What changed in this filing

/stocks — the workspaceLOADING

Item 7. Management’s Discussion and Analysis

2025-06-27 compared with 2024-06-26 · 183 added, 129 removed, 156 unchanged (67% of the section changed)

4 unchanged sentences

• 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;

• Ground support equipment, 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;

3 unchanged sentences

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.

• Digital solutions, which develops and provides digital aviation and other business services to customers within the aviation industry to generate recurring subscription revenues;

The Company additionally has a central corporate function that acts as the capital allocator and resource for other consolidated businesses, referred to as Corporate and other.

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 (loss) and Adjusted EBITDA.

Effective as of the fourth quarter of fiscal year 2025, we renamed our ground equipment sales segment to ground support equipment and renamed our commercial jet engines and parts segment to commercial aircraft, engines and parts to better align the descriptions of the segments with their activities.

Additionally, we have elected to separately disclose the digital solutions segment to better align our financial statement presentation with a key long-term growth area for the Company.

Digital solutions was previously classified as part of insignificant business activities.

As a result of this change, prior period segment information has been recast to conform to our current presentation in our financial statements and related notes included Item 8 of this report.

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

We evaluate the performance of our reportable segments based on operating income (loss) and Adjusted EBITDA.

Unconsolidated Investments

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

The Company has an ownership interest in Crestone Asset Management, LLC.

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

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

See Note 9 and Note 2 1 of Notes to Consolidated Financial Statements included under Part II, Item 8 of this report.

The Company also has ownership interests in Lendway and CCI.

1 unchanged sentence

See Note 9 of Notes to Consolidated Financial Statements included under Part II, Item 8 of this report.

The Company additionally has ownership interests in other smaller entities that are not consolidated into the operations of the Company and included in the disclosure in Note 9 of Notes to Consolidated Financial Statements included under Part II, Item 8 of this report.

Forward Looking Statements

9 unchanged sentences

• The impact of any terrorist activities or armed conflict on United States soil or abroad;

• Changes in U.S.

and foreign trade regulations and tariffs;

• 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;

6 unchanged sentences

• Mild winter weather conditions reducing the demand for deicing equipment;

• Market acceptance and operational success of the Company’s relatively new aircraft asset management business and related aircraft capital joint venture;

• Market acceptance and operational success of the Company’s aircraft asset management business and related aircraft capital joint venture;

• 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.

4 unchanged sentences

Consolidated revenue increased by $5.0 million (2%) to $291.9 million for the fiscal year ended March 31, 2025 compared to the prior fiscal year.

Following is a table detailing revenue by segment (after elimination of intercompany transactions), in thousands:

Following is a table detailing revenue for the Company's four segments and Corporate and other (after elimination of intercompany transactions), in thousands:

Year Ended March 31, Change

Overnight Air Cargo $ 124,031 $ 115,546 $ 8,485 7 %

Ground Equipment Sales 37,168 48,485 (11,317) (23) %

Commercial Jet Engines and Parts 125,535 101,737 23,798 23 %

Ground Support Equipment 38,940 37,168 1,772 5 %

Commercial Aircraft, Engines and Parts 118,215 125,535 (7,320) (6) %

Digital Solutions 7,268 5,783 1,485 26 %

Segments total

288,454 284,032 4,422 2 %

Corporate and Other 3,396 2,802 594 21 %

Total $ 291,850 $ 286,834 $ 5,016 2 %

Revenues from the overnight air cargo segment increased by $25.0 million (28%) compared to the prior fiscal year, principally attributable to higher labor revenues, higher admin fees and higher FedEx pass through revenues due to increased fleet (85 aircraft in the prior year compared to 105 in the current fiscal year), and the WASI acquisition mentioned in Note 2 of the Notes to Consolidated Financial Statements of this report, contributed a full year's revenues of $7.5 million in the current fiscal year compared to $0.9 million in the prior fiscal year.

Revenues from the overnight air cargo segment increased by $8.5 million (7%) compared to the prior fiscal year, principally attributable to higher labor revenues, increase in admin fees and higher FedEx pass through revenues due to higher billable hours for maintenance.

Pass-through costs under the dry-lease agreements with FedEx totaled $39.9 million and $36.4 million for the years ended March 31, 2025 and 2024, respectively.

The ground equipment sales segment contributed approximately $37.2 million and $48.5 million to the Company’s revenues for the fiscal years ended March 31, 2024 and 2023, respectively, representing a $11.3 million (23%) decrease in the current fiscal year.

The decrease was primarily driven by the lower number of deicing trucks sold in the current fiscal year compared to the prior fiscal year.

At March 31, 2024, the ground equipment sales segment’s order backlog was $12.6 million compared to $13.6 million at March 31, 2023.

The commercial jet engines and parts segment contributed $125.5 million of revenues in fiscal year ended March 31, 2024 compared to $101.7 million in the prior fiscal year which is an increase of $23.8 million (23%).

The increase was primarily driven by Contrail's higher component part sales and higher pass-through revenue at Worthington in transactions that Worthington acted as the principal of the consignment agreements in the current fiscal year compared to the prior fiscal year.

