AIR T INC 10-Q

Item 1. Financial Statements AIR T, INC. AND SUBSIDIARIES CONDENSED CONSOLIDATED STATEMENTS OF INCOME (LOSS) (UNAUDITED) (In thousands, except per share data) Three Months Ended June 30, 2025 2024 Operating Revenues: Overnight air cargo $ 30,589 $ 30,383 Ground support equipment 15,070 7,354 Commercial aircraft, engines and parts 21,960 26,250 Digital solutions 2,096 1,678 Corporate and other 1,155 746 70,870 66,411 Operating Expenses: Overnight air cargo 25,899 25,709 Ground support equipment 12,303 6,533 Commercial aircraft, engines and parts 14,656 18,533 Digital solutions 836 556 Corporate and other 415 285 General and administrative 15,031 14,612 Depreciation and amortization 1,284 760 70,424 66,988 Operating Income (Loss) 446 ( 577 ) Non-operating (Expense) Income: Interest expense ( 2,314 ) ( 1,946 ) (Loss) Income from equity method investments ( 19 ) 1,923 Earnout remeasurement income 402 20 Other 678 683 ( 1,253 ) 680 (Loss) Income before income taxes ( 807 ) 103 Income Tax (Benefit) Expense ( 136 ) 71 Net (Loss) Income ( 671 ) 32 Net Income Attributable to Non-controlling Interests ( 965 ) ( 367 ) Net Loss Attributable to Air T, Inc. Stockholders $ ( 1,636 ) $ ( 335 ) Loss per share (Note 6) Basic $ ( 0.61 ) $ ( 0.12 ) Diluted $ ( 0.61 ) $ ( 0.12 ) 4 Weighted Average Shares Outstanding: Basic $ 2,703 $ 2,761 Diluted $ 2,703 $ 2,761 See notes to condensed consolidated financial statements. 5 AIR T, INC. AND SUBSIDIARIES CONDENSED CONSOLIDATED STATEMENTS OF COMPREHENSIVE INCOME (LOSS) (UNAUDITED) Three Months Ended June 30, (In Thousands) 2025 2024 Net (Loss) Income $ ( 671 ) $ 32 Foreign currency translation gain (loss) 413 ( 50 ) Reclassification of interest rate swaps into earnings 12 ( 203 ) Redemption of non-controlling interest — 146 Other ( 243 ) 1 Total Other Comprehensive Gain (Loss) 182 ( 106 ) Total Comprehensive Loss ( 489 ) ( 74 ) Comprehensive Income Attributable to Non-controlling Interests ( 965 ) ( 367 ) Comprehensive Loss Attributable to Air T, Inc. Stockholders $ ( 1,454 ) $ ( 441 ) See notes to condensed consolidated financial statements. 6 AIR T, INC. AND SUBSIDIARIES CONDENSED CONSOLIDATED BALANCE SHEETS (UNAUDITED) (In thousands, except share amounts) June 30, 2025 March 31, 2025 ASSETS Current Assets: Cash and cash equivalents $ 14,460 $ 5,932 Marketable securities 485 422 Restricted cash 513 575 Restricted investments 758 683 Accounts receivable, net of allowance for doubtful accounts of $ 1,422 and $ 1,338 24,633 23,917 Income tax receivable 1,016 681 Inventories, net 39,886 38,516 Prepaid expenses 3,811 3,103 Other current assets 7,371 4,678 Total Current Assets 92,933 78,507 Notes Receivable - Lendway, Inc. ("Lendway") 3,350 3,350 Notes Receivable - CAM 2,500 2,500 Assets on lease or held for lease, net of accumulated depreciation of $ 2,039 and $ 1,451 14,073 14,662 Property and equipment, net of accumulated depreciation of $ 9,635 and $ 9,240 20,116 20,285 Intangible assets, net of accumulated amortization of $ 6,841 and $ 6,330 10,438 10,020 Right-of-use ("ROU") assets 12,898 13,274 Equity method investments 19,900 19,003 Other assets 1,926 1,635 Goodwill 11,903 10,542 Total Assets 190,037 173,778 LIABILITIES AND STOCKHOLDERS' DEFICIT Current Liabilities: Accounts payable 17,932 17,782 Accrued expenses and other (Note 4) 20,623 16,691 Current portion of long-term debt 6,080 9,099 Current portion of long-term debt - related party (Note 13) 1,431 1,282 Current portion of earnout liability 430 430 Short-term lease liability 2,555 2,377 Total Current Liabilities 49,051 47,661 Long-term debt 117,762 101,226 Long-term debt - related party (Note 13) 2,798 3,288 Deferred income tax liabilities, net 2,249 2,249 Long-term lease liability 11,293 11,843 Long-term earnout liability 706 1,109 Other non-current liabilities 886 866 Total Liabilities 184,745 168,242 Redeemable non-controlling interests 8,210 7,054 7 Commitments and contingencies (Note 17) Deficit: Air T, Inc. Stockholders' Deficit: 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 2,702,639 shares outstanding 758 758 Treasury stock, 327,606 shares at $ 19.55 and 327,606 shares at $ 19.55 ( 6,404 ) ( 6,404 ) Additional paid-in capital 987 947 Retained earnings 494 2,130 Accumulated other comprehensive loss ( 465 ) ( 647 ) Total Air T, Inc. Stockholders' Deficit ( 4,630 ) ( 3,216 ) Non-controlling Interests 1,712 1,698 Total Deficit ( 2,918 ) ( 1,518 ) Total Liabilities and Deficit $ 190,037 $ 173,778 See notes to condensed consolidated financial statements. 8 AIR T, INC. AND SUBSIDIARIES CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS (UNAUDITED) 9 (In Thousands) Three Months Ended June 30, 2025 2024 CASH FLOWS FROM OPERATING ACTIVITIES: Net (Loss) Income $ ( 671 ) $ 32 Adjustments to reconcile Net (Loss) Income to net cash (used in) provided by operating activities: Depreciation and amortization 1,284 760 Loss (Income) from equity method investments 19 ( 1,923 ) Other 440 642 Change in operating assets and liabilities: Accounts receivable ( 653 ) 50 Inventories ( 1,356 ) 2,474 Accounts payable 133 ( 1,069 ) Accrued expenses 3,817 ( 1,030 ) Other current assets ( 2,821 ) 504 Other ( 1,287 ) ( 327 ) Net cash (used in) provided by operating activities ( 1,095 ) 113 CASH FLOWS FROM INVESTING ACTIVITIES: Investment in unconsolidated entities ( 2,037 ) — Distribution from unconsolidated entities 848 2,324 Capital expenditures related to property & equipment ( 231 ) ( 339 ) Acquisition of businesses, net cash acquired ( 1,180 ) — Other ( 124 ) 23 Net cash (used in) provided by investing activities ( 2,724 ) 