What changed in this filing

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Item 1. Business

2024-06-26 compared with 2023-06-27 · 330 added, 230 removed, 475 unchanged (54% of the section changed)

(the “Company,” “Air T,” “we” or “us” or “our”) is a holding company with a portfolio of operating businesses and financial assets.

Our goal is to prudently and strategically diversify Air T’s earnings power and compound the growth in its free cash flow per share over time.

Our goal is to prudently and strategically grow Air T’s earnings power, compounding its free-cash-flow per share over time.

We currently operate in four industry segments:

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• Corporate and other, which acts as the capital allocator and resource for other consolidated businesses.

Further, Corporate and other is also comprised of insignificant businesses that do not pertain to other reportable segments.

On January 31, 2023, the Company acquired Worldwide Aircraft Services, Inc.

("WASI"), a Kansas corporation that services the aircraft industry across the United States and internationally through the operation of a repair station which is located in Springfield, Missouri at the Branson National Airport.

The acquisition was was funded with cash and the loans described in Note 14 of Notes to Consolidated Financial Statements included under Part II, Item 8 of this report.

WASI is included within the Overnight Air Cargo segment.

See Note 2 of Notes to Consolidated Financial Statements included under Part II, Item 8 of this report.

Unconsolidated Investments

The Company has ownership interest in Contrail Asset Management, LLC (“CAM”).

The operations of CAM are not consolidated into the operations of the Company.

See Note 24 of Notes to Consolidated Financial Statements included under Part II, Item 8 of this report.

The Company also has ownership interests in Insignia Systems, Inc.

("Insignia") and Cadillac Casting, Inc.

The operations of these companies are not consolidated into the operations of the Company.

See Note 10 of Notes to Consolidated Financial Statements included under Part II, Item 8 of this report.

Further, Corporate and other also comprises insignificant businesses and business interests.

Each business segment has separate management teams and infrastructures that offer different products and services.

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Air T was incorporated under the laws of the State of Delaware in 1980.

The principal place of business of Air T is 11020 David Taylor Drive, Suite 305, Charlotte NC, 28262 and Mountain Air Cargo, Inc.

(“MAC”) is 5930 Balsom Ridge Road, Denver, North Carolina.

The principal place of business of Air T is 11020 David Taylor Drive, Suite 305, Charlotte NC, 28262.

The principal place of business of Mountain Air Cargo, Inc.

(“MAC”) is Denver, North Carolina.

The principal place of business of CSA Air, Inc.

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and Landing Gear Support Services PTE Limited (collectively, "LGSS") is Singapore, Singapore.

The principal place of business of WASI is Springfield, Missouri.

The principal place of business of Worldwide Aircraft Services, Inc.

("WASI") is Springfield, Missouri.

We maintain an Internet website at http://www.airt.net and our SEC filings may be accessed through links on our website.

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fuel, landing fees, third-party maintenance, parts and certain other direct operating costs.

The current dry-lease agreement was most recently renewed on June 1, 2021 and is set to expire on August 31, 2026.

The dry-lease agreements may be terminated by FedEx or MAC and CSA, respectively, at any time upon 90 days’ written notice and FedEx may at any time terminate the lease of any particular aircraft thereunder upon 10 days’ written notice.

The current dry-lease agreements were most recently renewed on June 1, 2021 and are set to expire on August 31, 2026.

The dry-lease agreements may be terminated by FedEx or MAC and

CSA, respectively, at any time upon 90 days’ written notice and FedEx may at any time terminate the lease of any particular aircraft thereunder upon 10 days’ written notice.

In addition, each of the dry-lease agreements provides that FedEx may terminate the agreement upon written notice if 60% or more of MAC or CSA’s revenue (excluding revenues arising from reimbursement payments under the dry-lease agreement) is derived from the services performed by it pursuant to the respective dry-lease agreement, FedEx becomes MAC or CSA’s only customer, or MAC or CSA employs fewer than six employees.

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As of March 31, 2024, MAC and CSA had an aggregate of 105 aircraft under its dry-lease agreements with FedEx.

Included within the 85 aircraft, 2 Cessna Caravan aircraft are considered soft-parked.

Included within the 105 aircraft, 6 Cessna Caravan and 7 Sky Courier aircraft are considered soft-parked.

Soft-parked aircraft remain covered under our agreements with FedEx although at a reduced administrative fee compared to aircraft that are in operation.

MAC and CSA continue to perform maintenance on soft-parked aircraft, but they are not crewed and do not operate on scheduled routes.

Revenues from MAC and CSA’s contracts with FedEx accounted for approximately 36% and 41% of the Company’s consolidated revenue for the fiscal years ended March 31, 2023 and 2022, respectively.

In addition, 3 Cessna Caravan were considered hard-parked.

Hard-parked aircraft are covered under the agreements with FedEx, do not receive an administrative fee, and do not operate scheduled routes but do receive a nominal storage fee.

Revenues from MAC and CSA’s contracts with FedEx accounted for approximately 36% of the Company’s consolidated revenue for the fiscal years ended March 31, 2024 and 2023.

The loss of FedEx as a customer would have a material adverse effect on the Company.

FedEx has been a customer of the Company since 1980.

MAC and CSA are not contractually precluded from providing services to other parties and MAC occasionally provides third-party maintenance services to other airline customers and the U.S.

MAC and CSA are not contractually precluded from providing services to other parties and MAC occasionally provides third-party maintenance services to other airline customers.

MAC and CSA operate under separate aviation certifications.

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MAC and CSA are two of nine carriers that operate within the United States as FedEx feeder carriers.

MAC and CSA are benchmarked against the other five FedEx feeders based on safety, reliability, compliance with federal, state and applicable foreign regulations, price and other service-related measurements.

MAC and CSA are benchmarked against the other nine FedEx feeders based on safety, reliability, compliance with federal, state and applicable foreign regulations, price and other service-related measurements.

The Company believes accurate industry data is not available to indicate the Company’s position within its marketplace (in large measure because all of the Company’s direct competitors are privately held), but management believes that MAC and CSA, combined, constitute the largest contract carrier of the type described.

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The audits test adherence to the dry-lease agreements and assess the carrier’s overall internal control environment, particularly as related to the processing of invoices of FedEx-reimbursable costs.

The scope of these audits typically extends beyond simple validation of invoice data against the third-party supporting documentation.

The scope of these audits typically extends

beyond simple validation of invoice data against the third-party supporting documentation.

The audit teams generally investigate the operator’s processes and internal control procedures.

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WASI is a certified FAA/EASA part 145 repair station (no.

OWRF547L) and specializes in medium passenger regional jets, regional/commuter turboprops, cargo and special mission operators.

