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Item 1. Financial Statements

2024-11-12 compared with 2024-08-14 · 310 added, 156 removed, 517 unchanged (47% of the section changed)

3 unchanged sentences

(In thousands, except per share data) Three Months Ended

September 30, Six Months Ended

September 30,

2024 2023 2024 2023

Operating Revenues:

12 unchanged sentences

77,343 78,205 144,333 148,975

Operating (Loss) Income ( 577 ) 658

Non-operating Income (Expense):

Operating Income 3,899 761 3,321 1,422

Non-operating (Expense) Income:

Interest expense ( 2,162 ) ( 1,853 ) ( 4,108 ) ( 3,662 )

1 unchanged sentence

Other ( 784 ) ( 777 ) ( 80 ) ( 136 )

Income before income taxes 103 184

( 600 ) ( 1,882 ) 81 ( 2,359 )

Income (Loss) before income taxes 3,299 ( 1,121 ) 3,402 ( 937 )

Income Tax Expense 336 487 407 698

1 unchanged sentence

Net Income Attributable to Non-controlling Interests ( 443 ) ( 1 ) ( 810 ) ( 505 )

Net Loss Attributable to Air T, Inc.

Net Income (Loss) Attributable to Air T, Inc.

Stockholders $ 2,520 $ ( 1,609 ) $ 2,185 $ ( 2,140 )

Loss per share (Note 5)

Income (Loss) per share (Note 5)

Basic $ 0.91 $ ( 0.57 ) $ 0.79 $ ( 0.76 )

7 unchanged sentences

Three Months Ended

September 30, Six Months Ended

September 30,

(In Thousands) 2024 2023 2024 2023

Net Income (Loss) $ 2,963 $ ( 1,608 ) $ 2,995 $ ( 1,635 )

Foreign currency translation loss ( 50 ) ( 65 )

Redemption of non-controlling interest 146 —

Unrealized gain on interest rate swaps 1 24

Foreign currency translation gain (loss) 719 ( 170 ) 669 ( 235 )

Reclassification of interest rate swaps into earnings ( 148 ) ( 188 ) ( 351 ) ( 380 )

Total Other Comprehensive Loss ( 106 ) ( 233 )

Total Comprehensive Loss ( 74 ) ( 260 )

Redemption of non-controlling interest — — 146 —

Other ( 181 ) 16 ( 180 ) 40

Total Other Comprehensive Income (Loss) 390 ( 342 ) 284 ( 575 )

Total Comprehensive Income (Loss) 3,353 ( 1,950 ) 3,279 ( 2,210 )

Comprehensive Income Attributable to Non-controlling Interests ( 443 ) ( 1 ) ( 810 ) ( 505 )

Comprehensive Loss Attributable to Air T, Inc.

Comprehensive Income (Loss) Attributable to Air T, Inc.

Stockholders $ 2,910 $ ( 1,951 ) $ 2,469 $ ( 2,715 )

2 unchanged sentences

CONDENSED CONSOLIDATED BALANCE SHEETS

(In thousands, except per share data) June 30, 2024 March 31, 2024

(In thousands, except share amounts) September 30, 2024 March 31, 2024

Current Assets:

6 unchanged sentences

Prepaid expenses 2,199 2,351

Due from Contrail Asset Management, LLC (“CAM”) for expense reimbursements 3,164 3,093

Due from Crestone Asset Management, LLC ("CAM") for expense reimbursements 3,216 3,093

Other current assets (includes $ 450 and $ 531 measured at fair value)

Total Current Assets 102,610 102,877

Notes Receivable - Lendway, Inc.

("Lendway") 2,000 —

Equity method investments 17,592 16,653

Assets on lease or held for lease, net of accumulated depreciation of $ 309 and $ 8

4 unchanged sentences

Right-of-use ("ROU") assets 14,224 11,376

Equity method investments 16,030 16,653

Goodwill 10,503 10,540

Other assets (includes $ 835 and $ 1,909 measured at fair value)

Goodwill 10,675 10,540

Total Assets 197,116 177,167

14 unchanged sentences

Total Liabilities 181,040 158,371

Redeemable non-controlling interest 7,404 12,976

Redeemable non-controlling interests 7,267 12,976

Commitments and contingencies (Note 16)

7 unchanged sentences

Retained earnings 10,455 8,192

Accumulated other comprehensive loss ( 186 ) ( 80 )

Accumulated other comprehensive income (loss) 204 ( 80 )

Total Air T, Inc.

6 unchanged sentences

CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS

(In Thousands) Three Months Ended

(In Thousands) Six Months Ended

September 30,

CASH FLOWS FROM OPERATING ACTIVITIES:

2 unchanged sentences

Depreciation and amortization 1,709 1,389

Income from equity method of investments ( 1,923 ) ( 691 )

Inventory write-down 378 —

Income from equity method investments ( 4,269 ) ( 1,439 )

Other 2,258 1,346

11 unchanged sentences

Capital expenditures related to property & equipment ( 581 ) ( 557 )

Capital expenditures related to assets on lease or held for lease ( 14,598 ) —

Disbursements for note receivable - Lendway ( 2,000 ) —

Other ( 16 ) ( 109 )

Net cash provided by (used in) investing activities 2,008 ( 21 )

Net cash (used in) provided by investing activities ( 14,195 ) 156

CASH FLOWS FROM FINANCING ACTIVITIES:

1 unchanged sentence

Payments on lines of credit ( 59,451 ) ( 67,274 )

Proceeds from term loan 10,000 —

Payments on term loan ( 6,865 ) ( 15,438 )

Other ( 349 ) ( 225 )

Net cash used in financing activities ( 1,291 ) ( 4,076 )

Net cash provided by (used in) financing activities 12,494 ( 17,229 )

Effect of foreign currency exchange rates on cash and cash equivalents ( 2 ) 9

4 unchanged sentences

Equipment in inventory transferred to assets on lease 112 —

Assumption of liabilities to acquire assets on lease 720 —

Non-cash contribution from non-controlling interest 475 —

Contingent earnout for Contrail Aviation Support, LLC ("Contrail") redeemed interest 1,104 —

11 unchanged sentences

Repurchase of common stock — — 1 ( 15 ) — — — — ( 15 )

Stock option forfeiture (Note 15) — — — — ( 25 ) — — — ( 25 )

Stock compensation expense — — — — 79 — — — 79

Foreign currency translation loss — — — — — — ( 65 ) — ( 65 )

Redemption of non-controlling interest — — — — 78 146 — 224

Unrealized gain on interest rate swaps — — — — — — 1 — 1

Adjustment to fair value of redeemable non-controlling interest — — — — — 134 — — 134

Unrealized gain on interest rate swaps, net of tax — — — — — — 24 — 24

Reclassification of interest rate swaps into earnings — — — — — — ( 192 ) — ( 192 )

Balance, June 30, 2023 3,027 $ 757 209 $ ( 4,098 ) $ 807 $ 13,289 $ 583 $ 1,069 $ 12,407

Net loss* — — — — — ( 1,609 ) — ( 19 ) ( 1,628 )

