AIR T INC 10-Q

Item 2. Management's Discussion and Analysis of Financial Condition and Results of Operations. FORWARD-LOOKING STATEMENTS This section entitled "Management’s Discussion and Analysis of Financial Condition and Results of Operations" (“MD&A”) is intended to provide a reader of our financial statements with a narrative from the perspective of management on our financial condition, results of operations, liquidity, and certain other factors that may affect our future results. The MD&A provides a narrative analysis explaining the reasons for material changes in the Company’s (i) financial condition during the period from the most recent fiscal year-end, March 31, 2024, to and including June 30, 2024 and (ii) results of operations during the current fiscal period(s) as compared to the corresponding period(s) of the preceding fiscal year. This Quarterly Report on Form 10-Q, including the MD&A, contains “forward-looking statements” within the meaning of the Private Securities Litigation Reform Act of 1995. These statements reflect our current views with respect to future events and financial performance. The words “believe,” “expect,” “anticipate,” “intend,” “estimate,” “forecast,” “project,” “should,” "will," "continue" and similar expressions are intended to identify “forward-looking statements” within the meaning of the Private Securities Litigation Reform Act of 1995. Any and all forecasts and projections in this document are “forward looking statements” and are based on management’s current expectations or beliefs. From time to time, we may also provide oral and written forward-looking statements in other materials we release to the public, such as press releases, presentations to securities analysts or investors, or other communications by us. Any or all of our forward-looking statements in this report and in any public statements we make could be materially different from actual results. Accordingly, we wish to caution investors that any forward-looking statements made by or on behalf of us are subject to uncertainties and other factors that could cause actual results to differ materially from such statements, because of, among other things, potential risks and uncertainties, such as: • An inability to finance our operations through bank or other financing or through the sale of issuance of debt or equity securities; • Economic and industry conditions in the Company’s markets; • The risk that contracts with FedEx could be terminated or adversely modified; • The risk that the number of aircraft operated for FedEx will be reduced; • The risk that GGS customers will defer or reduce significant orders for deicing equipment; • The impact of any terrorist activities on United States soil or abroad; • The Company’s ability to manage its cost structure for operating expenses, or unanticipated capital requirements, and match them to shifting customer service requirements and production volume levels; • The Company's ability to meet debt service covenants and to refinance existing debt obligations; • The risk of injury or other damage arising from accidents involving the Company’s overnight air cargo operations, equipment or parts sold and/or services provided; • Market acceptance of the Company’s commercial and military equipment and services; • Competition from other providers of similar equipment and services; • Changes in government regulation and technology; • Changes in the value of marketable securities held as investments; • Mild winter weather conditions reducing the demand for deicing equipment; • Market acceptance and operational success of the Company’s commercial jet engines and parts segment or its aircraft asset management business and related aircraft capital joint venture; and • Despite our current indebtedness levels, we and our subsidiaries may still be able to incur substantially more debt, which could further exacerbate the risks associated with our substantial leverage. We also wish to caution investors that other factors might in the future prove to be important in affecting our results of operations. New factors emerge from time to time; it is not possible for management to predict all of such factors, nor can it assess the impact of each such factor on the business or the extent to which any factor, or a combination of factors, may cause actual results to differ materially from those contained in any forward-looking statements. 25 We undertake no obligation to update publicly or revise any forward-looking statements, whether as a result of new information, future events or otherwise. Our MD&A should be read in conjunction with the Consolidated Financial Statements and related Notes included in Item 1 of Part 1 of this Quarterly Report on Form 10-Q and our Annual Report on Form 10-K for the fiscal year ended March 31, 2024 (including the information presented therein under Risk Factors), as well other publicly available information. Overview Air T, Inc. (the “Company,” “Air T,” “we” or “us”) 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, compounding its free cash flow per share over time. We currently operate in four industry segments: • Overnight air cargo, which operates in the air express delivery services industry; • Ground equipment sales, which manufactures and provides mobile deicers and other specialized equipment products to passenger and cargo airlines, airports, the military and industrial customers; • Commercial aircraft, engines and parts, which manages and leases aviation assets; supplies surplus and aftermarket commercial jet engine components; provides commercial aircraft disassembly/part-out services; commercial aircraft parts sales; procurement services and overhaul and repair services to airlines and, • Corporate and other, which acts as the capital allocator and resource for other consolidated businesses. 