2,008 CASH FLOWS FROM FINANCING ACTIVITIES: Proceeds from lines of credit 35,966 30,620 Payments on lines of credit ( 32,201 ) ( 29,092 ) Proceeds from term loan 10,850 — Payments on term loan ( 1,752 ) ( 2,519 ) Other ( 286 ) ( 300 ) Net cash provided by (used in) financing activities 12,577 ( 1,291 ) Effect of foreign currency exchange rates on cash and cash equivalents ( 292 ) 32 NET INCREASE IN CASH AND CASH EQUIVALENTS AND RESTRICTED CASH 8,466 862 CASH AND CASH EQUIVALENTS AND RESTRICTED CASH AT BEGINNING OF PERIOD 6,757 7,843 CASH AND CASH EQUIVALENTS AND RESTRICTED CASH AT END OF PERIOD 15,223 8,705 CASH AND CASH EQUIVALENTS AND RESTRICTED CASH AT BEGINNING OF PERIOD: 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 beginning of period 6,757 CASH AND CASH EQUIVALENTS AND RESTRICTED CASH AT END OF PERIOD: Cash and cash equivalents 14,460 Restricted cash, current 513 Restricted cash, long-term(a) 250 Total cash and cash equivalents and restricted cash at end of period 15,223 10 (a) Included in other assets on the consolidated balance sheets. See notes to condensed consolidated financial statements. 11 AIR T, INC AND SUBSIDIARIES CONDENSED CONSOLIDATED STATEMENTS OF EQUITY (UNAUDITED) (In Thousands) Common Stock Treasury Stock Additional Paid-In Capital Retained Earnings Accumulated Other Comprehensive Income (Loss) Non-controlling Interests Total Equity Shares Amount Shares Amount Balance, March 31, 2024 3,030 $ 758 257 $ ( 4,959 ) $ 859 $ 8,192 $ ( 80 ) $ 1,050 $ 5,820 Net loss 1 — — — — — ( 335 ) — ( 5 ) ( 340 ) Repurchase of common stock — — 13 ( 301 ) — — — — ( 301 ) Stock option forfeiture (Note 17) — — — — ( 25 ) — — — ( 25 ) Stock compensation expense — — — — 42 — — — 42 Foreign currency translation loss 2 — — — — — — ( 50 ) — ( 50 ) Redemption of non-controlling interest — — — — — 78 146 — 224 Unrealized gain on interest rate swaps, net of tax — — — — — — 1 — 1 Reclassification of interest rate swaps into earnings — — — — — — ( 203 ) — ( 203 ) Balance, June 30, 2024 3,030 $ 758 270 $ ( 5,260 ) $ 876 $ 7,935 $ ( 186 ) $ 1,045 $ 5,168 12 (In Thousands) Common Stock Treasury Stock Additional Paid-In Capital Retained Earnings Accumulated Other Comprehensive Income (Loss) Non-controlling Interests Total Equity Shares Amount Shares Amount Balance, March 31, 2025 3,030 $ 758 328 $ ( 6,404 ) $ 947 $ 2,130 $ ( 647 ) $ 1,698 $ ( 1,518 ) Net income (loss) — — — — — ( 1,636 ) — 52 ( 1,584 ) Distributions to non-controlling interests — — — — — — — ( 38 ) ( 38 ) Stock compensation expense — — — — 40 — — — 40 Foreign currency translation gain 2 — — — — — — 413 — 413 Reclassification of interest rate swaps into earnings — — — — — — 12 — 12 Allocation of comprehensive income from unconsolidated investments — — — — — — 5 — 5 Allocation of comprehensive income to redeemable non-controlling interests — — — — — — ( 248 ) — ( 248 ) Balance, June 30, 2025 3,030 $ 758 328 $ ( 6,404 ) $ 987 $ 494 $ ( 465 ) $ 1,712 $ ( 2,918 ) (1) Excludes amount attributable to redeemable non-controlling interests in Contrail Aviation Support, LLC ("Contrail") and Shanwick B.V. ("Shanwick") See notes to condensed consolidated financial statements. (2) Cumulative translation adjustments were at a loss of $ 0.8 million as of March 31, 2024 and June 30, 2024, respectively, and a loss of $ 0.4 million and a gain of $ 54.0 thousand as of March 31, 2025 and June 30, 2025, respectively. 13 AIR T, INC. AND SUBSIDIARIES NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (UNAUDITED) 1. Financial Statement Presentation The condensed consolidated financial statements of Air T, Inc. (“Air T”, the “Company”, “we”, “us” or “our”) have been prepared, without audit, pursuant to the rules and regulations of the Securities and Exchange Commission. Certain information and disclosures normally included in financial statements prepared in accordance with accounting principles generally accepted in the United States of America have been condensed or omitted pursuant to such rules and regulations, although the Company believes that the following disclosures are adequate to make the information presented not misleading. In the opinion of management, all adjustments (consisting only of normal recurring adjustments) considered necessary for a fair presentation of the results for the periods presented have been made. These condensed consolidated financial statements should be read in conjunction with the consolidated financial statements and notes thereto included in the Company's Annual Report on Form 10-K for the year ended March 31, 2025. The unaudited results of operations for the period ended June 30, 2025 are not necessarily indicative of the operating results for the full year. The accompanying financial statements have been prepared in accordance with generally accepted accounting principles applicable to a going concern, which contemplates the realization of assets and the satisfaction of liabilities in the normal course of business. 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. 14 2. Acquisitions On May 15, 2025, Mountain Air Cargo, Inc. (“MAC”), a wholly-owned subsidiary of Air T, Inc., completed the acquisition of Royal Aircraft Services, LLC, a privately-held aircraft maintenance and repair company based in Hagerstown, Maryland for a purchase price of $ 1.2 million, net of cash acquired. The assets and liabilities of Royal were recorded at their estimated fair values at the date of acquisition and were not material, individually or in the aggregate, to the unaudited Condensed Consolidated Financial Statement. The acquired business is included in Overnight Air Cargo segment. 