Operating and Financial Review and Prospects The following discussion of our results of operations should be read together with our consolidated financial statements and the related notes, which appear elsewhere in this annual report. The following discussion contains forward-looking statements that reflect our current plans, estimates and beliefs and involve risks and uncertainties. Our actual results may differ materially from those discussed in the forward-looking statements. Factors that could cause or contribute to such differences include those discussed below and elsewhere in this annual report. A. Company Overview TAT is reliant on the robustness of the commercial and military aerospace and ground defense industries. Any downturn in these industries could weaken demand for its solutions and services and negatively impact its financial results. The commercial airline industry is cyclical and has historically been subject to fluctuations due to general economic and political conditions, such as fuel and labor costs, price competition, downturns in the global economy and national and international events. TAT’s cost of revenues for OEM operations and MRO services consists of component and material costs, direct labor costs, quality assurance costs, shipping expenses, royalties, overhead related to manufacturing and depreciation of manufacturing equipment. TAT’s gross margin is affected by the proportion of its revenues generated from each of its operational segments. The principal factors that affect the operating income of TAT’s four segments, in addition to their gross profit, is the expenditure on selling and marketing expenses and general and administrative expenses. While TAT closely monitors its operating expenses to prevent unnecessary spending, we believe that these operating expenses may increase in the future in accordance with our plans to grow the business. TAT’s research and development expenses are related to new products and technologies or significant improvement of existing products and technologies. TAT’s selling and marketing expenses are related to commission payments, compensation and related expenses of TAT’s sales teams, participation in trade shows, travel expenses, advertising expenses and related costs for facilities and equipment. TAT’s general and administrative expenses are related to compensation and related expenses for executive, finance and administrative personnel, professional fees such as legal, audit, SOX, internal audit, insurance premiums and general corporate expenses and related costs for facilities and equipment. 52 B. Key Indicators TAT’s management evaluates its performance by focusing on key performance indicators, which are revenues, sources of revenues, gross profit, operating income and EBITDA. These key performance indicators are primarily affected by the competitive landscape in which TAT operates and its ability to meet the challenges posed. C. Results of operations The results of operations presented below should be reviewed in conjunction with the consolidated financial statements as of December 31, 2025, and for the years ended December 31, 2025 and 2024. Year Ended December 31, 2025 2024 U.S. dollars in thousands Amount % Amount % Revenues: Products $ 50,850 28.6 % $ 47,710 31.4 % Services 127,165 71.4 % 104,406 68.6 % 178,015 100.0 % 152,116 100.0 % Cost of goods: Products 35,793 20.1 % 33,986 22.3 % Services 98,124 55.1 % 85,116 56.0 % 133,917 75.2 % 119,102 78.3 % Gross profit 44,098 24.8 % 33,014 21.7 % Operating expenses: Research and development, net 1,384 0.8 % 1,248 0.8 % Selling and marketing 8,576 4.8 % 7,746 5.1 % General and administrative 15,730 8.8 % 11,901 7.8 % Other income (404 ) (0.2 )% (383 ) (0.3 )% 25,286 14.2 % 20,512 13.5 % Operating income 18,812 10.6 % 12,502 8.2 % Interest expenses (1,010 ) (0.6 )% (1,472 ) (1.0 )% Other financial income (expenses), net (325 ) (0.2 )% (477 ) (0.3 )% Income before taxes on income 17,477 9.8 % 10,553 6.9 % Provision for taxes on income 2,143 1.2 % 195 0.1 % Profit before share of equity investment 15,334 8.6 % 10,358 6.8 % Share in profits of equity investment of affiliated companies 1,488 0.8 % 809 0.5 % Net income $ 16,822 9.4 % $ 11,167 7.3 % 53 Revenues TAT, directly and through its subsidiaries, provides a variety of solutions and services to the commercial and military aerospace and ground defense industries, including: (i) OEM of heat transfer solutions and aviation components, such as heat exchangers, pre-coolers and oil/fuel hydraulic coolers (through TAT Israel); (ii) MRO services for heat transfer components and OEM of