Repurchase of common stock — — — — — — — — —

Exercise of stock options 3 1 — — 25 — — — 26

Stock compensation expense — — — — 79 — — — 79

Foreign currency translation loss — — — — — — ( 170 ) — ( 170 )

Adjustment to fair value of redeemable non-controlling interest — — — — — 412 — — 412

Unrealized gain on interest rate swaps, net of tax — — — — — — 16 — 16

Reclassification of interest rate swaps into earnings — — — — — — ( 188 ) — ( 188 )

Balance, September 30, 2023 3,030 $ 758 209 $ ( 4,098 ) $ 911 $ 12,092 $ 241 $ 1,050 $ 10,954

(In Thousands) Common Stock Treasury Stock Additional

6 unchanged sentences

Repurchase of common stock — — 13 ( 301 ) — — — — ( 301 )

Stock option forfeiture (Note 16) — — — — ( 25 ) — — — ( 25 )

Stock compensation expense — — — — 42 — — — 42

Foreign currency translation loss — — — — — — ( 50 ) — ( 50 )

Adjustment to fair value of redeemable non-controlling interests — — — — — 134 — — 134

Unrealized gain on interest rate swaps, net of tax — — — — — — 24 — 24

Redemption of non-controlling interest — — — — — 78 146 — 224

Unrealized gain on interest rate swaps — — — — — — 1 — 1

Reclassification of interest rate swaps into earnings — — — — — — ( 203 ) — ( 203 )

Balance, June 30, 2024 3,030 $ 758 270 $ ( 5,260 ) $ 876 $ 7,935 $ ( 186 ) $ 1,045 $ 5,168

* Excludes amount attributable to redeemable non-controlling interests in Contrail and Shanwick B.V.

Net income (loss) — — — — — 2,520 — ( 1 ) 2,519

Repurchase of common stock — — — — — — — — —

Stock option forfeiture (Note 16) — — — — ( 28 ) — — — ( 28 )

Stock compensation expense — — — — 30 — — — 30

Foreign currency translation gain — — — — — — 719 — 719

Reclassification of interest rate swaps into earnings — — — — — — ( 148 ) — ( 148 )

Initial consolidation of CASP, LLC — — — — — — — 730 730

Allocation of comprehensive income from unconsolidated investments — — — — — — 2 — 2

Allocation of comprehensive income to redeemable non-controlling interests — — — — — — ( 183 ) — ( 183 )

Balance, September 30, 2024 3,030 $ 758 270 $ ( 5,260 ) $ 878 $ 10,455 $ 204 $ 1,774 $ 8,809

* Excludes amount attributable to redeemable non-controlling interests in Contrail Aviation Support, LLC ("Contrail") and Shanwick B.V.

See notes to condensed consolidated financial statements.

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These condensed consolidated financial statements should be read in conjunction with the consolidated financial statements and notes thereto included in the Company's Annual Report on Form 10-K for the year ended March 31, 2024.

The results of operations for the period ended June 30, 2024 are not necessarily indicative of the operating results for the full year.

The unaudited results of operations for the period ended September 30, 2024 are not necessarily indicative of the operating results for the full year.

The accompanying financial statements have been prepared in accordance with generally accepted accounting principles applicable to a going concern, which contemplates the realization of assets and the satisfaction of liabilities in the normal course of business.

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The following table summarizes disaggregated revenues by type (in thousands):

Three Months Ended June 30,

Three Months Ended September 30, Six Months Ended September 30,

2024 2023 2024 2023

Product Sales

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Leasing Revenue

Overnight air cargo — —

Ground equipment sales 15 10 30 34

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Contract liabilities relate to deferred revenue, our unconditional right to receive consideration in advance of performance with respect to subscription revenue and advanced customer deposits with respect to product sales.

The following table presents outstanding contract liabilities as of April 1, 2024 and June 30, 2024 and the amount of contract liabilities as of April 1, 2024 that were recognized as revenue during the three months ended June 30, 2024 (in thousands):

The following table presents outstanding contract liabilities as of April 1, 2024 and September 30, 2024 and the amount of contract liabilities as of April 1, 2024 that were recognized as revenue during the six-month period ended September 30, 2024 (in thousands):

Outstanding contract liabilities Outstanding contract liabilities as of April 1, 2024

Recognized as Revenue

As of June 30, 2024 $ 4,143

As of September 30, 2024 $ 4,134

As of April 1, 2024 $ 4,359

For the three months ended June 30, 2024 $ ( 1,981 )

For the six months ended September 30, 2024 $ ( 3,217 )

Accrued Expenses and Other

(in thousands) June 30, 2024 March 31, 2024

(In thousands) September 30, 2024 March 31, 2024

Salaries, wages and related items $ 5,581 $ 5,296

4 unchanged sentences

Total $ 14,325 $ 15,511

During the three-month period ended June 30, 2024, the Company recorded $ 71.0 thousand in income tax expense at an effective tax rate ("ETR") of 68.9 %.

During the three-month period ended September 30, 2024, the Company recorded $ 0.3 million in income tax expense at an effective rate ("ETR") of 10.2 %.

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-month period ended June 30, 2024 were the valuation allowance related to the Company's U.S.

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 September 30, 2024 were the valuation allowance related to the Company’s U.S.

consolidated group, Delphax Technologies, Inc.

1 unchanged sentence

("DSI") and BCCM Advisors (Kenya) Limited ("BCCM Kenya"), and the foreign rate differentials for Air T’s operations located in the Netherlands and Puerto Rico.

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 the Company's captive insurance company subsidiary ("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.

During the three-month period ended September 30, 2023, the Company recorded income tax expense of $ 0.5 million at an ETR of ( 43.4 )%.

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 September 30, 2023 were the valuation allowance related to the Company’s U.S.

consolidated group, DSI, DTI, and LGSS, and the foreign rate differentials for Air T’s operations located in the Netherlands and Puerto Rico.

During the six-month period ended September 30, 2024, the Company recorded $ 0.4 million in income tax expense at an ETR of 12.0 %.

The primary factors contributing to the difference between the federal statutory rate of 21.0% and the Company's effective tax rate for the six-month period ended September 30, 2024, were the 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.

During the six-month period ended September 30, 2023, the Company recorded income tax expense of $ 0.7 million at an ETR of ( 74.5 )% 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 six-month period ended September 30, 2023 were the valuation allowance related to the Company’s U.S.

consolidated group, DSI, DTI, and LGSS, and the foreign rate differentials for Air T’s operations located in the Netherlands and Puerto Rico.

Net Earnings (Loss) Per Share

2 unchanged sentences

For purposes of calculating diluted earnings (loss) per share, shares issuable under stock options were considered potential common shares and were included in the weighted average common shares unless they were anti-dilutive.

As of September 30, 2023, all stock options under the Air T's 2012 Stock Option Plan have either been exercised or expired.

Further, of the 202,400 options outstanding as of September 30, 2024 under the Air T's 2020 Omnibus Stock and Incentive Plan, none were exercisable.

The computation of basic and diluted earnings per common share is as follows (in thousands, except for per share figures):

Three Months Ended June 30,

Three Months Ended September 30, Six Months Ended September 30,

2024 2023 2024 2023

Net income (loss) $ 2,963 $ ( 1,608 ) $ 2,995 $ ( 1,635 )

Net income attributable to non-controlling interests ( 443 ) ( 1 ) ( 810 ) ( 505 )

Net loss attributable to Air T, Inc.

