AIR T INC 10-Q

Item 1. Financial Statements AIR T, INC. AND SUBSIDIARIES CONDENSED CONSOLIDATED STATEMENTS OF INCOME (UNAUDITED) (In thousands, except per share data) Three Months Ended September 30, Six Months Ended September 30, 2025 2024 2025 2024 Operating Revenues: Overnight air cargo $ 29,924 $ 31,187 $ 60,513 $ 61,570 Ground support equipment 9,637 14,454 24,707 21,809 Commercial aircraft, engines and parts 20,880 32,926 42,840 59,176 Digital solutions 2,209 1,836 4,305 3,515 Corporate and other 1,500 839 2,655 1,584 64,150 81,242 135,020 147,654 Operating Expenses: Overnight air cargo 24,922 26,326 50,821 52,036 Ground support equipment 6,539 12,395 18,842 18,929 Commercial aircraft, engines and parts 14,427 22,582 29,084 41,493 Digital solutions 762 682 1,598 1,238 Corporate and other 364 207 780 491 General and administrative 18,099 14,202 33,130 28,437 Depreciation and amortization 827 949 2,111 1,709 Earnout remeasurement ( 264 ) 279 ( 666 ) 259 65,676 77,622 135,700 144,592 Gain on sale of aircraft (Note 11) 7,034 — 7,034 — Operating Income 5,508 3,620 6,354 3,062 Non-operating (Expense) Income: Interest expense ( 2,252 ) ( 2,162 ) ( 4,565 ) ( 4,108 ) Income from equity method investments 4,179 2,346 4,160 4,269 Other ( 201 ) ( 505 ) 478 179 1,726 ( 321 ) 73 340 Income before income taxes 7,234 3,299 6,427 3,402 Income Tax Expense 2,201 336 2,065 407 Net Income 5,033 2,963 4,362 2,995 Net Income Attributable to Non-controlling Interests ( 678 ) ( 443 ) ( 1,643 ) ( 810 ) Net Income Attributable to Air T, Inc. Stockholders $ 4,355 $ 2,520 $ 2,719 $ 2,185 Income per share (Note 6) Basic $ 1.61 $ 0.91 $ 1.01 $ 0.79 Diluted $ 1.61 $ 0.91 $ 1.01 $ 0.79 4 Weighted Average Shares Outstanding: Basic 2,703 2,760 2,703 2,760 Diluted 2,703 2,760 2,703 2,760 See notes to condensed consolidated financial statements. 5 AIR T, INC. AND SUBSIDIARIES CONDENSED CONSOLIDATED STATEMENTS OF COMPREHENSIVE INCOME (UNAUDITED) Three Months Ended September 30, Six Months Ended September 30, (In Thousands) 2025 2024 2025 2024 Net Income $ 5,033 $ 2,963 $ 4,362 $ 2,995 Foreign currency translation gain 159 719 572 669 Reclassification of interest rate swaps into earnings 12 ( 148 ) 24 ( 351 ) Unrealized loss on interest rate swaps ( 65 ) — ( 65 ) — Redemption of non-controlling interest — — — 146 Other 197 ( 181 ) ( 46 ) ( 180 ) Total Other Comprehensive Gain 303 390 485 284 Total Comprehensive Income 5,336 3,353 4,847 3,279 Comprehensive Income Attributable to Non-controlling Interests ( 678 ) ( 443 ) ( 1,643 ) ( 810 ) Comprehensive Income Attributable to Air T, Inc. Stockholders $ 4,658 $ 2,910 $ 3,204 $ 2,469 See notes to condensed consolidated financial statements. 6 AIR T, INC. AND SUBSIDIARIES CONDENSED CONSOLIDATED BALANCE SHEETS (UNAUDITED) (In thousands, except share amounts) September 30, 2025 March 31, 2025 ASSETS Current Assets: Cash and cash equivalents $ 17,458 $ 5,932 Marketable securities 1,102 422 Restricted cash 80 575 Restricted investments — 683 Accounts receivable, net of allowance for doubtful accounts of $ 1,472 and $ 1,338 18,637 23,917 Income tax receivable 174 681 Inventories, net 46,626 38,516 Prepaid expenses 3,555 3,103 Other current assets 8,175 4,678 Total Current Assets 95,807 78,507 Notes Receivable - Lendway, Inc. ("Lendway") 3,250 3,350 Notes Receivable - Crestone Asset Management, LLC ("CAM") 1,527 2,500 Assets on lease or held for lease, net of accumulated depreciation of $ 60 and $ 1,451 — 14,662 Property and equipment, net of accumulated depreciation of $ 10,055 and $ 9,240 19,897 20,285 Intangible assets, net of accumulated amortization of $ 7,161 and $ 6,330 10,418 10,020 Right-of-use ("ROU") assets 12,269 13,274 Equity method investments 27,866 19,003 Other assets 1,805 1,635 Goodwill 11,902 10,542 Total Assets 184,741 173,778 LIABILITIES AND STOCKHOLDERS' EQUITY Current Liabilities: Accounts payable 15,771 17,782 Income tax payable 1,163 — Accrued expenses and other (Note 4) 22,055 16,691 Current portion of long-term debt 3,447 9,099 Current portion of long-term debt - related party (Note 13) 1,460 1,282 Current portion of earnout liability — 430 Short-term lease liability 2,551 2,377 Total Current Liabilities 46,447 47,661 Long-term debt 114,979 101,226 Long-term debt - related party (Note 13) 2,421 3,288 Deferred income tax liabilities, net 2,249 2,249 Long-term lease liability 10,665 11,843 Long-term earnout liability 442 1,109 Other non-current liabilities 231 866 Total Liabilities 177,434 168,242 7 Redeemable non-controlling interests 8,220 7,054 Commitments and contingencies (Note 18) Equity (Deficit): Air T, Inc. Stockholders' Equity (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 1,028 947 Retained earnings 4,849 2,130 Accumulated other comprehensive loss ( 162 ) ( 647 ) Total Air T, Inc. Stockholders' Equity (Deficit) 69 ( 3,216 ) Non-controlling Interests ( 982 ) 1,698 Total Equity (Deficit) ( 913 ) ( 1,518 ) Total Liabilities and Equity $ 184,741 $ 173,778 See notes to condensed consolidated financial statements. 8 AIR T, INC. AND SUBSIDIARIES CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS (UNAUDITED) (In Thousands) Six Months Ended September 30, 2025 2024 CASH FLOWS FROM OPERATING ACTIVITIES: Net Income $ 4,362 $ 2,995 Adjustments to reconcile Net Income to net cash (used in) provided by operating activities: Depreciation and amortization 2,111 1,709 Income from equity method investments ( 4,160 ) ( 4,269 ) Gain on sale of aircraft ( 7,034 ) — Other ( 166 ) 2,258 Change in operating assets and liabilities: Accounts receivable 5,210 ( 8,182 ) Inventories ( 8,047 ) 8,832 Accounts payable ( 2,025 ) 461 Accrued expenses 5,228 ( 1,306 ) Other current assets ( 3,552 ) ( 78 ) Other 1,569 624 Net cash (used in) provided by operating activities ( 6,504 ) 3,044 CASH FLOWS FROM INVESTING ACTIVITIES: Investment in unconsolidated entities ( 6,765 ) — Distribution from unconsolidated entities 1,750 3,000 Capital expenditures related to property & equipment ( 444 ) ( 581 ) Capital expenditures related to assets on lease or held for lease — ( 14,598 ) Proceeds from sale of aircraft 19,889 — Loan advances to Lendway ( 1,100 ) ( 2,000 ) Proceeds from notes receivable - CAM and Lendway 2,173 — Acquisition of businesses, net cash acquired ( 1,162 ) — Other ( 405 ) ( 16 ) Net cash provided by (used in) investing activities 13,936 ( 14,195 ) CASH FLOWS FROM FINANCING ACTIVITIES: Proceeds from lines of credit 80,235 69,159 Payments on lines of credit ( 72,873 ) ( 59,451 ) Proceeds from term loan 10,850 10,000 Payments on term loan ( 11,038 ) ( 6,865 ) Distribution to non-controlling interest ( 3,132 ) ( 323 ) Other ( 296 ) ( 26 ) Net cash provided by financing activities 3,746 12,494 Effect of foreign currency exchange rates on cash and cash equivalents ( 147 ) ( 2 ) NET INCREASE IN CASH AND CASH EQUIVALENTS AND RESTRICTED CASH 11,031 1,341 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 17,788 9,184 CASH AND CASH EQUIVALENTS AND RESTRICTED CASH AT BEGINNING OF PERIOD: Cash and cash equivalents 5,932 9 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 17,458 Restricted cash, current 80 Restricted cash, long-term(a) 250 Total cash and cash equivalents and restricted cash at end of period 17,788 (a) Included in other assets on the consolidated balance sheets. See notes to condensed consolidated financial statements. 10 AIR T, INC AND SUBSIDIARIES CONDENSED CONSOLIDATED STATEMENTS OF EQUITY (DEFICIT) (UNAUDITED) (In Thousands) Common Stock Treasury Stock Additional Paid-In Capital Retained Earnings Accumulated Other Comprehensive Income (Loss) Non-controlling Interests 1 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 14) — — — — ( 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 11 Net income (loss) 1 — — — — — 2,520 — ( 1 ) 2,519 Stock option forfeiture (Note 14) — — — — ( 28 ) — — — ( 28 ) Stock compensation expense — — — — 30 — — — 30 Foreign currency translation gain 2 — — — — — — 719 — 719 Reclassification of interest rate swaps into earnings — — — — — — ( 148 ) — ( 148 ) Initial consolidation of CASP, LLC — — — — — — — 730 730 Allocation of comprehensive income from unconsolidated investments — — — — — — 2 — 2 Allocation of comprehensive income to redeemable non-controlling interests — — — — — — ( 183 ) — ( 183 ) Balance, September 30, 2024 3,030 $ 758 270 $ ( 5,260 ) $ 878 $ 10,455 $ 204 $ 1,774 8,809 (In Thousands) Common Stock Treasury Stock Additional Paid-In Capital Retained Earnings Accumulated Other Comprehensive Income (Loss) Non-controlling Interests 1 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 (loss) income 1 — — — — — ( 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 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 ) Net income 1 — — — — — 4,355 — 302 4,657 Distributions to non-controlling interests — — — — — — — ( 2,996 ) ( 2,996 ) Stock compensation expense — — — — 41 — — — 41 Foreign currency translation gain 2 — — — — — — 159 — 159 Reclassification of interest rate swaps into earnings — — — — — — 12 — 12 Unrealized loss on interest rate swaps — — — — — — ( 65 ) — ( 65 ) Allocation of comprehensive income from unconsolidated investments — — — — — — 204 — 204 Allocation of comprehensive income to redeemable non-controlling interests — — — — — — ( 7 ) — ( 7 ) Balance, September 30, 2025 3,030 $ 758 328 $ ( 6,404 ) $ 1,028 $ 4,849 $ ( 162 ) $ ( 982 ) $ ( 913 ) (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 and $ 0.1 million as of March 31, 2024 and September 30, 2024, respectively, and a loss of $ 0.4 million and a gain of $ 0.2 million, as of March 31, 2025 and September 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 September 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. In September 2025, the FASB issued ASU 2025-06- Intangibles- Goodwill and Other- Internal-Use Software (Subtopic 350-40): Targeted Improvements to the Accounting for Internal-Use Software. The amendments in this Update modernize the accounting guidance for the costs to develop software for internal use. The new guidance amends the existing standard that refers to various stages of a software development project to align with current software development methods, such as agile programming. For public business entities, the amendments in this Update are effective for fiscal years beginning after December 15, 2027, and interim periods within those annual reporting periods. The Company is currently evaluating the impact of this amendment on its consolidated financial statements and disclosures. 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 ("Royal"), 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 Statements. The acquired business is included in Overnight Air Cargo segment. 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 14 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 September 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. 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 expended 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): 15 Three Months Ended September 30, Six Months Ended September 30, 2025 2024 2025 2024 Product Sales Overnight air cargo $ 11,194 $ 10,070 $ 23,671 $ 19,769 Ground support equipment 9,180 14,022 23,518 21,150 Commercial aircraft, engines and parts 17,378 30,165 35,139 53,784 Corporate and other 323 54 490 173 Support Services Overnight air cargo 18,712 21,037 36,704 41,695 Ground support equipment 289 287 708 453 Commercial aircraft, engines and parts 3,093 2,106 5,335 4,306 Corporate and other 9 3 25 18 Leasing Revenue Ground support equipment — 15 — 30 Commercial aircraft, engines and parts 204 475 1,958 514 Corporate and other 414 405 869 869 Software Services Digital solutions 2,209 1,836 4,305 3,515 Other Overnight air cargo 18 80 138 106 Ground support equipment 168 130 481 176 Commercial aircraft, engines and parts 205 180 408 572 Corporate and other 754 377 1,271 524 Total $ 64,150 $ 81,242 $ 135,020 $ 147,654 See Note 16 for the Company's disaggregated revenues by geographic region and Not e 17 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, 2025 and September 30, 2025 and the amount of contract liabilities that were recognized as revenue during the six-month period ended September 30, 2025 (in thousands): Outstanding contract liabilities Outstanding contract liabilities as of April 1, 2025 Recognized as Revenue As of September 30, 2025 $ 7,009 As of April 1, 2025 $ 4,199 For the six months ended September 30, 2025 $ ( 2,878 ) 16 4. Accrued Expenses and Other (In thousands) September 30, 2025 March 31, 2025 Salaries, wages and related items $ 6,196 $ 6,235 Profit sharing and bonus 1,961 2,980 Other deposits 2,260 513 Deferred income 4,749 3,686 Accrued insurance payable 2,730 1,336 Accrued interest expense 1,920 955 Other 