heat transfer solutions (through our Limco subsidiary); (iii) MRO services for aviation components (through our Piedmont subsidiary); and (iv) Overhaul and coating of jet engine components (through our Turbochrome subsidiary). TAT’s revenues from its four operational segments were as follows: Year Ended December 31, 2025 2024 Change Revenues Amount % Amount % Amount % OEM of heat transfer solutions and aviation components $ 41,403 23.3 % $ 36,466 24.0 % $ 4,937 13.5 % MRO services for heat transfer components and OEM of heat transfer solutions 44,448 25.0 % 43,863 28.8 % 585 1.3 % MRO services for aviation components 85,234 47.9 % 67,475 44.4 % 17,759 26.3 % Overhaul and coating of jet engine components 9,101 5.1 % 7,392 4.9 % 1,709 23.1 % Eliminations (2,171 ) (1.2 )% (3,080 ) (2.0 )% 909 (29.5 )% Total revenues $ 178,015 100.0 % $ 152,116 100.0 % $ 25,899 17.0 % 54 The following table reflects the geographic breakdown of TAT’s revenues for each of the two years ended December 31, 2025: Year Ended December 31, 2025 2024 Change Revenues Amount % Amount % Amount % United States $ 117,718 66.1 % $ 104,326 68.6 % $ 13,392 12.8 % Israel 14,006 7.9 % 7,868 5.2 % 6,138 78.0 % Other 46,291 26.0 % 39,922 26.2 % 6,369 16.0 % Total revenues $ 178,015 100.0 % $ 152,116 100.0 % $ 25,899 17.0 % Total revenues were $178.0 million for the year ended December 31, 2025, compared to $152.1 million for the year ended December 31, 2024, an increase of 17.0%. This reflects (i) the increase in revenues in the OEM of heat transfer solutions and aviation accessories segment; (ii) the increase in revenues in the MRO services for heat transfer components and OEM of heat transfer solutions segment; (iii) the increase in revenues in the MRO services for aviation components segment; and (iv) the increase in revenue in the overhaul and coating of jet engine components segment. Costs of Revenues TAT’s cost of revenues for OEM operations and MRO services consists of component and material costs, direct labor costs, quality assurance costs, royalties, shipping expenses, overhead related to manufacturing and depreciation of manufacturing equipment. TAT’s gross margin was affected by the proportion of TAT’s revenues generated from OEM operations and MRO services in each of the reported years. Year Ended December 31, 2025 2024 Change Cost of revenues Amount % Amount % Amount % OEM of heat transfer solutions and aviation components $ 28,608 21.4 % $ 24,965 21.0 % $ 3,643 14.6 % MRO services for heat transfer components and OEM of heat transfer solutions 33,174 24.8 % 35,978 30.2 % (2,804 ) (7.8 )% MRO services for aviation components 69,628 52.0 % 56,798 47.7 % 12,830 22.6 % Overhaul and coating of jet engine components 4,828 3.6 % 4,823 4.0 % 5 0.1 % Eliminations (2,321 ) (1.7 )% (3,462 ) (2.9 )% 1,141 (33.0 )% Total cost of revenues $ 133,917 100.0 % $ 119,102 100.0 % $ 14,815 12.4 % Cost of revenues was $133.9 million for the year ended December 31, 2025, compared to $119.1 million for the year ended December 31, 2024, an increase of 12.4%. Cost of revenues as a percentage of revenues decreased to 75.2% for the year ended December 31, 2025, from 78.3% for the year ended December 31, 2024. The increase in cost of revenues is primarily due to the increase in revenue in a higher percentage compared to the increase in our fixed costs. 55 Operating Expenses Research and development expenses, net. Research and development expenses, net are related to new products and technologies or to a significant improvement of products and technologies, net of grants and participations received. Selling and marketing expenses. Selling and marketing expenses consist primarily of commission payments, compensation and related expenses of TAT’s sales teams, participation in trade shows, travel expenses, advertising expenses and related costs for facilities and equipment. General and administrative expenses. General and administrative expenses consist of compensation and related expenses for executives, finance and administrative personnel, professional fees such as legal, audit, SOX, internal audit, other general corporate expenses and related costs for facilities and equipment. Year Ended December 31, 2025 2024 Change U.S. dollars in thousands Amount % Amount % Amount % Operating expenses Research and development costs, net $ 1,384 5.5 % $ 1,248 6.1 % $ 136 10.9 % Selling and marketing 8,576 33.9 % 7,746 37.8 % 830 10.7 % General and administrative 15,730 62.2 % 11,901 58.0 % 3,829 32.2 % Other expenses (income) (404 ) (1.6 )% (383 ) (1.9 )% (21 ) 5.5 % Total operating expenses $ 25,286 100.00 % $ 20,512 100.00 % $ 4,774 23.27 % Research and development, net Research and development expenses slightly increased by 10.9% to $1.4 million for the year ended December 31, 2025, from $1.2 million for the year ended December 31, 2024. Research and development expenses as a percentage of revenues remained at 0.8% for the year ended December 31, 2025, compared to 0.8% for the year ended December 31, 2024. The Company received a $0.1 million grant from the Israeli government in June 2025 which was accounted for a credit to research and development expenses. 