In addition, Contrail also sold three engines at zero profit margin in the current year as they had previously written these assets down to the sales price in the prior year.

Revenues from the corporate and other segment increased by $2.0 million (31%) compared to the prior fiscal year, principally

attributed to $1.2 million of increased software subscriptions at Shanwick.

Following is a table detailing operating income (loss) by segment, net of intercompany during Fiscal 2024 and Fiscal 2023 (in thousands):

The ground support equipment segment contributed approximately $38.9 million and $37.2 million to the Company’s revenues for the fiscal years ended March 31, 2025 and 2024, respectively, representing a $1.7 million (5%) increase in the current fiscal year.

The increase was primarily driven by an increase in spare part sales and support services provided to customers while deicer sales increased slightly.

At March 31, 2025, the ground support equipment segment’s order backlog was $14.3 million compared to $12.6 million at March 31, 2024.

The commercial aircraft, engines and parts segment contributed $118.2 million of revenues in fiscal year ended March 31, 2025 compared to $125.5 million in the prior fiscal year which is a decrease of $7.3 million (6%).

The decrease was primarily driven by a lower supply of whole assets available to purchase for tear-down or resale in an increasingly competitive market, further exacerbated by aircraft operators keeping older aircraft in operation for longer than they have in the past.

The digital solutions segment contributed $7.3 million of revenues in the fiscal year ended March 31, 2025 compared to $5.8 million in the prior fiscal year which is an increase of $1.5 million (26%).

The increase is primarily due to increased software subscriptions driven by continued acquisition of new and recurring customers.

Following is a table detailing operating income (loss) for the Company's four segments and Corporate and other, net of intercompany during Fiscal 2025 and Fiscal 2024 (in thousands):

Year Ended March 31, Change

Overnight Air Cargo $ 6,251 $ 6,765 $ (514)

Ground Equipment Sales (1,553) 3,141 (4,694)

Commercial Jet Engines and Parts 4,169 (957) 5,126

Commercial Aircraft, Engines and Parts 7,116 4,169 2,947

Ground Support Equipment (1,210) (1,553) 343

Digital Solutions (1,064) (661) (403)

Segments total

11,093 8,720 2,373

Corporate and Other (9,185) (7,456) (1,729)

1 unchanged sentence

Consolidated operating income for the fiscal year ended March 31, 2025 was $1.9 million compared to consolidated operating

loss of $4.4 million in the prior fiscal year.

Operating income for the overnight air cargo segment increased by $2.7 million in the current fiscal year, due primarily to higher segment revenues as described above.

Operating loss for the ground equipment sales segment was $1.6 million compared to operating income of $3.1 million in the prior fiscal year, a decrease of $4.7 million attributable to lower sales as described above.

Operating income of the commercial jet engines and parts segment was $4.2 million compared to operating loss of $1.0 million in the prior year.

The increase was primarily attributable to lower inventory write-down of $1.2 million in the current fiscal year compared to $7.3 million in the prior fiscal year, offset by a lower profit margin on component sales in the current year compared to the prior fiscal year.

Operating loss of the corporate and other segment decreased by $2.5 million in the current fiscal year, primarily driven by higher corporate allocations to other segments related to executive salaries, bonuses and audit fees compared to the prior fiscal year and increased revenue as described above.

The table below provides Adjusted EBITDA by segment for the fiscal year ended March 31, 2024 and 2023 (in thousands):

income of $1.3 million in the prior fiscal year.

Operating income for the overnight air cargo segment decreased by $0.5 million in the current fiscal year, due primarily to increased loss provisioning for bad debt and additional taxes related to conducting business in Puerto Rico.

Operating loss for the ground support equipment segment was $1.2 million compared to operating loss of $1.6 million in the prior fiscal year.

The decrease in operating loss was primarily attributable to reduced headcount, partially offset by increased warranty expense in the current year.

Operating income of the commercial aircraft, engines and parts segment was $7.1 million compared to operating income of $4.2 million in the prior year.

The increase was primarily attributable to increased sales of component packages with a higher gross profit, which offset the decrease in revenue noted above.

Operating loss for the digital solutions segment increased by $0.4 million year over year, attributable to increased personnel needed to continue to scale operations.

The table below provides Adjusted EBITDA for the Company's four segments and Corporate and other for the fiscal year ended March 31, 2025 and 2024 (in thousands):

Twelve Months Ended Change

1 unchanged sentence

Overnight Air Cargo $ 6,808 $ 7,144 (336)

Ground Equipment Sales (1,409) 3,314 (4,723)

Commercial Jet Engines and Parts 6,119 7,105 (986)

Ground Support Equipment (773) (949) 176

Commercial Aircraft, Engines and Parts 9,832 6,119 3,713

Digital Solutions (272) 149 (421)

Segments total

15,595 12,463 3,132

Corporate and Other (8,232) (6,273) (1,959)

Total $ 5,622 $ 6,029 $ (407)

Consolidated Adjusted EBITDA for the fiscal year ended March 31, 2024 was $5.6 million, a decrease of $0.4 million compared to the prior fiscal year.