OWRF547L) and specializes in medium passenger regional jets, regional/commuter turboprops, cargo and other operators.

It maintains a fully equipped engine shop with tooling and engine run stands.

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GGS’s mobile deicing equipment business has historically been seasonal, with revenues typically being lower in the fourth and first fiscal quarters as commercial deicers are typically delivered prior to the winter season.

The Company has continued its

efforts to reduce GGS’s seasonal fluctuation in revenues and earnings by broadening its international and domestic customer base and its product line.

The Company has continued its efforts to reduce GGS’s seasonal fluctuation in revenues and earnings by broadening its international and domestic customer base and its product line.

In October 2021, GGS was awarded a new contract to supply deicing trucks to the USAF.

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GGS sold a total of 9 and 14 deicers under the current contract with the USAF including both GL 1800 and ER 2875 models during fiscal years ended March 31, 2024 and March 31, 2023, respectively and all the units were accepted by the USAF.

GGS has already received confirmed orders of 6 deicers for fiscal 2024’s delivery order and currently expects the delivery of both GL 1800 and ER 2875 models to begin in the second quarter of fiscal year 2024.

GGS has already received confirmed orders of 14 deicers for fiscal 2025’s delivery order and currently expects the delivery of both GL 1800 and ER 2875 models in the first quarter of fiscal year 2025.

Commercial Jet Engines and Parts.

Contrail and Jet Yard (acquired during fiscal year 2017), AirCo (formed in May 2017), Worthington (acquired in May 2018), Jet Yard Solutions (formed in January 2021), Air'Zona (acquired in March 2021), LGSS (formed March 2022), and Crestone Air Partners ("Crestone", formed April 2022) comprises the commercial jet engines and parts segment of the Company’s operations.

Contrail and Jet Yard (acquired during fiscal year 2017), AirCo (formed in May 2017), Worthington (acquired in May 2018), Jet Yard Solutions (formed in January 2021), Air'Zona (acquired in March 2021), LGSS (formed March 2022), and Crestone Air Partners ("Crestone", formed April 2022) comprise the commercial jet engines and parts segment of the Company’s operations.

Contrail is a commercial aircraft trading, leasing and parts solutions provider.

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The Company’s commercial jet engines and parts operations are not materially seasonal.

Unconsolidated Investments

The Company has ownership interest in Contrail Asset Management, LLC (“CAM”).

The operations of CAM are not consolidated into the operations of the Company.

See Note 22 of Notes to Consolidated Financial Statements included under Part II, Item 8 of this report.

The Company also has ownership interests in Lendway Inc.

LDWY ("Lendway"), formerly known as Insignia Systems, Inc.

("Insignia"), and Cadillac Casting, Inc.

The operations of these companies are not consolidated into the operations of the Company.

See Note 10 of Notes to Consolidated Financial Statements included under Part II, Item 8 of this report.

GGS’s backlog consists of “firm” orders supported by customer purchase orders for the equipment sold by GGS.

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In addition, the Company maintains product liability insurance with respect to injuries and loss arising from use of products sold and services provided.

In March 2014, the Company formed SAIC, a captive insurance company licensed in Utah.

In March 2014, the Company formed Space Age Insurance Company ("SAIC") , a captive insurance company licensed in Utah.

SAIC insures risks of the Company and its subsidiaries that were not previously insured by the various Company insurance programs (including the risk of loss of key customers and contacts, administrative actions and regulatory changes);

and may from time to time underwrite third-party risk through certain reinsurance arrangements.

As of December 26, 2023, SAIC was considered a dormant captive insurance company with the State of Utah, in which it was registered.

SAIC is included within the Company's Corporate and other segment.

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The Company believes its relations with its employees are good.

We consider our relationship with our employees to be good.

Our human capital resources objectives include, as applicable, identifying, recruiting, retaining, incentivizing and integrating our existing and additional employees.

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We are committed to providing team members with the training and resources necessary to continually strengthen their skills.

Our executive team is responsible for periodically reviewing team member programs and initiatives, including healthcare and other benefits, as well as our management development and succession planning practices.

Our executive team is responsible for periodically reviewing team member programs and initiatives, including healthcare and other benefits, as well as

our management development and succession planning practices.

Management periodically reports to the Board regarding our human capital measures and results that guide how we attract, retain and develop a workforce to enable our business strategies.

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We focus on implementing change through workforce observation and feedback channels to recognize risk and continuously improve our processes.

Importantly during fiscal years 2020 through 2022, our focus on providing a positive work environment on workplace safety have enabled us to preserve business continuity without sacrificing our commitment to keeping our colleagues and workplace visitors safe during the COVID-19 pandemic.

We took immediate action at the onset of the COVID-19 pandemic to enact rigorous safety protocols in our facilities by improving sanitation measures, implementing mandatory social distancing, use of facing coverings, reducing on-site workforce through staggered shifts and schedules, remote working where possible, and restricting visitor access to our locations.

We believe these actions helped minimize the impact of COVID-19 on our workforce.

General Business Risks

• Market fluctuations may affect the Company’s operations.

• Rising inflation may result in increased costs of operations and negatively impact the credit and securities markets generally, which could have a material adverse effect on our results of operations and the market price of our Securities.

• We could experience significant increases in operating costs and reduced profitability due to competition for skilled management and staff employees in our operating businesses.

• Legacy technology systems require a unique technical skillset which is becoming scarcer.

• Security threats and other sophisticated computer intrusions could harm our information systems, which in turn could harm our business and financial results.

• We may not be able to insure certain risks adequately or economically.

• Legal liability may harm our business.

• Our business might suffer if we were to lose the services of certain key employees.

Risks Related to Our Structure and Financing/Liquidity Risks

• The Company could experience liquidity issues if the Company’s revolving line of credit with MBT is not extended or replaced.

• Our holding company structure may increase risks related to our operations.

• A small number of stockholders has the ability to control the Company.

• Although we do not expect to rely on the “controlled company” exemption, we may soon become a “controlled company” within the meaning of the Nasdaq listing standards, and we would qualify for exemptions from certain corporate governance requirements.

• An increase in interest rates or in our borrowing margin would increase the cost of servicing our debt and could reduce our cash flow and negatively affect the results of our business operations.

• Our inability to maintain sufficient liquidity could limit our operational flexibility and also impact our ability to make payments on our obligations as they come due.

• Future cash flows from operations or through financings may not be sufficient to enable the Company to meet its obligations.

• A large proportion of our capital is invested in physical assets and securities that can be hard to sell, especially if market conditions are poor.

• To service our debt and meet our other cash needs, we will require a significant amount of cash, which may not be available.

• If our cash flows and capital resources are insufficient to fund our debt service obligations, we may be forced to seek alternatives.