56 Selling and marketing Selling and marketing expenses were $8.5 million for the year ended December 31, 2025, compared to $7.7 million for the year ended December 31, 2024. Selling and marketing expenses as a percentage of revenues were 4.8% for the year ended December 31, 2025, compared to 5.1% for the year ended December 31, 2024. General and administrative General and administrative expenses were $15.7 million for the year ended December 31, 2025, compared to $11.9 million for the year ended December 31, 2024, an increase of 32.2% primarily due to increases in personnel-related expenses mainly from additional headcount, merit increases and stock-based compensation; in legal and professional services fees; in public company related expenses; and recruitment fees for key officers and senior executives. General and administrative expenses as a percentage of revenues were 8.8% for the year ended December 31, 2025, compared to 7.8% for the year ended December 31, 2024. Other income (expense). Other income (expense) results from capital gains on sale of property and equipment and one time expenses. Other income (expense) Interest expenses, net. Interest expenses, net consist of interest income and expense. Interest income and expenses relate to the interest received from or paid to banks for the outstanding deposits and debts, respectively. Financial expense, net. Financial expense, net consists of exchange rate and interest income or expense. Interest income or expense relates to the interest received from or paid to banks and changes in the rate of the NIS or other currencies against the U.S. dollar. Tax expense. Tax expense consists of Israeli and U.S. federal and state taxes on the income of TAT’s business and changes in deferred tax assets or liabilities. Year Ended December 31, 2025 2024 Change U.S. dollars in thousands Amount Amount Amount % Interest expenses (1,010 ) (1,472 ) 462 (31.4 )% Other financial expenses, net (325 ) (477 ) 152 (31.9 )% Provision for taxes on income taxes 2,143 195 1,948 999.0 % 57 Interest expenses, net Interest expense, net for the year ended December 31, 2025 were $1.0 million, compared to $1.5 million of interest expenses for the year ended December 31, 2025. Interest expense as a percentage of revenues was 0.6% for the year ended December 31, 2025, compared to 1.0% for the year ended December 31, 2025. Other financial expenses, net Other financial expenses, net was $0.3 million for the year ended December 31, 2025, compared to other financial expenses, net of $0.5 million for the year ended December 31, 2024. The decrease was mainly due to revaluation of long-term loans in Israeli Shekel which were affected by favorable changes in exchange rates of U.S. dollar and NIS during the year. Other financial income (expenses) as a percentage of revenues were 0.2% for the year ended December 31, 2025, compared to 0.3% for the year ended December 31, 2024. Provision for taxes on income Taxes on income for the year ended December 31, 2025, amounted to $2.1 million, compared to $0.2 million for the year ended December 31, 2024. Provision for taxes on income as a percentage of revenues was 1.2% for the for the year ended December 31, 2025, compared to 0.1% for the year ended December 31, 2024. Share in profits of equity investment of affiliated companies Share in profits of equity investment of affiliated companies for the year ended December 31, 2025, amounted to a gain of $1.5 million compared to $0.8 million for the year ended December 31, 2024. Share in profits of equity investment of affiliated companies as a percentage of revenues was 0.8% for the for the year ended December 31, 2025, compared to 0.5% for the year ended December 31, 2024. Year ended December 31, 2024 compared with Year ended December 31, 2023 Please see Item 5 on Form 20-F for the Year ended December 31, 2024 filed with the SEC on March 26, 2025 for this comparison. 