2,239 986 Total $ 22,055 $ 16,691 5. Income Taxes During the three-month period ended September 30, 2025, the Company recorded $ 2.2 million in income tax expense at an effective tax rate (“ETR”) of 30.4 %. The Company has computed the provision for income taxes based on the estimated annual effective tax rate 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 September 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, non-deductible acquisition-related costs, and the benefit from the Foreign-Derived Intangible Income (“FDII”) deduction. On July 4, 2025, the One Big Beautiful Bill Act ("OBBBA") was signed into law in the U.S., which includes a broad range of tax reform provisions affecting businesses. The Company has reflected the impact of the OBBBA in the second quarter of 2026 financial statements as required by generally accepted accounting principles. 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. During the six-month period ended September 30, 2025, the Company recorded $ 2.1 million in income tax expense at an ETR of 32.1 %. The Company has computed the provision for income taxes based on the estimated annual effective tax rate excluding loss jurisdictions with no tax benefit and the application of discrete items, if any, for interim reporting. The primary factors contributing to the difference between the federal statutory rate of 21.0% and the Company's effective tax rate for the six-month period ended September 30, 2025 were the valuation allowance related to the Company’s U.S. consolidated group, DTI and DSI, the foreign rate differentials for Air T’s operations located in the Netherlands and Puerto Rico, non-deductible transaction costs, and the benefit from the FDII deduction. During the three-month period ended September 30, 2024, the Company recorded $ 0.3 million in income tax expense at an ETR of 10.2 %. The Company has computed the provision for income taxes based on the estimated annual effective tax rate excluding loss jurisdictions with no tax benefit and the application of discrete items, if any, for interim reporting. The primary factors contributing to the difference between the federal statutory rate of 21.0% and the Company's effective tax rate for the three-month period ended September 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. During the six-month period ended September 30, 2024, the Company recorded $ 0.4 million in income tax expense at an ETR of 12.0 %. The Company has computed the provision for income taxes based on the estimated annual effective tax rate excluding loss jurisdictions with no tax benefit and the application of discrete items, if any, for interim reporting. The primary factors contributing to the difference between the federal statutory rate of 21.0% and the Company's effective tax rate for the six-month period ended September 30, 2024 were the valuation allowance related to the Company’s U.S. consolidated group, DTI, LGSS, DSI and BCCM Kenya, and the foreign rate differentials for Air T’s operations located in the Netherlands and Puerto Rico. 6. Net Earnings (Loss) Per Share Basic earnings per share has been calculated by dividing net income 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. 17 As of September 30, 2025, of the 244,750 options outstanding under the Air T's 2020 Omnibus Stock and Incentive Plan, none were exercisable. The computation of basic and diluted earnings per common share is as follows (in thousands, except for per share figures): Three Months Ended September 30, Six Months Ended September 30, 2025 2024 2025 2024 Net income $ 5,033 $ 2,963 $ 4,362 $ 2,995 Net income attributable to non-controlling interests ( 678 ) ( 443 ) ( 1,643 ) ( 810 ) Net income attributable to Air T, Inc. Stockholders $ 4,355 $ 2,520 $ 2,719 $ 2,185 Income per share: Basic $ 1.61 $ 0.91 $ 1.01 $ 0.79 Diluted $ 1.61 $ 0.91 $ 1.01 $ 0.79 Weighted Average Shares Outstanding: Basic 2,703 2,760 2,703 2,760 Diluted 2,703 2,760 2,703 2,760 Potential common shares outstanding are not included in the computation of diluted income per share if their effect is anti-dilutive. During the three and six months ended September 30, 2025, the Company had 244,750 potential shares from share-based awards that were anti-dilutive. There were no potential shares from share-based awards that were anti-dilutive during the three and six months ended September 30, 2024. 