• Despite our substantial indebtedness, we may incur significantly more debt, and cash may not be available to meet our financial obligations when due or enable us to capitalize on investment opportunities when they arise.

• Our current financing arrangements require compliance with financial and other covenants and a failure to comply with such covenants could adversely affect our ability to operate.

• Future acquisitions and dispositions of businesses and investments are possible, changing the components of our assets and liabilities, and if unsuccessful or unfavorable, could reduce the value of the Company and its securities.

• We face numerous risks and uncertainties as we expand our business.

• Our business strategy includes acquisitions, and acquisitions entail numerous risks, including the risk of management diversion and increased costs and expenses, all of which could negatively affect the Company’s ability to operate profitably.

• Strategic ventures may increase risks applicable to our operations.

• Rapid business expansions or new business initiatives may increase risk.

• Our policies and procedures may not be effective in ensuring compliance with applicable law.

• Compliance with the regulatory requirements imposed on us as a public company results in significant costs that may have an adverse effect on our results.

• Deficiencies in our public company financial reporting and disclosures could adversely impact our reputation.

Risks Related to Our Segment Operations

• The operating results of our four segments may fluctuate, particularly our commercial jet engine and parts segment.

• Our Air Cargo Segment is dependent on a significant customer.

• Our dry-lease agreements with FedEx subject us to operating risks.

• Because of our dependence on FedEx, we are subject to the risks that may affect FedEx’s operations.

• A material reduction in the aircraft we fly for FedEx could materially adversely affect our business and results of operations.

• Sales of deicing equipment can be affected by weather conditions.

• We are affected by the risks faced by commercial aircraft operators and MRO companies because they are our customers.

• Our engine values and lease rates, which are dependent on the status of the types of aircraft on which engines are installed, and other factors, could decline.

• Upon termination of a lease, we may be unable to enter into new leases or sell the airframe, engine or its parts on acceptable terms.

• Failures by lessees to meet their maintenance and recordkeeping obligations under our leases could adversely affect the value of our leased engines and aircraft which could affect our ability to re-lease the engines and aircraft in a timely manner following termination of the leases.

• We may experience losses and delays in connection with repossession of engines or aircraft when a lessee defaults.

• Our commercial jet engine and parts segment and its customers operate in a highly regulated industry and changes in laws or regulations may adversely affect our ability to lease or sell our engines or aircraft.

• Our aircraft, engines and parts could cause damage resulting in liability claims.

• We have risks in managing our portfolio of aircraft and engines to meet customer needs.

• Liens on our engines or aircraft could exceed the value of such assets, which could negatively affect our ability to repossess, lease or sell a particular engine or aircraft.

• In certain countries, an engine affixed to an aircraft may become an addition to the aircraft and we may not be able to exercise our ownership rights over the engine.

• Higher or volatile fuel prices could affect the profitability of the aviation industry and our lessees’ ability to meet their lease payment obligations to us.

• Interruptions in the capital markets could impair our lessees’ ability to finance their operations, which could prevent the lessees from complying with payment obligations to us.

• Our lessees may fail to adequately insure our aircraft or engines which could subject us to additional costs.

• If our lessees fail to cooperate in returning our aircraft or engines following lease terminations, we may encounter obstacles and are likely to incur significant costs and expenses conducting repossessions.

• If our lessees fail to discharge aircraft liens for which they are responsible, we may be obligated to pay to discharge the liens.

• If our lessees encounter financial difficulties and we restructure or terminate our leases, we are likely to obtain less favorable lease terms.

• Withdrawal, suspension or revocation of governmental authorizations or approvals could negatively affect our business.

Risks Related to Air T Funding

• The ranking of the Company’s obligations under the Junior Subordinated Debentures and the Guarantee creates a risk that Air T Funding may not be able to pay amounts due to holders of the Capital Securities.

• The Company has the option to extend the Capital Securities interest payment period.

• Tax event or investment company act redemption of the Capital Securities.

• The Company may cause the Junior Subordinated Debentures to be distributed to the holders of the Capital Securities.

• There are limitations on direct actions against the Company and on rights under the guarantee.

• The covenants in the Indenture are limited.

• Holders of the Capital Securities have limited voting rights.

RISKS RELATED TO THE COMPANY

General Business Risks

Market fluctuations may affect our operations.

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In addition, we may be unable to obtain financing on satisfactory terms, or at all.

Third-party reports relating to market studies or demographics we obtained previously also may no longer be accurate or complete.

Market studies or demographics we have reviewed also may no longer be accurate or complete.

The occurrence of any of the foregoing events or any other related matters could materially and adversely affect our business, financial condition, results of operation and the overall value of our assets.

Rising inflation may result in increased costs of operations and negatively impact the credit and securities markets generally, which could have a material adverse effect on our results of operations and the market price of our common stock.

Rising inflation and interest rates may result in increased costs of operations and negatively impact the credit and securities markets generally, which could have a material adverse effect on our results of operations and the market price of our Common Stock.

Inflation has accelerated in the U.S.

and globally due in part to global supply chain issues, the increase in interest rates by the Federal Reserve, the Ukraine-Russia war, a rise in energy prices, and strong consumer demand.

and globally due in part to global supply chain issues, the increase in interest rates by the Federal Reserve, armed conflicts, a rise in energy prices, wage increases and strong consumer demand.

An inflationary environment can increase our cost of labor, as well as our other operating costs, which may have a material adverse impact on our financial results.

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Security threats and other sophisticated computer intrusions could harm our information systems, which in turn could harm our business and financial results.

We utilize information systems and computer technology throughout our business.

We utilize information systems and computer technology throughout our businesses.

We store sensitive data and proprietary information on these systems.

Threats to these systems, and the laws and regulations governing security of data, including personal data, on information systems and otherwise held by companies is evolving and adding layers of complexity in the form of new requirements and increasing costs of attempting to protect information systems and data and complying with new cybersecurity regulations.

Information systems are subject to numerous and evolving cybersecurity threats and sophisticated computer crimes, which pose a risk to the stability and security of our information systems, computer technology, and business.

Global cybersecurity threats can range from uncoordinated individual attempts to gain unauthorized access to our information systems and computer technology to sophisticated and targeted measures known as advanced persistent threats and ransomware.

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We have taken actions to improve our existing systems such as adding multi-factor authentication and to improve employee training and security competency.

While we do not believe this event or resultant actions will have a material adverse effect on our business, this or similar incidents, or any other such breach of our data security infrastructure could have a material adverse effect on our business, results of operations and financial condition.

Although we maintain cybersecurity liability insurance, our insurance may not cover potential claims of these types or may not be adequate to indemnify us for any liability that may be imposed.

