connectivity, is defined as the use by a unique passenger of Passenger Connectivity on a flight segment. Multiple logins or purchases under the same user name during one flight segment count as only one session.

•

~~Connectivity take rate~~. We define connectivity take rate as the number of sessions during the period expressed as a percentage of GPO. Included in our connectivity take-rate calculation are sessions for which we did not receive revenue, including those provided pursuant to free promotional campaigns and, to a lesser extent, as a result of complimentary passes distributed by our customer service representatives for unforeseen technical issues. For the periods listed above, the number of sessions for which we did not receive revenue was not material.

Business Aviation

   For the Three Months    For the Nine Months
   Ended September 30,    Ended September 30,
   2017    2016    2017    2016
Aircraft online (at period end)

Satellite
   5,474    5,473    5,474    5,473
ATG
   4,567    3,974    4,567    3,974
Average monthly service revenue per aircraft online

Satellite
   $ 235    $ 211    $ 232    $ 217
ATG
   2,874    2,535    2,848    2,521
Units Sold

Satellite
   116    126    303    367
ATG
   210    165    596    558
Average equipment revenue per unit sold (in thousands)

Satellite
   $ 38    $ 45    $ 42    $ 44
ATG
   58    54    55    57

•

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

•

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

•

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

•

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

•

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

•

Average equipment revenue per ATG unit sold. We define average equipment revenue per ATG unit sold as the ~~three and nine months ended September 30, 2017, we recognized~~aggregate equipment revenue ~~on four and seven Gogo Biz 4G~~from all ATG units ~~respectively, that were previously deferred.~~sold during the period, divided by the number of ATG units sold.

•

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

•

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

Key Components of Consolidated Statements of Operations

There have been no material changes to our key components of unaudited condensed consolidated statements of operations ~~and segment profit (loss)~~ as described in “Management’s Discussion and Analysis of Financial Condition and Results of Operations” (“MD&A”) in our ~~2016~~2020 10-K.

Off-Balance Sheet Arrangements

We do not have any obligations that meet the definition of anoff-balance sheet arrangement, other than operating leases, which have or are reasonably likely to have a material effect on our results of operations. See Note 10, “Leases” to our unaudited condensed consolidated financial statements for further information.arrangement.

Critical Accounting Policies and Estimates

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

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

There have been no material changes to our critical accounting policies and estimates as compared to the critical accounting policies and estimates described in MD&A in our ~~2016~~2020 10-K.

Recent Accounting Pronouncements

See Note 2,3, “Recent Accounting ~~Pronouncements”~~Pronouncements,” to our unaudited condensed consolidated financial statements for additional information.

Results of Operations

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

Gogo Inc. and Subsidiaries

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

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


	For the Three Months						For the Nine Months							For the Three Months
	Ended September 30,						Ended September 30,							Ended March 31,
	2017			2016			2017			2016				2021			2020
Revenue:
Service revenue	$	153,347		$	129,099		$	453,918		$	375,406		$	59,355		$	57,726
Equipment revenue		19,527			18,168			57,162			61,146			14,514			13,201

Total revenue		172,874			147,267			511,080			436,552			73,869			70,927

Operating expenses:
Cost of service revenue (exclusive of items shown below)		67,854			56,365			201,794			164,615			14,095			11,007
Cost of equipment revenue (exclusive of items shown below)		15,326			10,527			41,623			36,752			8,282			8,511
Engineering, design and development		31,313			25,835			103,262			72,201			5,493			7,357
Sales and marketing		16,294			14,874			47,253			46,366			3,729			4,450
General and administrative		24,064			21,661			70,162			65,038			10,373			14,706
Depreciation and amortization		35,824			26,779			96,821			76,042			4,117			3,579

Total operating expenses		190,675			156,041			560,915			461,014			46,089			49,610

Operating loss		(17,801	)		(8,774	)		(49,835	)		(24,462	)

Operating income														27,780			21,317
Other (income) expense:
Interest income		(683	)		(852	)		(1,999	)		(1,064	)		(57	)		(578	)
Interest expense		27,585			24,848			81,754			58,701			29,294			31,143
Loss on extinguishment of debt		—			—			—			15,406
Adjustment of deferred financing costs		—			—			—			(792	)
Other (income) expense		228			34			322			(137	)

Loss on settlement of convertible notes														4,397			-
Other expense														(5	)		(1	)
Total other expense		27,130			24,030			80,077			72,114			33,629			30,564

Loss before income taxes		(44,931	)		(32,804	)		(129,912	)		(96,576	)
Loss from continuing operations before income taxes														(5,849	)		(9,247	)
Income tax provision		350			469			945			997			35			141

Net loss from continuing operations														(5,884	)		(9,388	)
Net loss from discontinued operations, net of tax														(1,801	)		(75,390	)
Net loss	$	(45,281	)	$	(33,273	)	$	(130,857	)	$	(97,573	)	$	(7,685	)	$	(84,778	)

Three ~~and Nine~~ Months Ended ~~September 30, 2017~~March 31, 2021 and ~~2016~~2020

Revenue:

Revenue ~~by segment~~ and percent change for the ~~three and nine month~~three-month periods ended ~~September 30, 2017~~March 31, 2021 and ~~2016~~2020 were as follows(in thousands, except for percent change):

   For the Three Months    % Change
   Ended September 30,    2017 over
   2017    2016    2016
Service Revenue:

CA-NA
   $ 94,436    $ 88,534    6.7 %
BA
   43,224    33,330    29.7 %
CA-ROW
   15,687    7,235    116.8 %






Total Service Revenue
   $ 153,347    $ 129,099    18.8 %






Equipment Revenue:

CA-NA
   $ 1,291    $ 2,191    (41.1 %)
BA
   17,283    15,617    10.7 %
CA-ROW
   953    360    164.7 %






Total Equipment Revenue
   $ 19,527    $ 18,168    7.5 %






Total Revenue:

CA-NA
   $ 95,727    $ 90,725    5.5 %
BA
   60,507    48,947    23.6 %
CA-ROW
   16,640    7,595    119.1 %






Total Revenue
   $ 172,874    $ 147,267    17.4 %






   For the Nine Months    % Change
   Ended September 30,    2017 over
   2017    2016    2016
Service Revenue:

CA-NA
   $ 290,260    $ 261,751    10.9 %
BA
   125,415    96,442    30.0 %
CA-ROW
   38,243    17,213    122.2 %






Total Service Revenue
   $ 453,918    $ 375,406    20.9 %






Equipment Revenue:

CA-NA
   $ 5,234    $ 8,708    (39.9 %)
BA
   49,172    51,707    (4.9 %)
CA-ROW
   2,756    731    277.0 %






Total Equipment Revenue
   $ 57,162    $ 61,146    (6.5 %)






Total Revenue:

CA-NA
   $ 295,494    $ 270,459    9.3 %
BA
   174,587    148,149    17.8 %
CA-ROW
   40,999    17,944    128.5 %






Total Revenue
   $ 511,080    $ 436,552    17.1 %

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

~~Commercial Aviation North America:~~

~~CA-NA~~Revenue increased to $73.9 million for the three-month period ended March 31, 2021, as compared with $70.9 million for the prior-year period, due to increases in service revenue and equipment revenue.

Service revenue increased to ~~$95.7~~$59.4 million ~~and $295.5 million, respectively,~~ for the ~~three and nine month periods~~three-month period ended ~~September 30, 2017,~~March 31, 2021, as compared with ~~$90.7~~$57.7 million ~~and $270.5 million, respectively,~~ for the ~~prior year periods,~~prior-year period, primarily due to an increase in ATG aircraft online and the revenue share earned from the ATG Network Sharing Agreement with Intelsat.