58 D. Critical Accounting Policies and Estimates TAT’s consolidated financial statements are prepared in accordance with generally accepted accounting principles in the United States (“U.S. GAAP”). These accounting principles require management to make certain estimates, judgments and assumptions based upon information available at the time that they are made, historical experience and various other factors that are believed to be reasonable under the circumstances. These estimates, judgments and assumptions can affect the reported amounts of assets and liabilities as of the date of the financial statements, as well as the reported amounts of revenues and expenses during the periods presented. While all the accounting policies impact the financial statements, certain policies may be viewed to be critical. These policies are those that are both most important to the portrayal of TAT’s financial condition and results of operations and require management’s most difficult, subjective and complex judgments and estimates. Actual results could differ from those estimates. In many cases, the accounting treatment of a particular transaction is specifically dictated by U.S. GAAP and does not require management’s judgment in its application. There are also areas in which management’s judgment in selecting among available alternatives would not produce a materially different result. Management has reviewed these critical accounting policies and related disclosures with TAT’s audit committee. TAT’s management believes the significant accounting policies which affect management’s more significant judgments and estimates used in the preparation of TAT’s consolidated financial statements and which are the most critical to aid in fully understanding and evaluating the reported financial results include the following: • Recoverability of Inventory; • Income taxes. Inventory Valuation Inventories are stated at the lower cost and net realizable value. Cost of raw material and parts is determined using the moving average basis. Cost of work in progress and finished products is calculated based on actual costs and the capitalized production costs, mainly labor and overhead and is determined based on the average basis. TAT’s policy for valuation of inventory and commitments to purchase inventory, including the determination of obsolete or excess inventory, requires it to perform a detailed assessment of inventory at each balance sheet date which includes a review of, among other factors, an estimate of future demand for products within specific time frames, recoverability of existing inventory, as well as product lifecycle and product development plans. The business environment in which TAT operates, the wide range of products that TAT offers and the relatively short sales cycles TAT experiences, all contribute to the exercise of judgment relating to maintaining and writing-off of inventory levels. The estimates of future demand that TAT uses in the valuation of inventory are the basis for its revenue forecast, which is also consistent with its short-term manufacturing plan. Inventory reserves are also provided to cover risks arising from slow-moving items. Inventory management remains an area of management focus as TAT balances the need to maintain strategic inventory levels to ensure competitive lead times against the risk of inventory obsolescence due to changing technology and customer requirements. TAT writes down obsolete or slow-moving inventory in an amount equal to the difference between the cost of inventory and the net realizable value based upon assumptions about future demand, market conditions and sale forecasts. If actual market conditions are less favorable than TAT anticipates, additional inventory write-downs may be required. 59 Income Taxes TAT operates within multiple tax jurisdictions and is subject to audits in these jurisdictions. These audits can involve complex issues, which may require an extended period of time to resolve. In management’s opinion, adequate provisions for income taxes have been made for all years. Although management believes that its estimates are reasonable, no assurance can be given that the final tax outcome of these issues will not be different than those reflected in its historical income tax provisions. TAT uses the liability method of accounting for income taxes. Under this method, deferred tax assets and liabilities are determined based on temporary differences between the financial statement and tax bases of assets and liabilities and net operating loss and credit carry forwards using enacted tax rates in effect for the year in which the differences are expected to reverse. The effect on deferred tax assets and liabilities of a change in tax rates is recognized