Adjusted EBITDA for the overnight air cargo segment increased by $2.6 million in the current fiscal year, due primarily to higher segment operating income as described above.

Adjusted EBITDA for the ground equipment sales segment decreased by $4.7 million in the current fiscal year, primarily due to lower sales as described above.

Adjusted EBITDA of the commercial jet engines and parts segment was $6.1 million, a decrease of $1.0 million from the prior fiscal year.

The decrease was primarily driven by lower profit margins on sales as described above.

The corporate and other segment Adjusted EBITDA loss decreased by $2.7 million from fiscal 2023 to fiscal 2024.

The decrease was primarily driven by $2.4 million higher corporate allocations to other segments related to executive salaries, bonuses and audit fees compared to the prior fiscal year.

Adjusted EBITDA $ 7,363 $ 6,190 1,173

Consolidated Adjusted EBITDA for the fiscal year ended March 31, 2025 was $7.4 million, an increase of $1.2 million compared to the prior fiscal year.

Adjusted EBITDA for the overnight air cargo segment decreased by $0.3 million in the current fiscal year, due primarily to lower segment operating income as described above.

Adjusted EBITDA loss for the ground support equipment segment decreased by $0.2 million in the current fiscal year, primarily due to higher sales as described above.

Adjusted EBITDA of the commercial aircraft, engines and parts segment was $9.8 million, an increase of $3.7 million from the prior fiscal year.

The increase was primarily driven by higher profit margins on sales as described above.

Adjusted EBITDA of the digital solutions segment decreased by $0.4 million in the current fiscal year, due primarily to higher personnel costs as described above.

Following is a table detailing consolidated non-operating income (expense), net of intercompany during fiscal 2025 and fiscal 2024 (in thousands):

5 unchanged sentences

The Company had a net non-operating loss of $6.9 million for the fiscal year ended March 31, 2025 compared to a net non-operating loss of $5.2 million in the prior fiscal year.

The decrease in non-operating loss was primarily driven by a $1.0 million decrease in interest expense and a $0.4 million fluctuation in foreign currency exchange rates.

The increase in non-operating loss was primarily driven by a $1.5 million increase in interest expense, and $1.2 million related to the recognition of gains and losses from the change in fair value for interest rate swap contracts that were not classified as an effective hedge where hedge accounting was not applied.

During the year ended March 31, 2025, the Company recorded $0.4 million of income tax expense, which yielded an effective rate of -8.5%.

1 unchanged sentence

The net change in the valuation allowance was $1.1 million for the year ended March 31, 2025.

In assessing the need for a valuation allowance, the Company considers all positive and negative evidence, including scheduled reversals of deferred tax liabilities, projected future taxable income, tax planning strategies, and past financial performance.

In assessing the need for a valuation allowance, the Company considers all positive and negative evidence, including scheduled reversals of deferred tax

liabilities, projected future taxable income, tax planning strategies, and past financial performance.

The change in the Company’s valuation allowance is primarily due to the realizability of the domestic deferred tax assets, the unrealized losses on investments, the foreign tax credits generated by the operations in the Company’s Puerto Rico branch that is expected to expire before being fully utilized, and the change in full valuation allowances associated with the Delphax entities.

During the fiscal year ended March 31, 2024, the Company recorded $0.7 million of income tax expense at an effective tax rate of -18.5%.

The primary factors contributing to the difference between the federal statutory rate of 21% and the Company’s effective tax rate for the fiscal year ended March 31, 2023 were the estimated benefit for the exclusion of income for the Company’s captive insurance company subsidiary under §831(b), the exclusion of the minority owned portion of pretax income of Contrail, state income tax expense, and changes in the valuation allowance.

The primary factors contributing to the difference between the federal statutory rate of 21% and the Company’s effective tax rate for the fiscal year ended March 31, 2024 were the foreign rate differentials and changes in valuation allowance.

The net change in the valuation allowance was $2.0 million for the year ended March 31, 2024.

2 unchanged sentences

Market Outlook

Future economic developments such as inflation and increased interest rates as well as further business issues such as supply chain issues present uncertainty and risk with respect to our financial condition and results of operations.

Although we have largely emerged from the COVID-19 pandemic, our results of operations in fiscal 2024 reflected some of the COVID-19 pandemic's lingering impact.

Despite the aforementioned, we experienced improved demand for commercial aircraft, jet engines and parts compared to historical periods.

We expect that issues caused by the pandemic and other economic and business issues will continue to some extent.

The fluidity of this situation precludes any prediction as to the ultimate adverse impact these issues on economic and market conditions and our businesses in particular, and, as a result, present material uncertainty and risk with respect to us and our results of operations.

Future economic developments such as inflation, along with evolving trade policies and the potential for new or increased tariffs present uncertainty and risk with respect to our financial condition and results of operations.

Despite the aforementioned, we experienced improved demand for commercial aircraft, jet engines and parts in the fiscal year ended March 31, 2025.

We expect that issues caused by economic and business issues will continue to some extent.

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, present material uncertainty and risk with respect to us and our results of operations.

Liquidity and Capital Resources

1 unchanged sentence

The Company also held $0.7 million in restricted investments held as statutory reserve of SAIC.