Net income (loss) attributable to Air T, Inc.

Stockholders $ 2,520 $ ( 1,609 ) $ 2,185 $ ( 2,140 )

Loss per share:

Income (loss) per share:

Basic $ 0.91 $ ( 0.57 ) $ 0.79 $ ( 0.76 )

5 unchanged sentences

Intangible Assets and Goodwill

Intangible assets as of June 30, 2024 and March 31, 2024 consisted of the following (in thousands):

June 30, 2024

Intangible assets as of September 30, 2024 and March 31, 2024 consisted of the following (in thousands):

September 30, 2024

Gross Carrying Amount Accumulated Amortization Net Book Value

19 unchanged sentences

Intangible assets, total $ 16,097 $ ( 5,119 ) $ 10,978

Based on the intangible assets recorded at June 30, 2024 and assuming no subsequent additions to, or impairment of the underlying assets, the remaining estimated annual amortization expense is expected to be as follows:

Based on the intangible assets recorded at September 30, 2024 and assuming no subsequent additions to, or impairment of the underlying assets, the remaining estimated annual amortization expense is expected to be as follows:

(In thousands)

Year ending March 31, Amortization

2025 (excluding the three months ended June 30, 2024) $ 879

2025 (excluding the six months ended September 30, 2024) $ 594

Thereafter 4,751

The carrying amount of goodwill as of June 30, 2024 and March 31, 2024 was $ 10.5 million.

There was no impairment of goodwill during the three months ended June 30, 2024.

The carrying amount of goodwill as of September 30, 2024 and March 31, 2024 was $ 10.7 million and $ 10.5 million, respectively.

The increase from the prior fiscal year end balance is attributable to foreign currency translation adjustments related to the goodwill balance at Shanwick.

There was no impairment on goodwill during the six months ended September 30, 2024.

Investments in Securities and Derivative Instruments

As part of the Company’s interest rate risk management strategy, the Company, from time to time, uses derivative instruments to minimize significant unanticipated earnings fluctuations that may arise from rising variable interest rate costs associated with existing borrowings (Air T Term Note A and Term Note D).

To meet these objectives, the Company entered into interest rate swaps with notional amounts consistent with the outstanding debt to provide a fixed rate of 4.56 % and 5.09 %, respectively, on Term Notes A and D.

The swaps mature in January 2028.

On August 31, 2021, Air T and Minnesota Bank & Trust ("MBT") refinanced Term Note A and fixed its interest rate at 3.42 %.

To meet these objectives, the Company entered into interest rate swaps with notional amounts consistent with the outstanding debt on Term Note A - MBT and Term Note D - MBT, which were designated as effective hedges.

On August 31, 2021, Air T refinanced Term Note A and fixed its interest rate at 3.42 %.

As a result of this refinancing, the Company determined that the interest rate swap on Term Note A was no longer an effective hedge.

The Company will amortize the fair value of the interest-rate swap contract included in accumulated other comprehensive income (loss) associated with Term Note A at the time of de-designation into earnings over the remainder of its term.

In addition, any changes in the fair value of Term Note A's swap after August 31, 2021 are recognized directly into earnings.

The remaining swap contract associated with Term Note D is designated as an effective cash flow hedging instrument in accordance with ASC 815.

The Company amortized the fair value of the interest-rate swap contract included in accumulated other comprehensive income (loss) associated with Term Note A at the time of de-designation into earnings over the remainder of its term.

On July 10, 2024, the interest rate swap on Term Note A - MBT was terminated and the Company received proceeds in the amount $ 0.1 million with the net realized loss on swap termination included in other income (loss) on the condensed consolidated statement of income (loss).

The swap termination has no impact on the Company's accounting for the fair value adjustments of the interest-rate swap contract included in accumulated other comprehensive income (loss) associated with Term Note A - MBT.

On July 10, 2024, the interest rate swap on Term Note D - MBT was also terminated and the Company received proceeds in the amount $ 41.0 thousand with the net realized loss on swap termination included in other income (loss) on the condensed consolidated statement of income (loss).

As a result of this swap termination, the Company determined that the interest rate swap on Term Note D - MBT was no longer an effective hedge.

The Company will amortize the fair value of the interest-rate swap contract included in accumulated other comprehensive income (loss) associated with Term Note D - MBT at the time of de-designation into earnings over the remaining term of the interest rate swap prior to termination.

On January 7, 2022, Contrail completed an interest rate swap transaction with Old National Bank ("ONB") with respect to the $ 43.6 million loan made to Contrail in November 2020 pursuant to the Main Street Priority Loan Facility as established by the U.S.

1 unchanged sentence

The purpose of the floating-to-fixed interest rate swap transaction was to effectively fix the loan interest rate at 4.68 %.

As of February 24, 2022, this swap contract has been designated as a cash flow hedging instrument and qualified as an effective hedge in accordance with ASC 815.

During the period between January 7, 2022 and February 24, 2022, the Company recorded a loss of approximately $ 0.1 million in the consolidated statement of income (loss) due to the changes in the fair value of the instrument prior to the designation and qualification of this instrument as an effective hedge.

After it was deemed an effective hedge, the Company recorded changes in the fair value of the instrument in the consolidated statement of comprehensive income (loss).

As of February 24, 2022, this swap contract was designated as a cash flow hedging instrument and qualified as an effective hedge in accordance with ASC 815.

On March 30, 2023, Contrail made a prepayment of $ 6.7 million on Contrail - Term Note G.

2 unchanged sentences

In addition, any changes in the fair value of Contrail - Term Note G's swap after March 30, 2023 are recognized directly into earnings.

For the swap related to Air T Term Note D, the effective portion of changes in the fair value on this instrument is recorded in other comprehensive income (loss) and is reclassified into the consolidated statement of income (loss) as interest expense in the same period in which the underlying hedged transactions affect earnings.

The changes in the fair value of the instruments during the three months ended June 30, 2024 and 2023 were not material.

When the interest rate swaps were designated as effective hedges, the effective portion of changes in the fair value on these instruments were recorded in other comprehensive income (loss) and reclassified into the consolidated statement of income (loss) as interest expense in the same period in which the underlying hedged transaction affected earnings.

The changes in the fair value of the instruments during the three and six months ended September 30, 2024 and 2023, inclusive of Term Note D - MBT due to its effective hedge designation at the time, were not material.

The interest rate swaps are considered Level 2 fair value measurements.

As of June 30, 2024 and March 31, 2024, the fair value of these interest-rate swap contracts was an asset of $ 1.7 million and $ 1.9 million, respectively, which is included within other assets in the condensed consolidated balance sheets.

We estimate that $ 0.8 million of net unrealized gains related to the interest rate swaps included in accumulated other comprehensive loss will be reclassified into earnings within the next twelve months.

As of September 30, 2024 and March 31, 2024, the fair value of these interest-rate swap contracts was an asset of $ 0.8 million and $ 1.9 million, respectively, which is included within other assets in the condensed consolidated balance sheets.