in income in the period that includes the enactment date. Valuation allowances are established when it is more likely than not that some portion of the deferred tax assets will not be realized. To the extent that TAT’s decisions and assumptions and historical reporting are determined not to be compliant with applicable tax laws, TAT may be subject to adjustments in its reported income for tax purposes as well as interest and penalties. According to an acceptable interpretation that prescribes a minimum recognition threshold, a tax position is required to meet before being recognized in the financial statements. The interpretation also provides guidance on de-recognition of tax positions, classification on the balance sheet, interest and penalties, accounting in interim periods, disclosure and transition. In addition, the interpretation requires significant judgment with respect to determining what constitutes an individual tax position as well as assessing the outcome of each tax position. Changes in judgment as to recognition or measurement of tax positions can materially affect the estimate of the effective tax rate and consequently affect our operating results. E. Conditions in Israel TAT is incorporated under the laws of the State of Israel, certain executive offices and manufacturing and research and development facilities are located in Israel. Please refer to “Item 3D – Risk Factors” for a description of governmental, economic, fiscal, monetary, or political policies or factors that have materially affected or could materially affect TAT’s operations. 60 F. Trade Relations Israel is a member of the United Nations, the International Monetary Fund, the International Bank for Reconstruction and Development, and the International Finance Corporation. Israel is also a member of the World Trade Organization and is a signatory to the General Agreement on Tariffs and Trade. In addition, Israel benefits from preferential trade arrangements under various trade preference programs in a number of jurisdictions, which permit the export of certain eligible products either duty-free or at reduced tariff rates. Israel has entered into a number of bilateral and multilateral free trade agreements. In July 1975, Israel and the European Union Community (now the European Union, or the “EU”) concluded a Free Trade Agreement, granting certain advantages for Israeli exports to EU member states while requiring Israel to gradually reduce tariffs on imports from these countries. In 1985, Israel and the United States entered into an agreement to establish a Free Trade Area, which eliminated all tariff and some non-tariff barriers on most trade between the two countries. In January 1993, Israel entered into a free trade agreement with the European Free Trade Association (“EFTA”) establishing a free-trade zone between Israel and the EFTA member states. In November 1995, Israel entered into a further association agreement with the EU, which, among other things, includes a redefinition of rules of origin and additional benefits, such as allowing Israel to become a member of the Research and Technology programs of the European Union. During the recent years, Israel has expended its commercial and trade relations through additional free trade agreements and trade cooperation frameworks with a number of other countries and regions. In addition, Israel has entered into additional free trade agreements and trade cooperation frameworks with a number of other countries and regions, including certain countries in the Asia-Pacific region and the Americas. G. Impact of Currency Fluctuation and of Inflation TAT reports its financial results in US dollars and receives payment primarily in US dollars or dollar-linked to NIS for all of its sales. However, a portion of its expenses, principally salaries and related personnel expenses in Israel, are denominated in NIS. Additionally, certain assets, as well as a portion of its liabilities, are denominated in NIS. Therefore, the US dollar cost of TAT’s operations is influenced by the extent to which inflation in Israel is offset, either partially or fully, on a lagging basis or is not offset by the devaluation of the NIS in relation to the US dollar. When the rate of inflation in Israel exceeds the rate of devaluation of the NIS against the U.S. dollar, the dollar cost of operations in Israel increases. If the dollar cost of operations in Israel increases, its dollar-measured results of operations will be adversely affected. It is uncertain whether TAT will be materially and adversely affected in the future if inflation in Israel