15 3. 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. The following is a description of the Company’s performance obligations as of June 30, 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. 16 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 years to five years . Software access is usually billed monthly and support services are billed upon completion. Leasing Revenue Leasing revenue is recognized in accordance with ASC Topic 842. Refer to Note 11 for further details regarding the Company's leasing revenue. The following table summarizes disaggregated revenues by type (in thousands): Three Months Ended June 30, 2025 2024 Product Sales Overnight air cargo $ 12,476 $ 9,699 Ground support equipment 14,337 7,128 Commercial aircraft, engines and parts 17,760 23,619 Corporate and other 167 119 Support Services Overnight air cargo 17,992 20,658 Ground support equipment 419 166 Commercial aircraft, engines and parts 2,242 2,199 Corporate and other 16 14 Leasing Revenue Ground support equipment — 15 Commercial aircraft, engines and parts 1,755 39 Corporate and other 455 464 Software Services Digital Solutions 2,096 1,678 Other Overnight air cargo 121 26 Ground support equipment 314 45 Commercial aircraft, engines and parts 203 393 Corporate and other 517 149 Total $ 70,870 $ 66,411 See Note 1 5 for the Company's disaggregated revenues by geographic region and Note 1 6 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. 17 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, 2025 and June 30, 2025 and the amount of contract liabilities that were recognized as revenue during the three-month period ended June 30, 2025 (in thousands): Outstanding contract liabilities Outstanding contract liabilities as of April 1, 2025 Recognized as Revenue As of June 30, 2025 $ 7,781 As of April 1, 2025 $ 4,199 For the three months ended June 30, 2025 $ ( 1,577 ) 18 4. Accrued Expenses and Other (In thousands) June 30, 2025 March 31, 2025 Salaries, wages and related items $ 6,477 $ 6,235 Profit sharing and bonus 827 2,980 Other Deposits 2,965 513 Deferred Income 4,816 3,686 Accrued insurance payable 2,949 1,336 Other 2,589 1,941 Total $ 20,623 $ 16,691 5. Income Taxes During the three-month period ended June 30, 2025, the Company recorded $ 0.1 million in income tax benefit at an effective rate ("ETR") of 16.9 %. The Company has computed the provision for income taxes based on the estimated annual effective tax rate excluding loss jurisdictions with no tax benefit and the application of discrete items, if any, for interim reporting. The primary factors contributing to the difference between the federal statutory rate of 21.0% and the Company's effective tax rate for the three-month period ended June 30, 2025 were the valuation allowance related to the Company’s U.S. consolidated group, Delphax Technologies, Inc. (“DTI”), and Delphax Solutions, Inc. ("DSI"), the foreign rate differentials for Air T’s operations located in the Netherlands and Puerto Rico, and the benefit from the Foreign-Derived Intangible Income ("FDII") deduction. On July 4, 2025, the One Big Beautiful Bill Act was signed into law in the U.S., which includes a broad range of tax reform provisions affecting businesses. The Company is evaluating the full effects of the legislation on its estimated annual effective tax rate and cash tax position, but does not expect the legislation to have a material impact on its financial statements. Because the law was enacted after the end of the first fiscal quarter, its effects are not reflected in the operating results for the three months ended June 30, 2025. During the three-month period ended June 30, 2024, the Company recorded income tax expense of $ 71.0 thousand at an ETR of 68.9 %. The Company has computed the provision for income taxes based on the estimated annual effective tax rate excluding loss jurisdictions with no tax benefit and the application of discrete items, if any, for interim reporting. The primary factors contributing to the difference between the federal statutory rate of 21.0% and the Company's effective tax rate for the three-month period ended June 30, 2024 were the valuation allowance related to the Company's U.S. consolidated group, DTI, Landing Gear Support Services PTE LTD ("LGSS"), DSI, and BCCM Advisors (Kenya) Limited (“BCCM Kenya”), and the foreign rate differentials for Air T’s operations located in the Netherlands and Puerto Rico. 6. Net Loss Per Share Basic loss per share has been calculated by dividing net loss attributable to Air T, Inc. stockholders by the weighted average number of common shares outstanding during each period. For purposes of calculating diluted loss per share, shares issuable under stock options were considered potential common shares and were included in the weighted average common shares unless they were anti-dilutive. As of June 30, 2025, of the 199,000 options outstanding under the Air T's 2020 Omnibus Stock and Incentive Plan, none were exercisable. The computation of basic and diluted loss per common share is as follows (in thousands, except for per share figures): 19 Three Months Ended June 30, 2025 2024 Net (loss) income $ ( 671 ) $ 32 Net income attributable to non-controlling interests ( 965 ) ( 367 ) Net loss attributable to Air T, Inc. Stockholders $ ( 1,636 ) $ ( 335 ) Loss per share: Basic $ ( 0.61 ) $ ( 0.12 ) Diluted $ ( 0.61 ) $ ( 0.12 ) Antidilutive shares excluded from computation of loss per share — — Weighted Average Shares Outstanding: Basic 2,703 2,761 Diluted 2,703 2,761 7. Intangible Assets and Goodwill