AIR T INC 10-K

Item 8. Financial Statements and Supplementary Data . INDEX TO FINANCIAL STATEMENTS Page AIR T, INC. CONSOLIDATED FINANCIAL STATEMENTS Report of Independent Registered Public Accounting Firm 44 Consolidated Statements of Income (Loss) for the Years Ended March 31, 2025 and 2024 46 Consolidated Statements of Comprehensive Income (Loss) for the Years Ended March 31, 2025 and 2024 47 Consolidated Balance Sheets as of March 31, 2025 and 2024 48 Consolidated Statements of Cash Flows for the Years Ended March 31, 2025 and 2024 49 Consolidated Statements of Equity for the Years Ended March 31, 2025 and 2024 51 Notes to Consolidated Financial Statements 53 43 REPORT OF INDEPENDENT REGISTERED PUBLIC ACCOUNTING FIRM To the stockholders and the Board of Directors of Air T, Inc. Opinion on the Financial Statements We have audited the accompanying consolidated balance sheets of Air T, Inc. and subsidiaries (the “Company”) as of March 31, 2025 and 2024, the related consolidated statements of income (loss), comprehensive income (loss), equity, and cash flows, for each of the two years in the period ended March 31, 2025, and the related notes (collectively referred to as the “financial statements”). In our opinion, the financial statements present fairly, in all material respects, the financial position of the Company as of March 31, 2025 and 2024, and the results of its operations and its cash flows for each of the two years in the period ended March 31, 2025, in conformity with accounting principles generally accepted in the United States of America. Basis for Opinion These financial statements are the responsibility of the Company’s management. Our responsibility is to express an opinion on the Company’s financial statements based on our audits. We are a public accounting firm registered with the Public Company Accounting Oversight Board (United States) (PCAOB) and are required to be independent with respect to the Company in accordance with the U.S. federal securities laws and the applicable rules and regulations of the Securities and Exchange Commission and the PCAOB. We conducted our audits in accordance with the standards of the PCAOB. Those standards require that we plan and perform the audit to obtain reasonable assurance about whether the financial statements are free of material misstatement, whether due to error or fraud. The Company is not required to have, nor were we engaged to perform, an audit of its internal control over financial reporting. As part of our audits, we are required to obtain an understanding of internal control over financial reporting but not for the purpose of expressing an opinion on the effectiveness of the Company’s internal control over financial reporting. Accordingly, we express no such opinion. Our audits included performing procedures to assess the risks of material misstatement of the financial statements, whether due to error or fraud, and performing procedures that respond to those risks. Such procedures included examining, on a test basis, evidence regarding the amounts and disclosures in the financial statements. Our audits also included evaluating the accounting principles used and significant estimates made by management, as well as evaluating the overall presentation of the financial statements. We believe that our audits provide a reasonable basis for our opinion. Critical Audit Matter The critical audit matter communicated below is a matter arising from the current-period audit of the financial statements that was communicated or required to be communicated to the audit committee and that (1) relates to accounts or disclosures that are material to the financial statements and (2) involved our especially challenging, subjective, or complex judgments. The communication of critical audit matters does not alter in any way our opinion on the financial statements, taken as a whole, and we are not, by communicating the critical audit matter below, providing a separate opinion on the critical audit matter or on the accounts or disclosures to which it relates. Redeemable non-controlling interest – valuation of Contrail Aviation Support, LLC — Refer to Notes 1 and 4 to the financial statements Critical Audit Matter Description Inventories are carried at the lower of cost or net realizable value. Within the commercial aircraft, engines, and parts reportable segment, the Company is required to make assumptions about expected profit margins used in the relief of inventory as parts are sold from established groups of parts from one engine or airframe purchase. Additionally, in its periodic evaluation of the carrying value of the inventories, the Company is required to make estimates regarding the net realizable value. These estimates include assumptions about sales patterns, expected future demand and costs to refurbish. Changes in these assumptions could have a significant impact on the valuation of inventory held by the Company’s commercial aircraft, engines and parts reportable segment. We identified the valuation of certain inventory held by the Company’s commercial aircraft, engines and parts reportable segment as a critical audit matter. Given the magnitude of the inventories at certain business units, coupled with the significant judgments necessary to estimate the expected profit margins and to project sales patterns, expected future demand and costs to refurbish, auditing such estimates required a high degree of auditor judgment and an increased extent of effort when performing audit procedures and evaluating the results of those procedures How the Critical Audit Matter Was Addressed in the Audit 44 Our audit procedures related to expected profit margins utilized in the relief of inventory, and related to the sales patterns, expected future demand and costs to refurbish used in estimating the net realizable value of inventory, included the following, among others: • We assessed the reasonableness of management’s estimates of expected profit margins for a representative sample of inventories by: ◦ Comparing the life-to-date profit margin on sales from the group of parts to management’s initial profit margin assessment. ◦ Evaluating the reasonableness of management’s judgments about changes to the initial profit margin estimates, if any. • We assessed the reasonableness of management’s projections of sales patterns, expected future demand and costs to refurbish by: ◦ Comparing the information to historical results of those business units. ◦ Evaluating the methodology and assumptions used by, and the qualifications of, the Company’s third-party valuation specialist. ◦ Performing the following procedures for a representative sample of inventories: ◦ Evaluating the key assumptions underlying the valuation by examining recent sales of comparable parts and component condition. ◦ Utilizing historical costs to develop an independent estimate of costs necessary to refurbish the parts. ▪ We compared management’s assumptions to market data and industry forecasts. /s/ Deloitte & Touche LLP Minneapolis, Minnesota June 27, 2025 We have served as the Company's auditor since 2018. 45 AIR T, INC. AND SUBSIDIARIES CONSOLIDATED STATEMENTS OF INCOME (LOSS) Year Ended March 31, (In thousands, except per share data) 2025 2024 Operating Revenues: Overnight air cargo $ 124,031 $ 115,546 Ground support equipment 38,940 37,168 Commercial aircraft, engines and parts 118,215 125,535 Digital solutions 7,268 5,783 Corporate and other 3,396 2,802 291,850 286,834 Operating Expenses: Overnight air cargo 104,760 97,690 Ground support equipment 33,994 31,834 Commercial aircraft, engines and parts 84,896 99,222 Digital solutions 2,462 1,710 Corporate and other 1,191 1,202 General and administrative 57,848 51,114 Depreciation and amortization 4,356 2,798 Earnout remeasurement 435 — 289,942 285,570 Operating Income 1,908 1,264 Non-operating (Expense) Income: Interest expense ( 8,387 ) ( 6,916 ) Income from equity method investments 1,700 1,689 Other ( 209 ) 8 ( 6,896 ) ( 5,219 ) Loss before income taxes ( 4,988 ) ( 3,955 ) Income Tax Expense 423 729 Net Loss ( 5,411 ) ( 4,684 ) Net Income Attributable to Non-controlling Interests ( 729 ) ( 2,135 ) Net Loss Attributable to Air T, Inc. Stockholders $ ( 6,140 ) $ ( 6,819 ) Loss per share (Note 20) Basic $ ( 2.23 ) $ ( 2.42 ) Diluted $ ( 2.23 ) $ ( 2.42 ) Weighted Average Shares Outstanding: Basic 2,750 2,816 Diluted 2,750 2,816 See notes to consolidated financial statements. 46 AIR T, INC. AND SUBSIDIARIES CONSOLIDATED STATEMENTS OF COMPREHENSIVE INCOME (LOSS) Year Ended March 31, 2025 2024 Net Loss $ ( 5,411 ) $ ( 4,684 ) Other Comprehensive (Loss) Income: Foreign currency translation income (loss) 407 ( 93 ) Unrealized gain on interest rate swaps — 20 Reclassification of interest rate swaps into earnings ( 1,351 ) ( 823 ) Redemption of non-controlling interest 146 — Other 231 — Total Other Comprehensive Loss ( 567 ) ( 896 ) Total Comprehensive Loss ( 5,978 ) ( 5,580 ) Comprehensive Income Attributable to Non-controlling Interests ( 729 ) ( 2,135 ) Comprehensive Loss Attributable to Air T, Inc. Stockholders $ ( 6,707 ) $ ( 7,715 ) See notes to consolidated financial statements. 47 AIR T, INC. AND SUBSIDIARIES CONSOLIDATED BALANCE SHEETS (In thousands, except per share data) March 31, 2025 March 31, 2024 ASSETS Current Assets: Cash and cash equivalents $ 5,932 $ 7,100 Marketable securities 422 531 Restricted cash 575 743 Restricted investments 683 1,392 Accounts receivable, net of allowance for doubtful accounts of $ 1,338 and $ 1,420 23,917 22,911 Income tax receivable 681 561 Inventories, net 38,516 60,720 Prepaid expenses 3,103 2,351 Due from Crestone Asset Management, LLC for expense reimbursements 180 3,093 Other current assets 4,498 3,475 Total Current Assets 78,507 102,877 Notes Receivable - Lendway 3,350 — Notes Receivable - CAM 2,500 — Assets on lease or held for lease, net of accumulated depreciation of $ 1,451 and $ 8 14,662 252 Property and equipment, net of accumulated depreciation of $ 9,240 and $ 7,705 20,285 20,861 Intangible assets, net of accumulated amortization of $ 6,330 and $ 5,119 10,020 10,978 Right-of-use ("ROU") assets 13,274 11,376 Equity method investments 19,003 16,653 Other assets (includes $ 0 and $ 1,909 measured at fair value) 1,635 3,630 Goodwill 10,542 10,540 Total Assets 173,778 177,167 LIABILITIES AND STOCKHOLDERS' EQUITY Current Liabilities: Accounts payable $ 17,782 $ 15,072 Accrued expenses and other (Note 10) 16,691 15,650 Current portion of long-term debt 9,099 14,358 Current portion of long-term debt - related party (Note 12) 1,282 — Current portion of earnout liability 430 — Short-term lease liability 2,377 1,761 Total Current Liabilities 47,661 46,841 Long-term debt 101,226 98,568 Long-term debt - related party (Note 12) 3,288 — Deferred income tax liabilities, net 2,249 2,447 Long-term lease liability 11,843 10,515 Long-term earnout liability 1,109 — Other non-current liabilities (includes $ 44 and $ 0 measured at fair value) 866 — Total Liabilities 168,242 158,371 Redeemable non-controlling interest 7,054 12,976 Commitments and contingencies (Note 21) Equity: Air T, Inc. Stockholders' (Deficit) Equity: Preferred stock, $ 1.00 par value, 2,000,000 shares authorized — — Common stock, $ 0.25 par value; 4,000,000 shares authorized, 3,030,245 and 3,030,245 shares issued, 2,702,639 and 2,775,163 shares outstanding 758 758 Treasury stock, 327,606 shares at $ 19.55 and 256,850 shares at $ 19.31 ( 6,404 ) ( 4,959 ) Additional paid-in capital 947 859 Retained earnings 2,130 8,192 Accumulated other comprehensive loss ( 647 ) ( 80 ) Total Air T, Inc. Stockholders' (Deficit) Equity ( 3,216 ) 4,770 Non-controlling Interests 1,698 1,050 Total (Deficit) Equity ( 1,518 ) 5,820 Total Liabilities and (Deficit) Equity $ 173,778 $ 177,167 See notes to consolidated financial statements. 48 AIR T, INC. AND SUBSIDIARIES CONSOLIDATED STATEMENTS OF CASH FLOWS Year Ended March 31, (In thousands) 2025 2024 CASH FLOWS FROM OPERATING ACTIVITIES: Net loss $ ( 5,411 ) $ ( 4,684 ) Adjustments to reconcile net loss to net cash provided by operating activities: Depreciation and amortization 4,356 2,798 Income from equity method of investments ( 1,700 ) ( 1,689 ) Inventory write-down 1,463 1,195 Other 2,369 1,294 Change in operating assets and liabilities: Accounts receivable ( 1,808 ) 4,047 Inventories 20,630 9,103 Accounts payable 2,710 4,623 Accrued expenses 1,087 2,378 Employee retention credit receivable — 940 Other ( 200 ) ( 2,827 ) Total adjustments 22,419 18,264 Net cash provided by operating activities 23,496 17,178 CASH FLOWS FROM INVESTING ACTIVITIES: Investment in unconsolidated entities ( 7,027 ) ( 4,633 ) Distribution from unconsolidated entities 6,030 3,192 Capital expenditures related to property & equipment ( 1,081 ) ( 1,076 ) Capital expenditures related to assets on lease or held for lease ( 14,598 ) — Disbursements for note receivable - Lendway ( 3,750 ) — Other 237 18 Net cash used in investing activities ( 20,189 ) ( 2,499 ) CASH FLOWS FROM FINANCING ACTIVITIES: Proceeds from lines of credit 136,515 124,249 Payments on lines of credit ( 131,376 ) ( 141,956 ) Proceeds from term loan 24,877 24,850 Payments on term loan ( 35,040 ) ( 28,341 ) Proceeds received from issuance of TruPs 910 8,780 Repurchase of common stock ( 1,445 ) ( 876 ) Other 758 ( 616 ) Net cash used in financing activities ( 4,801 ) ( 13,910 ) Effect of foreign currency exchange rates on cash and cash equivalents 408 ( 16 ) NET (DECREASE) INCREASE IN CASH AND CASH EQUIVALENTS AND RESTRICTED CASH ( 1,086 ) 753 CASH AND CASH EQUIVALENTS AND RESTRICTED CASH AT BEGINNING OF PERIOD 7,843 7,090 CASH AND CASH EQUIVALENTS AND RESTRICTED CASH AT END OF PERIOD 1 6,757 7,843 SUPPLEMENTAL DISCLOSURE OF NON-CASH ACTIVITIES: 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 — Related-party note payable for Contrail redeemed interest 4,570 — Due from CAM expense reimbursements converted into notes receivable - CAM 2,500 — Equipment leased or held for lease transferred to inventory — 73 Equipment in inventory transferred to assets on lease 112 260 SUPPLEMENTAL DISCLOSURE OF CASH FLOW INFORMATION: Operating cash payments for operating leases 2,260 2,351 Cash paid during the year for interest 8,437 3,891 Cash paid during the year for income taxes $ 983 $ 917 1 The following table includes a reconciliation of "Cash and cash equivalents and restricted cash at end of period": 49 Cash and cash equivalents $ 5,932 Restricted cash, current 575 Restricted cash, long-term (a) 250 Total cash and cash equivalents and restricted cash at end of period $ 6,757 (a) Included in other assets on the consolidated balance sheets. See notes to consolidated financial statements. 50 AIR T, INC. AND SUBSIDIARIES CONSOLIDATED STATEMENTS OF EQUITY (In thousands) Common Stock Treasury Stock Shares Amount Shares Amount Additional Paid-In Capital Retained Earnings Accumulated Other Comprehensive Income (Loss) Non-controlling Interests* Total Equity Balance, March 31, 2023 3,027 $ 757 208 $ ( 4,083 ) $ 728 $ 13,686 $ 816 $ 1,078 $ 12,982 Net loss* — — — — — ( 6,819 ) — ( 28 ) ( 6,847 ) Repurchase of common stock — — 49 ( 876 ) — — — — ( 876 ) Exercise of stock options 3 1 — — 25 — — — 26 Stock compensation expense — — — — 106 — — — 106 Foreign currency translation loss — — — — — — ( 93 ) — ( 93 ) Adjustment to fair value of redeemable non-controlling interest — — — — — 1,325 — — 1,325 Unrealized gain of interest rate swaps — — — — — — 20 — 20 Reclassification of interest rate swaps into earnings — — — — — — ( 823 ) — ( 823 ) Balance, March 31, 2024 3,030 $ 758 257 $ ( 4,959 ) $ 859 $ 8,192 $ ( 80 ) $ 1,050 $ 5,820 *Excludes amount attributable to redeemable non-controlling interest in Contrail and Shanwick. 