We estimate that $ 0.8 million of net unrealized gains related to the interest rate swaps included in accumulated other comprehensive income (loss) will be reclassified into earnings within the next twelve months.

The Company also invests in exchange-traded marketable securities and accounts for that activity in accordance with ASC 321, Investments- Equity Securities.

1 unchanged sentence

The fair market value of marketable equity securities is determined based on quoted market prices in active markets and are therefore, considered Level 1 fair value measurements.

During the three months ended June 30, 2024, the Company had a gross unrealized gain in the fair value of marketable equity securities aggregating to $ 0.2 million and a gross unrealized loss aggregating to $ 0.3 million.

During the three months ended June 30, 2023, the Company had a gross unrealized gain in the fair value of marketable securities aggregating to $ 0.5 million and a gross unrealized loss aggregating to $ 0.7 million.

The Company's gross unrealized gains and losses on equity securities for the three and six months ended September 30, 2024 and 2023 are as follows (in thousands):

Three Months Ended

September 30,

Six Months Ended

September 30,

2024 2023 2024 2023

Unrealized Gains $ 216 $ 389 $ 441 $ 925

Unrealized Losses $ 368 $ 1,124 $ 672 $ 1,832

These unrealized gains and losses are included in other income (loss) on the condensed consolidated statement of income (loss).

As of June 30, 2024 and March 31, 2024, the fair value of these marketable equity securities was an asset of $ 1.6 million and $ 1.9 million, respectively, which is included within restricted investments and other current assets in the condensed consolidated balance sheets.

As of September 30, 2024 and March 31, 2024, the fair value of these marketable equity securities was an asset of $ 1.4 million and $ 1.9 million, respectively, which is included within restricted investments and other current assets in the condensed consolidated balance sheets.

Equity Method Investments

The Company’s investment in Lendway, Inc.

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

("Insignia"), is accounted for under the equity method of accounting.

Lendway, Inc.

The Company’s investment in Lendway (NASDAQ:

LDWY), formerly Insignia Systems, Inc., is accounted for under the equity method of accounting.

The Company elected a three-month lag upon adoption of the equity method.

3 unchanged sentences

("Bloomia"), marking its first investment in specialty agriculture and underscoring its strategy of targeting high-quality agricultural assets and enterprises.

As of June 30, 2024, the Company owned 0.5 million Lendway shares, representing approximately 27.9 % of Lendway's outstanding shares.

As of September 30, 2024, the Company owned 487,000 Lendway shares, representing approximately 27.5 % of Lendway's outstanding shares.

On August 15, 2024, the Company entered into a delayed draw term loan with Lendway for up to $ 2.5 million with an interest rate of 8.0 %.

On September 27, 2024 the borrowing limit was increased to $ 3.5 million and as of September 30, 2024, $ 2.0 million has been drawn.

All outstanding principal and accrued interest will become due and payable to the Company on the maturity date, which is the earlier of August 15, 2029 or by written demand of the Company after February 15, 2026.

Prior to the maturity, Lendway may prepay any accrued interest or principal outstanding without penalty.

Cadillac Casting, Inc.

The Company's 20.1 % investment in Cadillac Casting, Inc.

1 unchanged sentence

Due to the differing fiscal year-ends, the Company has elected a three-month lag to record the CCI investment, with a basis difference decrease of $ 0.3 million.

The Company recorded a basis difference adjustment of $ 12.0 thousand for the three months ended June 30, 2024.

CCI and Lendway's combined summarized unaudited financial information for the three months ended March 31, 2024 and 2023 is as follows (in thousands):

March 31, 2024 March 31, 2023

The Company recorded a basis difference adjustment of $ 12.0 thousand and $ 25.0 thousand in each of the three and six months ended September 30, 2024.

CCI and Lendway's combined summarized unaudited financial information for the three and six months ended June 30, 2024 and 2023 is as follows (in thousands):

Three Months Ended Six Months Ended

June 30, 2024 June 30, 2023 June 30, 2024 June 30, 2023

Revenue $ 52,662 $ 47,905 $ 98,419 $ 99,062

2 unchanged sentences

Net income 755 3,295 2,081 8,410

On May 5, 2021, the Company formed an aircraft asset management business called Contrail Asset Management, LLC ("CAM"), and an aircraft capital joint venture called Contrail JV II LLC ("CJVII").

Crestone Asset Management, LLC investment

On May 5, 2021, the Company formed an aircraft asset management business called Crestone Asset Management, LLC ("CAM"), formerly known as Contrail Asset Management LLC, and an aircraft capital joint venture called Crestone JV II LLC ("CJVII"), formerly known as Contrail JV II LLC.

The venture focuses on acquiring commercial aircraft and jet engines for leasing, trading and disassembly.

18 unchanged sentences

This approach provides a more accurate reflection of the Company's investment in CAM, compared to recording its proportionate share of income or loss.

CAM's summarized unaudited financial information, including both common interests and investor interests, for the three months ended June 30, 2024 and 2023 is as follows (in thousands):

June 30, 2024 June 30, 2023

HLBV net assets $ 27,051 $ 25,434

CAM's HLBV net assets, including common interests and investor interests, was $ 29.9 million and $ 22.5 million as of September 30, 2024 and 2023, respectively.

Additionally, contributions from and distributions to both Air T and MRC for the three and six months ended September 30, 2024 and 2023 is as follows (in thousands):

Three Months Ended Six Months Ended

September 30, 2024 September 30, 2023 September 30, 2024 September 30, 2023

Contributions $ — $ — $ — $ 457

Distributions $ 676 $ 705 $ 2,277 $ 1,348

Investment balances for the Company's equity method investees as of June 30, 2024 and March 31, 2024 is as follows (in thousands):

June 30, 2024 March 31, 2024

$ 2,049 $ 2,339

Investment balances for the Company's equity method investees as of September 30, 2024 and March 31, 2024 is as follows (in thousands):

Investment September 30, 2024 March 31, 2024

Lendway $ 1,853 $ 2,339

CCI 4,474 3,723

CAM 8,949 7,397

Other 2,305 3,194

Other equity method investments 2,316 3,194

Total $ 17,592 $ 16,653

Net income (loss) attributable to Air T, Inc.

stockholders for the Company's equity method investees, including basis difference adjustments, during the three months ended June 30, 2024 and 2023 is as follows (in thousands):

June 30, 2024 June 30, 2023

$ ( 290 ) $ 446

stockholders for the Company's equity method investees, included in non-operating (expense) income on the condensed consolidated statements of income (loss), including basis difference adjustments, during the three and six months ended September 30, 2024 and 2023 is as follows (in thousands):

Three Months Ended Six Months Ended

Investment September 30, 2024 September 30, 2023 September 30, 2024 September 30, 2023

Lendway $ ( 206 ) $ ( 10 ) $ ( 496 ) $ 437

CCI 77 656 751 1,339

CAM 2,345 ( 67 ) 3,839 ( 562 )

Other equity method investments 130 169 175 225

Total $ 2,346 $ 748 $ 4,269 $ 1,439

The Company's equity method investees may, from time to time, make distributions and dividends to the Company in accordance with accumulated earnings at the investee.