Intangible assets as of June 30, 2025 and March 31, 2025 consisted of the following (in thousands): June 30, 2025 Gross Carrying Amount Accumulated Amortization Net Book Value Purchased software $ 880 $ ( 582 ) $ 298 Internally developed software 3,862 ( 1,261 ) 2,601 In-place lease and other intangibles 1,094 ( 485 ) 609 Customer relationships 8,588 ( 2,283 ) 6,305 Patents 1,139 ( 1,115 ) 24 Other 1,546 ( 1,115 ) 431 17,109 ( 6,841 ) 10,268 In-process software 170 — 170 Intangible assets, total $ 17,279 $ ( 6,841 ) $ 10,438 March 31, 2025 Gross Carrying Amount Accumulated Amortization Net Book Value Purchased software $ 865 $ ( 549 ) $ 316 Internally developed software 3,658 ( 1,111 ) 2,547 In-place lease and other intangibles 1,094 ( 460 ) 634 Customer relationships 8,012 ( 2,007 ) 6,005 Patents 1,139 ( 1,114 ) 25 Other 1,512 ( 1,089 ) 423 16,280 ( 6,330 ) 9,950 In-process software 70 — 70 Intangible assets, total $ 16,350 $ ( 6,330 ) $ 10,020 20 The increase in customer relationships from March 31, 2025 to June 30, 2025 relates to the quarterly changes in foreign currency translation adjustments at Shanwick. Based on the intangible assets recorded at June 30, 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) Year ending March 31, Amortization 2026 (excluding the three months ended June 30, 2025) $ 941 2027 1,199 2028 1,116 2029 1,028 2030 1,023 2031 1,022 Thereafter 3,939 $ 10,268 The carrying amount of goodwill as of June 30, 2025 and March 31, 2025 was $ 11.9 million and $ 10.5 million, respectively. The increase from the prior fiscal year end balance is attributable to the Royal acquisition within the overnight air cargo segment (as described in Note 2 ) of $ 1.0 million and the $ 0.3 million change in foreign currency translation adjustments related to the goodwill balance at Shanwick within the digital solutions segment. There was no impairment of goodwill during the three months ended June 30, 2025. Goodwill for relevant segments and corporate and other, at original cost, consists of the following (in thousands): June 30, 2025 March 31, 2025 Overnight air cargo $ 1,121 $ 76 Commercial aircraft, engines and parts 4,227 4,227 Digital solutions 6,555 6,239 Total reportable segment goodwill, at cost 11,903 10,542 Corporate and other 376 376 Less accumulated impairment ( 376 ) ( 376 ) Goodwill, net of impairment $ 11,903 $ 10,542 8. Investments in Securities and Derivative Instruments As part of the Company’s interest rate risk management strategy, the Company, from time to time, uses derivative instruments to minimize significant unanticipated earnings fluctuations that may arise from rising variable interest rate costs associated with existing borrowings. To meet these objectives, the Company has entered into interest rate swaps designated as cash flow hedging instruments. As of June 30, 2025, all interest rate swaps previously designated as cash flow hedging instruments have been determined to no longer be effective hedges. For de-designated interest-rate swap contracts included in accumulated other comprehensive loss as of June 30, 2025, the Company is amortizing the fair value of the de-designated interest-rate swaps at the time of de-designation into earnings within interest expense on the condensed consolidated statement of income (loss) over the remaining term of originally hedged loans. Estimated net unrealized losses related to the interest rate swaps included in accumulated other comprehensive loss that will be reclassified into earnings within the next twelve months are immaterial. 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). The interest rate swaps are considered Level 2 fair value measurements. As of June 30, 2025 and March 31, 2025, the fair value of the interest-rate swap contracts was immaterial. 21 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 three months ended June 30, 2025 and 2024, gains and losses related to these derivative instruments were immaterial. These gains and losses are included within Corporate and other's operating expenses in the condensed consolidated statement of income (loss). 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 three months ended June 30, 2025 and 2024 were immaterial. These unrealized gains and losses are included within other income (loss) on the condensed consolidated statement of income (loss). As of June 30, 2025 and March 31, 2025, the fair value of these marketable equity securities was an asset of $ 1.2 million and $ 1.1 million, respectively, which is included within marketable securities and restricted investments in the condensed consolidated balance sheets. 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 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 and pivoted 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 June 30, 2025, the Company owned 487,000 Lendway shares, representing approximately 27.5 % of Lendway's outstanding shares. On August 15, 2024, the Company entered into a delayed draw term loan with Lendway for up to $ 2.5 million with an interest rate of 8.0 %. On September 27, 2024 the borrowing limit was increased to $ 3.5 million. 