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

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

Cost of Revenue:

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

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

Cost of service revenue ~~driven by~~ increased ~~Passenger Connectivity revenue. The increase inCA-NA~~ ~~Passenger Connectivity revenue~~to $14.1 million for the ~~three and nine month periods~~three-month period ended ~~September 30, 2017 was~~March 31, 2021, as compared with $11.0 million for the prior-year period, primarily due to an increase in connectivity take rate and an increase in the number of aircraft equivalents, offset in part by a decrease in ARPS. GPO increased to 110.8 million and 314.9 million, respectively, for the three and nine month periods ended September 30, 2017,ATG network costs as ~~compared with 108.4 million and 298.8 million, respectively, for the prior year periods, driven by an increase in aircraft equivalents. The connectivity take rate increased to 7.5%~~

and 7.8%, respectively, for the three and nine month periods ended September 30, 2017, as compared with 6.5% and 6.4%, respectively, for the prior year periods, reflecting increased passenger adoption including the impact of third party-paid and airline-paid promotions. Passenger Connectivity sessions totaled 8.3 million and 24.6 million, respectively, for the three and nine month periods ended September 30, 2017, as compared with 7.0 million and 19.2 million, respectively, for the prior year periods. ARPS decreased to $10.49 and $10.83, respectively, for the three and nine month periods ended September 30, 2017, as compared with $11.46 and $12.43, respectively, for the prior year periods, due to shifts in product mix, third party-paid and airline-paid promotions. Total ARPA was $11.1 thousand for both the three month period ended September 30, 2017 and 2016, and increased to $11.6 thousand for the nine month period ended September 30, 2017, as compared with $11.3 thousand for the prior year period. Total ARPA is comprised of Satellite ARPA of $18.4 thousand and $19.1 thousand, respectively, and ATG ARPA of $10.4 thousand and $11.0 thousand, respectively, for the three and nine month periods ended September 30, 2017.

~~A summary of the components ofCA-NA’s~~ ~~service revenue for the three and nine month periods ended September 30, 2017 and 2016 is as follows~~~~(in thousands, except for percent change)~~:

   For the Three Months    % Change
   Ended September 30,    2017 over
   2017    2016    2016
Passenger Connectivity revenue⁽¹⁾
   $ 88,348    $ 84,323    4.8 %
Passenger Entertainment and CAS revenue
   6,088    4,211    44.6 %






Total service revenue
   $ 94,436    $ 88,534    6.7 %






   For the Nine Months    % Change
   Ended September 30,    2017 over
   2017    2016    2016
Passenger Connectivity revenue⁽¹⁾
   $ 272,351    $ 250,060    8.9 %
Passenger Entertainment and CAS revenue
   17,909    11,691    53.2 %






Total service revenue
   $ 290,260    $ 261,751    10.9 %

~~(1)~~

~~Includesnon-session~~ related revenue of $1.0 million and $5.6 million, respectively, for the three and nine month periods ended September 30, 2017, and $4.0 million and $11.9 million, respectively, for the prior year periods.

~~CA-NA~~ Passenger Connectivity revenue increased to $88.3 million and $272.4 million, respectively, for the three and nine month periods ended September 30, 2017, as compared with $84.3 million and $250.1 million, respectively, for the prior year periods. The increase during the three month period ended September 30, 2017 as comparedthese costs are no longer shared with the prior year period was due to increases in third party-paid and airline-paid revenue, while the increase during the nine month period ended September 30, 2017 as compared with the prior year period was due to increases in passenger-paid, third party-paid and airline-paid revenue. Third party-paid revenue increased primarily due to increases in sponsorship, roaming, enterprise and wholesale revenue. Our airline-paid revenue increased due to new agreements with certain airline partners under which the airlines pay us for specified data usage, including data used by passengers and by airline crew members using connectivity services while in flight. Passenger-paid revenue increased during the nine month period ended September 30, 2017 as compared with the prior year period due to increases in both individual sessions and subscriptions, despite being negatively impacted by the hurricanes during the period.

The increase in Passenger Entertainment and CAS revenue to $6.1 million and $17.9 million, respectively, for the three and nine month periods ended September 30, 2017, as compared with $4.2 million and $11.7 million, respectively, for the prior year periods, was due to increased usage of CAS operational applications and Passenger Entertainment services under~~business-to-business~~ ~~arrangements with our airline partners.~~

~~The increase inCA-NA~~ service revenue was partially offset by a decrease in equipment revenue to $1.3 million and $5.2 million, respectively, for the three and nine month periods ended September 30, 2017, as compared with $2.2 million and $8.7 million, respectively, in the prior year periods, due primarily to more equipment transactions qualifying for sales treatment (instead of lease treatment) in the prior year period as compared with the current year.

~~Business Aviation:~~

BA revenue increased to $60.5 million and $174.6 million, respectively, for the three and nine month periods ended September 30, 2017, as compared with $48.9 million and $148.1 million, respectively, for the prior year periods, due to an increase in service revenue. BA revenue was also positively impacted by an increase in equipment revenue during the three month period ended September 30, 2017 as compared with the prior year period, while equipment revenue decreased during the nine month period ended September 30, 2017 as compared with the prior year period.

BA service revenue increased to $43.2 million and $125.4 million, respectively, for the three and nine month periods ended September 30, 2017, as compared with $33.3 million and $96.4 million, respectively, for the prior year periods, primarily due to more customers subscribing to our Gogo Biz (ATG) service and an increase in average monthly service revenue per aircraft online. The number of ATG aircraft online increased 14.9% to 4,567 as of September 30, 2017 as compared with 3,974 as of September 30, 2016.

BA equipment revenue increased to $17.3 million for the three month period ended September 30, 2017, as compared with $15.6 million, for the prior year period, due to an increase in ATG equipment revenue partially offset by a decrease in satellite equipment revenue. Equipment revenue decreased to $49.2 million for the nine month period ended September 30, 2017, as compared with $51.7 million in the prior year period due to decreases in satellite equipment revenue offset in part by an increase in ATG equipment revenue.

Under a sales program for Gogo Biz 4G equipment that started in 2016, we have deferred approximately $5.2 million of equipment revenue as of September 30, 2017 in connection with a free upgrade program under which we shipped ATG and UCS equipment to customers who have a right to exchange that equipment for Gogo Biz 4G equipment. In the three and nine months ended September 30, 2017, we shipped four and seven Gogo Biz 4G units, respectively, under this program and recognized $0.3 million and $0.5 million, respectively, of previously deferred equipment revenue. We will recognize the remaining deferred revenue upon the earlier of the shipment of the Gogo Biz 4G equipment or the expiration of the free upgrade period, which is June 30, 2018.

~~Commercial Aviation Rest of World:~~

~~CA-ROW~~ revenue increased to $16.6 million and $41.0 million, respectively, for the three and nine month periods ended September 30, 2017, as compared with $7.6 million and $17.9 million, respectively, for the prior year periods, due to an increase in service revenue and to a lesser extent an increase in equipment revenue.

~~CA-ROW~~ service revenue increased to $15.7 million and $38.2 million, respectively, for the three and nine month periods ended September 30, 2017, as compared with $7.2 million and $17.2 million, respectively, for the prior year periods, due to an increase in ARPA and to a lesser extent an increase in aircraft equivalents. ARPA for the~~CA-ROW~~ segment increased to $18.8 thousand and $18.3 thousand for the three and nine month periods ended September 30, 2017, respectively, as compared with $14.5 thousand and $12.8 thousand, respectively, for the prior year periods, due to increased airline-paid passenger usage and the transition in the accounting treatment for one of our airline agreements from an operating lease or Turnkey model in the prior year to a sale or Airline Directed model in the first quarter of the current year due to specific provisions elected by the airline. Take rate was 13.5% and 14.3%, respectively, for the three and nine month periods ended September 30, 2017.

~~CA-ROW~~ generated equipment revenue of $1.0 million and $2.8 million, respectively, for the three and nine month periods ended September 30, 2017, as compared with $0.4 million and $0.7 million, respectively, for the prior year periods, due to the transition in the accounting treatment for one of our airline agreements from an operating lease or Turnkey model in the prior year to a sale or Airline Directed model in the first quarter of the current year due to specific provisions elected by the airline.