While we do not believe this event or resultant actions had or will have a material adverse effect on our business, this or similar incidents, or any other such breach of our data security infrastructure could have a material adverse effect on our business, results of operations and financial condition.

Although we maintain cybersecurity liability insurance, our insurance may not cover potential claims or may not be adequate to indemnify us for any liability that may be incurred.

Any imposition of liability or litigation costs that are not covered by insurance could harm our business.

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Loss of any of these employees, particularly our Chief Executive Officer, could have a material adverse effect on our businesses as our key employees have knowledge of our businesses, the industries they operate in and customers that would be difficult to replace.

Our business, financial condition and results of operations could be adversely affected by global public health issues or similar events.

During the fiscal years ended March 31, 2021 and 2022, and to a lesser extent during the fiscal year ended March 31, 2023, the Company’s operations were impacted by the spread of the COVID-19 pandemic.

Additionally, the Company has had to navigate the impact it had on employees, supply chains and the economy in general and the aviation industry in particular.

The Company is unable at this time to predict the impact that a global health crisis or similar event would have on its businesses, financial position and operating results in future periods due to numerous uncertainties.

A pandemic, epidemic or outbreak of a contagious disease in the markets in which we operate or that otherwise impacts our centers could adversely impact our business.

If a pandemic, epidemic or outbreak of an infectious disease, including new COVID-19 variants, or other public health crisis were to affect the areas in which we operate, our business, including our revenue, profitability and cash flows, could be

adversely affected.

Further, a pandemic, epidemic or outbreak of an infectious disease might adversely impact our business by causing temporary shutdowns of our businesses or by causing staffing shortages.

A pandemic, epidemic or outbreak of a contagious disease in the markets in which we operate or that otherwise impacts our markets could adversely impact our business.

Further, a pandemic, epidemic or outbreak of an infectious disease might adversely impact our businesses by causing temporary shutdowns or by causing staffing shortages.

We may be unable to locate replacement supplies, and ongoing delays could require us to reduce business operations.

Although we have disaster plans in place, the extent to which new COVID-19 variants or other public health crisis will impact our business is difficult to predict and will depend on many factors beyond our control, including the speed of contagion, the development and implementation of effective preventative measures and possible treatments, the scope of governmental and other restrictions on travel and other activity, and public reactions to these factors.

Although we have disaster plans in place, the extent to which a public health crisis would impact our business is difficult to predict and will depend on many factors beyond our control, including the speed of contagion, the development and implementation of effective preventative measures and possible treatments, the scope of governmental and other restrictions on travel and other activity, and public reactions to these factors.

Risks Related to Our Structure and Financing/Liquidity Risks

The Company could experience liquidity issues if the Company’s revolving line of credit with MBT is not extended or replaced.

The principal amount of Air T’s revolving line of credit with MBT (“Revolver – MBT”) was $0 as of March 31, 2024.

This revolving facility matures on August 31, 2024.

The Company believes it has sufficient cash on hand, and available liquidity, to meet its obligations as they become due in the ordinary course of business for at least 12 months following the date of this report.

The Company is currently seeking to refinance the Revolver – MBT prior to its maturity date;

however, there is no assurance that we will be able to execute this refinancing or, if we are able to refinance this obligation, that the terms of such refinancing would be as favorable as the terms of our existing credit facility.

A failure to extend or replace the Revolver – MBT could have a material adverse effect on the Company and its financial condition.

Our holding company structure may increase risks related to our operations.

Our business, financial condition and results of operations are dependent upon those of our individual businesses, and our aggregate investment in particular industries.

We are a holding company with investments in businesses and assets in a number of industries.

Our business, financial condition and results of operations are dependent upon our various businesses and investments and their management teams.

Each of our businesses generally operate independently and in a decentralized manner.

Additionally, in the ordinary course of business we guarantee the obligations of entities that we manage and/or invest in.

Any material adverse change in one of our businesses, investments or management teams, or in a particular industry in which we operate or invest, may cause material adverse changes to our business, financial condition and results of operations.

The more capital we devote to a particular investment or industry may increase the risk that such investment could significantly impact our financial condition and results of operations, possibly in a material adverse way.

A small number of stockholders has the ability to control the Company.

We have a very concentrated stockholder base.

As of March 31, 2024, our two largest stockholders beneficially owned or had the ability to direct the voting of shares of our Common Stock representing approximately 67% of the outstanding shares.

As a result, these stockholders have the power to determine the outcome of substantially all matters submitted to our stockholders for approval, including the election of our board of directors.

In addition, future sales by these stockholders of substantial amounts of our Common Stock, or the potential for such sales, could adversely affect the prevailing market price of our securities.

Although we do not expect to rely on the “controlled company” exemption, we may soon become a “controlled company” within the meaning of the Nasdaq listing standards, and we would qualify for exemptions from certain corporate governance requirements.

A “controlled company,” as defined in the Nasdaq listing standards, is a company of which more than 50% of the voting power for the election of directors is held by an individual, a group or another company.

Controlled companies are not required to comply with certain Nasdaq listing standards relating to corporate governance, including:

• the requirement that a majority of its board of directors consist of independent directors;

• the requirement that its nominating and corporate governance committee be composed entirely of independent directors with a written charter addressing the committee’s purpose and responsibilities;

• the requirement that its compensation committee be composed entirely of independent directors with a written charter addressing the committee’s purpose and responsibilities.

Nicolas Swenson, our President, Chief Executive Officer and Chairman of the Board, beneficially owns an aggregate of 1,352,938 shares of our Common Stock, which represents approximately 49% of the voting power of our outstanding Common Stock.

Our President, CEO/Chairman could soon own a majority of the voting power for the election of our directors, and thus we would meet the definition of a “controlled company.” As a result, these requirements would not apply to us as long as we remain a “controlled company.”

Although we may soon qualify as a “controlled company,” we currently do not, and we do not expect to, rely on this exemption and we currently comply with, and we expect to continue to comply with, all relevant corporate governance requirements under the Nasdaq listing standards.

However, if we were to utilize some or all of these exemptions, you may not have the same protections afforded to stockholders of companies that are subject to all of the Nasdaq listing standards that relate to corporate governance.

An increase in interest rates or in our borrowing margin would increase the cost of servicing our debt and could reduce our cash flow and negatively affect the results of our business operations.

A portion of our outstanding debt bears interest at floating rates.

As a result, to the extent we have not hedged against rising interest rates, an increase in the applicable benchmark interest rates would increase the cost of servicing our debt and could materially and adversely affect our results of operations, financial condition, liquidity and cash flows.

In addition, if we refinance our indebtedness or it matures and interest rates or our borrowing margins increase between the time an existing financing arrangement was consummated and the time such financing arrangement is refinanced or matures, the cost of servicing our debt would increase and our results of operations, financial condition, liquidity and cash flows could be materially and adversely affected.