exceeds the devaluation of the NIS against the US dollar or if the timing of the devaluation lags behind inflation in Israel. In 2025, the U.S. dollar depreciated in relation to the NIS at a rate of 13%, from NIS 3.65 per $1 on December 31, 2024 to NIS 3.19 per $1 on December 31, 2025. The annual rate of inflation in Israel was 2.6% in 2025 and 3.4% in 2024. Because exchange rates between the NIS and the US dollar fluctuate continuously, exchange rate fluctuations, and especially significant changes in the exchange rate, may have an impact on TAT’s profitability and period-to-period comparisons of its results. The effects of foreign currency re-measurements are reported in TAT’s consolidated financial statements in current operations. Although TAT hedges a portion of its exchange rate risk through the use of forward contracts and other derivative instruments, there is no certainty that future results of operations will not be materially adversely affected by currency fluctuations. 61 H. Corporate Tax Rate Israeli companies are generally subject to corporate tax on their taxable income (including capital gains). The regular corporate tax rate for Israel was 23% for the year ended December 31, 2023, 2024 and 2025. However, the rate is effectively reduced for income derived from Approved and Beneficiary Enterprises, as defined by the Law for the Encouragement of Capital Investments, 1959, as amended. For additional information, please see Item 10.E below “Taxation - Israeli Tax Considerations - Tax Benefits under the Law for the Encouragement of Capital Investments, 1959”. Certain investment income derived by TAT from investments may not be regarded by the Israeli tax authorities as income from TAT’s Preferred Enterprise and consequently may be taxed at the regular statutory rate in Israel. Certain of TAT’s subsidiaries operate in and are subject to the tax laws of various other jurisdictions, primarily the United States. TAT’s U.S. subsidiaries are taxed based on federal and state tax laws. The U.S. federal statutory flat tax rate for tax years 2025 and 2024 is 21%. I. Recently Issued Accounting Standards In November 2024, the FASB issued ASU No. 2024-03 Income Statement - Reporting Comprehensive Income - Expense Disaggregation Disclosures (Subtopic 220-40). The ASU improves the disclosures about a public business entity’s expenses and provides more detailed information about the types of expenses in commonly presented expense captions. The amendments require that at each interim and annual reporting period an entity will, inter alia, disclose amounts of purchases of inventory, employee compensation, depreciation and amortization included in each relevant expense caption (such as cost of sales, SG&A and research and development). The ASU is effective for fiscal years beginning after December 15, 2026, and interim periods within fiscal years beginning after December 15, 2027. Early adoption is permitted. The Company is currently evaluating this ASU to determine its impact on the Company's disclosures On July 2025, the FASB issued ASU 2025-05, Financial Instruments – Credit Losses (Topic 326): Measurement of Credit Losses for Accounts Receivable and Contract Assets (“ASU 2025-05”). ASU 2025-05 provides a practical expedient that all entities can use when estimating expected credit losses for current accounts receivable and current contract assets arising from transactions accounted for under ASC 606, Revenue from Contracts with Customers. Under this practical expedient, an entity is allowed to assume that the current conditions it has applied in determining credit loss allowances for current accounts receivable and current contract assets remain unchanged for the remaining life of those assets. ASU 2025-05 is effective for fiscal years beginning after December 15, 2025, and interim reporting periods in those years. Entities that elect the practical expedient and, if applicable, make the accounting policy election are required to apply the amendments prospectively. The Company is currently evaluating the potential impact of this guidance on its consolidated financial statements and disclosures. 