As of March 31, 2024, the Company’s working capital amounted to $56.0 million, an increase of $3.8 million compared to March 31, 2023.

The Company’s Credit Agreement with Minnesota Bank & Trust, a Minnesota state banking corporation (“MBT”) (the Air T debt in Note 13 of Notes to Consolidated Financial Statements included under Part II, Item 8 of this report) includes several covenants that are measured twice a year at September 30 and March 31, including but not limited to, a negative covenant requiring a debt service coverage ratio of 1.25.

On June 24, 2024, we obtained a waiver letter from MBT ("Letter") that waives two outstanding events of default.

This Letter provides a one-time waiver for defaults resulting from our inability to meet the debt service coverage ratio as of March 31, 2024 and our failure to submit unaudited financial statements within 45 days following the quarter ending on that date.

Based on the Letter, we are no longer in default of the Company's Credit Agreement with MBT.

The AirCo 1 Credit Agreement (the AirCo 1 debt in Note 13 of Notes to Consol idated Financial Statements included under Part II, Item 8 of this report) contains an affirmative covenant relating to collateral valuation.

The Air T Acquisition 22.1's term loans with ING (the Air T Acquisition 22.1 debt in Note 13 of Notes to Consolidated Financial Statements included under Part II, Item 8 of this report) include several covenants that are measured once a year at December 31, including but not limited to, a negative covenant requiring a debt service coverage ratio of 1.10 and a senior net leverage ratio of 2.10 at December 31, 2022 and 1.50 at subsequent years.

The Contrail Credit Agreement (the Contrail debt in Note 13 of Notes to Consolidated Financial Statements included under Part II, Item 8 of this report) contains affirmative and negative covenants, including covenants that restrict the ability of Contrail and its subsidiaries to, among other things, incur or guarantee indebtedness, incur liens, dispose of assets, engage in mergers and consolidations, make acquisitions or other investments, make changes in the nature of its business, and engage in transactions with affiliates.

As of March 31, 2025, the Company’s working capital amounted to $30.8 million, a decrease of $25.2 million compared to March 31, 2024.

The decrease in working capital was primarily driven by a $22.2 million decrease in inventory driven by timing of sales and acquisition of inventory in addition to increased competition for acquiring aircraft and engines for tear-down and conversion of $2.5 million of receivables for expense reimbursements from CAM to a long-term note receivable.

The Company’s Credit Agreement with Alerus Financial, National Association (“Alerus”) (the debt obtained by the Company, as the Loan Party Agent, and AirCo, LLC, AirCo 2, LLC, AirCo Services, LLC, Air'Zona, CSA, GGS, MAC, Stratus Aero Partners LLC, WASI, Worthington, Jet Yard and Jet Yard Solutions (the "Original Alerus Loan Parties") in Note 1 2 of Notes to Consolidated Financial Statements included under Part II, Item 8 of this report) includes several covenants that are measured twice a year (at September 30 and March 31), including but not limited to, a negative covenant requiring a debt service coverage ratio of 1.25 and a leverage ratio greater than 3.00.

Air T Acquisition 22.1's term loans with ING Bank (the Air T Acquisition 22.1 debt in Note 1 2 of Notes to Consolidated Financial Statements included under Part II, Item 8 of this report) include several covenants that are measured once a year at December 31, including but not limited to, a negative covenant requiring a debt service coverage ratio of 1.10 and a senior net leverage ratio of 1.50.

The Contrail Credit Agreement with Old National Bank ("ONB") (the Contrail debt in Note 1 2 of Notes to Consolidated Financial Statements included under Part II, Item 8 of this report) contains affirmative and negative covenants, including covenants that restrict the ability of Contrail and its subsidiaries to, among other things, incur or guarantee indebtedness, incur liens, dispose of assets, engage in mergers and consolidations, make acquisitions or other investments, make changes in the nature of its business, and engage in transactions with affiliates.

The Contrail Credit Agreement also contains quarterly financial covenants applicable to Contrail and its subsidiaries, including a minimum debt service coverage ratio of 1.25 to 1.0 and a minimum tangible net worth ("TNW") of $15.0 million.

As of March 31, 2024, AirCo 1, Air T Acquisition 22.1 and Contrail were all in compliance with their respective covenants.

On March 22, 2023, Contrail entered into the First Amendment to Second Amendment to Master Loan Agreement and Third Amendment to Master Loan Agreement ("the Amendment") with ONB whereby, among other things, in exchange for a $20 million principal prepayment of Term Note G, Contrail obtained a waiver of the debt service coverage ratio covenant.

$6.7 million of the $20.0 million prepayment was paid on March 30, 2023 and the remaining $13.3 million payment was paid in September 2023.

As mentioned in Note 13 of Notes to Consolidated Financial Statements included under Part II, Item 8 of this report, on June 23, 2023, the Company and MBT entered into amendments to the Credit Agreement with MBT and related promissory note.

The amendments extended the maturity date of the credit facility to August 31, 2024 and included the following changes:

A $2.0 million seasonal increase in the maximum amount available under the facility.