~~Cost of Service Revenue:~~

~~Cost of service revenue by segment, percent change and cost of service revenue as a percent of service revenue for the three and nine month periods ended September 30, 2017 and 2016 were as follows~~~~(in thousands, except for percent change)~~:divested CA business.

   For the Three Months    % Change
   Ended September 30,    2017 over
   2017    2016    2016
CA-NA
   $ 37,738    $ 36,696    2.8 %
BA
   10,090    8,374    20.5 %
CA-ROW
   20,026    11,295    77.3 %






Total
   $ 67,854    $ 56,365    20.4 %






   For the Nine Months    % Change
   Ended September 30,    2017 over
   2017    2016    2016
CA-NA
   $ 112,439    $ 107,067    5.0 %
BA
   29,476    25,691    14.7 %
CA-ROW
   59,879    31,857    88.0 %






Total
   $ 201,794    $ 164,615    22.6 %

~~CA-ROW~~ cost of service revenue increased to $20.0 million and $59.9 million, respectively, for the three and nine month periods ended September 30, 2017, as compared with $11.3 million and $31.9 million, respectively, for the prior year periods, primarily due to increases in network operations expenses (including satellite service fees), aircraft operations expenses, revenue share expense and billing and transaction related expenses as the business continued to grow. Cost of service revenue was further impacted by decreases in the amortization of our deferred airborne lease incentives, the recognition of monthly service fees and maintenance fees paid to us by certain of our airline partners, all of which reduce our cost of services.

~~CA-NA~~ cost of service revenue increased to $37.7 million and $112.4 million, respectively, for the three and nine month periods ended September 30, 2017, as compared with $36.7 million and $107.1 million, respectively, for the prior year periods, due to increases in network operations expenses (including satellite service fees) and aircraft operations expenses. These increases were partially offset by increases in the amortization of our deferred airborne lease incentives, the recognition of monthly service fees and maintenance fees paid to us by certain of our airline partners, all of which reduce our cost of services. See Note 10, “Leases” to our unaudited condensed consolidated financial statements for additional information regarding our deferred airborne lease incentives.

BA cost of service revenue increased to $10.1 million and $29.5 million, respectively, for the three and nine month periods ended September 30, 2017, as compared with $8.4 million and $25.7 million, respectively, for the prior year periods. The increases were primarily due to increased ATG units online and an increase in the average network utilization per ATG unit online which resulted in higher ATG network service costs and, to a lesser extent, an increase in satellite service fees.

We expect cost of service revenue ~~forCA-NA~~to increase over time, ~~mainly~~primarily due to increased satellite service fees for additional coverage. Additionally, we expect a decrease in the amortization of deferred airborne lease incentives as we anticipate our airline agreements will transition from an operating lease or Turnkey model to a sale or Airline Directed model.

~~As we expand our business internationally, we also expect to incur additional cost of~~ service revenue in~~CA-ROW,~~ ~~reflecting increased satellite usage, maintenance~~growth and increasing ATG network costs ~~and network related expenses.~~

~~Cost of Equipment Revenue:~~associated with Gogo 5G.

Cost of equipment revenue ~~by segment and percent change~~decreased to $8.3 million for the ~~three and nine month periods~~three-month period ended ~~September 30, 2017 and 2016 were as follows~~~~(in thousands, except for percent change)~~:

   For the Three Months    % Change
   Ended September 30,    2017 over
   2017    2016    2016
CA-NA
   $ 1,065    $ 1,526    (30.2 %)
BA
   13,414    8,820    52.1 %
CA-ROW
   847    181    368.0 %






Total
   $ 15,326    $ 10,527    45.6 %






   For the Nine Months    % Change
   Ended September 30,    2017 over
   2017    2016    2016
CA-NA
   $ 5,646    $ 8,335    (32.3 %)
BA
   33,651    27,986    20.2 %
CA-ROW
   2,326    431    439.7 %






Total
   $ 41,623    $ 36,752    13.3 %

~~Cost of equipment revenue increased to $15.3 million and $41.6 million, respectively, for the three and nine month periods ended September 30, 2017,~~March 31, 2021, as compared with ~~$10.5~~$8.5 million ~~and $36.8 million, respectively,~~ for the ~~prior year periods. The increase occurred~~prior-year period, primarily ~~within the BA segment and to a lesser extent theCA-ROW~~ ~~segment, offset in part by a decrease in theCA-NA~~ ~~segment. The increase in BA was~~ due to ~~an increase in inventory reserves on certain products, thewrite-off~~ ~~of capitalized software,~~lower overhead costs and changes in product mix, ~~and increases~~partially offset by an increase in ~~warranty expense. The increase inCA-ROW~~ ~~was due to additional equipment transactions that qualify for sale treatment. The decrease inCA-NA~~ ~~was due to fewer equipment transactions that qualify for sale treatment.~~ ATG units sold.

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

Engineering, Design and Development Expenses:

Engineering, design and development expenses ~~increased 21.2% and 43.0%~~decreased to ~~$31.3~~$5.5 million ~~and $103.3 million, respectively,~~ for the ~~three and nine month periods~~three-month period ended ~~September 30, 2017,~~March 31, 2021, as compared with ~~$25.8~~$7.4 million ~~and $72.2 million, respectively,~~ for the prior year periods, due primarily to increases in all three segments due to higher personnel expense and outside services in connection with the development of new products and technologies and obtaining STCs. Additionally, the increase in the~~CA-NA~~ segment for the three and nine month periods was due to the recognition of approximately $3 million and $16 million, respectively, of expenses related to the development of our next generation ATG solution,prior-year period, primarily due to ~~the achievement of major~~a decrease in Gogo 5G development ~~milestones at different points during the year.~~costs.

We expect ~~consolidated~~ engineering, design and development expenses to remain flat or increase slightly as a percentage of service revenue in the near term, driven by Gogo 5G development costs, and decrease as a percentage of ~~consolidated~~service revenue over ~~time.~~the long term as the level of investment decreases and revenue increases.

Sales and Marketing Expenses:

Sales and marketing expenses ~~increased 9.5% and 1.9%~~decreased to ~~$16.3~~$3.7 million ~~and $47.3 million, respectively,~~ for the ~~three and nine month periods~~three-month period ended ~~September 30, 2017,~~March 31, 2021, as compared with ~~$14.9~~$4.5 million ~~and $46.4 million, respectively,~~ for the ~~prior year periods,~~prior-year period, primarily due to ~~increases in the BA~~decreased travel, advertising, and~~CA-ROW~~ ~~segments, offset in part by a decrease inCA-NA.~~ ~~The increase in BA andCA-ROW~~ ~~was due primarily to an increase in~~ personnel expense to support the growth of the businesses. Sales and marketing expenses as a percentage of total consolidated revenue decreased to 9.4% and 9.2%, respectively, for the three and nine month periods ended September 30, 2017, as compared with 10.1% and 10.6%, respectively, for the prior year periods.expenses.

We expect ~~our~~ sales and marketing expenses to ~~increase in future periods as we expand our international marketing initiatives, commence service on aircraft operated by new and existing airline partners in bothCA-NA~~ ~~andCA-ROW,~~ increase advertising and promotional initiatives for new product offerings (particularly in BA) and expand programs to retain and support our existing users. In addition, the commission component of sales and marketing expenses at BA will fluctuate with equipment revenue. We expect consolidated sales and marketing expenses to decreaseremain relatively flat as a percentage of ~~consolidated revenue over time.~~

service revenue.

General and Administrative Expenses:

General and administrative expenses ~~increased 11.1% and 7.9%~~decreased to ~~$24.1~~$10.4 million ~~and $70.2 million, respectively,~~ for the ~~three and nine month periods~~three-month period ended ~~September 30, 2017,~~March 31, 2021, as compared with ~~$21.7~~$14.7 million ~~and $65.0 million, respectively,~~ for the ~~prior year periods,~~prior-year period, primarily due to ~~increases in all three segments, due primarily to increases in~~lower outside services costs and decreased personnel expense. General and administrative expenses as a percentage of total consolidated revenue decreased to 13.9% and 13.7%, respectively, for the three and nine month periods ended September 30, 2017, as compared with 14.7% and 14.9%, respectively, for the prior year periods.expenses.