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. We evaluate the performance of our business segments based on operating income and Adjusted EBITDA. Results of Operations First Quarter Fiscal 2025 Compared to First Quarter Fiscal 2024 Consolidated revenue for the three months ended June 30, 2024 decreased by $5.0 million (7.0%) compared to the same quarter in the prior fiscal year. Following is a table detailing revenue by segment, net of intercompany during the three months ended June 30, 2024 compared to the same quarter in the prior fiscal year (in thousands): Three Months Ended June 30, Change 2024 2023 Overnight Air Cargo $ 30,383 $ 27,728 $ 2,655 9.6 % Ground Equipment Sales 7,354 11,787 (4,433) (37.6) % Commercial Jet Engines and Parts 26,250 29,846 (3,596) (12.0) % Corporate and Other 2,424 2,070 354 17.1 % $ 66,411 $ 71,431 $ (5,020) (7.0) % Revenues from the air cargo segment for the three months ended June 30, 2024 increased by $2.7 million (9.6%) compared to the first quarter of the prior fiscal year. The increase was principally attributable to higher administrative fees due to increased fleet of 105 aircraft in the current year quarter compared to 85 aircraft in the prior year quarter, partially offset by lower pass-through revenues from FedEx due to initial provisioning for new aircraft in the prior year that did not recur in the current year quarter. The ground equipment sales segment contributed approximately $7.4 million and $11.8 million to the Company’s revenues for the three month ended June 30, 2024 and 2023 respectively, representing a $4.4 million (37.6%) decrease in the current fiscal quarter. The decrease was primarily driven by the lower number of deicing trucks sold offset by a slight increase in catering truck sales in the current year quarter compared to the prior year's fiscal comparable quarter. At June 30, 2024, the ground equipment sales segment’s order backlog was $9.9 million compared to $13.7 million at June 30, 2023. 26 The commercial jet engines and parts segment contributed $26.3 million of revenues in the quarter ended June 30, 2024 compared to $29.8 million in the comparable prior year quarter, which is a decrease of $3.6 million (12.0%). The decrease was primarily driven by lower component part sales at Contrail in the current quarter compared to the prior year comparable quarter. Revenues from the corporate and other segment for the three months ended June 30, 2024 increased by $0.4 million (17.1%) compared to the first quarter of the prior fiscal year. The increase was primarily attributable to more subscriptions sales at Shanwick. Following is a table detailing operating income (loss) by segment during the three months ended June 30, 2024 compared to the same quarter in the prior fiscal year (in thousands): Three Months Ended June 30, Change 2024 2023 Overnight Air Cargo $ 1,839 $ 1,935 $ (96) Ground Equipment Sales (775) (85) (690) Commercial Jet Engines and Parts 1,095 1,478 (383) Corporate and Other (2,736) (2,670) (66) $ (577) $ 658 $ (1,235) Consolidated operating loss for the quarter ended June 30, 2024 was $0.6 million, compared to an operating income of $0.7 million in the comparable quarter of the prior year. The air cargo segment's operating income for the three months ended June 30, 2024 was relatively flat compared to the first quarter of the prior fiscal year. The ground equipment sales segment's operating loss for the quarter ended June 30, 2024 was $0.8 million compared to the prior year comparable quarter's operating loss of $0.1 million. This change was primarily attributable to the decrease in sales noted above. The commercial jet engines and parts segment generated operating income of $1.1 million in the fiscal quarter ended June 30, 2024 compared to operating income of $1.5 million in the prior year comparable quarter. The decrease was primarily attributable to lower sales at Contrail mentioned above partially offset by higher gross profit margins in the current year quarter's sales compared to the prior year's comparable quarter. The corporate and other segment's operating loss for the three months ended June 30, 2024 was relatively flat compared to the first quarter of the prior fiscal year. Following is a table detailing non-operating income (expense) during the three months ended June 30, 2024 compared to the same quarter in the prior fiscal year (in thousands): Three Months Ended June 30, Change 2024 2023 Interest expense $ (1,946) $ (1,808) $ (138) Income from equity method investments 1,923 691 1,232 Other 703 643 60 $ 680 $ (474) $ 1,154 The Company had a net non-operating income of $0.7 million during the quarter ended June 30, 2024, compared to a net non-operating loss of $0.5 million in the prior comparable quarter. The increase in non-operating income was primarily driven by the increase of net income allocated to the Company from equity method investments as mentioned in Note 8 of Notes to Condensed Consolidated Financial Statements included under Part I, Item 1 of this Report. During