The maximum amount of the facility will now increase to $19.0 million between May 1 and November 30 of each year and will decrease to $17.0 million between December 1 and April 30 of each year;

The reference rate for the interest rate payable on the revolving facility will change from Prime to SOFR, plus a spread.

The exact spread over SOFR will change every September 30 and March 31 based on the Company calculated funded debt leverage ratio (defined as total debt divided by EBITDA).

Depending on the result of the calculation, the interest rate spread applicable to the facility will range between 2.25% and 3.25%;

The unused commitment fee on the revolving credit facility will increase from 0.11% to 0.15%;

The covenant restricting the Company’s use of funds for “Other Investments” was revised to limit the Company to $5.0 million of “Other Investments” per year.

As mentioned in Note 13 of Notes to Consolidated Financial Statements included under Part II, Item 8 of this report, on September 5, 2023, Contrail entered into the Sixth Amendment to Supplement #2 to Master Loan Agreement and the Fifth Amended and Restated Promissory Note with ONB.

The principal purpose of the amended documents was to extend the maturity date of the revolving $25.0 million facility to November 24, 2025 or such earlier date on which the revolving note becomes due and payable pursuant to the supplement or the master loan agreement.

As mentioned in Note 13 of Notes to Consolidated Financial Statements included under Part II, Item 8 of this report, on February 22, 2024 the Company, along with its wholly owned subsidiary AAM 24-1, LLC, a Minnesota limited liability company ("AAM 24-1"), entered into a Note Purchase Agreement with Honeywell Common Investment Fund and Honeywell International Inc.

Master Retirement Trust (collectively, "Honeywell") pursuant to which AAM 24-1 agreed to issue and sell 8.5% senior secured notes in the aggregate principal amount of $15.0 million for an aggregate purchase price of $14.9 million.

The notes bear an annual interest rate of 8.5% which is computed on the basis of a 30/360-day year and actual days elapsed and is payable semi-annually in arrears.

The maturity date of the notes is February 22, 2031.

A continuing first priority lien and security interest in and to all of the Company’s right, title and interest in all of the capital stock of AAM 24-1 was created in favor of Honeywell, as collateral for the repayment of the notes.

In addition, 160,000 newly-issued shares of TruPs held by AAM 24-1 are also separately pledged to the Honeywell.

As mentioned in Note 13 of Notes to Consolidated Financial Statements included under Part II, Item 8 of this report, on March 28, 2024, Contrail entered into Supplement #10 to the Master Loan Agreement with Old National Bank dated June 24, 2019 and Term Loan I.

Term Loan I is a multiple advance term loan in the principal amount of $10.0 million and is secured by a first lien on three engines and other identified collateral recently purchased by Contrail.

The loan requires Contrail to disassemble the collateral and place it in Contrail's inventory.

The loan bears a monthly variable interest rate at the 30 Day Term SOFR + 3.1148%.

The loan requires 18 monthly payments of interest until the loan maturity date of September 20, 2025.

Principal reduction payments are due monthly in an amount equal to 100% of the amount of the gross sales proceeds collected that are derived from any of the engines or other specific collateral listed in the security agreement sold during the prior month.

In addition to the first lien noted above, the loan is also secured by the current $2.0 million limited guarantees of the Company and Joe Kuhn.

The loan may be prepaid without penalty and includes a quarterly rolling cash flow coverage ratio covenant, a tangible net worth covenant and monthly sales reporting.

The loan was fully drawn at closing and the funds were used to prepay the principal balance on Contrail’s existing Main Street Loan (Term Loan G) by $10.0 million.

As mentioned in Note 22 of Notes to Consolidated Financial Statements included under Part II, Item 8 of this report, Contrail entered into an Operating Agreement with OCAS, Inc.

(the "Seller") providing for the put and call options with regard to the 21% non-controlling interest retained by the Seller.

The Seller is the founder of Contrail and its current Chief Executive Officer.

The Put/Call Option permits the Seller to require Contrail to purchase all of the Seller’s equity membership interests in Contrail commencing on July 18, 2021 ("Contrail RNCI").

After March 31, 2024 and before the financial statements were issued, Contrail redeemed 16% of the 21% of the Seller's interest for consideration consisting of a promissory note and an earnout.

Immediately following the redemption transaction, the Put/Call Option in the Operating Agreement was amended so that the remaining 5% interest in Contrail will be redeemable based on an amount other than fair value.

Refer to Note 2 5 of Notes to Consolidated Financial Statements included under Part II, Item 8 of this report for additional details on the transaction..

As mentioned in Note 22 of Notes to Consolidated Financial Statements included under Part II, Item 8 of this report, the Company has ownership interest in Contrail Asset Management, LLC (“CAM”).

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

For its Investment Function (as defined in Note 22 of Notes to Consolidated Financial Statements included under Part II, Item 8 of this report), CAM’s initial commitment to CJVII was approximately $51.0 million.

The Company and Mill Road Capital ("MRC") have commitments to CAM in the respective amounts of $7.0 million and $44.0 million.

As of March 31, 2023, the Company fulfilled its capital commitments to CAM.