51 (In thousands) Common Stock Treasury Stock Shares Amount Shares Amount Additional Paid-In Capital Retained Earnings Accumulated Other Comprehensive Income (Loss) Non-controlling Interests* Total Equity Balance, March 31, 2024 3,030 $ 758 257 $ ( 4,959 ) $ 859 $ 8,192 $ ( 80 ) $ 1,050 $ 5,820 Net loss* — — — — — ( 6,140 ) — 16 ( 6,124 ) Declared distributions to non-controlling interests — — — — — — — ( 98 ) ( 98 ) Repurchase of common stock — — 71 ( 1,445 ) — — — — ( 1,445 ) Stock option forfeiture (Note 14) — — — — ( 54 ) — — — ( 54 ) Stock compensation expense — — — — 142 — — — 142 Foreign currency translation gain — — — — — — 407 — 407 Redemption of non-controlling interest — — — — — 78 146 — 224 Reclassification of interest rate swaps into earnings — — — — — — ( 1,351 ) — ( 1,351 ) Initial consolidation of CASP, LLC — — — — — — — 730 730 Allocation of comprehensive income from unconsolidated investments — — — — — — ( 3 ) — ( 3 ) Allocation of comprehensive income to redeemable non-controlling interests — — — — — — 234 — 234 Balance, March 31, 2025 3,030 $ 758 328 $ ( 6,404 ) $ 947 $ 2,130 $ ( 647 ) $ 1,698 $ ( 1,518 ) * Excludes amount attributable to redeemable non-controlling interest in Contrail and Shanwick. See notes to consolidated financial statements. 52 AIR T, INC. AND SUBSIDIARIES NOTES TO CONSOLIDATED FINANCIAL STATEMENTS YEARS ENDED MARCH 31, 2025 AND 2024 Air T, Inc. (the “Company,” “Air T,” “we” or “us” or “our”) is a holding company with a portfolio of operating businesses and financial assets. Our goal is to prudently and strategically diversify Air T’s earnings power, compounding its free-cash-flow per share over time. We currently operate in four reportable segments: • Overnight air cargo, which operates in the air express delivery services industry; • 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; supplies surplus and aftermarket commercial jet engine components; provides commercial aircraft disassembly/part-out services; commercial aircraft parts sales; procurement services and overhaul and repair services to airlines and; • 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 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. 1. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES Principles of Consolidation – The consolidated financial statements include the accounts of the Company and its wholly-owned subsidiaries as well as its non-wholly owned subsidiaries, Contrail, Shanwick and Delphax. All material intercompany transactions and balances have been eliminated in consolidation. Certain reclassifications have been made to the prior period amounts to conform to the current presentation. Reportable Segments and Reclassification of Prior Year Presentation – Effective as of the fourth quarter of fiscal year 2025, the Company renamed our ground equipment sales segment to ground support equipment and renamed out commercial jet engines and parts segment to commercial aircraft, engines and parts to better align the descriptions of the segments with their activities. The Company has elected to separately disclose the digital solutions segment, as of the fourth quarter of fiscal year 2025, to align presentation in the financial statements 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. Refer to Note 19 for additional details. Accounting Estimates – The preparation of consolidated financial statements in conformity with accounting principles generally accepted in the United States of America requires management to make estimates and assumptions that affect the amounts of assets and liabilities and amounts of revenues and expenses during the reporting period. Actual results could differ from those estimates. Future economic developments such as inflation, along with evolving trade policies and the potential for new or increased tariffs, may impact our financial condition and operating results. The unpredictable nature of these developments makes it difficult to assess their full effect on economic and market conditions or on our business specifically. The Company believes the estimates and assumptions underlying the Company’s consolidated financial statements are reasonable and supportable based on the information available as of March 31, 2025. Segments - The Company has four reportable operating segments: overnight air cargo, ground support equipment, commercial aircraft, engines and parts, and digital solutions. The Company assesses the performance of these segments on an individual basis (see Note 19 ). 53 Operating segments are defined as components of an enterprise about which separate financial information is available that is evaluated regularly by the chief operating decision maker, or decision making group, in deciding how to allocate resources and in assessing performance. The Company’s chief operating decision maker is its Chief Executive Officer. The Company’s Chief Executive Officer reviews financial information by reportable segment for purposes of allocating resources and evaluating financial performance. 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. Variable Interest Entities – In accordance with the applicable accounting guidance for the consolidation of variable interest entities, the Company analyzes its variable interests to determine if an entity in which we have a variable interest is a variable interest entity. Our analysis includes both quantitative and qualitative reviews to determine if we must consolidate a variable interest entity as its primary beneficiary. Business Combinations – The Company accounts for business combinations in accordance with Financial Accounting Standards Board (“FASB”) Accounting Standards Codification (“ASC”) 805, Business Combinations . Consistent with ASC 805, the Company accounts for each business combination by applying the acquisition method. Under the acquisition method, the Company records the identifiable assets acquired and liabilities assumed at their respective fair values on the acquisition date. Goodwill is recognized for the excess of the purchase consideration over the fair value of identifiable net assets acquired. Included in purchase consideration is the estimated acquisition date fair value of any earn-out obligation incurred. For business combinations where non-controlling interests remain after the acquisition, assets (including goodwill) and liabilities of the acquired business are recorded at the full fair value and the portion of the acquisition date fair value attributable to non-controlling interests is recorded as a separate line item within the equity section or, as applicable to redeemable non-controlling interests, between the liabilities and equity sections of the Company’s consolidated balance sheets . The acquisition method permits the Company a period of time after the acquisition date during which the Company may adjust the provisional amounts recognized in a business combination. This period of time is referred to as the “measurement period”. The measurement period provides an acquirer with a reasonable time to obtain the information necessary to identify and measure the assets acquired and liabilities assumed. If the initial accounting for a business combination is incomplete by the end of the reporting period in which the combination occurs, the Company reports in its consolidated financial statements provisional amounts for the items for which the accounting is incomplete. Accordingly, the Company is required to recognize adjustments to the provisional amounts, with a corresponding adjustment to goodwill, in the reporting period in which the adjustments to the provisional amounts are determined. Thus, the Company would adjust its consolidated financial statements as needed, including recognizing in its current-period earnings the full effect of changes in depreciation, amortization, or other income effects, by line item, if any, as a result of the change to the provisional amounts calculated as if the accounting had been completed at the acquisition date. Income statement activity of an acquired business is reflected within the Company’s consolidated statements of income (loss) commencing with the date of acquisition. Amounts for pre-acquisition periods are excluded. Acquisition-related costs are costs the Company incurs to affect a business combination. Those costs may include such items as finder’s fees, advisory, legal, accounting, valuation, and other professional or consulting fees, and general administrative costs. The Company accounts for such acquisition-related costs as expenses in the period in which the costs are incurred and the services are received. Changes in estimates of the fair value of earn-out obligations subsequent to the acquisition date are not accounted for as part of the acquisition, rather, they are recognized directly in earnings. Cash and Cash Equivalents – Cash equivalents consist of liquid investments with maturities of three months or less when purchased. Financial Instruments Designated for Trading – Except for short sales of equity securities, the Company accounts for all other financial instruments (including derivative instruments) designated for trading in accordance with ASC 815. All changes in the fair value of the financial instruments designated for trading are recognized in earnings as they occur. Further, all gains and losses on derivative instruments designated for trading are presented net on the consolidated Statements of Income (Loss). The fair value of derivative instruments designated for trading in a gain position are recorded in Other Current Assets and the fair value of derivative instruments designated for trading in a loss position are recorded in Accrued Expenses and Other on the consolidated Balance Sheets. The Company accounts for short sales of equity securities in accordance with ASC 942 and ASC 860. The obligations incurred in short sales are reported in Accrued Expenses and Other on the consolidated Balance Sheets. They are subsequently measured at fair value through the income statement at each reporting date with gains and losses on securities. Interest on the short 54 positions are accrued periodically and reported as interest expense. The market value of the Company’s equity securities and cash held by the broker are used as collateral against any outstanding margin account borrowings for purposes of short selling equities. This collateral is recorded in Other Current Assets on the consolidated Balance Sheets. The Company reports all cash receipts and payments resulting from the purchases and sales of securities, loans, and other assets that are acquired specifically for resale as operating cash flows. Accounts Receivable – Accounts receivable include trade receivables from customers with stated collection terms of less than one year from the date of origination. Accounts receivable are stated net of estimated allowance for uncollectible balances. We measure expected credit losses primarily utilizing credit loss history. In addition, our credit loss estimates consider current conditions. We charge off receivables against the allowances after reasonable collection efforts are exhausted. Below is t he reconciliation for allowance for credit losses on accounts receivables for the years ended March 31, 2025 and 2024 (in thousands): Year Ended Year ended March 31, 2025 2024 Balance at the beginning of the year $ 1,420 $ 1,160 Provision for credit losses 802 288 Charge-offs, net of recoveries ( 884 ) ( 28 ) Balance at March 31 $ 1,338 $ 1,420 Inventories – Inventories are carried at the lower of cost or net realizable value. When finished goods units are leased to customers under operating leases, the units are transferred to Assets on Lease or Held For Lease. The classification of cash flows associated with the purchase and sale of finished goods is based on the activity that is likely to be the predominant source or use of cash flows for the items. Consistent with aviation industry practice, the Company includes expendable aircraft parts and supplies in current assets, although a certain portion of these inventories may not be used or sold within one year. 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. These assumptions and estimates are complex and subjective in nature. Changes in economic and operating conditions could impact the assumptions and result in future losses to our inventory. 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. 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. In accordance with industry practice, all inventories are classified as a current asset including portions with long production cycles, some of which may not be realized within one year. Investments under the Equity Method – The Company utilizes the equity method to account for investments when the Company possesses the ability to exercise significant influence, but not control, over the operating and financial policies of the investee. The Company applies the equity method to investments in common stock and to other investments when such other investments possess substantially identical subordinated interests to common stock. For investments that have a different fiscal year-end, if the difference is not more than three months, the Company elects a 3-month lag to record the change in the investment. The Company assesses the carrying value of its investments whenever events or changes in circumstances indicate that the carrying amounts may not be recoverable. The recoverability is measured by comparing the carrying amount of the investment to the estimated future undiscounted cash flows of the investment, which take into account current, and expectations for future, market conditions and the Company’s intent with respect to holding or disposing of the investment. Changes in economic and operating conditions that occur subsequent to a current impairment analysis and the Company’s ultimate use of the investment could impact the assumptions and result in future impairment losses to the investments. If the Company’s analysis indicates that the carrying value is not recoverable on an undiscounted cash flow basis, the Company will recognize an impairment loss for 55 the amount by which the carrying value exceeds the fair value. The fair value is determined through quoted prices in active markets or various valuation techniques, including internally developed discounted cash flow models or comparable market transactions. Goodwill - The Company evaluates goodwill on an annual basis or anytime events or circumstances change that would more likely than not reduce the fair value of a reporting unit below its carrying value. The Company is permitted to first assess qualitative factors to determine whether it is more likely than not (that is, a likelihood of more than 50 percent) that the fair value of a reporting unit is less than its carrying value, including goodwill. In qualitatively evaluating whether it is more likely than not that the fair value of a reporting unit is less than its carrying amount, the Company assesses relevant events and circumstances such as macroeconomic conditions, industry and market developments, cost factors, and the overall financial performance of the reporting unit. If, after assessing these events and circumstances, it is determined that there may be an impairment, then a quantitative analysis is performed. In the first step of the quantitative method, recoverability of goodwill is evaluated by estimating the fair value of the reporting unit’s goodwill using multiple techniques, including a discounted cash flow model income approach and a market approach. The