the three months ended June 30, 2024, the Company recorded $0.1 million in income tax expense at an effective tax rate of 68.9%. The Company has computed the provision for income taxes based on the estimated annual effective tax rate excluding loss jurisdictions with no tax benefit and the application of discrete items, if any, for interim reporting. The primary factors contributing to the difference between the federal statutory rate of 21.0% and the Company's effective tax rate for the three months ended June 30, 2024 were valuation allowance related to the Company's U.S. consolidated group, DTI, LGSS, DSI, and BCCM Kenya, and the foreign rate differentials for Air T’s operations located in the Netherlands and Puerto Rico. 27 During the three-month period ended June 30, 2023, the Company recorded $0.2 million in income tax expense at an ETR of 114.7%. The primary factors contributing to the difference between the federal statutory rate of 21.0% and the Company's effective tax rate for the three-month period ended June 30, 2023 were the change in valuation allowance related to the Company’s U.S. consolidated group, DTI, LGSS, DSI, the estimated benefit for the exclusion of income for SAIC under Section 831(b), the exclusion from the tax provision of the minority owned portion of the pretax income of Contrail, and the foreign rate differentials for Air T’s operations located in the Netherlands, Puerto Rico and Singapore. Critical Accounting Policies and Estimates The Company’s significant accounting policies are fully described in Note 1 to the condensed consolidated financial statements and in the notes to the consolidated financial statements included in the Company’s Annual Report on Form 10-K for the year ended March 31, 2024. The preparation of the Company’s condensed consolidated financial statements in conformity with accounting principles generally accepted in the United States requires the use of estimates and assumptions to determine certain assets, liabilities, revenues and expenses. Management bases these estimates and assumptions upon the best information available at the time of the estimates or assumptions. The Company’s estimates and assumptions could change materially as conditions within and beyond our control change. Accordingly, actual results could differ materially from estimates. There were no significant changes to the Company’s critical accounting policies and estimates during the three months ended June 30, 2024. Seasonality The ground equipment sales segment business has historically been seasonal, with the revenues and operating income typically being lower in the first and fourth fiscal quarters as commercial deicers are typically delivered prior to the winter season. Other segments have typically not experienced material seasonal trends. Systems and Network Security Although we have employed significant resources to develop our security measures against breaches, our cybersecurity measures may not detect or prevent all attempts to compromise our systems, including hacking, viruses, malicious software, break-ins, phishing attacks, security breaches or other attacks and similar disruptions that may jeopardize the security of information stored in and transmitted by our systems. Although prior breaches of our systems have not resulted in material negative consequences, breaches of our cybersecurity measures could result in unauthorized access to our systems, misappropriation of information or data, deletion or modification of client information or other interruption to our business operations. As techniques used to obtain unauthorized access to sabotage systems change frequently and may not be known until launched against us or our third-party service providers, we may be unable to anticipate, or implement adequate measures to protect against these attacks. If we are unable to avert these attacks and security breaches, we could be subject to significant legal and financial liability, our reputation would be harmed and we could sustain substantial revenue loss from lost sales and customer dissatisfaction. We may not have the resources or technical sophistication to anticipate or prevent rapidly evolving types of cyber-attacks. Cyber-attacks may target us or other participants, or the communication infrastructure on which we depend. Actual or anticipated attacks and risks may cause us to incur significantly higher costs, including costs to deploy additional personnel and network protection technologies, train employees, and engage third-party experts and consultants. Cybersecurity breaches would not only harm our reputation and business, but also could materially decrease our revenue and net income. Inflation Future economic developments such as inflation and increased interest rates as well as further business issues present uncertainty and risk with respect to our financial condition and results of operations. High inflation increased material and component prices, labor rates and supplier costs, and put pressure on our margins. Current geopolitical conditions, including conflicts and other causes of strained intercountry relations, as well as sanctions and other trade restrictive activities, are contributing to these supply chain issues. We expect that issues caused by economic and business issues will continue beyond fiscal 2025. The fluidity of this situation precludes any prediction as to the ultimate adverse impact of these issues