As mentioned in Note 13 of Notes to Consolidated Financial Statements included under Part II, Item 8 of this report, the Revolver - MBT has no outstanding balance as of March 31, 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.

As a result, management 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 our 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.

Following is a table of changes in cash flow from continuing operations for the respective years ended March 31, 2024 and 2023 (in thousands):

As of March 31, 2025, Air T, Air T Acquisition 22.1 and Contrail were all in compliance with their respective covenants.

As mentioned in Note 12 of Notes to Consolidated Financial Statements included under Part II, Item 8 , 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.

(the "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.

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 three 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.

The OCAS Loan is classified as related party debt on the Company's condensed consolidated balance sheet.

As mentioned in Note 12 of Notes to Consolidated Financial Statements included under Part II, Item 8 , on August 29, 2024, the Original Alerus Loan Parties entered into a credit agreement with Alerus (the “New Credit Agreement”).

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 balance outstanding will bear interest at a rate per annum equal to the greater of 5.00% or one-month SOFR plus 2.00%.

On January 21, 2025, the Original Alerus Loan Parties entered into Amendment No.

1 to Credit Agreement ("Amendment No.

1") and Other Loan Documents with Alerus which extends the maturity date of the revolving credit agreement from February 28, 2026 to August 28, 2026.

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.

A prepayment premium based on the amount prepaid is due in certain circumstances.

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.

A prepayment premium based on the amount prepaid is due in certain circumstances.

The Original Alerus Loan Parties are co-borrowers under the New Credit Agreement and each of the notes.

The obligations of the Original Alerus Loan Parties under the New Credit Agreement and the notes are secured by a first priority security interest in substantially all of the Original 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 Original Alerus Loan Parties owed to the Alerus.

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.

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 existing secured credit facility with Minnesota Bank & Trust ("MBT").

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

As mentioned in Note 12 of Notes to Consolidated Financial Statements included under Part II, Item 8 , 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 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.

As mentioned in Note 1 2 of Notes to Consolidated Financial Statements included under Part II, Item 8 of this report, 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 two institutional investors (the "Institutional Investors").

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 the Institutional Investors, 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 the Institutional Investors, in connection with the closing of the Second NPA.

As mentioned in Note 12 of Notes to Consolidated Financial Statements included under Part II, Item 8 , on February 21, 2025, MAC entered into a $2.3 million term loan with Bank of America, N.A ("BofA").

The term loan requires monthly interest payments commencing March 21, 2025 until payment in full on the February 21, 2030 maturity date.

The loan also requires principal payments in equal monthly installments of $9,500 and MAC may prepay the loan at any time in full or in part without penalty.

The loan bears a variable monthly interest rate at the 1-month SOFR Rate plus 1.75% plus 0.11%.

As part of the term loan, BofA put a lien on real property owned by MAC in Denver, North Carolina to further secure the loan..

The new loan with Bank of America, N.A.

contains a number of covenants, including but not limited to:

providing financial information and statements, maintaining a fixed coverage ratio of at least 1.25 to 1.0, a limit on other debts and other liens, maintenance of assets, a limit on loans and investments, a prohibition on a change of ownership and additional negative covenants.

In connection with the financing, the Original Alerus Loan Parties entered into Amendment No.

2 to Credit Agreement and Consent (“Amendment No.

2”) on February 21, 2025.

Amendment No.

2 updated the Credit Agreement dated as of August 29, 2024, as amended by Amendment No.

1 dated as of January 21, 2025 to remove references to Term Note B - Alerus and remove the lien and assignment of rents on the Denver, North Carolina real property.

MAC used the proceeds of the new financing to repay Term Note B - Alerus with Alerus.

As mentioned in Note 12 of Notes to Consolidated Financial Statements included under Part II, Item 8 , on March 31, 2025, the Alerus Loan Parties under the Credit Agreement with Alerus entered into Amendment No.

3 to Credit Agreement ("Amendment No.

3") with Alerus as well as a $3.0 million secured Overline Note and an Amended and Restated Revolving Credit Note in the amount of $14.0 million.

The maturity date of the Overline Note is October 31, 2025 or such earlier date on which the Overline Note becomes due and payable.

The Overline Note bears interest at the greater of 5.00% or one-month SOFR plus 2.00%.

In connection with Amendment No.

3, AirCo, LLC, AirCo 2, LLC, AirCo Services, LLC, and Stratus Aero Partners, LLC were released as co-borrowers from the New Credit Agreement (including the Overline Note).

As a result, only Air'Zona, CSA, GGS, MAC, WASI, Worthington, Jet Yard and Jet Yard Solutions remain as entities related to the Alerus note (the "Alerus Loan Parties")

As mentioned in Note 24 of Notes to Consolidated Financial Statements included under Part II, Item 8 of this report, on May 15, 2025 the Alerus Loan Parties under the Revolving Credit Agreement with Alerus and Royal Aircraft Services, LLC, a Maryland limited liability company (“Royal”) and Air T entered into Amendment No.

4 to Credit Agreement and Consent (the “Amendment”) and Term Loan C with Alerus in the amount of $1.1 million.