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 the earlier of August 15, 2029 or by written demand of the Company after February 15, 2026. Prior to the maturity, Lendway may prepay any accrued interest or principal outstanding without penalty. As of June 30, 2025, $ 3.4 million of the principal balance remains outstanding and $ 0.2 million of interest has been accrued. Cadillac Casting, Inc. investment The Company's 20.1 % investment in Cadillac Casting, Inc. ("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 June 30, 2025. CCI and Lendway's combined summarized unaudited financial information for the three months ended March 31, 2025 and 2024 is as follows (in thousands): Three Months Ended March 31, 2025 March 31, 2024 Revenue $ 41,670 $ 45,757 Gross Profit 5,363 6,006 Operating income 1,685 1,206 Net income $ 368 $ 1,102 Crestone Asset Management, LLC investment On May 5, 2021, the Company formed an aircraft asset management business called Crestone Asset Management, LLC ("CAM"), formerly known as Contrail Asset Management LLC, and an aircraft capital joint venture called Crestone JV II LLC ("CJVII"), 22 formerly known as Contrail JV II LLC. 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 interest will become due and payable to 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 $ 37.3 million and $ 27.1 million as of June 30, 2025 and 2024, respectively. Additionally, contributions from and distributions to both Air T and MRC for the three months ended June 30, 2025 and 2024 is as follows (in thousands): Three Months Ended June 30, 2025 June 30, 2024 Contributions $ 3,767 $ — Distributions $ 2,515 $ 1,613 Investment balances for the Company's equity method investees as of June 30, 2025 and March 31, 2025 is as follows (in thousands): Investment June 30, 2025 March 31, 2025 Lendway $ 858 $ 729 CCI 3,860 3,889 CAM 13,385 12,428 Other equity method investments 1,797 1,957 Total $ 19,900 $ 19,003 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, during the three months ended June 30, 2025 and 2024 is as follows (in thousands): 23 Three Months Ended Investment June 30, 2025 June 30, 2024 Lendway $ 123 $ ( 290 ) CCI ( 29 ) 674 CAM ( 251 ) 1,495 Other equity method investments 138 44 Total $ ( 19 ) $ 1,923 The Company's equity method investees may, from time to time, make distributions and dividends to the Company in accordance with accumulated earnings at the investee. For the three months ended June 30, 2025 and 2024, the Company received distributions and dividends from equity method investees as follows (in thousands): Three Months Ended Investment June 30, 2025 June 30, 2024 Lendway $ — $ — CCI — — CAM 829 1,626 Other equity method investments 298 933 Total $ 1,127 $ 2,559 10. Inventories Inventories consisted of the following (in thousands): June 30, 2025 March 31, 2025 Inventories: Raw Materials $ 7,275 $ 6,928 Work in process 3,078 2,342 Finished Goods 4,084 5,358 Aircraft parts 30,440 28,794 Total inventories 44,877 43,422 Reserves ( 4,991 ) ( 4,906 ) Total inventories, net of reserves $ 39,886 $ 38,516 11. Lessor Arrangements Equipment Leases The Company leases equipment to third-parties, primarily through Contrail. Leases for aircraft and engines to aviation customers typically have terms ranging from 1 and 4 years under operating lease agreements. On August 26, 2024, Contrail executed the operating agreement for CASP Leasing 1, LLC ("CASP"), a newly-created and 95 % owned subsidiary of Contrail. On August 29, 2024, CASP entered into two purchase agreements to acquire and subsequently lease two Airbus Model A321-111 aircraft. 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 three months ended June 30, 2025 and 2024, the Company recognized depreciation expense relating to equipment leases of $ 0.6 million and $ 0.1 million, respectively. 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 three months ended June 30, 2025, earned contingent rent on equipment leases totaled approximately $ 0.5 million. The Company had no contingent rent earned on equipment leases during the three months ended June 30, 2024. As of June 30, 2025, future minimum rental payments to be received under non-cancelable leases are as follows (in thousands): 24 Year ended March 31, 2026 (excluding the 3 months ended 06/30/2025) $ 2,192 2027 3,361 2028 2,843 Thereafter — Total $ 8,396 Subsequent to the financial statement period end date, as mentioned in Note 19 of Notes to Condensed Consolidated Financial Statements included under Part I, Item 1 of this Report on Form 10-Q, on July 15, 2025, CASP completed the sale of the two Airbus Model A321-111 aircrafts, including associated engines, for over $ 18.0 million. Concurrently, CASP entered into assignment, assumption, and amendment agreements under the existing leases, effectively transferring the lessor’s rights and obligations to the purchaser. The amounts related to the transferred leases included in the future minimum rental payments to be received under non-cancelable leases schedule above are as follows: $ 2.1 million, $ 3.3 million, and $ 2.8 million for the years ended March 31, 2026 (excluding the 3 months ended June 30, 2025), 2027, and 2028, respectively. 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 $ 0.1 million for the three months ended June 30, 2025 and 2024, respectively. During the three months ended June 30, 2025, the Company recognized rental and other revenues related to operating lease payments of $ 0.5 million, of which variable lease payments were $ 0.2 million. During the three months ended June 30, 2024, the Company recognized rental and other revenues related to operating lease payments of $ 0.5 million, of which variable lease payments were $ 0.2 million. 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 June 30, 2025: Year ended March 31, 2026 (excluding the 3 months ended 06/30/2025) $ 765 2027 990 2028 849 2029 774 2030 743 Thereafter 1,824 Total $ 5,945 12. 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. 