on economic and market conditions and our businesses in particular, and, as a result, presents material uncertainty and risk with respect to us and our results of operations. The Company believes the estimates and assumptions underlying the Company’s consolidated financial statements are reasonable and supportable based on the information available as of June 30, 2024. Liquidity and Capital Resources As of June 30, 2024, the Company held approximately $8.7 million in cash and cash equivalents and restricted cash, $0.6 million of which related to cash reserved for payments of SAIC's insurance claims. The Company also held $1.2 million in restricted investments held as statutory reserve of SAIC. The Company has approximately $2.0 million of marketable securities and an aggregate of approximately $39.0 million in available funds under its lines of credit as of June 30, 2024. As of June 30, 2024, the Company’s working capital amounted to $53.8 million, a decrease of $2.2 million compared to March 31, 2024. 28 On May 30, 2024, Contrail, a majority-owned subsidiary the Company, entered in the Redemption Agreement with Seller. Pursuant to the Redemption Agreement, Contrail agreed to purchase and redeem from the Seller, 16% of its 21% interest in Contrail, effective as of April 1, 2024. The purchase price for the redeemed interest was $4.6 million, plus an earnout amount. The cash purchase price is payable through the OCAS Loan, payable beginning on May 1, 2024 and monthly thereafter for a 12-month period of interest payments only with the outstanding balance amortized and paid over the following 3 years. Interest accrues on the principal amount at an annual rate equal to the 10-year Treasury bond yield plus 375 basis points, compounded monthly. The rate adjusts on each anniversary date of the note. The payment obligation under the note may be deferred if Contrail’s forecast indicates that any payment following the first 12-month period would cause a loan default or a loan default exists. Initially, the payment obligation would revert back to interest only, unless a default exists, in which case no payment would be required. If Contrail is unable to make a payment for 12 months, then interest shall cease to accrue. The note is expressly subordinated to the payment in full of all indebtedness of Contrail on or prior to the date of the note or thereafter created. See additional details on the OCAS Loan in Note 11 of Notes to Condensed Consolidated Financial Statements included under Part I, Item 1 of this Report. As mentioned in Note 1 1 of Notes to Condensed Consolidated Financial Statements included under Part I, Item 1 of this Report on Form 10-Q, the Revolver - MBT has $4.4 million outstanding as of June 30, 2024 and matures on August 31, 2024. We are 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. The Company believes it is probable that the cash on hand and current financings, net cash provided by operations from its remaining operating segments, together with amounts available under its current revolving lines of credit, as amended, will be sufficient to meet its obligations as they become due in the ordinary course of business for at least 12 months following the date these financial statements are issued. Cash Flows Following is a table of changes in cash flow for the three months ended June 30, 2024 and 2023 (in thousands): Three Months Ended June 30, 2024 2023 Net Cash Provided by Operating Activities $ 113 $ 3,484 Net Cash Provided By (Used in) Investing Activities 2,008 (21) Net Cash Used in Financing Activities (1,291) (4,076) Effect of foreign currency exchange rates on cash and cash equivalents 32 (56) Net Increase (Decrease) in Cash and Cash Equivalents and Restricted Cash $ 862 $ (669) Net cash provided by operating activities was $0.1 million for the three months ended June 30, 2024 compared to $3.5 million in the prior year comparable period. The decrease in net cash provided by operating activities was driven by a lower decrease in inventory of $4.3 million and a decrease in payables and accrued expenses of $3.6 million in the current year fiscal quarter compared to the prior year comparable quarter. This is offset by a net change in accounts receivable of $4.9 million quarter over quarter. Net cash provided in investing activities for the three months ended June 30, 2024 was $2.0 million compared to net cash used in investing activities of $21.0 thousand in the prior year comparable period. The increase in cash provided by investing activities was primarily driven by less contributions to and more distributions received from unconsolidated entities in the current year fiscal quarter. Net cash used in financing activities for the three months ended June 30, 2024 was $1.3 million compared to $4.1 million in the prior year comparable period. The decrease in cash usage in financing activities was primarily driven by lower payments on the lines of credit of $7.7 million, partially offset by lower proceeds from line of credit of $3.6 million and higher payments on term notes of $1.3 million in the current quarter compared to the prior period comparable quarter. Non-GAAP Financial Measures The Company uses adjusted earnings before taxes, interest, and depreciation and amortization ("Adjusted EBITDA"), a non-GAAP financial measure as defined by the SEC, to evaluate the Company's financial performance. This performance measure is not defined by accounting