For the three and six months ended September 30, 2024 and 2023, the Company received distributions and dividends from equity method investees as follows (in thousands):

Three Months Ended Six Months Ended

Investment September 30, 2024 September 30, 2023 September 30, 2024 September 30, 2023

Lendway $ — $ — $ — $ —

CCI — 151 — 452

CAM 676 580 2,277 1,196

Other equity method investments 118 35 1,051 169

Total $ 794 $ 766 $ 3,328 $ 1,817

Inventories consisted of the following (in thousands):

September 30,

2024 March 31,

13 unchanged sentences

Total inventories, net of reserves $ 51,274 $ 60,720

Lessor Arrangements

Equipment Leases

The Company leases equipment to third-parties, primarily through Contrail.

Leases for aircraft and engines to aviation customers typically have terms ranging from 1 and 4 years under operating lease agreements.

On August 26, 2024, Contrail executed the operating agreement for CASP Leasing 1, LLC ("CASP"), a newly created and 95 % owned subsidiary of Contrail.

On August 29, 2024, CASP entered into two purchase agreements to acquire and subsequently lease two Airbus Model A321-111 aircraft.

For the assets currently on lease, there are no options for the lessees to purchase the assets at the end of the lease term.

The Company depreciates the aircrafts and engines on a straight-line basis over the assets' useful life from the acquisition date to an estimated residual value.

During the three and six months ended September 30, 2024, the Company recognized depreciation expense relating to equipment leases of $ 0.2 million and $ 0.3 million, respectively.

Depreciation expense relating to equipment leases for the three and six months ended September 30, 2023 was not material.

Future minimum rental payments to be received do not include contingent rentals that may be received under certain leases because amounts are based on usage.

During the respective three and six months ended September 30, 2024, earned contingent rent on equipment leases totaled approximately $ 0.1 million.

The Company had no contingent rent earned on equipment leases during the three and six months ended September 30, 2023.

As of September 30, 2024, future minimum rental payments to be received under non-cancelable leases are as follows (in thousands):

Year ended March 31,

2025 (excluding the six months ended September 30, 2024) $ 968

Total $ 10,476

Office leases

The Company, through its wholly owned subsidiary, Wolfe Lake, leases offices to third parties with lease terms between 5 and 29 years under operating lease agreements.

For the offices currently on lease, there are no options for the lessees to purchase the spaces at the end of the leases.

Our contractual obligations for offices currently on lease can include termination and renewal options.

We utilize the reasonably certain threshold criteria in determining which options our customers will exercise.

The Company depreciates the assets on a straight-line basis over the assets' useful life.

During the respective three months ended September 30, 2024 and 2023, depreciation expense relating to office leases was $ 0.1 million.

During the respective six months ended September 30, 2024 and 2023, depreciation expense relating to office leases was $ 0.2 million.

During the three and six months ended September 30, 2024, the Company recognized rental and other revenues related to operating lease payments of $ 0.4 million and $ 0.9 million, respectively, of which variable lease payments were $ 0.2 million and $ 0.4 million, respectively.

During the three and six months ended September 30, 2023, the Company recognized rental and other revenues related to operating lease payments of $ 0.4 million and $ 0.8 million, respectively, of which variable lease payments were $ 0.2 million and $ 0.3 million, respectively.

Future minimum rental payments to be received do not include variable lease payments that may be received under certain leases because amounts are based on usage.

The following table sets forth the undiscounted cash flows for future minimum base rents to be received from customers for office leases in effect as of September 30, 2024:

Year ended March 31,

2025 (excluding the six months ended September 30, 2024) $ 483

Thereafter 1,842

Total $ 6,265

Lessee Arrangements

The Company has operating leases for the use of real estate, machinery, and office equipment.

The majority of our leases have a term of 2 to 5 years;

The majority of our leases have a lease term of 2 to 5 years;

however, we have certain leases with longer terms of up to 30 years.

6 unchanged sentences

The interest rate implicit in lease contracts is typically not readily determinable, and as such the Company utilizes the incremental borrowing rate to calculate lease liabilities, which is the rate incurred to borrow on a collateralized basis over a similar term an amount equal to the lease payments in a similar economic environment.

The components of lease cost for the three months ended June 30, 2024 and 2023 are as follows (in thousands):

Three Months Ended June 30,

The components of lease cost for the three and six months ended September 30, 2024 and 2023 are as follows (in thousands):

Three Months Ended September 30, Six Months Ended September 30,

2024 2023 2024 2023

Operating lease cost $ 749 $ 742 $ 1,418 $ 1,424

2 unchanged sentences

Total lease cost $ 1,274 $ 1,218 $ 2,463 $ 2,171

Amounts reported in the consolidated balance sheets for leases where we are the lessee as of June 30, 2024 and March 31, 2024 were as follows (in thousands):

June 30, 2024 March 31, 2024

Amounts reported in the consolidated balance sheets for leases where we are the lessee as of September 30, 2024 and March 31, 2024 were as follows (in thousands):

September 30, 2024 March 31, 2024

Operating leases

2 unchanged sentences

Weighted-average remaining lease term

Operating leases 11 years 12 years, 1 month

Operating leases 10 years, 5 months 12 years, 1 month

Weighted-average discount rate

Operating leases 5.63 % 5.09 %

Maturities of lease liabilities under non-cancellable leases where we are the lessee as of June 30, 2024 are as follows (in thousands):

During the six months ended September 30, 2024, the Company had ROU assets that were obtained in exchange for new operating lease liabilities in the amount of $ 3.8 million.

Maturities of lease liabilities under non-cancellable leases where we are the lessee as of September 30, 2024 are as follows (in thousands):

Operating Leases

2025 (excluding the three months ended June 30, 2024) $ 2,044

2025 (excluding the six months ended September 30, 2024) $ 1,563

Thereafter 7,669

3 unchanged sentences

Financing Arrangements

Borrowings of the Company and its subsidiaries are summarized below at June 30, 2024 and March 31, 2024, respectively.

Borrowings of the Company and its subsidiaries are summarized below at September 30, 2024 and March 31, 2024, respectively.

On May 30, 2024, Contrail, a majority-owned subsidiary of the Company, entered into a Membership Interest Redemption and Earnout Agreement (the “Redemption Agreement”) with OCAS, Inc., a corporation owned by the Chief Executive Officer of Contrail, Joe Kuhn (the “Seller”).

1 unchanged sentence

The purchase price for the redeemed interest is $ 4.6 million, plus an earnout amount.

The cash purchase price is payable pursuant to a secured, subordinated promissory note ("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.

6 unchanged sentences

As a result, it is excluded from the tables of current financing arrangements and contractual financing obligations below.

The revolving line of credit at Air T with MBT ("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 following table provides certain information about the current financing arrangements of the Company and its subsidiaries as of June 30, 2024:

(In Thousands) June 30,

On August 29, 2024, the Company and twelve of the Company’s subsidiaries ("Alerus Loan Parties") entered into a credit agreement (the “New Credit Agreement”) with Alerus Financial, National Association (the “Lender”).

The New Credit Agreement provides for a secured revolving credit facility ("Revolver - Alerus") in an initial maximum principal amount of up to $ 14.0 million.