The purpose of the Amendment and Term Note was to provide a term loan to finance the full purchase price of the Royal acquisition, to add Royal as a part of the Alerus Loan Parties to the Alerus credit agreement, as amended and to memorialize Alerus’ consent to the Royal acquisition.

The new term loan matures May 15, 2030 and bears interest at the greater of five (5%) percent or the CME one-month term SOFR rate plus 2.25%.

Monthly payments on Term Note C commenced June 15, 2025 and are equal to $12,500 plus accrued interest.

The term loan is secured by the terms of Security Agreement dated as of August 29, 2024.

As mentioned in Note 24 of Notes to Consolidated Financial Statements included under Part II, Item 8 of this report, on May 30, 2025 the Company and AAM 24-1 entered into a Third Note Purchase Agreement (the "Third NPA") with the Institutional Investors.

Under the Third NPA, the Institutional Investors advanced an addition $10.0 million to AAM 24-1 and committed to advance an additional $60.0 million in $10.0 million increments periodically on the 30th day of each September, January commencing on September 30, 2025 and ending on May 30, 2027 if all requirements as dictated by the Third NPA are met.

The Third NPA bears annual interest at a rate of 8.5% which is computed on the basis of a 30/360-day year and actual days elapsed and is payable semi-annually in arrears.

The maturity of the Third NPA is May 31, 2035.

As a result, management 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 our current revolving lines of credit, as amended, will be sufficient to meet obligations as they become due in the ordinary course of business for at least 12 months following the date these financial statements are issued.

Following is a table of changes in cash flow from continuing operations for the respective fiscal years ended March 31, 2025 and 2024 (in thousands):

Year Ended March 31, Change

3 unchanged sentences

Effect of foreign currency exchange rates 408 (16) 424

Net Increase (Decrease) in Cash and Cash Equivalents and Restricted Cash $ 753 $ (1,278) $ 2,031

Cash provided by operating activities in fiscal year 2024 was relatively flat compared to fiscal year 2023.

Cash used in investing activities for fiscal year 2024 was $2.5 million compared to cash used in investing activities for the prior fiscal year of $6.2 million.

The current fiscal year's cash usage was primarily driven by investment in unconsolidated entities of $4.6 million offset by distributions from unconsolidated entities of $3.2 million.

The prior fiscal year's cash usage was primarily driven by cash used for the acquisition of WASI of $2.5 million and investment in unconsolidated entities of $3.1 million, offset by distributions from unconsolidated entities of $0.7 million.

Cash used in financing activities for fiscal year 2024 was $13.9 million compared to cash used by financing activities for the prior fiscal year of $12.4 million.

This was primarily due to decreased net proceeds from lines of credit of $15.0 million and increased payments to lines of credit of $9.0 million, offset by proceeds from term loans of $14.2 million in addition to the issuance of TruPs of $8.8 million in the current fiscal year.

Net (Decrease) Increase in Cash and Cash Equivalents and Restricted Cash $ (1,086) $ 753 $ (1,839)

Net cash provided by operating activities in fiscal year 2025 was $23.5 million compared to net cash provided by operating activities for the prior fiscal year of $17.2 million.

The increase in operating cash flows was primarily driven by a higher decrease in inventory of $11.5 million due to higher component sales at Contrail in the current year and timing of inventory purchases.

These changes were partially offset by $5.9 million net change in accounts receivable.

Net cash used in investing activities for fiscal year 2025 was $20.2 million compared to net cash used in investing activities for the prior fiscal year of $2.5 million.

The cash used in investing activities was primarily driven by capital expenditures of $14.6 million related to assets on lease in the current year at Contrail and disbursements of $3.8 million related to the Lendway notes receivable.

Net cash used in financing activities for fiscal year 2025 was $4.8 million compared to net cash used in financing activities for the prior fiscal year of $13.9 million.

The cash used in financing activities in the current year period was primarily driven by $12.3 million more proceeds and $10.6 million less payments on the Company's revolving lines of credit.

These changes were partially offset by $6.7 million more payments made on the Company's term loans and $7.9 million less proceeds received from the issuance of TruPs in the current year period compared to the prior year period.

Off-Balance Sheet Arrangements

11 unchanged sentences

Supply Chain and Inflation

In fiscal 2024, we continued to experience supply chain disruptions that impacted our ability to procure raw materials and certain commodities, which resulted in delays and increased costs.

These disruptions were driven by supply chain market constraints and macroeconomic conditions, including inflation and labor market shortages.

In fiscal 2025, we faced sourcing challenges that impacted our ability to procure raw materials and certain commodities, which resulted in delays and increased costs.

These disruptions were driven by supply chain market constraints and macroeconomic

conditions, including inflation and labor market shortages.

High inflation increased material and component prices, labor rates and supplier costs, and put pressure on our margins.

7 unchanged sentences

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 in the current fiscal year, whereas there was $1.6 million in the prior fiscal year.

There was $1.4 million depreciation expense for leased assets in the current fiscal year, whereas there was no depreciation expense in the prior fiscal year.

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) from continuing operations, the most directly comparable amounts reported under GAAP.