Our inability to maintain sufficient liquidity could limit our operational flexibility and also impact our ability to make payments on our obligations as they come due.

In addition to being capital intensive and highly leveraged, our aircraft and engine business requires that we maintain sufficient liquidity to enable us to contribute the non-financed portion of engine and aircraft purchases as well as to service our payment obligations to our creditors as they become due, despite the fact that the timing and amounts of our revenues do not match the timing under our debt service obligations.

Our restricted cash is unavailable for general corporate purposes.

Accordingly, our ability to successfully execute our business strategy and maintain our operations depends on our ability to continue to maintain sufficient liquidity, cash and available credit under our credit facilities.

Our liquidity could be adversely impacted if we are subjected to one or more of the following:

• a significant decline in revenues,

• a material increase in interest expense that is not matched by a corresponding increase in revenues,

• a significant increase in operating expenses,

• a reduction in our available credit under our credit facilities, or

• general economic or national events.

If we do not maintain sufficient liquidity, our ability to meet our payment obligations to creditors or to borrow additional funds could become impaired.

Future cash flows from operations or through financings may not be sufficient to enable the Company to meet its obligations.

Future cash flow of the Company’s operations can fluctuate significantly.

If future cash flows are not sufficient to permit the Company to meet its obligations, this would likely have a material adverse effect on the Company, its businesses, financial condition and results of operations.

Additionally, credit market volatility may affect our ability to refinance our existing debt, borrow funds under our existing lines of credit or incur additional debt.

There can be no assurance that the Company or its subsidiaries will continue to have access to their lines of credit if their financial performance does not satisfy the financial

covenants set forth in the applicable financing agreements.

If the Company or its subsidiaries do not meet certain of its financial covenants, and if they are unable to secure necessary waivers or other amendments from the respective lenders on terms acceptable to management and to renew or replace financing arrangements that mature during the current fiscal year, their ability to access available lines of credit could be limited, their debt obligations could be accelerated by the respective lenders and liquidity could be adversely affected.

The Company and/or its subsidiaries may be required to seek additional or alternative financing sources if the Company’s or its subsidiaries’ cash needs are significantly greater than anticipated or they do not materially meet their business plans, or there are unanticipated downturns in the markets for the Company’s and its subsidiaries’ products and services.

Future disruption and volatility in credit market conditions could have a material adverse impact on the Company’s ability, or that of its subsidiaries, to refinance debt when it comes due on terms similar to our current credit facilities, to draw upon existing lines of credit or to incur additional debt if needed.

There can be no assurance therefore that such financing will be available or available on acceptable terms.

The inability to generate sufficient cash flows from operations or through financings or disruptions in the credit markets could impair the Company’s or its subsidiaries’ liquidity and would likely have a material adverse effect on their businesses, financial condition and results of operations.

A large proportion of our capital is invested in physical assets and securities that can be hard to sell, especially if market conditions are poor.

Because our investment strategy can involve public company securities, we may be restricted in our ability to effect sales during certain time periods.

A lack of liquidity could limit our ability to vary our portfolio or assets promptly in response to changing economic or investment conditions.

Additionally, if financial or operating difficulties of other competitors result in distress sales, such sales could depress asset values in the markets in which we operate.

The restrictions inherent in owning physical assets could reduce our ability to respond to changes in market conditions and could adversely affect the performance of our investments, our financial condition and results of operations.

Because there is significant uncertainty in the valuation of, or in the stability of the value of illiquid or non-public investments, the fair values of such investments do not necessarily reflect the prices that would actually be obtained when such investments are realized.

To service our debt and meet our other cash needs, we will require a significant amount of cash, which may not be available.

Our ability to make payments on, or repay or refinance, our debt, will depend largely upon our future operating performance.

Our future performance, to a certain extent, is subject to general economic, financial, competitive, legislative, regulatory and other factors that are beyond our control.

In addition, our ability to borrow funds in the future to make payments on our debt will depend on our maintaining specified financial ratios and satisfying financial condition tests and other covenants in the agreements governing our debt.

Our business may not generate sufficient cash flow from operations and future borrowings may not be available in amounts sufficient to pay our debt and to satisfy our other liquidity needs.

If our cash flows and capital resources are insufficient to fund our debt service obligations or meet covenant requirements, we may be forced to seek alternatives.

If we cannot meet our debt service or covenant obligations, we may be forced to reduce or delay investments and aircraft or engine purchases, sell assets, seek additional capital or restructure or refinance our indebtedness.

Our ability to restructure or refinance our debt will depend on the condition of the capital markets and our financial condition at such time.

Any refinancing of our debt could be at higher interest rates and might require us to comply with more onerous covenants, which could further restrict our business operations.

The terms of our debt instruments may restrict us from adopting some of these alternatives.

These alternative measures may not be successful and may not permit us to meet our scheduled debt service obligations or to meet any aircraft or engine purchase commitments as they come due.

Despite our substantial indebtedness, we may incur significantly more debt, and cash may not be available to meet our financial obligations when due or enable us to capitalize on investment opportunities when they arise.

We employ debt and other forms of leverage in the ordinary course of business to enhance returns to our investors and finance our operations, and despite our current indebtedness levels, we expect to incur additional debt in the future to finance our operations, including purchasing aircraft and engines and meeting our contractual obligations as the agreements relating to our debt, including our junior subordinated debentures, indentures, term loan facilities, revolving credit facilities, and other financings do not entirely prohibit us from incurring additional debt.

We also enter into financing commitments in the normal course of business, which we may be required to fund.

If we are required to fund these commitments and are unable to do so, we could be liable for damages pursued against us or a loss of opportunity through default under contracts that are otherwise to our benefit could occur.

We are therefore subject to the risks associated with debt financing and refinancing, including but not limited to the following:

(i) our cash flow may be insufficient to meet required payments of principal and interest;

(ii) payments of principal and interest on borrowings may leave us with insufficient cash resources to pay operating expenses and dividends;

(iii) if we are unable to obtain committed debt financing for potential acquisitions or can only obtain debt at high interest rates or on other unfavorable terms, we may have difficulty completing acquisitions or may generate profits that are lower than would otherwise be the case;

(iv) we may not be able to refinance indebtedness at maturity due to company and market factors such as the estimated cash flow produced by our assets, the value of our assets, liquidity in the debt markets, and/or financial, competitive, business and other factors;

and (v) if we are able to refinance our indebtedness, the terms of a refinancing may not be as favorable as the original terms for such indebtedness.