Availability under the Revolver - Alerus is subject to a borrowing base and provides for a sub-facility for the issuance of letters of credit in an aggregate amount not to exceed $ 3.0 million, with the outstanding amount of any such letters of credit reducing availability for borrowings under the revolving credit facility.

Revolver - Alerus matures on February 28, 2026 and the balance outstanding bears interest at a rate per annum equal to the greater of 5.00 % or one-month SOFR plus 2.00 %.

In addition to the Revolver - Alerus, the New Credit Agreement provides for two secured term loans – Term Note A ("Term Note A - Alerus") and Term Note B ("Term Note B - Alerus").

Term Note A - Alerus is a loan in the principal amount of $ 10.7 million that matures on August 15, 2029 that bears interest at a rate per annum equal to the greater of 5.00 % or one-month SOFR plus 2.00 %.

Term Note A - Alerus requires monthly payments of principal commencing September 15, 2024 with such payments set at a seven year level principal amortization and a payment of $ 3.2 million due at maturity.

Term Note B - Alerus is a loan in the principal amount of $ 2.3 million that matures on August 15, 2029 and bears interest at a rate per annum equal to the greater of 5.00 % or one-month SOFR plus 2.00 %.

Term Note B - Alerus requires monthly payments of principal commencing September 15, 2024 with such payments set at a 25 year level principal amortization and a payment of $ 1.8 million due at maturity.

Term Note A and Term Note B may be prepaid in whole or in part at any time, subject to accrued interest and a prepayment premium.

The prepayment premium is:

3.00 % of the prepaid amount in the first loan year, 2.00 % in the second and third loan years, 1.00 % in the fourth and fifth loan years, and no premium after the fifth loan year.

No prepayment premium applies if it is refinanced by the Lender or prepaid with funds from the Alerus Loan Parties’ internally generated cash flows.

The Alerus Loan Parties are co-borrowers under the New Credit Agreement and each of the notes and include the following subsidiaries:

AirCo, LLC, Airco 2, LLC, Air’Zona Aircraft Services, Inc., AirCo Services, LLC, CSA Air, Inc., Global Ground Support, LLC, Jet Yard, LLC, Jet Yard Solutions, LLC, Mountain Air Cargo, Inc., Stratus Aero Partners, LLC, Worldwide Aircraft Services, Inc., and Worthington Aviation, LLC.

The obligations of the Alerus Loan Parties under the New Credit Agreement and the notes are secured by a first priority security interest in substantially all of the Alerus Loan Parties' current assets, including accounts receivable and inventory.

The Company is not a borrower under the New Credit Agreement but has guaranteed the obligations of the Borrowers owed to the Lender.

In addition, Air T, Inc.

has pledged a brokerage account of marketable securities held at a securities intermediary to secure the obligations.

Furthermore, the obligations are further secured by a deed of trust on approximately 4.626 acres of real estate that includes a 13,000 square foot office building in Denver, North Carolina.

The New Credit Agreement contains a financial covenant that the Borrowers will not permit the debt service coverage ratio to be less than 1.25 to 1.00 at any quarterly measurement date or permit the leverage ratio to be greater than 3.00 to 1.00 at any semi-annual measurement date.

The New Credit Agreement also includes other customary representations and warranties, affirmative covenants, negative covenants and events of default.

Upon the occurrence of events of default, the obligations to the Lender may be accelerated and the commitments may be terminated.

In connection with the closing of the New Credit Agreement, the Company and its subsidiaries used proceeds from the new financing to satisfy and discharge all obligations, and terminated all commitments, under the Company’s previous secured credit facility with Minnesota Bank & Trust ("MBT").

All debt issuance cost were expensed as debt extinguishment cost within other income (loss) on the condensed consolidated statement of income (loss).

The Company incurred no termination penalties in connection with such termination.

On September 12, 2024, Contrail entered into the Fifth Amendment to the Master Loan Agreement dated June 24, 2019 and Supplement #11 to the Master Loan Agreement, and Term Note J with Old National Bank ("ONB").

Term Note J is a term loan in the principal amount of $ 10.0 million.

The loan bears a variable monthly interest rate at the 1-month SOFR Rate plus 3.86 % and requires equal monthly payments of principal and interest until the loan maturity date of September 12, 2028.

The loan requires compliance with covenants that require minimum Tangible Net Worth of $ 15.0 million and a Quarterly Cash Flow Coverage of not less than 1.25 to 1.0.

In order to induce ONB to enter into these agreements, Contrail and OCAS, Inc.

entered into a subordination agreement dated September 12, 2024 to address certain loan matters and to establish the priority of repayment of Contrail’s debt to ONB over the OCAS Loan in the original principal amount of $ 4.6 million.

The following table provides certain information about the current financing arrangements of the Company and its subsidiaries (other than related party obligations) as of September 30, 2024:

(In Thousands) September 30,

2024 March 31,

2024 Maturity Date Interest Rate Unused commitments at June 30, 2024

2024 Maturity Date Interest Rate Unused commitments at September 30, 2024 Type of Debt

Revolver - MBT 1 $ — $ — 8/31/2024 SOFR + range of 2.25 % - 3.25 %

Term Note A - MBT 1

— 6,955 8/31/2031 3.42 % Recourse

Term Note B - MBT 1

Term Note D - MBT 1,254 1,271 1/1/2028 1-month LIBOR + 2.00 %

Term Note F - MBT 733 783 1/31/2028 Greater of 6.00 % or Prime + 1.00 %

Debt - Trust Preferred Securities 34,260 34,214 6/7/2049 8.00 %

Total 49,780 45,679

Term Loan - PSB 5,434 5,434 12/11/2025 3-month SOFR + 3.26 %

— 2,456 8/31/2031 3.42 % Recourse

Term Note D - MBT 1

— 1,271 1/1/2028 1-month LIBOR + 2.00 %

Term Note F - MBT 1

— 783 1/31/2028 Greater of 6.00 % or Prime + 1.00 %

Debt - Trust Preferred Securities 2 34,306 34,214 6/7/2049 8.00 % Recourse

Total 34,306 45,679

1 unchanged sentence

Term Loan - MBT 1

— 1,749 8/31/2031 4.14 % Recourse

Total — 1,749

Alerus Loan Parties Debt

Revolver - Alerus 12,930 — 2/28/2026 Greater of 5.00 % or 1-month SOFR + 2.00 %

1,070 Recourse

Term Note A - Alerus 10,592 — 8/15/2029 Greater of 5.00 % or 1-month SOFR + 2.00 %

Term Note B - Alerus 2,272 — 8/15/2029 Greater of 5.00 % or 1-month SOFR + 2.00 %