estimated fair value is then compared to the carrying value of the reporting unit. The Company will recognize an impairment charge for the amount by which the carrying value of the reporting unit exceeds its fair value, if any. Goodwill for relevant segments and corporate and other, at original cost, consisted of the following (in thousands): Year Ended March 31, 2025 2024 Overnight air cargo $ 76 $ 76 Commercial aircraft, engines and parts 4,227 4,227 Digital solutions 6,239 6,237 Total reportable segment goodwill, at cost 10,542 10,540 Corporate and other 376 376 Less accumulated impairment ( 376 ) ( 376 ) Goodwill, net of impairment $ 10,542 $ 10,540 As of March 31, 2025, the $ 4.2 million goodwill balance in commercial aircraft, engines and parts is attributable to the acquisition of Contrail in July 2016. The $ 6.2 million goodwill balance in digital solutions is attributable to the acquisition of Shanwick in February 2022. The $ 0.1 million goodwill balance in overnight aircraft cargo is attributable to the acquisition of WASI in January 2023. The minimal increase from the prior fiscal year's balance to the current fiscal year's balance is attributable to foreign currency translation adjustments related to the goodwill balance at Shanwick. Based on the results of our annual assessment of qualitative factors conducted as of March 31, 2025, management determined that it was more likely than not that the fair value of our reporting units exceeded its carrying value, including goodwill. Intangible Assets – Amortizable intangible assets consist of acquired patents, tradenames, customer relationships, and other finite-lived identifiable intangibles. Such intangibles are initially recorded at fair value and subsequently subject to amortization. Amortization is recorded using the straight-line method over the estimated useful lives of the assets. In accordance with the applicable accounting guidance, the Company evaluates the recoverability of amortizable intangible assets whenever events occur that indicate potential impairment. In doing so, the Company assesses whether the carrying amount of the asset is unrecoverable by estimating the sum of the future cash flows expected to result from the asset, undiscounted and without interest charges. If the carrying amount is more than the recoverable amount, an impairment charge must be recognized based on the estimated fair value of the asset. The estimated amortizable lives of the intangible assets are as follows: 56 Years Purchased software 3 Internally developed software 10 - 15 In-place lease and other intangibles Over lease term Trade names 5 Certification 5 Non-compete 5 License 5 Patents 9 Customer relationships 10 - 15 Property and Equipment and Assets on Lease or Held for Lease – Property and equipment is stated initially at cost, or fair value if purchased as part of a business combination. Depreciation and amortization are provided on a straight-line basis over the asset’s useful life. Equipment leased to customers is depreciated using the straight-line method. Useful lives range from three years for computer equipment, seven years for flight equipment, ten years for deicers and other equipment leased to customers and thirty years for buildings. Engine assets on lease or held for lease are stated at cost, less accumulated depreciation. Certain costs incurred in connection with the acquisition of engine assets are capitalized as part of the cost of such assets. If assets are not actively being leased (i.e. held for lease), then they are not being depreciated. Major overhauls which improve functionality or extend original useful life are capitalized and depreciated over the engine assets' useful life to a residual value. The Company depreciates the engines on a straight-line basis over the assets' useful life from the acquisition date to a residual value. The Company adjusts its estimates annually for these older generation assets, including updating estimates of an engine’s or aircraft’s remaining operating life. The Company believes this methodology accurately reflects the typical holding period for the assets and that the residual value assumption, which is dependent on the Company's eventual plan for the engine assets (i.e. whole asset sale, part-out, etc.), reasonably approximates the selling price of the assets. When engine assets are committed for sales, the assets are transferred to Inventory. The classification of cash flows associated with the purchase and sale of engine assets is based on the activity that is likely to be the predominant source or use of cash flows for the items. The Company assesses long-lived assets for impairment when events and circumstances indicate the assets may be impaired and the undiscounted cash flows estimated to be generated by those assets are less than their carrying amount. When evaluating the future cash flows that an asset will generate, we make assumptions regarding the lease market for specific engine models, including estimates of market lease rates and future demand. These assumptions are based upon lease rates that we are obtaining in the current market as well as our expectation of future demand for the specific engine/aircraft model. We determine fair value of the assets by reference to independent appraisals, quoted market prices (e.g., an offer to purchase) and other factors such as current data from manufacturers as well as specific market sales. In the event it is determined that the carrying values of long-lived assets are in excess of the estimated undiscounted cash flows from those assets, the Company then will write-down the value of the assets by the excess of carrying value over fair value. Accounting for Debt - Trust Preferred Securities and Warrant Liability – On April 24, 2024, the Company entered into an At the Market Offering Agreement (the “ATM Agreement”) with Ascendiant Capital Markets, LLC (the “sales agent” or “Ascendiant”), pursuant to which it may sell and issue its TruPs having an aggregate offering price of up to $ 8.0 million from time to time. The Company has no obligation to sell any TruPs, and may at any time suspend offers under the ATM Agreement or terminate the ATM Agreement. These TruPs are mandatorily redeemable preferred security obligations of the Company. In accordance with ASC 480, the Company presented mandatorily redeemable preferred securities that do not contain a conversion option as a liability on the balance sheet. Further, as the redemption date and the redemption amount are both fixed, in accordance with ASC 825, we measured these TruPs at the present value of the amount to be paid at settlement, discounted by using the implicit rate at inception. Income Taxes – Income taxes have been provided using the asset and liability method. Deferred tax assets and liabilities are recognized for the future tax consequences attributable to differences between the financial statement carrying amounts of existing assets and liabilities and their respective tax bases. Deferred tax assets and liabilities are measured using enacted tax 57 laws and rates expected to apply to taxable income in the years in which those temporary differences are expected to be recovered or settled. The effect of a change in tax rates on deferred tax assets and liabilities is recognized in income in the period that includes the enactment date. A valuation allowance against net deferred tax assets is recorded when it is more likely than not that such assets will not be fully realized. Tax credits are accounted for as a reduction of income taxes in the year in which the credit originates. All deferred income taxes are classified as non-current in the consolidated balance sheets. The Company recognizes the benefit of a tax position taken on a tax return, if that position is more likely than not of being sustained on audit, based on the technical merits of the position. An uncertain income tax position is not recognized if it has a less than a 50% likelihood of being sustained. Accounting for Redeemable Non-Controlling Interest – In 2016, in connection with the Company's acquisition of Contrail, Contrail entered into an Operating Agreement (the “Operating Agreement”) with the Seller providing for the governance of and the terms of membership interests in Contrail. The Operating Agreement includes put and call options (“Contrail Put/Call Option”) 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 Contrail Put/Call Option permits the Seller to require Contrail to purchase all of the Seller’s equity membership interests in Contrail commencing on the fifth anniversary of the acquisition, which was on July 18, 2021. On May 30, 2024, Contrail entered into a Membership Interest Redemption and Earnout Agreement (the "Redemption Agreement") with the Seller. Pursuant to the Redemption Agreement, Contrail agreed to purchase and redeem from the Seller, 16 % of its 21 % interest in Contrail, with the earnout period being retroactive to April 1, 2024. 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. Per the Operating Agreement, Contrail's non-controlling interest is redeemable at an amount other than fair value, which is equal to 5 % of the Contrail Equity Value, which is defined as an amount equal to nine times the average Adjusted EBITDA of Contrail's most recent three completed fiscal years at the time an option notice is delivered. The purchase price for the 5 % interest is to be paid in equal quarterly installments over a three-year period, together with interest at the then current ten-year Treasury bond yield plus 2.5 % adjusted annually. In February 2022, in connection with the Company's acquisition of GdW, a consolidated subsidiary of Shanwick, the Company entered into a shareholder agreement with the 30.0 % non-controlling interest owners of Shanwick, providing for the governance of and the terms of membership interests in Shanwick. The shareholder agreement includes the Shanwick Put/Call Option with regard to the 30.0 % non-controlling interest. 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 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"). Applicable accounting guidance requires an equity instrument that is redeemable for cash or other assets to be classified outside of permanent equity if it is redeemable (a) at a fixed or determinable price on a fixed or determinable date, (b) at the option of the holder, or (c) upon the occurrence of an event that is not solely within the control of the issuer. As a result of this feature, the Company recorded the non-controlling interests as redeemable and classified them in temporary equity within its Consolidated Balance Sheets. Initial measurement of the redeemable non-controlling interests is at their acquisition-date fair value. Because the redeemable non-controlling interests are redeemable at an amount other than fair value, subsequent measurement is to be measured at the greater of the carrying value in accordance with ASC 810-10 measurement guidance or the redemption value in accordance with ASC 480-10 . Refer to Note 21 for further information. Revenue Recognition – Substantially all of the Company’s revenue is derived from contracts with an initial expected duration of one year or less. As a result, the Company has applied the practical expedient to exclude consideration of significant financing components from the determination of transaction price, to expense costs incurred to obtain a contract, and to not disclose the value of unsatisfied performance obligations. We evaluate gross versus net presentation on revenues from products or services purchased and resold in accordance with the revenue recognition criteria outlined in ASC 606-10, Principal Agent Considerations. 58 The Company, under the terms of its overnight air cargo dry-lease service contracts, passes through to its air cargo customer certain cost components of its operations without markup. The cost of fuel, landing fees, outside maintenance, parts and certain other direct operating costs are included in operating expenses and billed to the customer, at cost, and included in overnight air cargo revenue on the accompanying statements of income (loss). These pass-through costs totaled $ 39.9 million and $ 36.4 million for the years ended March 31, 2025 and 2024, respectively. Recently Adopted Accounting Pronouncements In November 2023, the FASB issued ASU 2023-07- Segment Reporting (Topic 848): Improvements to Reportable Segment Disclosures. The amendments in this Update improve reportable segment disclosure requirements, primarily through enhanced disclosures about significant segment expenses utilized by the chief operating decision maker for a company along with details about who the chief operating decision maker is and their title. The Update additionally requires that all annual disclosures under Topic 280 be included in interim periods financial statements, clarifies when an entity can disclose multiple segment measures of profit or loss, and provides new segment disclosure requirements for entities with a single reportable segment. For public business entities, the amendments in this Update are effective for fiscal years beginning after December 31, 2023 and interim periods within fiscal years beginning after December 15, 2024. The Company adopted this guidance for the fiscal year ended March 31, 2025. Refer to Note 19 for more information. Recently Issued Accounting Pronouncements In December 2023, the FASB issued ASU 2023-09- Income Taxes (Topic 740): Improvements to Income Tax Disclosures. The amendments in this Update require the addition of specific categories to be disclosed in the rate reconciliation if they meet a quantitative threshold, disclosure of disaggregated income taxes paid to federal, state, and foreign jurisdictions, and disclosure of income or loss from continuing operations disaggregated by federal, state, and foreign jurisdictions. For public business entities, the amendments in this Update are effective for fiscal years beginning after December 15, 2024. The Company is currently evaluating the impact of this amendment on its consolidated financial statements and disclosures. In November 2024, the FASB issued ASU 2024-03- Income Statement- Reporting Comprehensive Income- Expense Disaggregation Disclosures (Subtopic 220-40): Disaggregation of Income Statement Expenses. The amendments in this Update require disaggregated disclosure of income statement expenses for public business entities. The Update does not change the expense captions an entity presents on the face of the income statement; rather, it requires disaggregation of certain expense captions into specified categories in disclosures within the footnotes to the financial statements. For public business entities, the amendments in this Update are effective for fiscal years beginning after December 15, 2026, and interim periods within annual reporting periods beginning after December 15, 2027. The Company is currently evaluating the impact of this amendment on its condensed consolidated financial statements and disclosures. 2. MAJOR CUSTOMER Approximately 39 % and 36 % of the Company’s consolidated revenues were derived from services performed for FedEx Corporation by the Company's Overnight Air Cargo segment during the fiscal years ended March 31, 2025 and 2024, respectively. Approximately 35 % and 21 % of the Company’s consolidated accounts receivable at March 31, 2025 and 2024, respectively, were due from FedEx Corporation. Approximately 13 % and 10 % of the Company’s consolidated revenues were derived from services performed for American Airlines Corporation by the Company's Commercial Aircraft, Engines and Parts and Ground Support Equipment segments in fiscal 2025 and 2024, respectively. Approximately 19 % and 24 % of the Company’s consolidated accounts receivable at March 31, 2025 and 2024, respectively, were due from American Airlines Corporation. 