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

~~Segment Profit (Loss):~~

~~CA-NA’s~~ segment profit increased 10.0% to $16.0 million for the three month period ended September 30, 2017, as compared with $14.5 million for the prior year period, while segment profit decreased 7.8% to $43.3 million for the nine month period ended September 30, 2017, as compared with $47.0 million for the prior year period. The increase in~~CA-NA’s~~ segment profit for the three month period ended September 30, 2017 was due to an increase in service revenue and decreases in cost of equipment revenue and sales and marketing expense, offset in part by increases in cost of service revenue, engineering, design and development and general and administrative expenses and a decrease in equipment revenue, as discussed above. The decrease in~~CA-NA’s~~ segment profit for the nine month period ended September 30, 2017 was due to increases in cost of service revenue, engineering, design and development and general and administrative expenses and a decrease in equipment revenue, offset in part by an increase in service revenue and decreases in cost of equipment revenue and sales and marketing expense, as discussed above.

BA’s segment profit increased 3.3% and 21.3% to $21.3 million and $72.6 million, respectively, for the three and nine month periods ended September 30, 2017, as compared with $20.7 million and $59.9 million, respectively, for the prior year periods. The increase in BA’s segment profit for the three and nine month periods ended September 30, 2017 was due to an increase in service revenue, partially offset by an increase in operating expenses, as discussed above.

~~CA-ROW’s~~ segment loss increased 21.0% and 30.4% to $24.1 million and $82.1 million, respectively, for the three and nine month periods ended September 30, 2017, as compared with $19.9 million and $62.9 million, respectively, for the prior year periods. The increase in~~CA-ROW’s~~ segment loss for the three and nine month periods ended September 30, 2017 was due to an increase in operating expenses, offset in part by an increase in service and equipment revenue, as discussed above.

Depreciation and Amortization:

Depreciation and amortization expense increased ~~33.8% and 27.3%~~ to ~~$35.8~~$4.1 million ~~and $96.8 million, respectively,~~ for the ~~three and nine month periods~~three-month period ended ~~September 30, 2017,~~March 31, 2021, as compared with ~~$26.8~~$3.6 million ~~and $76.0 million, respectively,~~ for the ~~prior year periods,~~prior-year period, primarily due to the amortization of capitalized software.

We expect that our depreciation and amortization expense will increase in the ~~number~~future as we launch our Gogo 5G network.

Other (Income) Expense:

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

	For the Three Months						% Change
	Ended March 31,						2021 over
	2021			2020			2020
Interest income	$	(57	)	$	(578	)		(90.1	)%
Interest expense		29,294			31,143			(5.9	)%
Loss on settlement of convertible notes		4,397			-		nm		%
Other expense		(5)			(1)		nm		%
Total	$	33,629		$	30,564			10.0	%

Total other expense increased to $33.6 million for the three-month period ended March 31, 2021, as compared with $30.6 million for the prior-year period, primarily due to the loss on settlement of ~~aircraft outfitted with~~convertible notes, partially offset by a decrease in interest expense.

We expect our ~~airborne equipment by ourCA-ROW~~interest expense to decrease in the future as a result of the refinancing and~~CA-NA~~ ~~segments~~ the conversions and ~~accelerated depreciation expense for certain upgrade~~exchanges of 2022 Convertible Notes that have occurred to date and ~~decommission programs.~~the maturity or earlier conversion of the remaining 2022 Convertible Notes. See Note ~~1, “Basis of Presentation”~~10, “Long-Term Debt and Other Liabilities” to our unaudited condensed consolidated financial statements for additional ~~information on the accelerated depreciation expense.~~

We expect our depreciation and amortization expense to increase in future periods as we install our equipment on additional aircraft, install more expensive satellite-based equipment on aircraft and further expand our ground and satellite networks.

~~Other (Income) Expense:~~

~~Other (income) expense and percent change for the three and nine month periods ended September 30, 2017 and 2016 were as follows~~~~(in thousands, except for percent change)~~:

   For the Three Months    % Change
   Ended September 30,    2017 over
   2017    2016    2016
Interest income
   $ (683 )    $ (852 )    (19.8 %)
Interest expense
   27,585    24,848    11.0 %
Other expense
   228    34    570.6 %






Total
   $ 27,130    $ 24,030    12.9 %






   For the Nine Months    % Change
   Ended September 30,    2017 over
   2017    2016    2016
Interest income
   $ (1,999 )    $ (1,064 )    87.9 %
Interest expense
   81,754    58,701    39.3 %
Loss on extinguishment of debt
   —      15,406    n/a
Adjustment to deferred financing costs
   —      (792 )    n/a
Other (income) expense
   322    (137 )    n/a






Total
   $ 80,077    $ 72,114    11.0 %

Total other expense was $27.1 million and $80.1 million, respectively, for the three and nine month periods ended September 30, 2017, as compared to $24.0 million and $72.1 million, respectively, for the prior year periods. Interest expense increased during the three and nine month periods ended September 30, 2017 as compared with the prior year periods due to higher average debt levels outstanding and higher average interest rates incurred during the current year as compared with the prior year. The increase in interest expense for the three and nine month periods ended September 30, 2017, as compared to the prior year periods, was due to the issuance of the Original Senior Secured Notes in June 2016, the January 2017 Additional Notes in January 2017 and the September 2017 Additional Notes in September 2017. The increase in interest expense associated with the Senior Secured Notes was partially offset by lower interest expense associated with the Amended and Restated Senior Term Facility, which was repaid in full in June 2016. See Note 8, “Long-Term Debt and Other Liabilities,” in our unaudited condensed consolidated financial statements for additional information. See Note 9, “Interest Costs,” in our unaudited condensed consolidated financial statements for additional information related to our interest expense. The nine month period ended September 30, 2016 included a loss on extinguishment of debt related to the repayment of the Amended and Restated Senior Term Facility and adjustment of deferred financing costs, while the current year did not include such activities.

We expect our interest expense to increase due to higher average debt outstanding and higher average interest rates because of the issuance of the Senior Secured Notes. Interest expense will also increase due to a full year of amortization of deferred financing fees associated with the Senior Secured Notes offset in part by the amortization of the debt premium associated with the Senior Secured Notes. These increases will be partially offset by the extinguishment of the Amended and Restated Senior Term Facility. See Note 8, “Long-Term Debt and Other Liabilities,” in our unaudited condensed consolidated financial statements for additional information.

Income Taxes:

The effective income tax ~~rate~~rates for the ~~three and nine month~~three-month periods ended ~~September 30, 2017~~March 31, 2021 and ~~2016 was (0.8%)~~2020 were (0.6)% and ~~(0.7%)~~(1.5)%, ~~respectively, as compared with (1.4%)~~respectively. For the three-month periods ended March 31, 2021 and ~~(1.0%), respectively, for the prior year periods. Income~~2020, our income tax expense ~~recorded in each period~~ was ~~similar, with differences inpre-tax~~ income causing the change in the effective tax rate. The difference between our effective tax rates and the U.S. federal statutory rate of 35% for the three and nine month periods ended September 30, 2017 and 2016 wasnot significant primarily due to the ~~recording of a~~full valuation allowance against our net deferred tax assets.

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

Non-GAAP Measures

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

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

Definition and Reconciliation ofNon-GAAP Measures

EBITDA represents net ~~income (loss)~~loss attributable to common stock before interest expense, interest income, income taxes ~~interest income, interest expense,~~and depreciation ~~expense~~ and amortization ~~of other intangible assets.~~expense.