25 The interest rate implicit in lease contracts is typically not readily determinable, and as such the Company utilizes the incremental borrowing rate to calculate lease liabilities, which is the rate incurred to borrow on a collateralized basis over a similar term an amount equal to the lease payments in a similar economic environment. The components of lease cost for the three months ended June 30, 2025 and 2024 are as follows (in thousands): Three Months Ended June 30, 2025 2024 Operating lease cost $ 841 $ 668 Short-term lease cost 279 294 Variable lease cost 246 226 Total lease cost $ 1,366 $ 1,188 Amounts reported in the consolidated balance sheets for leases where we are the lessee as of June 30, 2025 and March 31, 2025 were as follows (in thousands): June 30, 2025 March 31, 2025 Operating leases Operating lease ROU assets $ 12,898 $ 13,274 Operating lease liabilities $ 13,848 $ 14,220 Weighted-average remaining lease term Operating leases 10 years, 2 months 10 years, 3 months Weighted-average discount rate Operating leases 5.68 % 5.67 % During the three months ended June 30, 2025, the Company had ROU assets that were obtained in exchange for new operating lease liabilities in the amount of $ 0.2 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 June 30, 2025, the remaining lease term on the operating lease was 4 years, 5 months and the useful life of leasehold improvements that exceeded the lease term ranged from 4 years, 7 months to 4 years, 11 months . As of June 30, 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 June 30, 2025 are as follows (in thousands): Operating Leases 2026 (excluding the three months ended June 30, 2025) $ 2,450 2027 3,065 2028 2,358 2029 1,750 2030 977 Thereafter 7,669 Total undiscounted lease payments 18,269 Interest ( 4,421 ) Total lease liabilities $ 13,848 13. Financing Arrangements Borrowings of the Company and its subsidiaries are summarized below at June 30, 2025 and March 31, 2025, respectively. 26 In connection with the acquisition of Royal on May 15, 2025, Air'Zona, CSA, GGS, MAC, WASI, Worthington, Jet Yard, and Jet Yard Solutions ("the Alerus Loan Parties") under the Revolving Credit Agreement with Alerus 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 an Alerus Loan Party 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 5.00 % or the CME one-month term SOFR rate plus 2.25 %. Monthly payments on Term Note C commenced June 15, 2025 and are equal to $ 12.5 thousand plus accrued interest. The term loan is secured by the terms of the Security Agreement dated as of August 29, 2024. On May 30, 2025, the Company, along with AAM 24-1 (the "Issuer"), entered into new transaction documents with two Institutional Investors that replaced the Second Note Purchase Agreement ("Second NPA") transaction documents. Pursuant to the Third Note Purchase Agreement ("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 NPA, 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 $ 10.0 million January 30, 2026 $ 10.0 million May 30, 2026 $ 10.0 million September 30, 2026 $ 10.0 million January 30, 2027 $ 10.0 million May 30, 2027 $ 10.0 million 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 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 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 as do 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. The following table provides certain information about the current financing arrangements of the Company and its subsidiaries (other than related party obligations) as of June 30, 2025: (In Thousands) June 30, 2025 March 31, 2025 Maturity Date Interest Rate Unused commitments as of June 30, 2025 Type of Debt Air T Debt 27 Debt - Trust Preferred Securities 1 $ 35,450 $ 35,342 6/7/2049 8.00 % Recourse Total 35,450 35,342 Alerus Loan Parties Debt Revolver - Alerus 12,924 6,050 8/28/2026 Greater of 5.00 % or 1-month SOFR + 2.00 % $ 1,076 Recourse Overline Note - Alerus — — 10/31/2025 Greater of 5.00 % or 1-month SOFR + 2.00 % 3,000 Recourse Term Note A - Alerus 9,444 9,827 8/15/2029 Greater of 5.00 % or 1-month SOFR + 2.00 % Recourse Term Note C - Alerus 1,038 — 5/15/2030 Greater of 5.00 % or 1-month SOFR + 2.25 % Recourse Total 23,406 15,877 Contrail Debt Revolver - ONB 18 3,127 11/24/2025 1-month SOFR + 3.56 % 24,982 Limited recourse 2 Term Note J - ONB 8,125 8,750 9/12/2028 1-month SOFR + 3.86 % Limited recourse 2 Total 8,143 11,877 Wolfe Lake Debt Term Loan - Bridgewater 8,989 9,059 12/2/2031 3.65 % Non-recourse Total 8,989 9,059 Air T Acquisition 22.1 Term Loan - Bridgewater 3,500 3,500 2/8/2027 4.00 % Non-recourse Term Loan A - ING 1,231 1,298 2/1/2027 3.50 % Non-recourse Term Loan B - ING 1,172 1,082 5/1/2027 4.00 % Non-recourse Total 5,903 5,880 WASI Debt Promissory Note - Seller's Note 280 398 1/1/2026 6.00 % Non-recourse Total 280 398 AAM 24-1 Debt Promissory Notes - Honeywell 40,000 30,000 5/31/2035 8.50 % Non-recourse Total 40,000 30,000 1 Does not include $ 13.0 million held by wholly-owned subsidiaries of the Company. 2 Includes Air T's guarantee of approximately $ 1.6 million. 28 MAC Debt Term Loan - Bank of America, N.A. 2,242 2,271 2/21/2030 1-month SOFR + 0.11 % + 1.75 % Non-recourse Total 2,242 2,271 Total Debt 124,413 110,704 Unamortized Premiums and Debt Issuance Costs ( 571 ) ( 379 ) Total Debt, net $ 123,842 $ 110,325 At June 30, 2025, our contractual financing obligations, including payments due by period, are as follows (in thousands): Due by Amount June 30, 2026 $ 6,080 June 30, 2027 22,212 June 30, 2028 4,599 June 30, 2029 2,736 June 30, 2030 5,869 Thereafter 82,917 124,413 Unamortized Premiums and Debt Issuance Costs ( 571 ) $ 123,842 Interest Expense, net - Net interest expense for the Company and its subsidiaries were as follows for the three months ended June 30, 2025 and 2024: Three Months Ended June 30, 2025 2024 Air T $ 711 $ 971 Jet Yard — 18 Alerus Loan Parties 371 — Contrail 309 358 AirCo 1 — 126 Wolfe Lake 83 60 Air T Acquisition 22.1 89 68 WASI 5 12 AAM 24-1 699 323 MAC 38 — Other 9 10 Total $ 2,314 $ 1,946 Cash paid for interest totaled $ 2.3 million during the three months ended June 30, 2025. 