3. FAIR VALUE OF FINANCIAL INSTRUMENTS The Company measures and reports financial assets and liabilities at fair value. Fair value measurement is classified and disclosed in one of the following three categories: Level 1: Unadjusted quoted prices in active markets that are accessible at the measurement date for identical, unrestricted assets or liabilities. 59 Level 2: Quoted prices in markets that are not active or inputs which are observable, either directly or indirectly, for substantially the full term of the asset or liability. Level 3: Prices or valuation techniques that require inputs that are both significant to the fair value measurement and unobservable (i.e., supported by little or no market activity). Assets Measured and Recorded at Fair Value on a Recurring Basis The following consolidated balance sheet items are measured at fair value on a recurring basis (in thousands): Fair Value Measurements at March 31, 2025 2024 Marketable securities (including restricted investments) (Level 1) $ 1,105 $ 1,923 Interest rate swaps (liability) asset (Level 2) ( 44 ) 1,909 Contrail's earnout (Level 3) $ 1,539 $ — Contrail's redeemable non-controlling interest (Level 3) $ — $ 7,437 The fair values of our interest rate swaps are based on the market standard methodology of netting the discounted expected future variable cash receipts and the discounted future fixed cash payments. The variable cash receipts are based on an expectation of future interest rates derived from observed market interest rate forward curves. Since these inputs are observable in active markets over the terms that the instruments are held, the derivatives are classified as Level 2 in the hierarchy. See Note 8 . The fair value of Contrail's earnout is valued using an income approach and is classified as Level 3 in the hierarchy. See Note 21 . The carrying amounts reported in the consolidated balance sheets for cash and cash equivalents, restricted cash, accounts receivable, notes receivable and accounts payable approximate their fair values at March 31, 2025 and 2024. 4. INVENTORIES Inventories consisted of the following (in thousands): Year Ended March 31, 2025 2024 Inventories: Raw materials 6,928 6,174 Work in process 2,342 5,244 Finished goods 5,358 4,387 Aircraft parts 28,794 49,522 Total inventories 43,422 65,327 Reserves ( 4,906 ) ( 4,607 ) Total inventories, net of reserves $ 38,516 $ 60,720 A write-down of $ 1.5 million was recorded on the inventory of the commercial aircraft, engines and parts segment during the fiscal year ended March 31, 2025. The write-down was attributable to our evaluation of the carrying value of inventory as of March 31, 2025, 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. 5. LESSOR ARRANGEMENTS 60 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. The lease term for these two leased assets ends December 31, 2027. 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 aircraft and engines on a straight-line basis over the assets' useful life from the acquisition date to an estimated residual value. During the fiscal year ended March 31, 2025, the Company recognized depreciation expense relating to equipment leases of $ 1.5 million. Depreciation expense relating to equipment leases for the fiscal year ended March 31, 2024 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 fiscal year ended March 31, 2025, earned contingent rent on equipment leases totaled approximately $ 1.1 million. The Company had no contingent rent earned on equipment leases during the fiscal year ended March 31, 2024. As of March 31, 2025, future minimum rental payments to be received under non-cancelable leases are as follows (in thousands): Year ended March 31, 2026 $ 3,402 2027 3,361 2028 2,843 Thereafter — Total $ 9,606 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. Depreciation expense relating to office leases was $ 0.3 million for the fiscal years ended March 31, 2025 and 2024, respectively. We recognized rental and other revenues related to operating lease payments of $ 1.7 million and $ 1.6 million, of which variable lease payments were $ 0.7 million during both fiscal years ended March 31, 2025 and 2024, 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 March 31, 2025: Year ended March 31, 2026 $ 1,022 2027 987 2028 849 2029 774 2030 743 Thereafter 1,824 Total $ 6,199 6. PROPERTY AND EQUIPMENT 61 Property and equipment consisted of the following (in thousands): Year Ended March 31, 2025 2024 Furniture, fixtures and equipment $ 7,282 $ 7,060 Leasehold improvements 8,393 7,656 Land and buildings 13,850 13,850 29,525 28,566 Accumulated depreciation ( 9,240 ) ( 7,705 ) Property and equipment, net $ 20,285 $ 20,861 During the fiscal years ended March 31, 2025 and 2024, depreciation on fixed assets amounted to $ 1.7 million and $ 1.5 million, respectively. 7. INTANGIBLES Intangibles consisted of the following (in thousands): Year Ended March 31, 2025 2024 Purchased software $ 865 $ 582 Internally developed software 3,658 3,657 In-place lease and other intangibles 1,094 1,094 Customer relationships 8,012 8,009 Patents 1,139 1,112 Other 1,512 1,502 16,280 15,956 Accumulated amortization ( 6,330 ) ( 5,119 ) 9,950 10,837 In-process software 70 141 Intangible assets, total $ 10,020 $ 10,978 Based on the intangible assets recorded at March 31, 2025 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) Amortization 2026 $ 1,193 2027 1,136 2028 1,053 2029 968 2030 965 Thereafter 4,635 $ 9,950 Amortization expense totaled $ 1.2 million for each fiscal years ended March 31, 2025 and 2024. 8. INVESTMENTS IN SECURITIES AND DERIVATIVE INSTRUMENTS 62 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 (Term Note A - MBT and Term Note D - MBT). 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 cash flow hedging instruments and qualified as effective hedges in accordance with ASC 815. 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. At the time of de-designation, the Company amortized the fair value of the interest-rate swap contract included in accumulated other comprehensive income (loss) associated with Term Note A into earnings, classified with interest expense on the consolidated statement of income (loss), 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 of $ 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, classified with interest expense on the consolidated statement of income (loss), over the remaining term of the originally hedged loan. 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. Federal Reserve ("Contrail - Term Note G"). 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 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. As a result of this prepayment, the Company determined that the interest rate swap on Contrail - Term Note G was no longer an effective hedge. The Company amortized the fair value of the interest-rate swap contract included in accumulated other comprehensive income (loss) associated with Contrail - Term Note G at the time of de-designation into earnings over the remainder of its term. During the year ended March 31, 2025, the interest rate swap on Contrail - Term Note G was terminated and the Company received proceeds in the amount of $ 0.6 million. As a result of the termination, the Company reclassified a gain of $ 0.7 million from accumulated other comprehensive income (loss) into earnings. On February 28, 2025, MAC completed an interest rate swap transaction with Bank of America, N.A ("BofA") with respect to the $ 2.3 million loan made to MAC in February 2025. The purpose of the floating-to-fixed interest rate swap transaction was to effectively fix the loan interest rate at 5.99 %. The Company elected not to apply hedge accounting on the interest rate swap with BofA, therefore, any changes in the fair value of the swap are recognized directly into earnings. These fair value changes are included in interest expense on the condensed consolidated statement of income (loss). 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 fiscal years ended March 31, 2025 and 2024, 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. The fair value of these interest-rate swap contracts was not material as of March 31, 2025. As of March 31, 2024, the fair value of these interest-rate swap contracts was an asset of $ 1.9 million, which is included within other assets in the condensed consolidated balance sheets. Estimated net unrealized losses related to the interest rate swaps included in accumulated other comprehensive income (loss) that will be reclassified into earnings within the next twelve months are not material. The Company may, from time to time, employ trading strategies designed to profit from market anomalies and opportunities it identifies. Management uses derivative financial instruments to execute those strategies, which may include options, and futures contracts. These derivative instruments are priced using publicly quoted market prices and are considered Level 1 fair value measurements. During the fiscal year ended March 31, 2025, gains and losses related to these derivative instruments were not material. During the fiscal year ended March 31, 2024, the Company recorded a $ 0.2 million gain and $ 0.4 million loss related to these derivative instruments. These gains and losses are included within Corporate and other's operating expenses in the consolidated statement of income (loss). 63 The Company also invests in exchange-traded marketable securities and accounts for that activity in accordance with ASC 321, Investments-Equity Securities. Marketable equity securities are carried at fair value, with changes in fair market value included in the determination of net income (loss). 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. The Company's gross unrealized gains and losses on equity securities for the twelve months ended March 31, 2025 and 2024 are as follows (in thousands): Year Ended March 31, 2025 2024 Unrealized Gains $ 615 $ 1,602 Unrealized Losses $ 1,049 $ 2,055 These unrealized gains and losses are included within Other income (loss) in the consolidated statement of income (loss). As of March 31, 2025 and 2024, the fair value of these marketable equity securities was an asset of $ 1.1 million and $ 1.9 million, respectively, which is included within restricted investments and other current assets in the condensed consolidated balance sheets. 64 9. EQUITY METHOD INVESTMENTS Lendway, Inc. investment The Company’s investment in Lendway (NASDAQ: LDWY), formerly Insignia Systems, Inc., is accounted for under the equity method of accounting. The Company has elected a three-month lag upon adoption of the equity method. On August 2, 2023, Insignia reincorporated in the state of Delaware as Lendway, Inc. Subsequent to reincorporation, Lendway sold its legacy business on August 4, 2023 to pivot the business towards specialty agricultural finance. On February 26, 2024, Lendway acquired Bloomia B.V. ("Bloomia"), marking its first investment in specialty agriculture and underscoring its strategy of targeting high-quality agricultural assets and enterprises. As of March 31, 2025, the number of Lendway's shares owned by the Company was 0.5 million, representing approximately 28 % of the outstanding shares. As of March 31, 2025, the Company's net investment basis in Lendway is $ 0.7 million. 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. On January 15, 2025 the borrowing limit was further increased to $ 3.8 million and as of March 31, 2025, $ 3.8 million has been drawn. All outstanding principal and accrued interest will become due and payable to the Company on the maturity date, which is earlier of August 15, 2029 or by written demand of the Company after February 15, 2026. Prior to the maturity date, Lendway may prepay any accrued interest or principal outstanding without penalty. As of March 31, 2025, $ 3.4 million of the principal balance remains outstanding and $ 0.1 million of interest has been accrued. Cadillac Casting, Inc. investment The Company's 20.1 % investment in CCI is accounted for under the equity method of accounting. Due to the differing fiscal year-ends, the Company has elected a three-month lag to record the CCI investment at cost, with a basis difference of $ 0.3 million. The Company's net investment basis in CCI is $ 3.9 million as of March 31, 2025. 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 Contrail JV II LLC ("CJVII"). The venture focuses on acquiring commercial aircraft and jet engines for leasing, trading and disassembly. The joint venture, CJVII, was formed as a series LLC ("CJVII Series"). It consists of several individual series that target investments in current generation narrow-body aircraft and engines, building on Contrail’s origination and asset management expertise. CAM was formed to serve two separate and distinct functions: 1) to direct the sourcing, acquisition and management of aircraft assets owned by CJVII Series as governed by the Management Agreement between CJVII and CAM (“Asset Management Function”), and 2) to directly invest into CJVII Series alongside other institutional investment partners (“Investment Function”). CAM has two classes of equity interests: 1) common interests and 2) investor interests. Neither interest votes as the entity is operated by a Board of Directors. The common interests of CAM relate to its Asset Management Function. The investor interests of CAM relate to the Company’s and Mill Road Capital’s (“MRC”) investments through CAM into CJVII (the Investment Function) and ultimately into the individual CJVII Series. With regard to CAM’s common interests, the Company currently owns 90 % of the economic common interests in CAM, and MRC owns the remaining 10 %. MRC invested $ 1.0 million directly into CAM in exchange for 10 % of the common interests. For the Asset Management Function, CAM receives origination fees, management fees, consignment fees (where applicable) and a carried interest from the direct investors into each CJVII Series. Such fee income and carried interest will be distributed to the Company and MRC in proportion to their respective common interests. The Company determined that CAM is a variable interest entity and that the Company is not the primary beneficiary. This is primarily the result of the Company's conclusion that it does not control CAM’s Board of Directors, which has the power to direct the activities that most significantly impact the economic performance of CAM. Accordingly, the Company does not consolidate CAM and has determined to account for this investment using equity method accounting. The Company accounts for its investment in CAM using the hypothetical liquidation at book value ("HLBV") method without a reporting lag. The HLBV method uses a balance sheet approach to capture changes in the Company's claim on CAM's net assets from a period-end hypothetical liquidation at book value. This approach provides a more accurate reflection of the Company's investment in CAM, compared to recording its proportionate share of income or loss. On October 18, 2024, the Company entered into an unsecured promissory note with CAM for $ 2.5 million with an interest rate of 10.0 %, through conversion of a portion of the Company's accounts receivable from CAM. All outstanding principal and accrued 65 interest will become due and payable for the Company on the maturity date (which is October 15, 2027). Prior to the maturity, CAM may prepay any accrued