62 In December 2025, the Financial Accounting Standards Board (FASB) issued Accounting Standard Update (ASU) 2025-10; Accounting for Government Grants Received by Business Entities, which provides guidance on how companies should recognize, measure, and present government grants received. The new standard is effective for annual and interim reporting periods beginning after December 15, 2028. The standard allows for a modified prospective, modified retrospective, or retrospective transition. Early adoption is permitted. We are currently evaluating the impact of adopting this new pronouncement. J. Recently adopted accounting pronouncements: In December 2023, the FASB issued ASU 2023-09, Income Taxes (Topic 740): Improvements to Income Tax Disclosures, to enhance income tax reporting disclosures and require disclosure of specific categories in the tabular rate reconciliation. We adopted this standard for the annual period ending December 31, 2025 on a prospective basis. We updated our income tax disclosures to comply with the requirements. See “Note 14: Income Taxes.” The adoption of the standard did not have an impact on our financial position, results of operations, or liquidity. K. Liquidity and Capital Resources On May 2025, TAT entered into an Underwriting Agreement with certain Underwriters, relating to an underwritten public offering of 4,150,000 ordinary shares at a public offering price of $26.00 per share, of which TAT sold 1,625,000 ordinary shares and the Selling Shareholders sold 2,525,000 ordinary shares (collectively, the “Firm Shares”) which was closed on June 3, 2025. The gross proceeds of the offering to the Company were $42.3 million. Pursuant to the Underwriting Agreement, TAT and the Selling Shareholders also granted the Underwriters an option to purchase up to an additional 242,298 and 380,202 ordinary shares from the Company and the Selling Shareholders, respectively (collectively, the “Options Shares”), at a public offering price less the underwriting discount and commissions (the “Underwriters Option”). On June 26, 2025, following the exercise by the Underwriters of the Underwriters Option in full, the sale and issuance of the Option Shares was completed. The total gross proceeds of the sale and issuance of the Option Shares to TAT, were $6.3 million. The net proceeds for the Company from this public offering after issuance costs was $45.4 million. As of December 31, 2025, TAT had cash and cash equivalents and restricted cash of $51.5 million compared to $ 7.4 million as of December 31, 2024, an increase of $44 million primarily due to the previously mentioned public offering agreement in June 2025 coupled with strong cash flows from operations. During 2025, TAT decreased its loans and lines of credit from commercial banks by $4.4 million and repaid loans in the amount of $2.1 million. Total long term loans and credit line balance amount as of the year ended December 31 December 31, Current Interest Rate Duration (in Years) 2025 2024 Israel Government guaranteed loans a $ 3,833 $ 3,990 7.25 % 5-10 Commercial loans b 1,961 2,171 6.65 % 7 United States Commercial loans c 5,480 6,285 3.75% - 4.2 % 7-10 Line of credit d - 4,350 7.25% - 8.6 % Revolving Machinery finance loans e 438 575 6.5 % 5 $ 11,712 $ 17,371 63 The maturities of long-term loans are as follows: Year Amount 2026 $ 2,227 2027 3,427 2028 2,057 2029 1,534 2030 and after 2,467 $ 11,712 In respect of the credit lines and the loans in (a), (c) and (d) above, the Company and its subsidiaries are required to meet certain financial covenants. As of December 31, 2025 the Company and its subsidiaries met all its covenants. Capital expenditures for the years ended December 31, 2025, 2024 and 2023 were approximately $10.9 million, $3.9 million and $3.6 million, respectively. TAT funded these expenditures mainly from its own cash resources and cash flows from operations. TAT’s management believes that anticipated cash flow from operations and its current cash balances will be sufficient to meet its cash requirements for at least 12 months from the financial statement issuance date. TAT’s future capital requirements will depend on many factors, including its rate of revenue growth, the expansion of its selling and marketing activities, costs associated with expansion into new markets and the timing of the introduction of new products and services. Cash Flows The following table summarizes TAT’s cash flows for the periods presented: Year Ended December 31, (in thousands) U.S. dollars in thousands 2025 2024 2023 Net cash provided by (used in) operating activities $ 14,974 $ (5,818 ) $ 2,255 Net cash used in investing activities (10,054 ) (3,851 ) (3,579 ) Net cash provided by financing activities 39,212 161 10,240 Net increase (decrease) in cash and cash equivalents 44,132 (9,508 ) 8,916 Cash and cash equivalents at beginning of the year 7,434 16,942 8,026 Cash and cash equivalents at end of the year $ 51,566 $ 7,434 $ 16,942 64 Net cash provided by operating activities for the year ended December 31, 2025, amounted to approximately $15.0 