29 14. Shares Repurchased On May 14, 2014, the Company announced that its Board of Directors had authorized a program to repurchase up to 750,000 (retrospectively adjusted to 1,125,000 after the stock split on June 10, 2019) shares of the Company’s common stock from time to time on the open market or in privately negotiated transactions, in compliance with SEC Rule 10b-18, over an indefinite period. No shares were repurchased by the Company during the three months ended June 30, 2025. 15. Geographical Information Total tangible long-lived assets, which include property and equipment as well as assets on lease, net of accumulated depreciation, located in the United States, the Company's country of domicile, and held outside the United States, are summarized in the following table as of June 30, 2025 and March 31, 2025 (in thousands): June 30, 2025 March 31, 2025 United States $ 20,025 $ 20,422 Foreign 14,164 14,525 Total tangible long-lived assets, net $ 34,189 $ 34,947 The net book value of tangible long-lived assets located within each individual foreign country at June 30, 2025 and March 31, 2025 is listed below (in thousands): June 30, 2025 March 31, 2025 Thailand $ 221 $ — Bulgaria 13,853 14,435 Other 90 90 Total tangible long-lived assets, net $ 14,164 $ 14,525 Total revenue, in and outside the United States, is summarized in the following table for the three months ended June 30, 2025 and June 30, 2024 (in thousands): 30 Three Months Ended June 30, 2025 2024 Operating Revenues: Overnight Air Cargo United States $ 29,246 $ 29,543 Foreign 1,343 840 Total Overnight Air Cargo 30,589 30,383 Commercial Aircraft, Engines and Parts United States 13,502 18,460 Foreign 8,458 7,790 Total Commercial Aircraft, Engines and Parts 21,960 26,250 Ground Support Equipment United States 14,693 5,798 Foreign 377 1,556 Total Ground Support Equipment 15,070 7,354 Digital Solutions United States 490 395 Foreign 1,606 1,283 Total Digital Solutions 2,096 1,678 Corporate and Other United States 1,136 728 Foreign 19 18 Total Corporate and Other 1,155 746 Total revenue $ 70,870 $ 66,411 16. Segment Information Air T's 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 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 ("CODM") 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 support equipment 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 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 anticipated 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 The Company's four business segments are as follows: 31 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 it is 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): 32 Three Months Ended June 30, 2025 Overnight Air Cargo Commercial Aircraft, Engines and Parts Ground Support Equipment Digital Solutions Total Revenue from external customers $ 30,589 $ 21,960 $ 15,070 $ 2,096 $ 69,715 Intersegment revenue 862 468 — — 1,330 31,451 22,428 15,070 2,096 71,045 Reconciliation of revenue Other revenue 1 1,199 Elimination of intersegment revenue 2 ( 1,374 ) Total consolidated revenue $ 70,870 Cost of sales: Cost of sales from external sources 25,899 14,656 12,303 836 Intersegment operating expense 862 436 — — 26,761 15,092 12,303 836 Less: 3 General and administrative 3,086 6,123 1,393 1,302 11,904 Other segment items 4 138 757 36 208 1,139 Segment profit (loss) 1,466 456 1,338 ( 250 ) 3,010 Reconciliation of profit (loss) Other revenue 1 1,199 Other cost of sales 1 ( 415 ) Other expenses 1 ( 1,118 ) Interest expense ( 2,314 ) Loss from equity method investments ( 19 ) Other non-operating income 678 Earnout remeasurement 402 Other corporate expenses 5 ( 2,375 ) Elimination of intersegment profits 145 Loss before income taxes $ ( 807 ) 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 $ 44.0 thousand for the three months ended June 30, 2025. After eliminations, Other revenue from third parties is $ 1.2 million for the three months ended June 30, 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. 33 Three Months Ended June 30, 2024 Overnight Air Cargo Commercial Aircraft, Engines and Parts Ground Support Equipment Digital Solutions Total Revenue from external customers $ 30,383 $ 26,250 $ 7,354 $ 1,678 $ 65,665 Intersegment revenue — 364 — — 364 30,383 26,614 7,354 1,678 66,029 Reconciliation of revenue Other revenue 1 789 Elimination of intersegment revenue 2 ( 407 ) Total consolidated revenue $ 66,411 Cost of sales: Cost of sales from external sources 25,709 18,533 6,533 556 Intersegment operating expense 8 289 — — 25,717 18,822 6,533 556 Less: 3 General and administrative 2,738 6,519 1,501 1,388 12,146 Other segment items 4 97 191 95 198 581 Segment profit (loss) 1,831 1,082 ( 775 ) ( 464 ) 1,674 Reconciliation of profit (loss) Other revenue 1 789 Other cost of sales 1 ( 285 ) Other expenses 1 ( 907 ) Interest expense ( 1,946 ) Income from equity method investments 1,923 Other non-operating income 683 Earnout remeasurement 20 Other corporate expenses 5 ( 1,943 ) Elimination of intersegment profits 95 Loss before income taxes $ 103 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 $ 43.0 thousand for the three months ended June 30, 2024. After eliminations, Other revenue from third parties is $ 0.7 million for the three months ended June 30, 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. 