interest or principal outstanding without penalty. CAM's HLBV net assets, including common interests and investor interests, was $ 37.8 million and $ 29.6 million as of March 31, 2025 and 2024, respectively. Additionally, contributions from and distributions to both Air T and MRC for the fiscal year ended March 31, 2025 and 2024 are as follows (in thousands): Year Ended March 31, 2025 2024 Contributions $ 7,029 $ 4,095 Distributions $ 11,847 $ 4,852 Investment balances for the Company's equity method investees as of March 31, 2025 and 2024 is as follows (in thousands): Investment March 31, 2025 March 31, 2024 Lendway $ 729 $ 2,339 CCI 3,889 3,723 CAM 12,428 7,397 Other equity method investments 1,957 3,194 Total $ 19,003 $ 16,653 Summarized income statement financial information for the Company's equity method investees accounted for on a three month lag for the twelve months ended December 31, 2024 and December 31, 2023 are as follows (in thousands): Twelve Months Ended December 31, 2024 2023 Revenue $ 174,810 $ 143,208 Gross Profit 20,942 19,137 Operating (loss) income ( 1,150 ) 4,843 Net (loss) income ( 3,347 ) 8,765 Net (loss) income attributable to Air T, Inc. stockholders $ ( 1,286 ) $ 1,862 Summarized balance sheet financial information for the Company's equity method investees accounted for on a three month lag as of December 31, 2024 and December 31, 2023 are as follows (in thousands): December 31, 2024 2023 Current assets $ 48,327 $ 49,101 Noncurrent assets 119,881 40,971 Total assets 168,208 90,072 Current liabilities 34,594 28,656 Noncurrent liabilities 101,151 19,262 Total liabilities 135,745 47,918 Noncontrolling interests 2,841 689 The summarized income statement financial information for the Company's equity method investees accounted for without a reporting lag for the fiscal years ended March 31, 2025 and 2024 are as follows (in thousands): 66 Year Ended March 31, 2025 2024 Revenue $ 31,516 $ 27,306 Gross Profit 11,949 8,356 Operating (loss) income ( 228 ) 1,311 Net income (loss) 6,374 ( 1,552 ) Net income (loss) attributable to Air T, Inc. stockholders $ 3,054 $ ( 80 ) Summarized balance sheet financial information for the Company's equity method investees accounted for on a three month lag as of March 31, 2025 and 2024 are as follows (in thousands): March 31, 2025 2024 Current assets $ 41,947 $ 37,275 Noncurrent assets 26,856 28,460 Total assets 68,803 65,735 Current liabilities 6,194 5,959 Noncurrent liabilities 1,090 1,399 Total liabilities 7,284 7,358 Noncontrolling interests — — Net income (loss) attributable to Air T, Inc. 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 and other comprehensive income adjustments, during the fiscal years ended March 31, 2025 and 2024 is as follows (in thousands): Year Ended March 31, Investment 2025 2024 Lendway $ ( 1,609 ) $ 659 CCI 165 1,041 CAM 2,919 ( 184 ) Other equity method investments 225 173 Total $ 1,700 $ 1,689 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 fiscal years ended March 31, 2025 and 2024, the Company received distributions and dividends from equity method investees as follows (in thousands): Year Ended March 31, Investment 2025 2024 Lendway $ — $ — CCI — 452 CAM 4,907 2,275 Other equity method investments 1,458 465 Total $ 6,365 $ 3,192 67 10. ACCRUED EXPENSES Year ended March 31, (In thousands) 2025 2024 Salaries, wages and related items $ 6,235 $ 5,296 Profit sharing and bonus 2,980 2,335 Other deposits 513 1,403 Deferred income 3,686 2,956 Other 3,277 3,660 Total $ 16,691 $ 15,650 11. LESSEE ARRANGEMENTS The Company has operating leases for the use of real estate, machinery, and office equipment. 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. Many of our leases include options to extend the lease for an additional period. The lease term for all of the Company’s leases includes the non-cancellable period of the lease, plus any additional periods covered by either a Company option to extend the lease that the Company is reasonably certain to exercise, or an option to extend the lease controlled by the lessor that is considered likely to be exercised. Payments due under the lease contracts include fixed payments plus, for some of our leases, variable payments. Variable payments are typically operating costs associated with the underlying asset and are recognized when the event, activity, or circumstance in the lease agreement on which those payments are assessed occurs. Our leases do not contain residual value guarantees. The Company has elected to combine lease and non-lease components as a single component and not to recognize leases on the balance sheet with an initial term of one year or less. 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 fiscal years ended March 31, 2025 and 2024 are as follows (in thousands): Twelve Months Ended March 31, 2025 2024 Operating lease cost $ 3,121 $ 2,587 Short-term lease cost 1,111 873 Variable lease cost 1,049 828 Total lease cost $ 5,281 $ 4,288 68 Amounts reported in the consolidated balance sheets for leases where we are the lessee as of March 31, 2025 and 2024 were as follows (in thousands): March 31, 2025 March 31, 2024 Operating leases Operating lease ROU assets $ 13,274 $ 11,376 Operating lease liabilities $ 14,220 $ 12,276 Weighted-average remaining lease term Operating leases 10 years, 3 months 12 years, 1 month Weighted-average discount rate Operating leases 5.67 % 5.09 % During the twelve months ended March 31, 2025, the Company had ROU assets that were obtained in exchange for new operating lease liabilities in the amount of $ 4.1 million. The Company has an operating lease between entities under common control where the useful life of certain leasehold improvements exceeds the related lease term. As of March 31, 2025, the remaining lease term on the operating lease was 4 years, 8 months and the useful life of leasehold improvements that exceeded the lease term ranged from 4 years, 10 months to 5 years, 2 months . As of March 31, 2025, the unamortized balance of such leasehold improvements was $ 0.2 million. Maturities of lease liabilities under non-cancellable leases where we are the lessee as of the fiscal year ended March 31, 2025 are as follows (in thousands): Operating Leases 2026 $ 3,115 2027 2,979 2028 2,344 2029 1,745 2030 977 Thereafter 7,669 Total undiscounted lease payments 18,829 Interest ( 4,609 ) Total lease liabilities $ 14,220 12. FINANCING ARRANGEMENTS Borrowings of the Company and its subsidiaries are summarized below at March 31, 2025 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. (the "Seller"), the minority owner of Contrail. Pursuant to the Redemption Agreement, Contrail agreed to purchase and redeem from the Seller, 16 % of its 21 % interest in Contrail, effective as of April 1, 2024. The purchase price for the redeemed interest 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 o 69 nly, 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. The OCAS Loan is classified as related party debt on the Company's condensed consolidated balance sheet. As a result, it is excluded from the tables of current financing arrangements and contractual financing obligations below. On August 29, 2024, the Company 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") entered into a credit agreement (the "New Credit Agreement") with Alerus Financial ("Alerus"). 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 on Revolver - Alerus bears 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. 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 Alerus or prepaid with funds from the Original Alerus Loan Parties’ internally generated cash flows. 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 all indebtedness under the New Credit Agreement and the notes. In addition, the Company 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 previous secured credit facility with MBT. All debt issuance costs 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 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. On October 16, 2024, the Company and AAM 24-1, LLC ("AAM 24-1"), a wholly-owned subsidiary of the Company entered into a the 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 the Note Purchase Agreement (the 70 “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 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. On February 21, 2025, MAC entered into a $ 2.3 million term loan with 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 1.00, 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 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 the Alerus. On March 31, 2025, the Original Alerus Loan Parties under the Credit Agreement with Alerus entered into Amendment No. 3 to Credit Agreement 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") The following table summarizes certain information about the current financing arrangements of the Company's and its subsidiaries as of March 31, 2025 and 2024: (In Thousands) March 31, 2025 March 31, 2024 Maturity Date Interest Rate Unused commitments as of March 31, 2025 Type of Debt Air T Debt Revolver - MBT $ — $ — 8/31/2024 SOFR + range of 2.25 % - 3.25 % Recourse Term Note A - MBT 1 — 6,955 8/31/2031 3.42 % Recourse Term Note B - MBT 1 — 2,456 8/31/2031 3.42 % Recourse Term Note D - MBT 1 — 1,271 1/1/2028 1-month LIBOR + 2.00 % Recourse Term Note F - MBT 1 — 783 1/31/2028 Greater of 6.00 % or Prime + 1.00 % Recourse Debt - Trust Preferred Securities 2 35,342 34,214 6/7/2049 8.00 % Recourse Total 35,342 45,679 AirCo 1 Debt 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 $ 13.0 million held by wholly-owned subsidiaries of the Company. 71 Term Loan - PSB 3 — 5,434 12/11/2025 3-month SOFR + 3.26 % Non-recourse Total — 5,434 Jet Yard Debt Term Loan - MBT 1 — 1,749 8/31/2031 4.14 % Recourse Total — 1,749 Alerus Loan Parties Debt Revolver - Alerus 6,050 — 8/28/2026 Greater of 5.00 % or 1-month SOFR + 2.00 % 7,950 Recourse Overline Note - Alerus — — 10/31/2025 Greater of 5.00 % or 1-month SOFR + 2.00 % 3,000 Recourse Term Note A - Alerus 9,827 — 8/15/2029 Greater of 5.00 % or 1-month SOFR + 2.00 % Recourse Term Note B - Alerus — — 8/15/2029 Greater of 5.00 % or 1-month SOFR + 2.00 % Recourse Total 15,877 — Contrail Debt Revolver - ONB 3,127 3,476 11/24/2025 1-month SOFR + 3.56 % 21,873 Limited recourse 4 Term Loan G - ONB 5 — 14,918 11/24/2025 1-month SOFR + 3.11 % Limited recourse 3 Term Note I - ONB 5 — 10,000 9/28/2025 1-month SOFR + 3.11 % Limited recourse 3 Term Note J - ONB 8,750 — 9/12/2028 1-month SOFR + 3.86 % Limited recourse 3 Total 11,877 28,394 Wolfe Lake Debt Term Loan - Bridgewater 9,059 9,327 12/2/2031 3.65 % Non-recourse Total 9,059 9,327 Air T Acquisition 22.1 Term Loan - Bridgewater 3,500 4,000 2/8/2027 4.00 % Non-recourse Term Loan A - ING 1,298 1,946 2/1/2027 3.50 % Non-recourse Term Loan B - ING 1,082 1,081 5/1/2027 4.00 % Non-recourse Total 5,880 7,027 WASI Debt 3 Term Loan - PSB was fully paid off prior to the maturity date. 4 Includes Air T's guarantee of approximately $ 1.6 million. 5 Term Loan G - ONB and Term Note I - ONB were fully paid off prior to their respective maturity dates. 72 Promissory Note - Seller's Note 398 849 1/1/2026 6.00 % Non-recourse Total 398 849 AAM 24-1 Debt Promissory Notes - Institutional Investors 30,000 15,000 3/1/2031 8.50 % Non-recourse Total 30,000 15,000 MAC Debt Term Loan - BofA 2,271 — 2/21/2030 1-month SOFR + 0.11 % + 1.75 % Non-recourse Total 2,271 — Total Debt 110,704 113,459 Unamortized Premiums and Debt Issuance Costs ( 379 ) ( 533 ) Total Debt, net $ 110,325 $ 112,926 Fiscal year 2025's weighted average interest rate on short term borrowings outstanding was 7.68 %. The weighted average interest rate on short term borrowings outstanding as of March 31, 2024 was 8.88 %. The New Credit Agreement between Alerus Loan Parties and Alerus 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 . The Contrail Credit Agreement with ONB 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 1.00, a minimum cash flow coverage ratio of 1.25 to 1.00, and a minimum tangible net worth of $ 15.0 million. Air T Acquisition 22.1's term loans with ING 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 Promissory Notes - Institutional Investors also contain affirmative and negative covenants, including covenants on the utilization of loan proceeds, TruPs dividends, distributions from AAM 24-1's investments and other reporting requirements. The obligations of Contrail under the Contrail Credit Agreement with ONB are secured by a first-priority security interest in substantially all of the assets of Contrail. The obligations of Contrail under the Contrail Credit Agreement are also guaranteed by the Company, up to a maximum of $ 1.6 million, plus costs of collection. The Company is not liable for any other assets or liabilities of Contrail and there are no cross-default provisions with respect to Contrail’s debt in any of the Company’s debt agreements with Alerus. At March 31, 2025, our contractual financing obligations, including payments due by period, are as follows (in thousands) 73 Fiscal year ended Amount 2026 $ 9,099 2027 14,135 2028 5,527 2029 3,208 2030 5,840 Thereafter 72,895 110,704 Unamortized Premiums and Debt Issuance Costs ( 379 ) $ 110,325 The Company assumes various financial obligations and commitments in the normal course of its operations and financing activities. Financial obligations are considered to represent known future cash payments that the Company is required to make under existing contractual arrangements such as debt and lease agreements. Fair Value of Debts - The following table presents the carrying amounts and estimated fair values of the Company’s debt instruments, which are not measured at fair value on a recurring basis, as of March 31, 2025 and 2024: (in thousands) March 31, 2025 March 31, 2024 Carrying Value $ 75,362 $ 79,245 Estimated Fair Value $ 92,984 $ 90,248 The fair value of the Company’s debt was estimated using discounted cash flow models based on current market interest rates for debt instruments with similar terms, maturities, and credit risk. These estimates utilize Level 2 inputs within the fair value hierarchy. As of March 31, 2025 and March 31, 2024, the estimated fair value exceeded the carrying value primarily due to certain outstanding borrowings bearing contractual interest rates that are above current market rates, which results in higher present values of future cash flows. The smaller differential in the prior year reflects changes in interest rate environments and debt structure. The Company has not elected the fair value option under ASC 825-10 and continues to report its debt obligations at amortized cost. The fair value amounts are presented for disclosure purposes only. Interest Expense, net The components of net interest expense during the years ended March 31, 2025 and March 31, 2024 are as follows (in thousands): March 31, 2025 March 31, 2024 Contractual interest $ 8,606 $ 6,688 Amortization of deferred financing costs 323 324 Gain on interest rate swaps ( 167 ) ( 4 ) Interest income ( 375 ) ( 92 ) Total $ 8,387 $ 6,916 Net interest expense by entity during the years ended March 31, 2025 and March 31, 2024 are as follows (in thousands): 74 Year Ended March 31, 2025 2024 Air T $ 3,380 $ 3,818 Jet Yard 31 78 Alerus Loan Parties 997 — Contrail 1,316 1,570 AirCo 1 378 561 Wolfe Lake 345 356 Air T Acquisition 22.1 277 318 WASI 39 67 AAM 24-1 1,793 132 MAC 14 — Gain on interest rate swaps ( 167 ) ( 4 ) Other ( 16 ) 20 Total $ 8,387 $ 6,916 75 13. RELATED PARTY MATTERS Contrail leases its corporate and operating facilities at Verona, Wisconsin from Cohen Kuhn Properties, LLC, a limited liability company