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

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

We believe it is useful for an understanding of our operating performance to exclude the ~~exclusion~~results of ~~the amortization of deferred airborne lease incentives~~our discontinued operations from Adjusted EBITDA is useful as it allows an investor to view operating performance across time periods in a manner consistent with how management measures segment profit and loss (see Note 14, “Business Segments and Major Customers,” for a descriptionbecause they are not part of ~~segment profit (loss) in~~ our unaudited condensed consolidated financial statements). Management evaluates segment profit and loss in this manner, excluding the amortization of deferred airborne lease incentives, because such presentation reflects operating decisions and activities from the current period, without regard to the prior period decision or the form of connectivity agreements. See “—Key Components of Consolidated Statements of Operations—Cost of Service Revenue—Commercial Aviation North America and Rest of World” in our 2016~~10-K~~ ~~for a discussion of the accounting treatment of deferred airborne lease incentives.~~ongoing operations.

We believe it is useful tofor an understanding of our operating performance to exclude the loss on ~~extinguishment~~settlement of ~~debt and adjustment of deferred financing costs~~convertible notes from Adjusted EBITDA because of the~~non-recurring~~ infrequently occurring nature of ~~these charges.~~this activity.

We believe it is useful for an understanding of our operating performance to exclude separation costs related to the sale of CA from Adjusted EBITDA because of the non-recurring nature of this activity.

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

Free Cash ~~CAPEX~~Flow represents ~~capital expenditures~~ net cash provided by operating activities, less purchases of ~~airborne~~property and equipment ~~proceeds received from~~and the ~~airlines.~~acquisition of intangible assets. We believe that Free Cash ~~CAPEX~~Flow provides ~~a more representative indication of~~meaningful information regarding our liquidity requirements with respect to capital expenditures, as under certain agreements with our airline partners we are reimbursed for all or a substantial portion of the cost of our airborne equipment, thereby reducing our cash capital requirements.liquidity.

Gogo Inc.

and Subsidiaries

Reconciliation of GAAP toNon-GAAP Measures

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

~~(unaudited)~~unaudited)


	For the Three Months						For the Nine Months							For the Three Months
	Ended September 30,						Ended September 30,							Ended March 31,
	2017			2016			2017			2016				2021			2020
Adjusted EBITDA:
Net loss attributable to common stock (GAAP)	$	(45,281	)	$	(33,273	)	$	(130,857	)	$	(97,573	)	$	(7,685	)	$	(84,778	)
Interest expense		27,585			24,848			81,754			58,701			29,294			31,143
Interest income		(683	)		(852	)		(1,999	)		(1,064	)		(57	)		(578	)
Income tax provision		350			469			945			997			35			141
Depreciation and amortization		35,824			26,779			96,821			76,042			4,117			3,579

EBITDA		17,795			17,971			46,664			37,103			25,704			(50,493	)
Stock-based compensation expense		5,283			5,000			15,007			12,986			1,849			2,322
Amortization of deferred airborne lease incentives		(10,121	)		(7,765	)		(28,099	)		(20,650	)
Loss on extinguishment of debt		—			—			—			15,406
Adjustment of deferred financing costs		—			—			—			(792	)

Loss from discontinued operations														1,801			75,390
Loss on settlement of convertible notes														4,397			-
Separation costs related to CA sale														145			-
Adjusted EBITDA	$	12,957		$	15,206		$	33,572		$	44,053		$	33,896		$	27,219

Cash CAPEX:
Consolidated capital expenditures (GAAP)⁽¹⁾	$	(68,495	)	$	(43,653	)	$	(214,238	)	$	(128,694	)
Change in deferred airborne lease incentives⁽²⁾		5,351			330			8,856			8,674
Amortization of deferred airborne lease incentives⁽²⁾		10,077			7,697			27,994			20,458

Cash CAPEX	$	(53,067	)	$	(35,626	)	$	(177,388	)	$	(99,562	)

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

~~(1)~~

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

~~(2)~~

Excludes deferred airborne lease incentives and related amortization associated with STCs for the three and nine month periods ended September 30, 2017 and 2016 as STC costs are expensed as incurred as part of Engineering, Design and Development.

(1) See unaudited condensed consolidated statements of cashflows

Material limitations ofNon-GAAP measures

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

Some of these limitations include:

•

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

•

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

•

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

•

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

•

Adjusted EBITDA does not reflect the results of discontinued operations;

•

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

•

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

•

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

•

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

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

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

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

~~Cash CAPEX does not reflect the full extent of capital investments we have made in our operations; and~~

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

Liquidity and Capital Resources

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

   For the Nine Months
   Ended September 30,
   2017    2016
Net cash provided by (used in) operating activities
   $ (4,209 )    $ 45,148
Net cash used in investing activities
   (66,743 )    (247,708 )
Net cash provided by financing activities
   175,472    202,426
Effect of foreign exchange rate changes on cash
   556    (378 )




Net increase (decrease) in cash and cash equivalents
   105,076    (512 )
Cash and cash equivalents at the beginning of period
   117,302    147,342




Cash and cash equivalents at the end of period
   $ 222,378    $ 146,830




_________________
Supplemental information:

Short-term investments
   $ 188,496    $ 338,725

	For the Three Months
	Ended March 31,
	2021			2020
Continuing operations cash flow activity:
Net cash provided by operating activities	$	24,574		$	23,890
Net cash used in investing activities		(702	)		(876	)
Net cash provided by (used in) financing activities		(3,320	)		19,105
Discontinued operations cash flow activity		(748	)		(455	)
Effect of foreign exchange rate changes on cash		3			51
Net decrease in cash, cash equivalents and restricted cash		19,807			41,715
Cash, cash equivalents and restricted cash at the beginning of period		435,870			177,675
Cash, cash equivalents and restricted cash at the end of period	$	455,677		$	219,390
Supplemental information:
Cash, cash equivalents and restricted cash at the end of period	$	455,677		$	219,390
Less: current restricted cash		525			560
Less: non-current restricted cash		-			4,601
Cash and cash equivalents at the end of the period	$	455,152		$	214,229

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

Liquidity:

Although we can provide no assurances, we currently believe that cash, cash equivalents and short-term investments on hand as of September 30, 2017 will be sufficient to meet our working capital and capital expenditure requirements for at least the next twelve months, including costs associated with installing our airborne equipment on certain aircraft operated by our airline partners, continuing our international expansion and developing our next generation ATG solution. Excluding the impact of our initial public offering, ~~in June 2013, the Amended~~other debt and ~~Restated Senior Term Facility, the Convertible Notes~~equity offerings and ~~the Senior Secured Notes,~~our prior credit facilities, to date we have not generated positive cash flows on a consolidated ~~basis, and our ability to do so will depend in large part~~basis. However, based on our ~~ability to increase revenue in each~~current plans, including the consummation of ~~our three business segments. In addition, our ability to generate positive cash flows from operating activities and~~ the timing of certain capital and other necessary expenditures are subject to numerous variables, such as costs related to international expansion and execution of our current technology roadmap, including 2Ku, next generation ATG and other potential future technologies. We currentlyRefinancing, we believe that our cash ~~on hand, comprised of cash,~~and cash equivalents ~~and short-term investments,~~ and cash flows provided by operating activities ~~and, if necessary, additional equity financings or the incurrence of additional debt,~~ will be sufficient to meet our ~~liquidity needs in the longer-term,~~operating obligations, including our ~~continued international expansion and execution of our current technology roadmap.~~ committed capital expenditure requirements, for at least the next twelve months.