principles generally accepted in the United States and should be considered in addition to, and not in lieu of, GAAP financial measures. Adjusted EBITDA is defined as earnings before taxes, interest, and depreciation and amortization, adjusted for specified items. The Company calculates Adjusted EBITDA by removing the impact of specific items and adding back the amounts of interest expense and 29 depreciation and amortization to earnings before income taxes. When calculating Adjusted EBITDA, the Company does not add back depreciation expense for aircraft engines that are on lease, as the Company believes this expense matches with the corresponding revenue earned on engine leases. There was no depreciation expense for leased engines for the three months ended June 30, 2024 and June 30, 2023. Management believes that Adjusted EBITDA is a useful measure of the Company's performance because it provides investors additional information about the Company's operations allowing better evaluation of underlying business performance and better period-to-period comparability. Adjusted EBITDA is not intended to replace or be an alternative to operating income (loss), the most directly comparable amounts reported under GAAP. The tables below provide a reconciliation of operating income (loss) to Adjusted EBITDA for the three months ended June 30, 2024 and 2023 (in thousands): Three months ended 6/30/2024 6/30/2023 Operating (loss) income $ (577) $ 658 Depreciation and amortization (excluding leased engines depreciation) 760 690 Asset impairment, restructuring or impairment charges 378 — Gain on sale of property and equipment — (6) TruPs issuance expenses 101 45 Adjusted EBITDA $ 662 $ 1,387 Included in the asset impairment, restructuring or impairment charges for the quarter ended June 30, 2024 was a write-down of $0.4 million on the commercial jet engines and parts segment's inventory attributable to our evaluation of the carrying value of inventory as of June 30, 2024, where we compared its cost to its net realizable value and considered factors such as physical condition, sales patterns and expected future demand to estimate the amount necessary to write down any slow moving, obsolete or damaged inventory. The table below provides Adjusted EBITDA by segment for the three months ended June 30, 2024 and 2023 (in thousands): Three months ended 6/30/2024 6/30/2023 Overnight Air Cargo $ 1,937 $ 2,014 Ground Equipment Sales (680) (51) Commercial Jet Engines and Parts 1,665 1,668 Corporate and Other (2,260) (2,244) Adjusted EBITDA $ 662 $ 1,387 Issuer and guarantor subsidiary summarized information Air T Funding is a statutory business trust formed under Delaware law in September 2018. Air T Funding exists for the exclusive purposes of (i) issuing and selling its Alpha Income Trust Preferred Securities (also referred to as the 8.0% Cumulative Securities, Capital Securities or “Trust Preferred Securities”), par value $25.00 per share, (ii) using the proceeds from the sale of the Trust Preferred Securities to acquire Junior Subordinated Debentures issued by the Company, and (iii) engaging in only those other activities necessary, advisable or incidental thereto (such as registering the transfer of the Trust Preferred Securities). Accordingly, the Junior Subordinated Debentures are the sole assets of Air T Funding, and payments by the Company under the Junior Subordinated Debentures and a related expense agreement are the sole revenues of Air T Funding. Air T Funding’s business and affairs are conducted by a Property Trustee, a Delaware Trustee and two individual Administrative Trustees who are officers of Air T. Distributions on the Trust Preferred Securities are payable to record holders at the annual rate of 8% of the stated $25.00 liquidation amount, payable quarterly in arrears on the 15th day of February, May, August, and November in each year. The Trust Preferred Securities issued by the Trust are fully and unconditionally and jointly and severally guaranteed on a senior unsecured basis by Air T. Air T guarantees the payment of distributions by Air T Funding and payments on liquidation or redemption of the Trust Preferred Securities (subordinate to the right to payment of senior and subordinated debt of Air T, as defined in Note 1 1 of Notes to Consolidated Financial Statements included under Part I, Item 1 of this report). If Air T Funding has insufficient funds to pay 30 distributions on the Trust Preferred Securities (i.e., if Air T has failed to make required payments under the Junior Subordinated Debentures), a holder of the Trust Preferred Securities would have the right to institute a legal proceeding directly against Air T to enforce payment of such distributions. All of the Common Securities of Air T Funding are owned by Air T. The Common Securities rank pari passu, and payments will be made thereon pro rata, with the Trust Preferred Securities, except that upon the occurrence and during the continuance of an event of default under the Trust Agreement, as amended resulting from an event of default under the indenture, the rights of the Company as holder of the common securities to payment in respect of distributions and payments upon liquidation, redemption or otherwise would be subordinated to the rights of the holders of the Trust Preferred Securities. The Company has an optional right to repay the Junior Subordinated Debentures (i) to Air T Funding on or after