If we are unable to refinance our indebtedness on acceptable terms,

or at all, we may need to utilize available liquidity, which would reduce our ability to pursue new investment opportunities, dispose of one or more of our assets on disadvantageous terms, or raise equity, causing dilution to existing stockholders.

Our current financing arrangements require compliance with financial and other covenants and a failure to comply with such covenants could adversely affect our ability to operate.

The terms of our various credit agreements and other financing documents require us to comply with a number of customary financial and other covenants, such as maintaining debt service coverage and leverage ratios and adequate insurance coverage.

These covenants may limit our flexibility in conducting our operations and breaches of these covenants could result in defaults under the instruments governing the applicable indebtedness, even if we have satisfied and continue to satisfy our payment obligations.

Regulatory and market changes may also result in higher borrowing costs and reduced access to credit.

Future acquisitions and dispositions of businesses and investments are possible, changing the components of our assets and liabilities, and if unsuccessful or unfavorable, could reduce the value of the Company and its securities.

Any future acquisitions or dispositions may result in significant changes in the composition of our assets and liabilities, as well as our business mix and prospects.

Consequently, our financial condition, results of operations and the trading price of our securities may be affected by factors different from those affecting our financial condition, results of operations and trading price at the present time.

We face numerous risks and uncertainties as we expand our business.

We expect the growth and development of our business to come primarily from internal expansion and through acquisitions, investments, and strategic partnering.

As we expand our business, there can be no assurance that financial controls, the level and knowledge of personnel, operational abilities, legal and compliance controls and other corporate support systems will be adequate to manage our business and growth.

The ineffectiveness of any of these controls or systems could adversely affect our business and prospects.

In addition, if we acquire new businesses and/or introduce new products, we face numerous risks and uncertainties concerning the integration of their controls and systems, including financial controls, accounting and data processing systems, management controls, other operations and adequate security.

A failure to integrate these systems and controls, and even an inefficient integration of these systems and controls, could adversely affect our business and prospects.

Our business strategy includes acquisitions, and acquisitions entail numerous risks, including the risk of management diversion and increased costs and expenses, all of which could negatively affect the Company’s ability to operate profitably.

Our business strategy includes, among other things, strategic and opportunistic acquisitions.

This element of our strategy entails several risks, including, but not limited to the diversion of management’s attention from other business concerns and the need to finance such acquisitions with additional equity and/or debt.

In addition, once completed, acquisitions entail further risks, including:

unanticipated costs and liabilities of the acquired businesses, including environmental liabilities, that could materially adversely affect our results of operations;

difficulties in assimilating acquired businesses, preventing the expected benefits from the transaction from being realized or achieved within the anticipated time frame;

negative effects on existing business relationships with suppliers and customers;

and losing key employees of the acquired businesses.

If our acquisition strategy is not successful or if acquisitions are not well integrated into our existing operations, the Company’s operations and business results could be negatively affected.

Strategic ventures may increase risks applicable to our operations.

We may enter into strategic ventures that pose risks, including a lack of complete control over the enterprise, and other potential unforeseen risks, any of which could adversely impact our financial results.

We may occasionally enter into strategic ventures or investments with third parties in order to take advantage of favorable financing opportunities, to share capital or operating risk, or to earn management fees.

These strategic ventures and investments may subject us to various risks, including those arising from our possessing limited decision-making rights in the enterprise or over related aircraft.

If we were unable to resolve a dispute with a strategic partner in such a venture that retains material managerial veto rights, we might reach an impasse which may lead to operational difficulties in the venture and increases costs or the liquidation of our investment at a time and in a manner that would result in our losing some or all of our original investment and/or the occurrence of other losses, which could adversely impact our financial results.

Rapid business expansions or new business initiatives may increase risk.

Certain business initiatives, including expansions of existing businesses such as the relatively recent expansion at our commercial jet engines and parts segment and the establishment of an aircraft asset management business and an aircraft capital joint venture, may bring us into contact, directly or indirectly, with individuals and entities that are not within our traditional client and counterparty base and may expose us to new asset classes, new business plans and new markets.

These business activities expose us to new and enhanced risks, greater regulatory scrutiny of these activities, increased credit-related, sovereign and operational risks, and reputational concerns regarding the manner in which these assets are being operated or held.

There is no assurance that prior year activity and results will occur in future periods.

Our policies and procedures may not be effective in ensuring compliance with applicable law.

Our policies and procedures designed to ensure compliance with applicable laws may not be effective in all instances to prevent violations.

We could become subject to various governmental investigations, audits and inquiries, both formal and informal.

Such investigations, regardless of their outcome, could be costly, divert management attention, and damage our reputation.

The unfavorable resolution of such investigations could result in criminal liability, fines, penalties or other monetary or non-monetary sanctions and could materially affect our business or results of operations.

Compliance with the regulatory requirements imposed on us as a public company results in significant costs that may have an adverse effect on our results.

As a public company, we are subject to various regulatory requirements including, but not limited to, compliance with the rules

and regulations of the Securities Act and the Securities Exchange Act of 1934, as amended (the “Exchange Act”), including the Sarbanes-Oxley Act of 2002 and the Dodd-Frank Wall Street Reform and Consumer Protection Act of 2010.

Compliance with these rules and regulations results in significant additional costs to us both directly, through increased audit and consulting fees, and indirectly, through the time required by our limited resources to address such regulations.

Deficiencies in our public company financial reporting and disclosures could adversely impact our reputation.

As we expand the size and scope of our business, there is a greater susceptibility that our financial reporting and other public disclosure documents may contain material misstatements and that the controls we maintain to attempt to ensure the complete accuracy of our public disclosures may fail to operate as intended.

The occurrence of such events could adversely impact our reputation and financial condition.

Management is responsible for establishing and maintaining adequate internal controls over financial reporting to give our stakeholders assurance regarding the reliability of our financial reporting and the preparation of financial statements for external purposes in accordance with generally accepted accounting principles (“ GAAP ”).

However, the process for establishing and maintaining adequate internal controls over financial reporting has inherent limitations, including the possibility of human error.

Our internal controls over financial reporting may not prevent or detect misstatements in our financial disclosures on a timely basis, or at all.

Some of these processes may be new for certain subsidiaries in our structure, and in the case of acquisitions, may take time to be fully implemented.

Our disclosure controls and procedures are designed to provide assurance that information required to be disclosed by us in reports filed or submitted under U.S.

securities laws is recorded, processed, summarized and reported within the required time periods.

Our policies and procedures governing disclosures may not ensure that all material information regarding us is disclosed in a proper and timely fashion or that we will be successful in preventing the disclosure of material information to a single person or a limited group of people before such information is generally disseminated.

Risks Related to Our Segment Operations

The operating results of our four segments may fluctuate, particularly our commercial jet engine and parts segment.