The ~~Indenture governing our Senior Secured Notes~~2021 Credit Agreement contains covenants that limit the ability of GIH and its subsidiaries to incur additional indebtedness. Additionally, the Indenture governing the Senior Secured Notes limits the amount of cash GIH and its subsidiaries may distribute to us, including cash distributed to us to pay interest on the Convertible Notes, to pay any interest on indebtedness incurred, or pay dividends on preferred stock issued by us to refinance, replace, renew or refund the Convertible Notes. Further, market conditions and/or our financial performance may limit our access to additional sources of equity or debt ~~financing.~~financing, or our ability to pursue potential strategic alternatives. As a result, we may be unable to finance growth of our business to the extent that our cash, ~~on hand (including~~cash equivalents and short-term ~~investments)~~investments and cash generated through operating activities prove insufficient ~~and~~or we are unable to raise additional financing through the issuance of ~~our~~ equity, ~~or through~~ permitted incurrences of debt by(by us or by GIH and its ~~subsidiaries.~~subsidiaries), or the pursuit of potential strategic alternatives.

For additional information on ~~our Senior Secured Notes, Convertible Notes, Amended and Restated~~the 2021 Credit Agreement, ~~and Restricted Cash, please~~ see Note 8,10, “Long-Term Debt and Other ~~Liabilities”~~Liabilities,” to our unaudited condensed consolidated financial statements.

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

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


	For the Nine Months						For the Three Months
	Ended September 30,						Ended March 31,
	2017			2016			2021			2020
Net loss	$	(130,857	)	$	(97,573	)	$	(5,884	)	$	(9,388	)
Non-cash charges and credits		136,695			121,812			12,160			11,452
Changes in operating assets and liabilities		(10,047	)		20,909			18,298			21,826

Net cash provided by (used in) operating activities	$	(4,209	)	$	45,148

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

For the ~~nine month~~three-month period ended ~~September 30, 2017, cash used in operating activities was $4.2 million as compared with $45.1 million of~~March 31, 2021, net cash provided by operating activities was $24.6 million as compared with net cash provided by operating activities of $23.9 million in the ~~prior year~~prior-year period. The principal contributors to the year-over-year change in operating cash flows were:

~~A $18.4 million changes~~

•

A $4.2 million improvement in net loss ~~adjusted fornon-cash~~ ~~charges and credits,~~ and non-cash charges and credits, as noted above under “-Results of Operations.”

•

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

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

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

▪

Changes in prepaid expenses due to the timing of payments;

▪

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

▪

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

~~A $31.0 million change in cash flows related to operating assets and liabilities resulting from:~~

~~A decrease in cash flows due to the following:~~

~~Changes inCA-NA’s,~~ ~~BA’s andCA-ROW’s~~ ~~accounts receivable due to the timing of collections;~~

~~Changes inCA-NA’s~~ ~~and BA’s deferred revenue as deferred revenue balances increased more during 2016 than in 2017;~~

~~Changes inCA-ROW’s~~ ~~deferred airborne lease incentives due to more installations at higher amounts during 2016 as compared with 2017;~~

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

~~Changes in accrued interest due to the payment of interest on the Senior Secured Notes during 2017 while no such payment was made during 2016, as the Senior Secured Notes were issued in June 2016.~~

~~Offset in part by an increase in cash flows due to the following:~~

~~Changes in all three segments’ prepaid expenses and other current assets. The change inCA-NA~~ was due to the recognition of development services during 2017 that were paid in 2016. The change in BA was due to deposits made on certain inventory items during the first quarter of 2016, while no such payments were made during 2017. The change in~~CA-ROW~~ ~~was due to the timing of payments on satellite services;~~

~~Changes in BA’s inventory due to inventory builds throughout 2016 while inventory decreased slightly during 2017;~~

~~Changes inCA-NA’s~~ ~~deferred airborne lease incentives due to more installations at higher amounts during 2017 as compared with 2016; and~~

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

We anticipate cash flows from changes in operating assets and liabilities to be impacted by deferred airborne lease incentives, which we estimate will range from $60 million to $70 million for the year ending December 31, 2017 and $40 million to $50 million for the year ended December 31, 2018. See “—Capital Expenditures” below for further information.

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

Cash used in investing activities is primarily for capital expenditures related to ~~airborne equipment,~~ cell site construction, software development, and data center upgrades. See “—Capital Expenditures” below. Additionally, cash used in investing activities includes net changes in our short-term investments of a cash inflow of $150.0 million and a cash outflow $119.2 million, respectively, for the nine month period ended September 30, 2017 and 2016.

Cash flows provided by (used in) Financing Activities:

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

Cash provided by financing activities for the ~~nine~~three month period ended ~~September 30, 2017~~March 31, 2020 was ~~$175.5~~$19.1 million primarily due to the ~~issuance~~$22.0 million of proceeds from the ~~January 2017 Additional Notes and the September 2017 Additional Notes with gross proceeds of $181.8 million,~~ABL Credit Facility offset in part by the ~~payment of debt issuance costs for the January 2017 Additional Notes and September 2017 Additional Notes of $3.6 million and capital lease payments of $2.3 million.~~

Cash used in financing activities for the nine month period ended September 30, 2016 was $202.4 million primarily due to the issuance of $525.0 million of Senior Secured Notes, partially offset by the payment in fullrepayment on maturity of the ~~Amended and Restated Credit Agreement totaling $310.1~~outstanding $2.5 million ~~(including~~in aggregate principal amount of the ~~early prepayment penalty of approximately $8.6 million), the payment of debt issuance costs for the Senior Secured~~2020 Convertible Notes ~~of $10.6 million and capital lease payments of $1.9 million.~~on March 1, 2020.

Capital Expenditures

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

Capital expenditures for the ~~nine~~three month periods ended ~~September 30, 2017~~March 31, 2021 and ~~2016~~2020 were ~~$214.2~~$0.7 million and ~~$128.7~~$0.9 million, respectively. ~~The increase in~~

We expect that our capital expenditures ~~was primarily due to an increase~~will vary in ~~airborne equipment purchases (as airborne equipment represents approximately 70%~~the future depending on the timing of ~~our~~network-related capital ~~expense for the current year), primarily for the rollout of 2Ku,~~expenditures as we build out Gogo 5G and ~~to a lesser extent an increase~~further invest in capitalized software.

We anticipate that capital expenditures for the year ending December 31, 2017 will range from $290 million to $330 million as we increase purchases of airborne equipment (including 2Ku) that when sold to the airlines will qualify as an operating lease of space, and begin the buildout of our next generation ATG network. We expect our capital expenditures, net of deferred airborne lease incentives, which we estimate will range from $60 million to $70 million, to range from $230 million to $260 million for the year ending December 31, 2017. We anticipate that capital expenditures for the year ending December 31, 2018 will range from $110 million to $170 million. We expect our capital expenditures, net of deferred airborne lease incentives, which we estimate will range from $40 million to $50 million, to range from $70 million to $120 million for the year ending December 31, 2018. The decrease in capital expenditures and related deferred airborne lease incentives in 2018 as compared with 2016 and 2017 primarily reflects our purchases of equipment in 2018 that, when sold to airlines, will qualify as sales rather than as operating leases of space on aircraft.

~~Contractual Commitments:~~

We have agreements with vendors to provide us with transponder and teleport satellite services. These agreements vary in length and amount and as of September 30, 2017 commit us to purchase transponder and teleport satellite services totaling approximately $21.4 million in 2017 (October 1 through December 31), $75.6 million in 2018, $81.9 million in 2019, $86.2 million in 2020, $75.9 million in 2021 and $303.0 million thereafter.Other

Leases and Cell Site Contracts:We have lease agreements relating to certain facilities and equipment, which are considered operating leases. Additionally, we have operating leases with wireless service providers for tower space and base station capacity on a volume usage basis (“cell site leases”), some of which provide for minimum annual payments. See Note ~~10,~~12, “Leases,” to our unaudited condensed consolidated financial statements for additional information.

For the airline agreements where the equipment transactions are accounted for as operating leases of space, the revenue share paid to our airline partners represents operating lease payments. They are deemed to be contingent rental payments, as the payments due to each airline are based on a percentage of our~~CA-NA~~ ~~andCA-ROW~~ service revenue generated from that airline’s passengers, which is unknown until realized. As such, we cannot estimate the lease payments due to an airline at the commencement of our contract with such airline. This rental expense is included in cost of service revenue and is offset by the amortization of the deferred airborne lease incentive discussed above. See Note 10, “Leases,” to our unaudited condensed consolidated financial statements for additional information.