whose membership interests are owned by Mr. Joseph Kuhn, Contrail's Chief Executive Officer and Mrs. Miriam Cohen-Kuhn, Contrail's Chief Financial Officer, equally. The facility consists of approximately 21,000 square feet of warehouse and office space. The Company paid aggregate rental payments of approximately $ 0.2 million to Cohen Kuhn Properties, LLC pursuant to such lease during the period for each of the fiscal years ended March 31, 2025 and March 31, 2024. This lease expires on July 17, 2026. The lease agreement provides that the Company shall be responsible for maintenance of the leased facilities and for utilities, taxes and insurance. The Company believes that the terms of such leases are no less favorable to the Company than would be available from an independent third party. Gary S. Kohler, a director of the Company, entered into an employment agreement with Blue Clay Capital Management, a wholly-owned subsidiary of the Company included in Corporate and other, to serve as its Chief Investment Officer in return for an annual salary of $ 51.5 thousand plus variable compensation based on the management and incentive fees to be paid to the subsidiary by certain of these investment funds and eligibility to participate in discretionary annual bonuses. Nick Swenson, CEO of the Company, along with his affiliates (other than the Company), successors and assignees, are the majority shareholders of CCI. As of March 31, 2025, Mr. Swenson and his affiliates, successors and assignees own 70.4 % of ownership interests in CCI. Under the VIE model, Mr. Swenson and his affiliates (other than the Company), successors and assignees are the primary beneficiaries of CCI due to Mr. Swenson's controlling interest in CCI. It follows the power held by Mr. Swenson to direct the activities of CCI that most significantly impact CCI's economic performance is not shared with the Company ("the related party group"). Air T Acquisition 22.1's term loan with Bridgewater is secured by a first lien on all of the assets of the subsidiary, a pledge of $ 5.0 million, 8.0 % TruPs, and a personal guaranty of the Company’s Chairman, President and Chief Executive Officer Nick Swenson. Air T engages Fox Lake Capital, LLC ("FLC") to perform certain consulting and brokerage services for the Company. Dan Philp, an employee of Air T, is the CEO of FLC. During the fiscal year ended March 31, 2025, the Company has paid approximately $ 0.2 million to FLC to compensate for services rendered. On October 16, 2024 Air T converted a portion of receivables related to expense reimbursements for CAM to a note receivable in the amount of $ 2.5 million. The note accrues interest at a rate of 10.0 % and is due with any accrued and unpaid interest on October 16, 2027. As of March 31, 2025, $ 0.1 million has been accrued to interest with an outstanding principal balance of $ 2.5 million. On August 2024 Air T provided a Delayed Draw Term Loan to Lendway where Lendway can borrow up to $ 2.5 million. The Delayed Draw Term Loan with Lendway was later amended on September 27, 2024 and January 15, 2025 to increase the total borrowing to $ 3.5 million and $ 3.8 million, respectively. The note accrues interest at a rate of 8.0 % and is due with any accrued and unpaid interest the earlier of August 14, 2029 or by written notice by the Company delivered on or after February 15, 2026. As of March 31, 2025 $ 0.1 million has been accrued to interest with an outstanding principal balance of $ 3.4 million. 14. EMPLOYEE AND NON-EMPLOYEE STOCK OPTIONS Air T, Inc. maintains two stock option plans for the benefit of certain eligible employees and directors. The first Air T stock option plan is the 2012 Stock Option Plan. The second Air T stock option plan is the 2020 Omnibus Stock and Incentive Plan. Compensation expense is recognized over the requisite service period for stock options which are expected to vest based on their grant-date fair values. The Company uses the Black-Scholes option pricing model to value stock options granted under the Air T, Inc. The key assumptions for this valuation method include the expected term of the option, stock price volatility, risk-free interest rate and dividend yield. Many of these assumptions are judgmental and highly sensitive in the determination of compensation expense. Air T's 2012 Stock Option Plan Air T, Inc.’s 2012 Stock Option Plan terminated in 2022. The last of the activity under this plan occurred during the year ended March 31, 2024. As of March 31, 2024 no unrecognized compensation expense related to the Air T's 2012 stock options and no stock-based compensation expense with respect to this plan was recognized for the year ended March 31, 2024. No unexpired options remained outstanding under this plan as of March 31, 2024. 76 There was no activity related to this plan during the fiscal year ended March 31, 2025. The final outstanding options after termination of this plan in 2022 were exercised or forfeited during the fiscal year ended March 31, 2024 as summarized in the table below (in thousands, except for shares): Shares Weighted Average Exercise Price Per Share Weighted Average Remaining Life (Years) Aggregate Intrinsic Value Outstanding at Outstanding at March 31, 2023 7,500 $ 7.04 0.4 $ 135,075 Granted — — Exercised ( 3,750 ) 7.04 Forfeited ( 3,750 ) 7.04 Repurchased — — Outstanding at Outstanding at March 31, 2024 — — 0 — Air T's 2020 Omnibus Stock and Incentive Plan On December 29, 2020, the Company’s Board of Directors unanimously approved the Omnibus Stock and Incentive Plan (the "Plan"), which was subsequently approved by the Company's stockholders at the August 18, 2021 Annual Meeting of Stockholders. The total number of shares authorized under the Plan is 420,000 . Through March 31, 2025, options to purchase up to 348,050 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. However, the ability to exercise vested awards, occurring at the conclusion of each annual vesting period, is contingent upon the Company's stock price meeting predetermined milestones outlined in the options agreements (the "market condition"). If the market condition is not fulfilled at the annual vesting period on June 30 of every year, the vested awards may not be exercisable at any subsequent point and are forfeited. On the preceding three vesting dates, June 30, 2024, 2023 and 2022, a total of 97,000 shares satisfied the service condition; however, they did not meet the market condition to become exercisable. For the fiscal years ended March 31, 2025 and March 31, 2024, 26,000 unvested shares and no unvested shares, respectively, were forfeited due to employee departures resulting in the reversal of previously recognized expense of $ 54.0 thousand for the fiscal year ended March 31, 2025. As of March 31, 2025 there were 226,000 granted options that may become exercisable on future vesting dates under the Plan. No options were exercisable as of March 31, 2025. The Company used the Black-Scholes option pricing model to value stock options granted under the Air T's 2020 Omnibus Stock and Incentive Plan and determined the grant date's fair value was $ 1.3 million. The key assumptions used in the Plan's Black-Scholes option pricing model are as follows: Risk-free interest rate 0.94 % Expected dividend yield — Expected term 10 years Expected volatility 44.29 % We do not anticipate significant forfeitures and elected to account for forfeitures as they occur. During fiscal years ended March 31, 2025 and 2024, total compensation cost recognized under the Plan for each year was $ 0.1 million. The unrecognized compensation cost related to nonvested awards is $ 0.4 million, which is expected to be recognized over a weighted average period of 6.25 years. 15. REVENUE RECOGNITION Performance Obligations Substantially all of the Company’s non-lease revenue is derived from contracts with an initial expected duration of one year or less. As a result, the Company has applied the practical expedient to exclude consideration of significant financing components from the determination of transaction price, to expense costs incurred to obtain a contract, and to not disclose the value of unsatisfied performance obligations. 77 The following is a description of the Company’s performance obligations as of March 31, 2025: Type of Revenue Nature, Timing of Satisfaction of Performance Obligations, and Significant Payment Terms Product Sales The Company generates revenue from sales of various distinct products such as parts, aircraft equipment, printing equipment, jet engines, airframes, and scrap metal to its customers. A performance obligation is created when the Company accepts an order from a customer to provide a specified product. Each product ordered by a customer represents a performance obligation. The Company recognizes revenue when obligations under the terms of the contract are satisfied; generally, this occurs at a point-in-time upon shipment or when control is transferred to the customer. Transaction prices are based on contracted terms, which are at fixed amounts based on standalone selling prices. While the majority of the Company's contracts do not have variable consideration, for the limited number of contracts that do, the Company records revenue based on the standalone selling price less an estimate of variable consideration (such as rebates, discounts or prompt payment discounts). The Company estimates these amounts based on the expected incentive amount to be provided to customers and reduces revenue accordingly. Performance obligations are short-term in nature and customers are typically billed upon transfer of control. The Company records all shipping and handling fees billed to customers as revenue. The terms and conditions of the customer purchase orders or contracts are dictated by either the Company’s standard terms and conditions or by a master service agreement or by the contract. Support Services The Company provides a variety of support services such as aircraft maintenance, printer maintenance, and short-term repair services to its customers. Additionally, the Company operates certain aircraft routes on behalf of FedEx. A performance obligation is created when the Company agrees to provide a particular service to a customer. For each service, the Company recognizes revenues over time as the customer simultaneously receives the benefits provided by the Company's performance. This revenue recognition can vary from when the Company has a right to invoice to the output or input method depending on the structure of the contract and management’s analysis. For repair-type services, the Company records revenue over-time based on an input method of costs incurred to total estimated costs. The Company believes this is appropriate as the Company is performing labor hours and installing parts to enhance an asset that the customer controls. The vast majority of repair-services are short term in nature and are typically billed upon completion of the service. Some of the Company’s contracts contain a promise to stand ready as the Company is obligated to perform certain maintenance or administrative services. For most of these contracts, the Company applies the 'as invoiced' practical expedient as the Company has a right to consideration from the customer in an amount that corresponds directly with the value of the entity's performance completed to date. A small number of contracts are accounted for as a series and recognized equal to the amount of consideration the Company is entitled to less an estimate of variable consideration (typically rebates). These services are typically ongoing and are generally billed on a monthly basis. Software Services The Company provides market data related to air cargo based on primary sources and owns cloud hosted software that supports the needs of aviation businesses and helps aftermarket parts sellers automate quoting for their potential clients. For market data services, revenue is derived from contracts that grant customers the right to use the Company's web-based service for a specified term through a subscription fee. A performance obligation is created when the Company agrees to provide a subscription-based service to a customer. There is no variation in effort expanded by the Company over the subscription term, therefore, revenue is recognized each month on a straight-line basis according to the consideration paid by the customer for the given time period. Generally, subscription terms are in annual increments and, when a subscription term begins, an annual fee is remitted by the customer to cover the 12-month period. The cash received is recorded as deferred revenue for the amount stated in the contract and recognized over the subscription term based on straight-line recognition. For cloud hosted software, the Company enters into service contracts which provides access to the software and customer support services. A performance obligation is created when the Company agrees to provide a particular service to a customer. For software access, revenue is recognized ratably over time for the daily performance obligation related to the customer's access to the cloud hosted software. For support services, revenue is recognized over time for the hourly performance obligation provided to the customer. Generally, subscription terms range from three to five years . Software access is usually billed monthly and support services are billed upon completion. 78 The following table summarizes disaggregated revenues by type (in thousands): Year Ended March 31, 2025 2024 Product Sales Overnight air cargo $ 42,615 $ 39,302 Ground support equipment 35,903 36,127 Commercial aircraft, engines and parts 106,946 114,049 Corporate and other 661 739 Support Services Overnight air cargo 81,287 76,107 Ground support equipment 2,426 533 Commercial aircraft, engines and parts 7,923 10,727 Corporate and other 31 36 Leasing Revenue Ground support equipment 69 49 Commercial aircraft, engines and parts 2,597 64 Corporate and other 1,713 1,624 Software Services Digital Solutions 7,268 5,783 Other Overnight air cargo 129 137 Ground support equipment 542 459 Commercial aircraft, engines and parts 749 695 Corporate and other 991 403 Total $ 291,850 $ 286,834 See Note 1 8 for the Company's disaggregated revenues by geographic region and Note 19 for the Company’s disaggregated revenues by segment. These notes disaggregate revenue recognized from contracts with customers into categories that depict how the nature, amount, timing, and uncertainty of revenue and cash flows are affected by economic factors. Contract Balances and Costs 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 March 31, 2025 and the amount of contract liabilities that were recognized as revenue during the year ended March 31, 2025 (in thousands): Outstanding contract liabilities Outstanding contract liabilities as of April 1, 2024 Recognized as Revenue As of March 31, 2025 $ 4,199 As of April 1, 2024 $ 4,359 For the year ended March 31, 2025 $ ( 3,705 ) 16. EMPLOYEE BENEFITS 79 The Company has a 401(k) defined contribution plan covering domestic employees and an 1165(e) defined contribution plan covering Puerto Rico based employees (“Plans”). All employees of the Company are immediately eligible to participate in the Plans. The Company’s contribution to the Plans for the fiscal years ended March 31, 2025 and 2024 was approximately $ 1.0 million and $ 0.9 million, respectively, and was recorded in the consolidated statements of income (loss). The Company, in each of the past three years, has paid a discretionary profit sharing bonus in which all employees have participated. Profit sharing expense in fiscal 2025 and 2024 was approximately $ 3.8 million and $ 2.2 million, respectively, and was recorded in general and administrative expenses in the consolidated statements of income (loss). 