Total 25,794 —

Contrail Debt

Revolver - ONB 815 3,476 11/24/2025 1-month SOFR + 3.56 %

$ 24,185 Limited recourse 3

Term Loan G - ONB 14,918 14,918 11/24/2025 1-month SOFR + 3.11 %

Term Note I 8,187 10,000 9/28/2025 1-month SOFR + 3.11 %

Limited recourse 3

Term Note I - ONB 4,580 10,000 9/28/2025 1-month SOFR + 3.11 %

Limited recourse 3

Term Note J - ONB 10,000 — 9/12/2028 1-month SOFR + 3.86 %

Limited recourse 3

Total 30,313 28,394

Term Loan - PSB 5,434 5,434 12/11/2025 3-month SOFR + 3.26 %

Total 5,434 5,434

Wolfe Lake Debt

Term Loan - Bridgewater 9,263 9,327 12/2/2031 3.65 %

Term Loan - Bridgewater 9,197 9,327 12/2/2031 3.65 % Non-recourse

Total 9,197 9,327

Air T Acquisition 22.1

Term Loan - Bridgewater 4,000 4,000 2/8/2027 4.00 %

Term Loan A - ING 1,766 1,946 2/1/2027 3.50 %

Term Loan B - ING 1,071 1,081 5/1/2027 4.00 %

Term Loan - Bridgewater 4,000 4,000 2/8/2027 4.00 % Non-recourse

Term Loan A - ING 1,679 1,946 2/1/2027 3.50 % Non-recourse

Term Loan B - ING 1,120 1,081 5/1/2027 4.00 % Non-recourse

Total 6,799 7,027

Promissory Note - Seller's Note 739 849 1/1/2026 6.00 %

Promissory Note - Seller's Note 627 849 1/1/2026 6.00 % Non-recourse

Total 627 849

AAM 24-1 Debt

Promissory Notes - Honeywell 15,000 15,000 2/22/2031 8.50 %

Promissory Notes - Honeywell 15,000 15,000 2/22/2031 8.50 % Non-recourse

Total 15,000 15,000

2 unchanged sentences

Total Debt, net $ 126,799 $ 112,926

At June 30, 2024, our contractual financing obligations, including payments due by period, are as follows (in thousands):

At September 30, 2024, our contractual financing obligations, including payments due by period, are as follows (in thousands):

Due by Amount

June 30, 2025 $ 15,902

June 30, 2026 24,307

June 30, 2027 6,453

June 30, 2028 2,877

June 30, 2029 1,754

September 30, 2025 $ 12,390

September 30, 2026 38,064

September 30, 2027 8,874

September 30, 2028 4,429

September 30, 2029 6,693

Thereafter 57,020

Unamortized Premiums and Debt Issuance Costs ( 671 )

1 The revolver and term notes with MBT were fully paid off with the proceeds from the new credit agreement with Alerus.

The Company terminated all commitments under the credit facility with MBT as of August 29, 2024.

2 Does not include $ 9.0 million held by wholly-owned subsidiaries of the Company.

3 Includes Air T's guarantee of approximately $ 1.6 million.

Shares Repurchased

On May 14, 2014, the Company announced that its Board of Directors had authorized a program to repurchase up to 750,000 (retrospectively adjusted to 1,125,000 after the stock split on June 10, 2019) shares of the Company’s common stock from time to time on the open market or in privately negotiated transactions, in compliance with SEC Rule 10b-18, over an indefinite period.

During the three months ended June 30, 2024, the Company repurchased 13,348 shares at an aggregate cost of $ 0.3 million.

All of these repurchased shares were recorded as treasury shares as of June 30, 2024.

On August 16, 2022, President Biden signed the Inflation Reduction Act ("IRA") into law.

The IRA enacted a 15% corporate minimum tax rate, a 1% excise tax on share repurchases made after December 31, 2022 (subject to certain thresholds being met), and created and extended certain tax-related energy incentives.

As a result of the IRA's enactment into law, the Company is now subject to a 1% excise tax on share repurchases, effective for share repurchases made after December 31, 2022.

This excise tax may be reduced for the value of certain share issuances.

The excise tax incurred in connection with the Company's stock repurchases during the three months ended June 30, 2024 was no t material.

No shares were repurchased during the quarter ended September 30, 2024.

The excise tax incurred in connection with the Company's stock repurchases during the six months ended September 30, 2024 was not material.

Geographical Information

Total tangible long-lived assets, which include property and equipment as well as assets on lease, net of accumulated depreciation, located in the United States, the Company's country of domicile, and held outside the United States are summarized in the following table as of June 30, 2024 and March 31, 2024 (in thousands):

June 30, 2024 March 31, 2024

Total tangible long-lived assets, which include property and equipment as well as assets on lease, net of accumulated depreciation, located in the United States, the Company's country of domicile, and held outside the United States, are summarized in the following table as of September 30, 2024 and March 31, 2024 (in thousands):

September 30, 2024 March 31, 2024

United States $ 20,582 $ 20,807

1 unchanged sentence

Total tangible long-lived assets, net $ 36,497 $ 21,113

The net book value of tangible long-lived assets located within each individual foreign country at June 30, 2024 and March 31, 2024 is listed below (in thousands):

June 30, 2024 March 31, 2024

The net book value of tangible long-lived assets located within each individual foreign country at September 30, 2024 and March 31, 2024 is listed below (in thousands):

September 30, 2024 March 31, 2024

Bulgaria $ 15,617 $ —

Thailand 239 252

Total tangible long-lived assets, net $ 15,915 $ 306

Total revenue, in and outside the United States, is summarized in the following table for the three months ended June 30, 2024 and June 30, 2023 (in thousands):

June 30, 2024 June 30, 2023

Total revenue, in and outside the United States, is summarized in the following table for the six months ended September 30, 2024 and September 30, 2023 (in thousands):

Six Months Ended September 30,

United States $ 123,912 $ 128,435

3 unchanged sentences

The Company has four business segments:

overnight air cargo, ground equipment sales, commercial jet engine and parts segment and corporate and other.

overnight air cargo, ground equipment sales, commercial jet engine and parts, and corporate and other.

Segment data is summarized as follows (in thousands):

(In Thousands) Three Months Ended

September 30, Six Months Ended

September 30,

2024 2023 2024 2023

Operating Revenues by Segment:

34 unchanged sentences

Total $ 949 $ 700 $ 1,709 $ 1,389

The table below provides a reconciliation of operating income (loss) to Adjusted EBITDA for the three months ended June 30, 2024 and 2023 (in thousands):

Three Months Ended June 30, 2024 Three Months Ended June 30, 2023

Operating (loss) income $ ( 577 ) $ 658

Depreciation and amortization (excluding leased engines depreciation) 760 690

Asset impairment, restructuring or impairment charges 1 378 —

Gain on sale of property and equipment — ( 6 )

TruPs issuance expenses 101 45

Adjusted EBITDA $ 662 $ 1,387

1 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.

Commitments and Contingencies

6 unchanged sentences

Pursuant to the Redemption Agreement, Contrail is required to calculate the earnout payments annually within 30 days following the completion of the annual audits of the Company and Contrail and payment of any amount due is required following satisfaction of a procedure to address any objections to the calculated amount.

The earnout pursuant to the Redemption Agreement is a Level 3 fair value measurement that is valued at $ 1.1 million as of June 30, 2024 with a decrease in value from the effective date of April 1, 2024 in the amount of $ 20.0 thousand included as part of other non-operating income in the condensed consolidated statements of income (loss).