We may periodically review and update our non-GAAP financial measures based on our determination of their relevance to our business which could result in the addition or elimination of select non-GAAP financial measures in the future.

The table below provides a reconciliation of operating income (loss) from continuing operations to Adjusted EBITDA for the fiscal years ended March 31, 2025 and 2024 (in thousands):

2 unchanged sentences

Operating income (loss) from continuing operations $ 1,908 $ 1,264

Depreciation and amortization (excluding leased engines depreciation) 2,798 2,525

Depreciation and amortization (excluding leased assets depreciation) 2,998 2,798

Asset impairment, restructuring or impairment charges 1,463 1,195

1 unchanged sentence

TruPs issuance expenses 212 347

Share-based compensation 88 106

Severance expenses 244 462

Earnout remeasurement

Adjusted EBITDA $ 7,363 $ 6,190

The table below provides Adjusted EBITDA by segment for the fiscal years ended March 31, 2024 and 2023 (in thousands):

The table below provides Adjusted EBITDA for the Company's four segments and Corporate and other for the fiscal years ended March 31, 2025 and 2024 (in thousands):

Twelve Months Ended

1 unchanged sentence

Overnight Air Cargo $ 6,808 $ 7,144

Ground Equipment Sales (1,409) 3,314

Commercial Jet Engines and Parts 6,119 7,105

Ground Support Equipment (773) (949)

Commercial Aircraft, Engines and Parts 9,832 6,119

Digital Solutions (272) 149

Segments total

15,595 12,463

Corporate and Other (8,232) (6,273)

Adjusted EBITDA $ 7,363 $ 6,190

1 Included in the asset impairment, restructuring or impairment charges for the fiscal year ended March 31, 2024 was a write-down of $1.2 million on the commercial jet engines and parts segment's inventory attributable to our evaluation of the carrying value of inventory as of March 31, 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.

Issuer and guarantor subsidiary summarized information

13 unchanged sentences

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.

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.

7 unchanged sentences

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 March 31, 2024, there are $43.2 million in Trust Preferred Securities outstanding ($9.0 million held by wholly-owned subsidiaries of the Company).

As of March 31, 2025, there are $48.3 million in Trust Preferred Securities outstanding (which includes $13.0 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.

The ground equipment sales segment business has historically been seasonal, with the revenues and operating income typically being higher in the second and third fiscal quarters as commercial deicers are typically delivered prior to the winter season.

The ground support equipment segment business has historically been seasonal, with the revenues and operating income typically being higher in the second and third fiscal quarters as commercial deicers are typically delivered prior to the winter season.

Other segments are typically not susceptible to material seasonal trends.

7 unchanged sentences

Inventories – Inventories are carried at the lower of cost or net realizable value.

Within the Company’s commercial jet engines and parts segment, there are various estimates and judgments made in relief of inventory as parts are sold from established groups of parts from one engine or airframe purchase.

Within the Company’s commercial aircraft, engines and parts segment, there are various estimates and judgments made in relief of inventory as parts are sold from established groups of parts from one engine or airframe purchase.

The estimates and judgments made in relief of inventory are based on assumptions that are consistent with a market participant’s future expectations for the commercial aircraft, jet engines and parts industry and the economy in general and our expected intent for the inventory.

2 unchanged sentences

The Company periodically evaluates the carrying value of inventory.

In these evaluations, the Company is required to make estimates regarding the net realizable value, which includes the consideration of sales patterns and expected future demand.

In these evaluations, the Company is required to make estimates regarding the net realizable value, which includes the consideration of sales patterns, expected future demand, and costs to refurbish aircraft parts.

Any slow moving, obsolete or damaged inventory and inventory with costs exceeding net realizable value are evaluated for write-downs.

These estimates could vary significantly from actual amounts based upon future economic conditions, customer inventory levels, or competitive factors that were not foreseen or did not exist when the estimated write-downs were made.

Accounting for Redeemable Non-Controlling Interest .

Policies related to redeemable non-controlling interests involve judgment and complexity, specifically on the classification of the non-controlling interests in the Company’s consolidated balance sheet, and the accounting treatment for changes in the fair value or estimated redemption value for non-controlling interests that are redeemed at other than fair value.

Further, there is significant judgment in determining whether an equity instrument is currently redeemable or not currently redeemable but probable that the equity instrument will become redeemable.

Additionally, there are also significant estimates made in the valuation of Contrail's RNCI.

The fair value of Contrail's non-controlling interest is determined using a combination of the income approach, utilizing a discounted cash flow analysis, and the market approach, utilizing the guideline public company method.

Contrail's discounted cash flow analysis requires significant management judgment with respect to forecasts of revenue, operating margins, capital expenditures, and the selection and use of an appropriate discount rate.

Contrail’s market approach requires management to make significant assumptions related to market multiples of earnings derived from comparable publicly-traded companies with similar operating characteristics as Contrail.

These estimates could vary significantly from actual amounts based upon future

economic conditions, customer inventory levels, or competitive factors that were not foreseen or did not exist when the estimated write-downs were made.

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-K

Item 7. Management’s Discussion and Analysis