34 Three Months Ended June 30, 2025 Overnight Air Cargo Commercial Aircraft, Engines and Parts Ground Support Equipment Digital Solutions Total Reportable segments Corporate and Other Total Depreciation and amortization $ 138 $ 757 $ 36 $ 207 $ 1,138 $ 146 $ 1,284 Capital Expenditures 65 166 — — 231 — 231 Three Months Ended June 30, 2024 Overnight Air Cargo Commercial Aircraft, Engines and Parts Ground Support Equipment Digital Solutions Total Reportable segments Corporate and Other Total Depreciation and amortization $ 97 $ 190 $ 95 $ 198 $ 580 $ 180 $ 760 Capital Expenditures 191 62 54 — 307 32 339 Reconciliation of operating income (loss) and elimination of intersegment loss was as follows: Three Months Ended June 30, 2025 (in thousands) Overnight Air Cargo Commercial Aircraft, Engines and Parts Ground Support Equipment Digital Solutions Reportable Segment Total Corporate and Other Eliminations Total Operating income (loss) from external sources $ 1,466 $ 551 $ 1,338 $ ( 250 ) $ 3,105 $ ( 2,659 ) $ — $ 446 Intersegment operating (loss) income — ( 95 ) — — ( 95 ) ( 50 ) 145 — Operating income (loss) 1,466 456 1,338 ( 250 ) 3,010 ( 2,709 ) 145 446 Three Months Ended June 30, 2024 Overnight Air Cargo Commercial Aircraft, Engines and Parts Ground Support Equipment Digital Solutions Reportable Segment Total Corporate and Other Eliminations Total Operating income (loss) from external sources $ 1,839 $ 1,095 $ ( 775 ) $ ( 464 ) $ 1,695 $ ( 2,272 ) $ — $ ( 577 ) Intersegment operating (loss) income ( 8 ) ( 13 ) — — ( 21 ) ( 74 ) 95 — Operating income (loss) 1,831 1,082 ( 775 ) ( 464 ) 1,674 ( 2,346 ) 95 ( 577 ) 17. 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 Redemption 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 35 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. The earnout pursuant to the Redemption Agreement is a Level 3 fair value measurement that is valued at $ 1.1 million as of June 30, 2025. For the three months ended June 30, 2025, a loss has been recorded due to an decrease in fair value of $ 0.4 million and included as part of other non-operating income in the condensed consolidated statements of income (loss). In connection with the Redemption Agreement, the parties agreed to certain technical amendments to the First Amended and Restated Operating Agreement of Contrail and entered into a new Put and Call Agreement with respect to the remaining 5 % interest in Contrail held by the Seller. 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 10-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. 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 greater of fair value on the date of the agreement, adjusted for allocable income and loss, or the redemption value at the end of each reporting period. 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 their redemption value. As of June 30, 2025, the balances were comprised of the following (in thousands): Shanwick RNCI Contrail RNCI Total Beginning Balance as of April 1, 2025 $ 5,176 $ 1,878 $ 7,054 Distribution to non-controlling members — ( 4 ) ( 4 ) Net income attributable to non-controlling interests 117 57 174 Other comprehensive income attributable to the RNCI 248 — 248 Redemption value adjustments 67 671 738 Ending Balance as of June 30, 2025 $ 5,608 $ 2,602 $ 8,210 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 June 30, 36 2025, for its Investment Function, the Company has contributed $ 19.1 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 has 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 dates. 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. 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 June 30, 2025, options to purchase up to 348,000 shares have been granted under the Plan. The options vest annually over a period of ten years based on a specified service condition ("vested awards") and expire ten years after vesting. 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 four vesting dates, June 30, 2025, 2024, 2023 and 2022, a total of 128,000 shares satisfied the service condition; however, they did not meet the market condition to become exercisable. For the three months ended June 30, 2025 and June 30, 2024, 21,000 unvested shares and 8,000 unvested shares, respectively, were forfeited due to employee departures. No expense reversal from forfeiture of options due to employee departures was recorded during the three months ended June 30, 2025. For the three months ended June 30, 2025, total compensation cost recognized under the Plan was $ 40.0 thousand. As of June 30, 2025 there were 199,000 granted options that may become exercisable on future vesting dates under the Plan. No options were exercisable as of June 30, 2025. 18. 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 were $ 4.4 million at June 30, 2025 and March 31, 2025. The carrying value of recorded liabilities related to nonfinancial guarantees was $ 0 at both June 30, 2025 and March 31, 2025. 19. Subsequent Events On July 15, 2025, CASP, a 95 %-owned subsidiary of Contrail, completed the sale of two Airbus aircraft, including associated engines, for over $ 18.0 million. The purchaser was FTAI Aircraft Leasing Ireland (2025) DAC. Concurrently, CASP entered into assignment, assumption, and amendment agreements under the existing leases, effectively transferring the lessor’s rights and obligations to FTAI Aircraft Leasing Ireland (2025) DAC. 37