The operating results of our segments may fluctuate, particularly our commercial jet engine and parts segment.

The operating results of our four segments have varied from period to period and comparisons to results for preceding periods may not be meaningful.

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In the fiscal year ended March 31, 2024, 36% of our consolidated operating revenues, and 91% of the operating revenues for our overnight air cargo segment, arose from services we provided to FedEx.

While FedEx has been our customer since 1980 under similar terms, our current agreements may be terminated by FedEx upon 90 days’ written notice and FedEx may at any time terminate the lease of any particular aircraft thereunder upon 10 days’ written notice.

While FedEx has been our customer since 1980 under similar terms, our current agreements may be terminated by FedEx upon 90 days’ written notice and FedEx may at any time terminate the lease of

any particular aircraft thereunder upon 10 days’ written notice.

In addition, FedEx may terminate the dry-lease agreement with MAC or CSA upon written notice if 60% or more of MAC or CSA’s revenue (excluding revenues arising from reimbursement payments under the dry-lease agreement) is derived from the services performed by it pursuant to the respective dry-lease agreement, FedEx becomes its only customer, or either MAC or CSA employs less than six employees.

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These risks include but are not limited to the following:

• Economic conditions and anti-trade measures/trade policies and relations in the global markets in which it operates;

• Additional changes in international trade policies and relations could significantly reduce the volume of goods transported globally and adversely affect its business and results of operations.

• The price and availability of fuel.

• Dependence on its strong reputation and value of its brand;

• Potential disruption to operations resulting from a significant data breach or other disruption to FedEx’s technology infrastructure;

• The continuing impact of the COVID-19 pandemic;

• The impact of being self-insured for certain costs;

• The transportation infrastructure continues to be a target for terrorist activities;

• Failure to successfully implement its business strategy and effectively respond to changes in market dynamics and customer preferences.

• Any inability to execute and effectively operate, integrate, leverage and grow acquired businesses and realize the anticipated benefits of acquisitions, joint ventures or strategic alliances;

• FedEx's ability to manage capital and its assets, including aircraft, to match shifting and future shipping volumes;

• Intense competition;

• Its autonomous delivery strategy is dependent upon the ability to successfully mitigate unique technological, operational and regulatory risks.

• The failure to successfully implement its business strategy and effectively respond to changes in market dynamics and customer preferences;

• Failure to attract and maintain employee talent or maintain company culture, as well as increases in labor and purchased transportation cost;

• Labor organizations attempt to organize groups of our employees from time to time, and potential changes in labor laws could make it easier for them to do so.

• FedEx Ground relies on service providers to conduct its linehaul and pickup-and-delivery operations, and the status of these service providers as direct employers of drivers providing these services is being challenged.

• Disruptions, modifications in service or changes in the business or financial soundness of the United States Postal Service, a significant customer and vendor of FedEx;

• The impact of proposed pilot flight and duty time regulations;

• Increasing costs, the volatility of costs and funding requirements and other legal mandates for employee benefits, especially pension and healthcare benefits;

• The impact of global climate change or by legal, regulatory or market responses to such change;

• Potentially being unable to achieve our goal of carbon neutrality for its global operations by calendar 2040;

• Economic conditions in the global markets in which it operates;

• Its ability to successfully implement its business strategy and global transformation program and consolidate its operating companies into one organization;

• Effectively respond to change in market dynamics and achieve the anticipated benefits of such strategies and actions while managing risks;

• Its ability to achieve its cost reduction initiatives and financial performance goals;

• The timing and amount of costs related to its global transformation program and other ongoing initiatives;

• Damage to its reputation or loss of brand equity;

• Changes in the business or financial soundness of the U.S.

Postal Service or its relationship with FedEx, including strategic changes to its operations or reduce its reliance on the air network of FedEx Express;

• Its ability to meet its labor and purchased transportation needs while controlling related costs;

• A significant data breach or other disruption to its technology infrastructure;

• The impact of a widespread outbreak of an illness or any other communicable disease or public health crises;

• Anti-trade measures and additional changes in international trade policies and relations;

• The effects of any international conflicts or terrorist activities, including as a result of the current conflict between Russia and Ukraine and Israel and Hamas;

• Changes in fuel prices or currency exchange rates;

• Its ability to match capacity to shifting volume levels;

• The effect of intense competition;

• An increase in self-insurance accruals and expenses;

• Failure to receive or collect expected insurance coverage;

• Its ability to effectively operate, integrate, and grow acquired businesses and realize the anticipated benefits of acquisitions or other strategic transactions;

• Noncash impairment charges related to its goodwill and certain deferred tax assets;

• The future rate of e-commerce growth and levels of inventory restocking;

• Evolving or new U.S.

domestic or international laws and government regulations, policies, and actions;

• Future guidance, regulations, interpretations, challenges, or judicial decisions related to its tax positions;

• Any inability to quickly and effectively restore operations following adverse weather or a localized disaster or disturbance in a key geography;

• Evolving Government regulation and enforcement;

• Any adverse changes in regulations and interpretations or challenges to its tax positions;

• Complex and evolving U.S.

and foreign laws and regulations regarding data protection;

• Legal challenges or changes related to service providers engaged by FedEx Ground and the drivers providing services on their behalf and the coverage of U.S.

employees at FedEx Express under the Railway Labor Act of 1926, as amended;

• Any liability resulting from and the costs of defending against litigation;

• Its ability to achieve or demonstrate progress on its goal of carbon-neutral operations by 2040;

• The regulatory environment for global aviation or other transportation rights;

• Other risks and uncertainties, including:

▪ widespread outbreak of an illness or any other communicable disease, or any other public health crisis;

• the increasing costs of compliance with federal, state and foreign governmental agency mandates (including the Foreign Corrupt Practices Act and the U.K.

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• any liability resulting from and the costs of defending against class-action, derivative and other litigation, such as wage-and-hour, joint employment, securities and discrimination and retaliation claims, and any other legal or governmental proceedings;

▪ the impact of technology developments on our operations and on demand for our services, and our ability to continue to identify and eliminate unnecessary information-technology redundancy and complexity throughout the organization;

▪ governmental underinvestment in transportation infrastructure, which could increase our costs and adversely impact our service levels due to traffic congestion, prolonged closure of key thoroughfares or sub-optimal routing of our vehicles and aircraft;

▪ disruptions in global supply chains, which can limit the access of FedEx and our service providers to vehicles and other key capital resources and increase our costs;

▪ stockholder activism, which could divert the attention of management and our board of directors from our business, hinder execution of our business strategy, give rise to perceived uncertainties as to our future and cause the price of our common stock to fluctuate significantly;

▪ constraints, volatility or disruption in the capital markets, our ability to maintain our current credit ratings, commercial paper ratings, and senior unsecured debt and pass-through certificate credit ratings, and our ability to meet credit agreement financial covenants.