The earnout pursuant to the Redemption Agreement is a Level 3 fair value measurement that is valued at $ 1.4 million as of September 30, 2024 with an increase in value from the effective date of April 1, 2024 in the amount of $ 0.3 million included as part of other non-operating income in the condensed consolidated statements of income (loss).

In connection with the Redemption Agreement, the parties agreed to certain technical amendments to the First Amended and Restated Operating Agreement of Contrail and entered into a new Put and Call Agreement with respect to the remaining 5 % interest in Contrail held by the Seller.

7 unchanged sentences

The non-controlling interest holders are the executive management of the underlying business.

The Shanwick Put/Call Option grants the Company an option to purchase the 30.0 % interest at the call option price that equals to the average EBIT over the 3 Financial Years prior to the exercise of the Call Option multiplied by 8.

In addition, the Shanwick Put/Call Option also grants the non-controlling interest owners an option to require the Company to purchase from them their respective ownership interests at the Put Option price, that is equal to the average EBIT over the 3 Financial Years prior to the exercise of the Put Option multiplied by 7.5 .

The Shanwick Put/Call Option grants the Company an option to purchase the 30.0 % interest at the call option price that equals the average EBIT over the three Financial Years prior to the exercise of the Call Option multiplied by eight .

In addition, the Shanwick Put/Call Option also grants the non-controlling interest owners an option to require the Company to purchase from them their respective ownership interests at the Put Option price, that is equal to the average EBIT over the three Financial Years prior to the exercise of the Put Option multiplied by seven and one-half.

The Call Option and the Put Option may be exercised at any time from the fifth anniversary of the shareholder agreement and then only at the end of each fiscal year of Air T ("Shanwick RNCI").

3 unchanged sentences

Changes in its estimated redemption value are recorded on our consolidated statements of operations within non-controlling interests.

The Shanwick RNCI and Contrail RNCI's estimated redemption values as of June 30, 2024 were comprised of the following (in thousands):

The Shanwick RNCI and Contrail RNCI are measured at the higher of their carrying value or their redemption value.

As of September 30, 2024, the balances were comprised of the following (in thousands):

Shanwick RNCI Contrail RNCI Total

3 unchanged sentences

Net income attributable to non-controlling interests 25 325 350

Other comprehensive income attributable to the RNCI ( 183 ) — ( 183 )

Redemption value adjustments 466 — 466

Redemption of non-controlling interests — ( 5,899 ) ( 5,899 )

Ending Balance as of June 30, 2024 $ 5,740 $ 1,664 $ 7,404

Contrail Asset Management, LLC and CJVII, LLC

Ending Balance as of September 30, 2024 $ 5,525 $ 1,742 $ 7,267

Crestone Asset Management, LLC and CJVII, LLC

For CAM's Investment Function, as described in Note 8 , CAM's initial commitment to CJVII was approximately $ 51.0 million.

5 unchanged sentences

Participation in each is determined solely based on whether a potential investment at the CJVII Series is a domestic (Onshore) or international (Offshore) investment.

As of June 30, 2024, for its Investment Function, the Company has contributed $ 10.6 million to CAM’s Offshore Series and $ 1.0 million to CAM’s Onshore Series.

As of September 30, 2024, for its Investment Function, the Company has contributed $ 10.6 million to CAM’s Offshore Series and $ 1.0 million to CAM’s Onshore Series.

The Company fulfilled its Investment Function initial commitment to CAM in fiscal year 2023.

6 unchanged sentences

The total number of shares authorized under the Plan is 420,000 .

Through June 30, 2024, options to purchase up to 326,000 shares have been granted under the Plan.

Through September 30, 2024, options to purchase up to 326,000 shares have been granted under the Plan.

The options vest annually over a period of ten years based on a specified service condition ("vested awards") and expire ten years after vesting.

3 unchanged sentences

however, they did not meet the market condition to become exercisable.

On April 30, 2024, 2,000 vested shares that did not meet the market condition and 8,000 unvested shares were forfeited due to employee termination.

For the three months ended June 30, 2024, total compensation cost recognized under the Plan was $ 42.0 thousand.

As of June 30, 2024, options to purchase up to 221,000 shares are outstanding under the Plan.

No options were exercisable as of June 30, 2024.

For the three and six months ended September 30, 2024, 18,000 and 26,000 unvested shares, respectively, were forfeited due to employee departures resulting in the reversal of previously recognized expense of $ 28.0 thousand and $ 53.0 thousand, respectively.

For the three and six months ended September 30, 2024, total compensation cost recognized under the Plan was $ 30.0 thousand and $ 72.0 thousand.

As of September 30, 2024, options to purchase up to 202,400 shares are outstanding under the Plan.

No options were exercisable as of September 30, 2024.

Nonfinancial Guarantees

3 unchanged sentences

We regularly review our performance risk under these arrangements, and in the event it becomes probable that we will be required to perform under a guarantee or indemnity, the amount of probable payment will be recorded.

The maximum potential payments for nonfinancial guarantees were $ 5.1 million and $ 10.1 million at June 30, 2024 and March 31, 2024, respectively.

The maximum potential payments for nonfinancial guarantees were $ 4.8 million and $ 10.1 million at September 30, 2024 and March 31, 2024, respectively.

The reduction in the maximum potential payments required for nonfinancial guarantees this quarter, compared to March 31, 2024, stems from a strategic decision to sell the aircraft instead of maintaining it on lease, thereby mitigating future payment obligations for the underlying asset.

The carrying value of recorded liabilities related to nonfinancial guarantees was $ 0 at both June 30, 2024 and March 31, 2024.

The carrying value of recorded liabilities related to nonfinancial guarantees was $ 0 at both September 30, 2024 and March 31, 2024.

Subsequent Events

Management performs an evaluation of events that occur after the balance sheet date but before condensed consolidated financial statements are issued for potential recognition or disclosure of such events in its condensed consolidated financial statements.

On October 16, 2024, the Company and AAM 24-1, LLC, a wholly-owned subsidiary of the Company ("AAM 24-1") entered into a Second Note Purchase Agreement (the “Second NPA”) with Honeywell Common Investment Fund and Honeywell International Inc.

Master Retirement Trust ("Honeywell").

The Second NPA amended and restated the terms of the Company’s previously disclosed Note Purchase Agreement (the “Original NPA”), which was filed in a Current Report on Form 8-K on February 26, 2024.

Under the Original NPA, AAM 24-1 had issued and sold $ 15.0 million of 8.5 % senior secured notes.

The Second NPA amended and restated the amount issued and sold to $ 30.0 million of 8.5 % senior secured notes (collectively the "Notes") to Honeywell, which includes the $ 15.0 million from the Original NPA bringing the total indebtedness to $ 30.0 million.

The Notes mature on March 1, 2031 and bear an annual interest at a rate of 8.5 %.

In addition to the 160,000 previously pledged TruPs, 160,000 newly-issued shares of TruPs held by AAM 24-1 are now pledged to Honeywell, in connection with the closing of the S econd NPA.

Compared sentence by sentence after normalising whitespace, quotation marks, case and digits, so re-formatting and restated figures do not read as changed language. Wording changes appear as one removal and one addition. The current filing and the prior one are authoritative.

What changed 10-Q

Item 1. Financial Statements