~~A contract with one of our airline partners requires us to provide the airline partner with a cash rebate of $1.8 million in June 2018.~~

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

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

ITEM 3.

Quantitative and Qualitative Disclosures About Market Risk

Our exposure to market risk is currently confined to our cash and cash equivalents, short-term investments and ~~our~~ debt. We have not used derivative financial instruments for speculation or trading purposes. The primary objectives of our investment activities are to preserve our capital for the purpose of funding operations while ~~at the same time~~ maximizing the income we receive from our investments without significantly increasing risk. To achieve these objectives, our investment policy allows us to maintain a portfolio of cash equivalents and short-term investments through a variety of securities, including U.S. ~~Treasuries,~~Treasury securities, U.S. ~~Government Agency Securities,~~government agency securities, and ~~Money Market Funds.~~money market funds. Our cash and cash equivalents as of ~~September 30, 2017~~both March 31, 2021 and December 31, ~~2016 primarily~~2020 included amounts in bank ~~checking~~deposit accounts and ~~Money Market Funds.~~money market funds, and we did not have any short-term investments as of either such date. We believe that a change in average interest rates would not ~~materially~~ affect our interest income and results of ~~operations.~~operations by a material amount.

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

Interest:Our earnings are affected by changes in interest rates due to the impact those changes have on interest income generated from our cash, cash equivalents and short-term investments. Our cash and cash equivalents as of ~~September 30, 2017~~both March 31, 2021 and December 31, ~~2016~~2020 included amounts in bank ~~checking~~deposit accounts and money market ~~funds, and our short-term investments consist of U.S. Treasury bills.~~funds. We believe we have minimal interest rate ~~risk;~~risk as a 10% ~~change~~decrease in the average interest rate on our portfolio would have reduced interest income for the ~~three and nine month~~three-month periods ended ~~September 30, 2017~~March 31, 2021 and ~~2016~~2020 by an immaterial ~~amount.~~amounts.

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

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

ITEM 4.

Controls and Procedures

(a)

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

Management, with the participation of our Chief Executive Officer and the Chief Financial Officer, evaluated the effectiveness of the design and operation of the Company’s disclosure controls and procedures (as defined inRules 13a-15(e) and15d-15(e) of the Securities Exchange Act of 1934, as amended) as of ~~September 30, 2017.~~March 31, 2021. Based upon this evaluation, our Chief Executive Officer and the Chief Financial Officer have concluded that our disclosure controls and procedures were effective as of ~~September 30, 2017.~~March 31, 2021.

(b)

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

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

~~PART II. OTHER INFORMATION~~

PART II.

OTHER INFORMATION

ITEM 1.

Legal Proceedings

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

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

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

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

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

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

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


ITEM 1A.	Risk Factors

“Item 1A. Risk Factors” of our Form 10-K includes a discussion of our risk factors. The information presented below updates, and should be read in conjunction with, the risk factors and information disclosed in our 2020 10-K.Except as set forth ~~in our Quarterly Report on Form10-Q~~ ~~for the quarter ended March 31, 2017 as filed with the SEC on May 4, 2017,~~below, there have been no material changes to the risk factors previously disclosed in our ~~201610-K.~~2020 10-K.

The COVID-19 pandemic and the measures implemented to combat it have had, and may continue to have, a material adverse effect on our business.

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

The COVID-19 pandemic caused a significant decline in international and domestic business aviation travel, which materially and adversely affected our business in 2020. Beginning in March 2020, our business saw a sharp decrease in flight activity, as well as an increase in requests for account suspensions, an increase in downgrades to pay-as-you-go plans, and a decrease in new plan activations. Though we continue to see strong signs of recovery from the lows we experienced in mid-April 2020, there can be no assurance that such recovery will continue at the current pace. The impact of the pandemic has varied across different parts of our customer base – for example corporate flight departments, charter operators and commercial aircraft (under the ATG Network Sharing Agreement) – and we expect the pace of recovery to vary by type of customer. The negative impact of COVID-19 on demand for commercial air travel could have an adverse effect on the revenue share payable to us by Intelsat under the ATG Network Sharing Agreement.

We expect COVID-19 to continue to negatively impact our business and we are unable to predict how long or with what degree of severity that impact will continue. The extent of the impact of COVID-19 on our financial and operational performance will depend on future developments, including the duration, spread and severity of the outbreak, the timetable for administering and efficacy of vaccines, the duration and geographic scope of related travel advisories and restrictions and the extent of the impact of COVID-19 on overall demand for commercial and business aviation travel, all of which are highly uncertain and cannot be predicted.

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

•

delays and difficulties in completing installations on certain aircraft; and

•

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

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

At this time we are also not able to predict whether the COVID-19 pandemic will result in long-term changes to business practices and consumer behavior, with such changes including but not limited to a long-term reduction in travel as a result of increased usage of “virtual” and “teleconferencing” products.The full extent of the ongoing impact of COVID-19 on our longer-term operational and financial performance will depend on future developments, many of which are outside of our control.

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

We are currently developing a next generation ATG network using 5G technology and unlicensed spectrum which we intend to deploy on a nationwide basis in 2022. Gogo 5G will be capable of working with different spectrums and supporting different next generation technologies. There can be no assurance that we will launch Gogo 5G or any other next generation technology in sufficient time to meet growing user expectations regarding the in-flight connectivity experience and to effectively compete in the business aviation market, due to, among other things, risks associated with: (i) our failure to design and develop a technology that provides the features and performance we require; (ii) integrating the solution with our existing ATG network; (iii) the availability of adequate spectrum; (iv) the failure of spectrum to perform as expected; (v) the failure of equipment and software to perform as expected; (vi) problems arising in the manufacturing process; (vii) our ability to negotiate contracts with suppliers on acceptable commercial and other terms; (viii) our reliance on single-source suppliers for the development and manufacturing of the core elements of the network and on other suppliers to provide certain components and services; and (ix) delays in obtaining or failures to obtain the required regulatory approvals for installation and operation of such equipment and the provision of service to passengers. As disclosed above in this Item 1A under the caption “—The COVID-19 pandemic and the measures implemented to combat it have had, and may continue to have, a material adverse effect on our business,” manufacturing capacity is lagging behind demand as the economy recovers from COVID-19, andwe have experienced longer lead times and encountered delays in obtaining certain electronic components used in our business. A supplier of a Gogo 5G component has identified a manufacturing issue with respect to such component which has necessitated manufacturing process revisions and additional testing which is scheduled to occur in May 2021. We believe that we can accommodate the supplier’s current expectations for the delivery date for this component without affecting our service launch, but the resulting compression in our schedule could limit our ability to preserve the current schedule should other significant issues arise. If Gogo 5G or any other next generation technology fails to perform as expected or its commercial availability is significantly delayed as compared to the timelines we establish, our business, financial condition and results of operations may be materially adversely affected.

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

As of March 31, 2021, we had total consolidated indebtedness of approximately $1.2 billion, including $975.0 million outstanding of our 9.875% senior secured notes due 2024 (the “2024 Senior Secured Notes”), and $208.5 million outstanding of the 2022 Convertible Notes. As of May 1, 2021, following the Refinancing and our entry into the Facilities, we had total consolidated indebtedness of approximately $828 million, including $725 million outstanding under the Term Loan Facility and $103 million aggregate principal amount outstanding of our 2022 Convertible Notes.