17. INCOME TAXES Loss from continuing operations before income taxes as shown in the Consolidated Statements of Income (Loss) consists of the following: Year Ended March 31, 2025 2024 Domestic $ ( 4,791 ) $ ( 3,468 ) Foreign ( 197 ) ( 487 ) Total $ ( 4,988 ) $ ( 3,955 ) Income tax expense (benefit) attributable to pretax loss from continuing operations consists of (in thousands): Year Ended March 31, 2025 2024 Current: Federal $ — $ 23 State 166 ( 226 ) Foreign 557 902 Total current 723 699 Deferred: Federal 83 126 State ( 17 ) ( 13 ) Foreign ( 366 ) ( 83 ) Total deferred ( 300 ) 30 Total $ 423 $ 729 Income tax expense attributable to pretax loss from continuing operations differed from the amounts computed by applying the U.S. Federal income tax rate of 21.0 % to pretax loss from continuing operations as follows (in thousands): 80 Year Ended March 31, 2025 2024 Expected Federal income tax benefit U.S. statutory rate $ ( 1,048 ) 21.0 % $ ( 831 ) 21.0 % Foreign rate differential ( 101 ) 2.0 % 399 - 10.1 % State income taxes, net of federal benefit ( 165 ) 3.3 % ( 125 ) 3.2 % Micro-captive insurance benefit — 0.0 % ( 306 ) 7.7 % Change in valuation allowance 1,272 - 25.5 % 1,909 - 48.3 % Income attributable to minority interest - Contrail ( 140 ) 2.8 % ( 217 ) 5.5 % Other differences, net 605 - 12.1 % ( 100 ) 2.5 % Income tax expense $ 423 - 8.5 % $ 729 - 18.5 % The Company did not record any liabilities for uncertain tax positions for the fiscal years ended March 31, 2025 and March 31, 2024. The Tax Cuts and Jobs Act (the "Tax Act") provides for a territorial tax system, that includes the global intangible low-taxed income (“GILTI”) provision beginning in 2018. The GILTI provisions require us to include in our U.S. income tax return certain current year foreign subsidiary earnings net of foreign tax credits, subject to limitation. We elected to account for the GILTI tax in the period in which it is incurred. There was no GILTI inclusion for the fiscal years ended March 31, 2025 and March 31, 2024. The Company (exclusive of Delphax which has a full valuation allowance) has federal gross operating losses of $ 11.3 million and state gross operating losses of $ 15.7 million, and foreign gross operating losses of $ 7.6 million at March 31, 2025. These net operating losses will begin to expire in tax year 2031. The Company has foreign tax credits of $ 0.5 million that will begin to expire in tax year 2029. Deferred tax assets and liabilities were comprised of the following (in thousands): 81 Year Ended March 31, 2025 2024 Net operating loss & attribute carryforwards $ 11,681 $ 9,414 Unrealized losses on investments 1,540 1,055 Inventory reserve 1,149 1,041 Accrued vacation 442 449 Foreign tax credit 520 650 Lease liabilities 3,463 2,913 Research and development capitalizations 441 275 Other deferred tax assets 792 517 Total deferred tax assets 20,028 16,314 Property and equipment ( 1,651 ) ( 1,735 ) Right-of-use assets ( 3,236 ) ( 2,703 ) Capital gain deferment ( 1,793 ) ( 1,763 ) Foreign intangible assets ( 1,830 ) ( 2,089 ) Investment in partnerships ( 2,159 ) ( 105 ) Other deferred tax liabilities ( 403 ) ( 393 ) Total deferred tax liabilities ( 11,072 ) ( 8,788 ) Net deferred tax assets 8,956 7,526 Less valuation allowance ( 11,103 ) ( 9,973 ) Net deferred tax liabilities $ ( 2,147 ) $ ( 2,447 ) The Company is not asserting indefinite reinvestment with regards to foreign earnings in the Netherlands. The Company has not recorded deferred taxes associated with these undistributed earnings as the impact of any future distribution will not have a material tax impact. The Company continues to assert that it will permanently reinvest all other foreign earnings, including basis differences of all the Company's foreign subsidiaries. As a result of its permanent reinvestment assertion, the Company has not recorded deferred taxes related to its foreign subsidiaries under the indefinite exception. The Company has not determined the deferred tax liability associated with these undistributed earnings and basis differences, as such determination is not practicable. Valuation Allowance Management assesses the available positive and negative evidence to estimate whether sufficient future taxable income will be generated to permit use of the existing deferred tax assets. A significant piece of objective negative evidence evaluated was the cumulative loss incurred over the three-year period ended March 31, 2025. Such objective evidence limits the ability to consider other subjective evidence, such as our projections for future growth. On the basis of this evaluation, as of March 31, 2025, a valuation allowance of $ 11.1 million (inclusive of the Delphax entities’ valuation allowances that were discussed above) has been recorded to recognize only the portion of the deferred tax asset that is more likely than not to be realized. The amount of the deferred tax asset considered realizable, however, could be adjusted if estimates of future taxable income during the carryforward period are reduced or increased or if objective negative evidence in the form of cumulative losses is no longer present and additional weight is given to subjective evidence such as our projections for growth. The Organization for Economic Co-operation and Development ("OECD") has introduced a framework to implement a global minimum tax. Several jurisdictions in which the Company operates have enacted laws effective January 1, 2024, consistent with the OECD's framework. While details around the global minimum tax in each jurisdiction are uncertain, the Company has assessed the applicability of these rules and determined that it is not subject to the global minimum tax for the fiscal year ending March 31, 2025. 82 Delphax Effective on November 24, 2015, Air T, Inc. purchased interests in Delphax. With an equity investment level by the Company of approximately 67 %, Delphax is required to continue filing a separate United States corporate tax return. Delphax maintains a September 30 fiscal year end, and the returns for the fiscal year ended September 30, 2024 have not been filed. The gross deferred tax balances related to Delphax includes federal and state loss carryforwards of $ 8.6 million and $ 1.7 million, respectively. The net operating losses expire in varying amounts beginning in the tax year 2027. The provisions of ASC 740 require an assessment of both positive and negative evidence when determining whether it is more-likely-than-not that deferred tax assets will be recovered. In accounting for Delphax's tax attributes, the Company has established a full valuation allowance of $ 1.8 million as of March 31, 2025 and March 31, 2024. The cumulative tax losses incurred by Delphax in recent years was the primary basis for the Company’s determination that a full valuation allowance should be established against Delphax’s net deferred tax assets. 18. GEOGRAPHICAL INFORMATION Total tangible long-lived assets, net of accumulated depreciation, located in the United States, the Company's country of domicile, and similar tangible long-lived assets, net of accumulated depreciation, held outside the United States are summarized in the following table as of March 31, 2025 and March 31, 2024 (in thousands): March 31, 2025 March 31, 2024 United States $ 20,422 $ 20,807 Foreign 14,525 306 Total tangible long-lived assets, net $ 34,947 $ 21,113 The Company’s tangible long-lived assets, net of accumulated depreciation, held outside of the United States represent primarily assets on lease at March 31, 2025. The net book value located within each individual country at March 31, 2025 is listed below (in thousands): Country March 31, 2025 March 31, 2024 Thailand $ — $ 252 Bulgaria 14,435 — Other 90 54 Total foreign tangible long-lived assets, net $ 14,525 $ 306 Total revenue, located in the United States, and outside the United States is summarized in the following table as of March 31, 2025 and March 31, 2024 (in thousands): 83 Twelve months ended March 31, 2025 2024 Operating Revenues: Overnight Air Cargo United States $ 120,804 $ 114,809 Foreign 3,227 737 Total Overnight Air Cargo 124,031 115,546 Commercial Aircraft, Engines and Parts United States 79,138 95,175 Foreign 39,077 30,325 Total Commercial Aircraft, Engines and Parts 118,215 125,500 Ground Support Equipment United States 36,175 32,677 Foreign 2,765 4,491 Total Ground Support Equipment 38,940 37,168 Digital Solutions United States 1,781 1,331 Foreign 5,487 4,452 Total Digital Solutions 7,268 5,783 Corporate and Other United States 3,324 2,634 Foreign 72 203 Total Corporate and Other 3,396 2,837 Total revenue $ 291,850 $ 286,834 19. SEGMENT INFORMATION Air T's robust portfolio of businesses are managed on a highly decentralized basis. These businesses are aggregated into operating segments in a manner that reflects how Air T views the business activities. The Company's chief operating decision maker ("CODM") is the Chief Executive Officer. The Chief Executive Officer is ultimately responsible for significant capital allocation decisions and evaluating operating performance. In assessing performance for the Company's businesses, the chief operating decision maker reviews operating income and Adjusted EBITDA. Certain operating segments are aggregated into reportable segments. Effective as of the fourth quarter of fiscal year 2025, the Company renamed the ground equipment sales segment to ground support equipment and renamed the commercial jet engines and parts segment to commercial aircraft, engines and parts to better align the descriptions of the segments with their activities. Additionally, the Company has elected to separately disclose the digital solutions segment, as of the fourth quarter of fiscal year 2025, to align presentation in the financial statements 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 Air T's four reportable segments are as follows: 84 Reportable Segment Principal Business Activities Overnight Air Cargo Overnight air cargo primarily operates under its relationship with FedEx spanning over 40 years and represent two of eight companies in the U.S. that have North American feeder airlines under contract with FedEx. MAC and CSA operate and maintain Cessna Caravan, Sky Courier, ATR-42 and ATR-72 aircraft that fly daily small-package cargo routes throughout the eastern United States and upper Midwest, and in the Caribbean. Commercial Aircraft, Engines and Parts (formerly known as Commercial Jet Engines and Parts) The Commercial aircraft, engines and parts segment manages and leases aviation assets; supplies surplus and aftermarket commercial jet engine components; provides commercial aircraft disassembly/part-out services; commercial aircraft parts sales; procurement services and overhaul and repair services to airlines Ground Support Equipment (formerly known as Ground Support Sales) Ground support equipment manufactures and provides mobile deicers and other specialized equipment products to passenger and cargo airlines, airports, the military and industrial customers. Digital Solutions Digital solutions develops and provides digital aviation and other business services to customers within the aviation industry to generate recurring subscription revenues. Digital solutions has historically been reported as part of the central corporate function referred to as Corporate and Other. The information that follows shows data of Air T's reportable segments reconciled to amounts reflected in our Consolidated Financial Statements. Intersegment eliminations are included to reconcile segment totals to consolidated amounts. The cost and expense information presented below is based on the information regularly provided to the CODM. Further, asset information is not included in the information regularly provided to the CODM as they are not a key determining factor in the performance of the Company's reportable segments. The Company also has a "Corporate and Other" category which includes unallocated Air T holding company costs that are not directly attributable to the ongoing operating activities of our reportable segments in addition to revenues and expenses for non-reportable operating segments. Segment data is summarized in the following tables (in thousands): 85 Year ended March 31, 2025 Overnight Air Cargo Commercial Aircraft, Engines and Parts Ground Support Equipment Digital Solutions Total Revenue from external customers $ 124,031 $ 118,215 $ 38,940 $ 7,268 $ 288,454 Intersegment revenue 880 1,197 — — 2,077 124,911 119,412 38,940 7,268 290,531 Reconciliation of revenue Other revenue 1 3,570 Elimination of intersegment revenue 2 ( 2,251 ) Total consolidated revenue $ 291,850 Cost of sales: Cost of sales from external sources $ 104,760 $ 84,896 $ 33,994 $ 2,462 Intersegment cost of sales 911 1,323 — — 105,671 86,219 33,994 2,462 Less: 3 General and administrative $ 12,531 $ 24,113 $ 5,888 $ 5,078 Other segment items 4 489 2,583 268 792 Segment profit (loss) 6,220 6,497 ( 1,210 ) ( 1,064 ) $ 10,443 Reconciliation of profit (loss) Other revenue 1 3,570 Other cost of sales 1 ( 1,191 ) Other expenses 1 ( 3,930 ) Interest expense ( 8,387 ) Income from equity method investments 1,700 Other non-operating expense ( 209 ) Other corporate expenses 5 ( 7,878 ) Elimination of intersegment profits 894 Loss before income taxes $ ( 4,988 ) 1 Revenue, cost of sales, and expenses from segments below the quantitative thresholds or that do not constitute a business segment are attributable to an investment advisory business, a laser printer manufacturer, and a commercial property owned by the Company. 2 Elimination of intersegment revenue includes eliminations related to Other revenue in the tables above totaling $ 174 thousand for the fiscal year ended March 31, 2025. After eliminations, Other revenue from third parties is $ 3,396 thousand for the fiscal year ended March 31, 2025. 3 The significant expense categories and amounts align with the segment-level information that is regularly provided to the chief operating decision maker. Intersegment expenses are included within the amounts shown. 4 Other segment items consist of depreciation and amortization and remeasurement of the earnout liability. 5 Other corporate expenses consist of unallocated expenses that are related to the activities of Corporate and other in support of the overall business. Unallocated expenses include, but are not limited to: shared services that are not allocated, costs associated with the corporate headquarters and, expenses related to identifying and pursuing new corporate business initiatives. 86 Year ended March 31, 2024 Overnight Air Cargo Commercial Aircraft, Engines and Parts Ground Support Equipment Digital Solutions Total Revenue from external customers $ 115,546 $ 125,535 $ 37,168 $ 5,783 $ 284,032 Intersegment revenue 126 2,150 — — 2,276 115,672 127,685 37,168 5,783 286,308 Reconciliation of revenue Other revenue 1 3,957 Elimination of intersegment revenue 2 ( 3,431 ) Total consolidated revenue $ 286,834 Cost of sales: Cost of sales from external sources $ 97,690 $ 99,222 $ 31,834 $ 1,710 Intersegment cost of sales 137 2,025 — 1 97,827 101,247 31,834 1,711 Less: 3 General and administrative $ 10,734 $ 21,792 $ 6,743 $ 3,929 Other segment items 4 366 756 144 804 Segment profit (loss) 6,745 3,890 ( 1,553 ) ( 661 ) $ 8,421 Reconciliation of profit (loss) Other revenue 1 3,957 Other cost of sales 1 ( 1,202 ) Other expenses 1 ( 4,214 ) Interest expense ( 6,916 ) Income from equity method investments 1,689 Other non-operating expense 8 Other corporate expenses 5 ( 6,162 ) Elimination of intersegment profits 464 Loss before income taxes $ ( 3,955 ) 1 Revenue, cost of sales, and expenses from segments below the quantitative thresholds or that do not constitute a business segment are attributable to an investment advisory business, a laser printer manufacturer, and a commercial property owned by the Company. 