million, compared to net cash used by operating activities of $5.8 million for the year ended December 31, 2024 and net cash provided by operating activities of $2.3 million for the year ended December 31, 2023. Net cash provided by operating activities for the year ended December 31, 2025 was principally derived from the following adjustments of non-cash line items: an upward adjustment of $5.1 million for depreciation and amortization; an upward adjustment of $1.2 million for stock based compensation; an upward adjustment of $1.9 million for the foreign currency loss and inventory valuation; an upward adjustment of $1.9 million for deferred income taxes; an offset adjustment of $7.5 million for inventory; and a downward adjustment of $3.5 million for increase in trade accounts receivable. Net cash used in operating activities for the year ended December 31, 2024 was impacted by the Company’s growing working capital needs. Net cash used in operating activities for the year ended December 31, 2024 was principally derived from the following adjustments of non-cash line items: an upward adjustment of $5.5 million for depreciation and amortization; an upward adjustment of $4.7 million for an increase in trade accrued expenses other; an offset adjustment of $17.2 million for inventory; and a downward adjustment of $9.7 million for increase in trade accounts receivable. Net cash provided by operating activities for the year ended December 31, 2023 was principally derived from the following adjustments of non-cash line items: an upward adjustment of $4.7 million for depreciation and amortization; an upward adjustment of $4.1 million for an increase in trade accrued expenses other; an offset adjustment of $5.4 million for inventory; and a downward adjustment of $4.2 million for increase in trade accounts receivable. In the year ended December 31, 2025, net cash used by investing activities was $10.1 million, out of which approximately $11.0 million was attributed to investment mainly in new machinery and equipment and $0.9 million from sale of machinery and equipment. In the year ended December 31, 2024, net cash used by investing activities was $3.9 million, out of which approximately $5.1 million was attributed to investment mainly in new machinery and equipment and $1 million from sale of machinery and equipment. In the year ended December 31, 2023, net cash used by investing activities was $3.6 million, out of which approximately $5.1 million was attributed to investment mainly in new machinery and buildings and $2.0 million from sale of machinery and equipment. In the year ended December 31, 2025, net cash provided by financing activities was $39.2 million. In the year ended December 31, 2025, net cash provided by financing activities was primarily attributable to a net amount of $45.4 million from issuance of ordinary shares during 2025, net of $6.5 million repayment of short term credit line and repayment of long term loans. 65 In the year ended December 31, 2024, net cash provided by financing activities was $0.2 million. In the year ended December 31, 2024, net cash provided by financing activities was primarily attributable to an amount of $9.8 million from issuance of ordinary shares during 2024, net of $9.7 million repayment of short term credit line and repayment of long term loans. In the year ended December 31, 2023, net cash provided by financing activities was primarily attributable to an amount of $10.2 million from issuance of ordinary shares and exercise of options during 2023. L. Research and Development, Patents and Licenses Not applicable. M. Trend Information In recent years, the aerospace industry in which we operate has been impacted by the increase in number of commercial and defense aircraft, increase in commercial passenger traffic and a corresponding increase in airlines’ revenue. Commercial carriers remain committed to their efforts to reduce cost of MRO activities and increase efficiencies. There is a risk that the political environment in Israel could continue to prevent certain countries from doing business with us, in addition to the increased competition may have an adverse effect on our business. Given the above, we cannot guarantee or predict what our sales will be, what trends will develop, and if any changes in our business and marketing strategy will be implemented. N. Off-Balance Sheet Arrangements We are not a party to any material off-balance sheet arrangements. In addition, we have no unconsolidated special purpose financing or partnership entities that are likely to create material contingent obligations. 66