We and our subsidiaries may incur additional debt in the future, including up to $100.0 million, under the Revolving Facility, which could increase the risks described below and lead to other risks. The amount of our debt or such other obligations could have important consequences for holders of our common stock, including, but not limited to:

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

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

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

We have from time to time evaluated, and we continue to evaluate, our potential capital needs in light of increasing demand for our services, limitations on bandwidth capacity and performance and generally evolving technology in our industry. We may utilize one or more types of capital raising in order to fund any initiative in this regard, including the issuance of new equity securities and new debt securities, including debt securities convertible into our common stock. Since our IPO, we have obtained debt financing through our entry into our previous credit facilities, issuances of convertible notes and issuances of senior secured notes. In addition, our ability to generate positive cash flows from operating activities and the extent and timing of certain capital and other necessary expenditures are subject to numerous variables, such as costs related to execution of our current technology roadmap, including continuing development and deployment of Gogo 5G and other future technologies. The market conditions and the macroeconomic conditions that affect the markets in which we operate could have a material adverse effect on our ability to secure financing on acceptable terms, if at all. We may be unable to secure additional financing on favorable terms or at all or our operating cash flow may be insufficient to satisfy our financial obligations under the indenture governing the 2022 Convertible Notes, the Facilities and other indebtedness outstanding from time to time.

Our ability to obtain additional financing for working capital, capital expenditures, acquisitions, debt service requirements or general corporate purposes is limited by the 2021 Credit Agreement. In the future, if our subsidiaries are in compliance with certain incurrence ratios or other covenant exceptions set forth in the 2021 Credit Agreement, our subsidiaries may be able to incur additional indebtedness, which indebtedness may be secured or unsecured, the incurrence of which may increase the risks created by our current substantial indebtedness. Events beyond our control can affect our ability to comply with these requirements. The 2021 Credit Agreement also limits the ability of Gogo Inc. to incur additional indebtedness under certain circumstances and limits the amount of cash that our subsidiaries may dividend, transfer or otherwise distribute to us.

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

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

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

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

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

and how we use the proceeds from any such dispositions.

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

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

•

incur additional debt;

•

pay dividends, redeem stock or make other distributions;

•

make certain investments;

•

create liens;

•

transfer or sell assets;

•

merge or consolidate with other companies; and

•

enter into certain transactions with our affiliates.

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

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

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

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

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

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

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

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

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

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

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

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

ITEM 2.

Unregistered Sales of Equity Securities and Use of Proceeds

Sales of Unregistered Securities

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

Use of Proceeds from Public Offering of Common Stock

None.

ITEM 3.

Defaults Upon Senior Securities

None.

ITEM 4.

Mine Safety Disclosures

None.

ITEM 5.

Other Information

None.

ITEM 6.

Exhibits


Exhibit Number		Description of Exhibits

~~4.10~~ 4.1		~~First Supplemental Indenture,~~Registration Rights Agreement, dated as of ~~September 20, 2017,~~April 9, 2021, by and among Gogo ~~Intermediate~~Inc., Silver (XII) Holdings, LLC ~~Gogo Finance Co. Inc., each of the guarantors party thereto~~ and ~~U.S. Bank National Association, as trustee~~Silver (Equity) Holdings, LP (incorporated by reference to Exhibit ~~4.1~~10.2 to Form8-K filed on ~~September 20, 2017~~April 14, 2021 (File~~No.~~ Number 001-35975))

~~10.1.51 †~~ 4.2		Amendment #1 to the ~~UnifiedIn-Flight~~ ~~Connectivity Hardware, Services and Maintenance~~Registration Rights Agreement, dated as of ~~July 28, 2017,~~April 9, 2021, by and between Gogo Inc. (f/k/a AC HoldCo Inc.) and Thorndale Farm Gogo, LLC ~~and American Airlines, Inc.~~(as assignee to the interests of the Thorne Investors, as defined therein) (incorporated by reference to Exhibit 10.3 to Form 8-K filed on April 14, 2021 (File Number 001-35975))

~~10.1.52~~ 10.1		~~Reaffirmation~~Exchange Agreement, dated as of ~~September 25, 2017, among Gogo Intermediate Holdings LLC, Gogo Finance Co. Inc.,~~April 1, 2021, by and between Gogo Inc. and ~~the Subsidiary Guarantors party thereto~~Silver (XII) Holdings, LLC (incorporated by reference to Exhibit 10.1 to Form8-K filed on ~~September 25, 2017~~April 14, 2021 (File~~No.~~ Number 001-35975))

~~10.1.53~~ 10.2		~~Additional Secured Debt Designation,~~Commitment Letter, dated as of ~~September 25, 2017,~~March 31, 2021, by and ~~between~~among Gogo Inc., Morgan Stanley Senior Funding, Inc., Credit Suisse AG, Cayman Islands Branch, Credit Suisse Loan Funding LLC, Deutsche Bank AG New York Branch and Deutsche Bank Securities Inc.

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

10.4		Guarantee Agreement, dated as of April 30, 2021, among Gogo Inc., Gogo Intermediate Holdings LLC and ~~Gogo Finance Co.~~certain of its subsidiaries, and Morgan Stanley Senior Funding, Inc., as collateral agent. (incorporated by reference to Exhibit 10.2 to Form8-K filed on ~~September 25, 2017~~May 3, 2021 (File~~No.~~ Number 001-35975))

~~10.1.54 †~~ 10.5		~~Amendment No. 3 to the Master Supply and Services~~Collateral Agreement, dated as of ~~July 1, 2017, by and between ZTE USA, Inc. and Gogo LLC~~

~~10.8.9~~		~~Collateral Agreement Amended, dated as of September 20, 2017, made by~~April 30, 2021, among Gogo Inc., Gogo Intermediate Holdings LLC ~~Gogo Finance Co. Inc.~~ and certain of ~~their Subsidiaries in favor of U.S. Bank National Association,~~its subsidiaries, and Morgan Stanley Senior Funding, Inc., as collateral agent (incorporated by reference to Exhibit ~~4.2~~10.3 to Form8-K filed on ~~September 20, 2017~~May 3, 2021 (File~~No.~~ Number 001-35975))

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

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

31.2
Certification of Chief Financial Officer pursuant to Exchange Act Rules13a-14(a) and15d-14(a), as adopted pursuant to Section 302 of the Sarbanes-Oxley Act of 2002
32.1 *
Certification of Chief Executive Officer pursuant to 18 U.S.C. Section 1350, as adopted pursuant to Section 906 of the Sarbanes-Oxley Act of 2002
32.2 *
Certification of Chief Financial Officer pursuant to 18 U.S.C. Section 1350, as adopted pursuant to Section 906 of the Sarbanes-Oxley Act of 2002
101.INS
Inline XBRL Instance Document – The instance document does not appear in the interactive data file because its XBRL tags are embedded within the Inline XBRL document
101.SCH
Inline XBRL Taxonomy Extension Schema Document
101.CAL
Inline XBRL Taxonomy Extension Calculation Linkbase Document
101.LAB
Inline XBRL Taxonomy Extension Labels Linkbase Document
101.PRE
Inline XBRL Taxonomy Extension Presentation Linkbase Document
101.DEF
Inline XBRL Taxonomy Extension Definition Linkbase Document
104
Cover Page Interactive Data File (formatted as Inline XBRL and contained in Exhibit 101)

† #	~~Certain provisions of this exhibit have been omitted and separately filed with the Securities and Exchange Commission pursuant to a request for confidential treatment.~~ Indicates management contract or compensatory plan or arrangement.

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

SIGNATURES

Pursuant to the requirements of the Securities and Exchange Act of 1934, as amended, the registrant has duly caused this report to be signed on its behalf by the undersigned thereunto duly authorized.

						Gogo Inc.
Date: May 6, 2021						~~Gogo Inc.~~

~~Date: November 2, 2017~~

						/s/ ~~Michael Small~~Oakleigh Thorne
						~~Michael Small~~ Oakleigh Thorne
						President and Chief Executive Officer
						(Principal Executive Officer)

						/s/ Barry Rowan
						Barry Rowan
						Executive Vice President and Chief Financial Officer
						(Principal Financial Officer)

5150

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

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

Large accelerated filer

Accelerated filer

Non-accelerated filer

~~Non-accelerated~~ ~~filer~~

~~☐ (Do not check if smaller reporting company)~~

Smaller reporting company

Emerging growth company