2 Elimination of intersegment revenue includes eliminations related to Other revenue in the tables above totaling $ 1,155 thousand for the fiscal year ended March 31, 2024. After eliminations, Other revenue from third parties is $ 2,802 thousand for the fiscal year ended March 31, 2024. 3 The significant expense categories and amounts align with the segment-level information that is regularly provided to the chief operating decision maker. Intersegment expenses are included within the amounts shown. 4 Other segment items consist of depreciation and amortization and remeasurement of the earnout liability. 5 Other corporate expenses consist of unallocated expenses that are related to the activities of Corporate and other in support of the overall business. Unallocated expenses include, but are not limited to: shared services that are not allocated, costs associated with the corporate headquarters and, expenses related to identifying and pursuing new corporate business initiatives. 87 Year ended March 31, 2025 Overnight Air Cargo Commercial Aircraft, Engines and Parts Ground Support Equipment Digital Solutions Total Reportable Segments Corporate and other Total Consolidated Depreciation and amortization $ 489 $ 2,148 $ 268 $ 792 $ 3,697 $ 659 $ 4,356 Capital Expenditures 418 14,911 217 36 15,582 97 15,679 Year ended March 31, 2024 Overnight Air Cargo Commercial Aircraft, Engines and Parts Ground Support Equipment Digital Solutions Total Reportable Segments Corporate and other Total Consolidated Depreciation and amortization $ 366 $ 756 $ 144 $ 804 $ 2,070 $ 728 $ 2,798 Capital Expenditures 535 131 238 — 904 172 1,076 20. EARNINGS PER COMMON SHARE Basic earnings per share has been calculated by dividing net income (loss) attributable to Air T, Inc. stockholders by the weighted average number of common shares outstanding during each period. For purposes of calculating diluted earnings 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. The computation of earnings per common share is as follows (in thousands, except per share data): Year Ended March 31, 2025 2024 Net Loss $ ( 5,411 ) $ ( 4,684 ) Net income attributable to non-controlling interests ( 729 ) ( 2,135 ) Net loss attributable to Air T, Inc. Stockholders $ ( 6,140 ) ( 6,819 ) Loss per share: Basic $ ( 2.23 ) $ ( 2.42 ) Diluted $ ( 2.23 ) $ ( 2.42 ) Antidilutive shares excluded from computation of loss per share — — Weighted Average Shares Outstanding: Basic 2,750 2,816 Diluted 2,750 2,816 21. COMMITMENTS AND CONTINGENCIES Put/Call Options and Earnout Contrail entered into an Operating Agreement (the “Contrail Operating Agreement”) in connection with the acquisition of Contrail providing for the governance of and the terms of membership interests in Contrail and including put and call options with the Seller to require Contrail to purchase all of the Seller’s equity membership interests in Contrail, such options commencing on the fifth anniversary of the acquisition, which occurred on July 18, 2021. On May 30, 2024, Contrail entered into a Membership Interest Redemption and Earnout Agreement (the "Redemption Agreement") with the Seller. Pursuant to the Redemption Agreement, Contrail agreed to purchase and redeem from the Seller, 16 % of its 21 % interest in Contrail, with the earnout period being retroactive to April 1, 2024. The purchase price for the redeemed interest is $ 4.6 million in the form of a secured, subordinated promissory note, plus an earnout amount valued at $ 1.1 million. Under the Redempti 88 on Agreement, the Seller is entitled to an annual earnout payment equal to 9.14 % of Contrail's adjusted EBITDA over $ 7.0 million in each fiscal year beginning on March 31, 2025 and continuing through March 31, 2029. 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. As of March 31, 2025 the earnout pursuant to the Redemption Agreement is a Level 3 fair value measurement that is valued at $ 1.5 million. As of March 31, 2025 $ 0.4 million and $ 1.1 million are classified as short-term and long-term liabilities, respectively. For the fiscal year ended March 31, 2025, a loss has been recorded due to an increase in fair value of $ 0.4 million as presented in operating expenses on 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. Pursuant to the new Put and Call Agreement, commencing April 1, 2026 and at any time thereafter, either Contrail or the Seller has the option to elect by written notice to purchase or sell all of the remaining 5 % interest in Contrail held by the Seller. The purchase price for the 5 % interest is equal to 5 % of the Contrail Equity Value, which is defined as an amount equal to nine times the average Adjusted EBITDA of Contrail's most recent three completed fiscal years at the time an option notice is delivered. The purchase price for the 5 % interest is to be paid in equal quarterly installments over a three-year period, together with interest at the then current ten-year Treasury bond yield plus 2.5 % adjusted annually. The Company has presented this redeemable non-controlling interest in Contrail ("Contrail RNCI") between the liabilities and equity sections of the accompanying condensed consolidated balance sheets where the changes in its estimated redemption value are recorded on our consolidated statements of operations within non-controlling interests. In February 2022, in connection with the Company's acquisition of GdW, a consolidated subsidiary of Shanwick, the Company entered into a shareholder agreement with the 30.0 % non-controlling interest owners of Shanwick, providing for the governance of and the terms of membership interests in Shanwick. The shareholder agreement includes the Shanwick Put/Call Option with regard to the 30.0 % non-controlling interest. 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 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"). The Company has presented the Shanwick RNCI between the liabilities and equity sections of the accompanying condensed consolidated balance sheets. In addition, the Company has elected to recognize changes in the redemption value immediately as they occur and adjust the carrying amount of the instrument to equal the estimated redemption value at the end of each reporting period. As the Shanwick RNCI will be redeemed at established multiples of EBIT, it is considered redeemable at other than fair value. Changes in its estimated redemption value are recorded on our consolidated statements of operations within non-controlling interests. The Shanwick RNCI and Contrail RNCI are measured at the higher of their carrying value or redemption value. As of March 31, 2025, the balances were comprised of the following (in thousands): Shanwick RNCI Contrail RNCI Total Beginning Balance as of April 1, 2024 $ 5,540 $ 7,436 $ 12,976 Contribution from non-controlling members — — — Distribution to non-controlling members ( 323 ) ( 180 ) ( 503 ) Net income attributable to non-controlling interests 229 521 750 Other comprehensive income attributable to the RNCI ( 234 ) — ( 234 ) Redemption value adjustments ( 36 ) — ( 36 ) Redemption of non-controlling interests — ( 5,899 ) ( 5,899 ) Ending Balance as of March 31, 2025 $ 5,176 $ 1,878 $ 7,054 89 Crestone Asset Management, LLC and CJVII, LLC For CAM's Investment Function, as described in Note 9 , CAM's initial commitment to CJVII was approximately $ 51.0 million. The Company and MRC have commitments to CAM in the respective amounts of $ 7.0 million and $ 44.0 million. These represent the investor interests of CAM, separate and distinct from the common interests. Any investment returns on CAM’s investor interests are shared pro-rata between the Company and MRC for each individual investment at the CJVII Series. Per its Operating Agreement, CAM is comprised of only two Series: the Onshore and the Offshore Series. 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 March 31, 2025, for its Investment Function, the Company has contributed $ 17.6 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. In connection with the formation of CAM, MRC had a fixed price put option of $ 1.0 million to sell its common equity in CAM to the Company at each of the first three ( 3 ) anniversary date. The fixed price put option expired on May 5, 2024. At the later of (a) five ( 5 ) years after execution of the agreement and (b) distributions to MRC per the waterfall equal to their capital contributions, Air T has a call option and MRC has a put option on the MRC common interests in CAM ("secondary put and call option"). If either party exercises the option, the exercise price will be fair market value if Air T pays in cash at closing or 112.5 % of fair market value if Air T opts to pay in three ( 3 ) equal annual installments after exercise. With respect to the secondary put and call option, as it is priced at fair value, the Company determined that there is no potential loss or gain upon exercise that would need to be recognized. 22. GUARANTEES Nonfinancial Guarantees From time to time, we may issue guarantees or indemnifications to third parties assuring performance of lease agreements pertaining to aircraft assets owned by certain CJVII Series ("nonfinancial guarantees"). Air T's performance under these guarantees would be triggered by failure of the series to perform in accordance with the terms stated in the lease agreements. Nonfinancial guarantees and indemnifications are recorded at fair value at their inception. 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 may vary over time given changing circumstances related to the underlying asset. The maximum potential payments for nonfinancial guarantees were $ 4.4 million and $ 10.1 million at March 31, 2025 and March 31, 2024, respectively. There were no recorded liabilities related to nonfinancial guarantees at March 31, 2025 and March 31, 2024. 23. SHARES REPURCHASE 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 years ended March 31, 2025 and 2024, the Company repurchased 70,756 shares at an aggregate cost of $ 1.4 million, and 48,729 shares at an aggregate cost of $ 0.9 million, respectively, in which all were recorded as treasury shares. The Company has a total of 327,606 and 256,850 treasury shares as of March 31, 2025 and 2024, respectively. 24. SUBSEQUENT EVENTS Royal Acquisition and Amendment No. 4 to Credit Agreement and Term Loan C with Alerus On May 15, 2025, MAC purchased and acquired all the outstanding membership interests of Royal Aircraft Services, LLC ("Royal") for total estimated consideration of approximately $ 1.1 million, subject to customary adjustments. Royal provides aircraft painting, maintenance, repair, and overhaul services, together with parts sources and sales. The Royal operations will be included within the MAC division operations following the acquisition. As of the date of this filing, the initial accounting for the business combination is incomplete due to the timing of the transaction and the ongoing evaluation of the fair values of the assets acquired and liabilities assumed. 90 In connection with the acquisition, the Alerus Loan Parties under the Revolving Credit Agreement with Alerus and Royal and Air T entered into Amendment No. 4 to Credit Agreement and Consent 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 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 commence 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. AAM 24-1 Third NPA with the Institutional Investors On May 30, 2025, the Company, along with AAM 24-1 (the "Issuer"), entered into new transaction documents with the Institutional Investors that replaced the Second NPA transaction documents. Pursuant to the Third NPA with the Institutional Investors, the Issuer agreed to issue and sell a Multiple Advance Senior Secured Note in an aggregate principal amount of up to $ 100.0 million (the “Multiple Advance Note”). For purposes of clarity and the avoidance of doubt, as of the closing date, the Institutional Investors advanced an additional $ 10.0 million to the Issuer and have collectively advanced under the Multiple Advance Note to the Issuer the aggregate amount of $ 40.0 million. Provided no default or event of default of the Issuer exists, and subject to satisfaction of all requirements for any closing as set forth in the Third Note Purchase Agreement, the Investors are obligated to advance to the Issuer an additional aggregate $ 60.0 million in $ 10.0 million increments, each on or within fifteen days of the following dates: September 30, 2025 $ 10,000,000 January 30, 2026 $ 10,000,000 May 30, 2026 $ 10,000,000 September 30, 2026 $ 10,000,000 January 30, 2027 $ 10,000,000 May 30, 2027 $ 10,000,000 The Multiple Advance Note 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, pursuant to the terms of the Multiple Advance Note. The maturity date of the Multiple Advance Note is May 31, 2035. The Multiple Advance Note contains standard and customary events of default including, but not limited to, failure to make payments when due under the Multiple Advance Note, failure to comply with certain covenants contained in the Multiple Advance Note, or bankruptcy or insolvency of, or certain monetary judgments against the Issuer or the Company. The prior notes were cancelled and replaced by the Multiple Advance Note. Funds advanced under the Multiple Advance Note may be reinvested for a period of six years from the date of closing. The Issuer may prepay all or a portion of the outstanding principal and accrued but unpaid interest at any time, provided that (i) if the Issuer prepays all or any portion of the Multiple Advance Note within one year from the Issue Date, the Issuer is required to pay the Investors a prepayment premium equal to two percent ( 2.0 %) of the amount being prepaid, and (ii) if the Issuer prepays all or any portion of the Multiple Advance Note after the first anniversary of the Issue Date but on or prior to the second anniversary of the Issue Date, the Issuer is required to pay the Investors a prepayment premium equal to one percent ( 1.0 %) of the amount being prepaid. If the Issuer elects to prepay a portion of the outstanding principal and accrued but unpaid interest, then in no event can such prepayment be for an amount less than $ 1.0 million. The various equity interests that were assigned by the Company to the Issuer on or about the closing date of the Original Financings continue to serve as collateral for the repayment of the Multiple Advance Note: all of the issued and outstanding capital stock of the Issuer owned by the Company, and the 320,000 Trust Preferred Securities, held by the Issuer. CASP Sale of Airbus Models On June 19, 2025, CASP, entered into two separate sale and purchase agreements, each agreement to sell an Airbus Model aircraft. The aggregate transaction value, assuming both transactions are completed, would exceed $ 25,000,000 . Although closing of the transactions is currently anticipated to occur during the week of July 7, 2025, the agreements are subject to numerous closing conditions and other terms and conditions customary for such transactions and there is no assurance that such transactions will close on the dates anticipated or at all. 91 Item 9. Changes in and Disagreements with Accountants on Accounting and Financial Disclosure. None