June 7, 2024, in whole at any time or in part from time to time at a redemption price equal to the accrued and unpaid interest on the Junior Subordinated Debentures so redeemed to the date fixed for redemption, plus 100% of the principal amount thereof, or (ii) at any time, in whole (but not in part), upon the occurrence of a Tax Event, an Investment Company Event or a Capital Treatment Event (each as defined in the indenture) at a redemption price equal to the accrued and unpaid interest on the Junior Subordinated Debentures so redeemed to the date fixed for redemption, plus 100% of the principal amount thereof. In the event a Tax Event, an Investment Company Event or Capital Treatment Event has occurred and is continuing and the Company does not elect to redeem the Junior Subordinated Debentures and thereby cause a mandatory redemption of the Trust Preferred Securities or to liquidate Air T Funding and cause the Junior Subordinated Debentures to be distributed to holders of the Trust securities in liquidation of Air T Funding, such Trust Preferred Securities will remain outstanding and additional sums may be payable on the Junior Subordinated Debentures. At any time on or after June 7, 2024, the Trust Preferred Securities are subject to mandatory redemption upon the Company's repayment of the Junior Subordinated Debentures at maturity or their earlier redemption in an amount equal to the amount of Junior Subordinated Debentures maturing on or being redeemed at a redemption price equal to the aggregate liquidation amount of the Trust Preferred Securities plus accumulated and unpaid distributions thereon to the date of redemption. If less than all of the Junior Subordinated Debentures are to be repaid or redeemed on a redemption date, then the proceeds from such repayment or redemption would be allocated to the redemption of the Trust Preferred Securities pro rata. So long as no Debenture event of default has occurred and is continuing, at any time on or after June 7, 2024, the Company has the right under the indenture to defer the payment of interest on the Junior Subordinated Debentures at any time or from time to time for a period not exceeding 20 consecutive quarters with respect to each such period (each, an “Extension Period”), provided that no Extension Period may extend beyond the stated maturity of the Junior Subordinated Debentures on June 7, 2049. As a consequence of any such election, quarterly distributions on the Trust Preferred Securities will be deferred by Air T Funding during any such Extension Period. Distributions to which holders of Trust Preferred Securities are entitled will accumulate additional amounts thereon at the rate per annum of 8% thereof, compounded quarterly from the relevant Distribution Date, to the extent permitted under applicable law. During any such Extension Period, the Company may not (i) declare or pay any dividends or distributions on, or redeem, purchase, acquire, or make a liquidation payment with respect to, any of the Company’s capital stock (which includes common and preferred stock) or (ii) make any payment of principal, interest or premium, if any, on or repay, repurchase or redeem any debt securities of the Company that rank pari passu with or junior in interest to the Junior Subordinated Debentures or make any guarantee payments with respect to any guarantee by the Company of the debt securities of any subsidiary of the Company if such guarantee ranks pari passu with or junior in interest to the Junior Subordinated Debentures (other than (a) dividends or distributions in common stock of the Company, (b) any declaration of a dividend in connection with the implementation of a stockholders’ rights plan, or the issuance of stock under any such plan in the future, or the redemption or repurchase of any such rights pursuant thereto, (c) payments under the guarantee and (d) purchases of common stock for issuance under any of the Company’s benefit plans for its directors, officers or employees). Prior to the termination of any such Extension Period, the Company may further extend such Extension Period, provided that such extension does not cause such Extension Period to exceed 20 consecutive quarters or extend beyond the stated maturity. Upon the termination of any such Extension Period and the payment of all amounts then due, and subject to the foregoing limitations, the Company may elect to begin a new Extension Period. Subject to the foregoing, there is no limitation on the number of times that the Company may elect to begin an Extension Period. The Company has no current intention of exercising its right to defer payments of interest by extending the interest payment period on the Junior Subordinated Debentures. Air T Funding has a term of 30 years, but may terminate earlier as provided in the Trust Agreement, as amended. The Trust Agreement was most recently amended on March 3, 2021 and on January 28, 2022 and currently allows for the issuance of up to $100.0 million of Trust Preferred Securities. As of June 30, 2024, there are $43.3 million in Trust Preferred Securities outstanding ($9.0 million held by wholly-owned subsidiaries of the Company). The Trust is a “finance subsidiary” of Air T within the meaning of Rule 3‑10 of Regulation S‑X under the Securities Act of 1933, as amended, and as a result the Air T Funding does not file periodic reports with the SEC under the Securities Exchange Act of 1934, as amended.