• the impact of technology developments on its operations and on demand for its services, and its ability to continue to identify and eliminate unnecessary information-technology redundancy and complexity throughout the organization;

• governmental underinvestment in transportation infrastructure, which could increase its costs and adversely impact its service levels due to traffic congestion, prolonged closure of key thoroughfares or sub-optimal routing of its vehicles and aircraft;

• disruptions in global supply chains, which can limit the access of FedEx and its service providers to vehicles and other key capital resources and increase its costs;

• stockholder activism, which could divert the attention of management and its board of directors from its business, hinder execution of its business strategy, give rise to perceived uncertainties as to our future and cause the price of its Common Stock to fluctuate significantly;

• constraints, volatility or disruption in the capital markets, its ability to maintain its current credit ratings, commercial paper ratings, and senior unsecured debt and pass-through certificate credit ratings, and its ability to meet credit agreement financial covenants.

• widespread outbreak of an illness or any other communicable disease, or any other public health crisis;

A material reduction in the aircraft we fly for FedEx could materially adversely affect our business and results of operations.

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Upon termination of a lease, we may be unable to enter into new leases or sell the airframe, engine or its parts on acceptable terms.

We directly or indirectly own the engines or aircraft that we lease to customers and bear the risk of not recovering our entire investment through leasing and selling the engines or aircraft.

We directly or indirectly own the engines or aircraft that we lease or sell to customers and bear the risk of not recovering our entire investment through leasing and selling the engines or aircraft.

Upon termination of a lease, we seek to enter a new lease or to sell or part-out the engine or aircraft.

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The value and income producing potential of an engine or aircraft depends heavily on it being maintained in accordance with an approved maintenance system and complying with all applicable governmental directives and manufacturer requirements.

In addition, for an engine or aircraft to be available for service, all records, logs, licenses and documentation relating to maintenance and operations of the engine or aircraft must be maintained in accordance with governmental and manufacturer specifications.

addition, for an engine or aircraft to be available for service, all records, logs, licenses and documentation relating to maintenance and operations of the engine or aircraft must be maintained in accordance with governmental and manufacturer specifications.

Under our leases, our lessees are primarily responsible for maintaining our aircraft and engines and complying with all governmental requirements applicable to the lessee and the aircraft and engines, including operational, maintenance, government agency oversight, registration requirements and airworthiness directives.

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For example, the U.S.

Foreign Corrupt Practices Act (the “ FCPA ”) and similar world-wide anti-bribery laws generally prohibit improper payments to foreign officials for the purpose of influencing any official act or decision or securing any improper advantage.

Foreign Corrupt Practices Act (the

“ FCPA ”) and similar world-wide anti-bribery laws generally prohibit improper payments to foreign officials for the purpose of influencing any official act or decision or securing any improper advantage.

The scope and enforcement of such anti-corruption laws and regulations may vary.

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For example, certain jurisdictions give rights to the trustee in bankruptcy or a similar officer to assume or reject the lease, to assign it to a third party, or to entitle the lessee or another third party to retain possession of the aircraft or engines without paying lease rentals or performing all or some of the obligations under the relevant lease.

Certain of our lessees are partially or wholly owned by government-related entities, which can further complicate our efforts to repossess our aircraft or engines in that government’s jurisdiction.

Certain of our lessees may be partially or wholly-owned by government-related entities, which can further complicate our efforts to repossess our aircraft or engines in that government’s jurisdiction.

If we encounter any of these difficulties, we may be delayed in, or prevented from, enforcing certain of our rights under a lease and in re-leasing the affected aircraft or engines.

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Denial of export licenses could reduce our sales to those countries and could have a material adverse effect on our business.

Risks Related to Our Structure and Financing/Liquidity Risks

Our holding company structure may increase risks related to our operations.

Our business, financial condition and results of operations are dependent upon those of our individual businesses, and our aggregate investment in particular industries.

We are a holding company with investments in businesses and assets in a number of industries.

Our business, financial condition and results of operations are dependent upon our various businesses and investments and their management teams.

Each of our businesses generally operate independently and in a decentralized manner.

Additionally, in the ordinary course of business we guarantee the obligations of entities that we manage and/or invest

A small number of stockholders has the ability to control the Company.

We have a very concentrated stockholder base.

As of March 31, 2023, our three largest stockholders beneficially owned or had the ability to direct the voting of shares of our common stock representing approximately 65% of the outstanding shares.

As a result, these stockholders have the power to determine the outcome of substantially all matters submitted to our stockholders for approval, including the election of our board of directors.

In addition, future sales by these stockholders of substantial amounts of our common stock, or the potential for such sales, could adversely affect the prevailing market price of our securities.

Controlled companies are not required to comply with certain Nasdaq listing standards relating to corporate governance, including:

• the requirement that a majority of its board of directors consist of independent directors;

• the requirement that its compensation committee be composed entirely of independent directors with a written charter addressing the committee’s purpose and responsibilities.

As of May 4, 2023, Nicolas Swenson, our President, Chief Executive Officer and Chairman of the Board, beneficially owned an aggregate of 1,340,799 shares of our common stock, which represents 47.84% of the voting power of our outstanding common stock.

However, if we were to utilize some or all of these exemptions, you may not have the same protections afforded to shareholders of companies that are subject to all of the Nasdaq listing standards that relate to corporate governance.

An increase in interest rates or in our borrowing margin would increase the cost of servicing our debt and could reduce our cash flow and negatively affect the results of our business operations.

A portion of our outstanding debt bears interest at floating rates.

Our inability to maintain sufficient liquidity could limit our operational flexibility and also impact our ability to make payments on our obligations as they come due.

Our restricted cash is unavailable for general corporate purposes.

Our liquidity could be adversely impacted if we are subjected to one or more of the following:

• a significant decline in revenues,

• a material increase in interest expense that is not matched by a corresponding increase in revenues,

• a significant increase in operating expenses,

• a reduction in our available credit under our credit facilities, or

• general economic or national events.

If we do not maintain sufficient liquidity, our ability to meet our payment obligations to creditors or to borrow additional funds could become impaired.

Future cash flows from operations or through financings may not be sufficient to enable the Company to meet its obligations.

Future cash flow of the Company’s operations can fluctuate significantly.

Additionally, credit market volatility may affect our ability to refinance our existing debt, borrow funds under our existing lines of credit or incur additional debt.

There can be no assurance that the Company or its subsidiaries will continue to have access to their lines of credit if their financial performance does not satisfy the financial covenants set forth in the applicable financing agreements.