7. Intangible Assets and Goodwill Intangible assets as of September 30, 2025 and March 31, 2025 consisted of the following (in thousands): September 30, 2025 Gross Carrying Amount Accumulated Amortization Net Book Value Purchased software $ 886 $ ( 615 ) $ 271 Internally developed software 3,867 ( 1,348 ) 2,519 In-place lease and other intangibles 1,094 ( 511 ) 583 Customer relationships 8,601 ( 2,441 ) 6,160 Patents 1,139 ( 1,116 ) 23 Other 1,547 ( 1,130 ) 417 17,134 ( 7,161 ) 9,973 In-process software 445 — 445 Intangible assets, total $ 17,579 $ ( 7,161 ) $ 10,418 18 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 The increase in customer relationships from March 31, 2025 to September 30, 2025 relates to the quarterly changes in foreign currency translation adjustments at Shanwick. Based on the intangible assets recorded at September 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 6 months ended September 30, 2025) $ 627 2027 1,203 2028 1,120 2029 1,030 2030 1,025 2031 1,024 Thereafter 3,944 $ 9,973 The carrying amount of goodwill as of September 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 $ 0.4 million change in foreign currency translation adjustments related to the goodwill balance at Shanwick within the digital solutions segment. There was no impairment on goodwill during the six months ended September 30, 2025. Goodwill for relevant segments and corporate and other, at original cost, consists of the following (in thousands): September 30, 2025 March 31, 2025 Overnight air cargo $ 1,113 $ 76 Commercial aircraft, engines and parts 4,227 4,227 Digital solutions 6,562 6,239 Total reportable segment goodwill, at cost 11,902 10,542 Corporate and other 376 376 Less accumulated impairment ( 376 ) ( 376 ) Goodwill, net of impairment $ 11,902 $ 10,542 8. Investments in Securities and Derivative Instruments The Company 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 19 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 and six months ended September 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 both September 30, 2025 and March 31, 2025, the fair value of these marketable equity securities was an asset of $ 1.1 million, 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., has been accounted for under the equity method of accounting since Air T obtained significant influence in January 2018. 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 September 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 % (the "Delayed Draw Term Loan"). On September 27, 2024 and January 15, 2025 the borrowing limit was increased to $ 3.5 million and $ 3.8 million, respectively. The Delayed Draw Term Loan limit increases were provided to assist with inventory purchases during the growing season and operating expenses as needed. All outstanding principal and accrued interest is due on the maturity date, which is the earlier of August 15, 2029 or by written demand of the Company after February 15, 2026. As of September 30, 2025 the Delayed Draw Term Loan has $ 2.2 million and $ 0.3 million of principal and accrued interest outstanding, respectively. On September 15, 2025, Lendway expanded its financing by entering into three promissory notes totaling $ 4.0 million among three of the largest shareholders, where Air T provided $ 1.1 million of additional funding (the "Promissory Note"). The notes were issued to Lendway to assist with inventory purchase for the growing season and operating expenses as needed. The promissory note bears interest at a rate of 13.5 % with all outstanding principal and accrued interest due on the maturity date, which is June 1, 2027. Prior to the maturity date, Lendway may prepay any accrued interest or principal outstanding without penalty. As of September 30, 2025, $ 1.1 million of the principal balance remains outstanding and minimal interest has been accrued. Due to the continued subordinated financial support, Lendway is a variable interest entity to which the Company holds several variable interests. The Company has determined that it is not the primary beneficiary, as it does not control Lendway's Board of Directors, which is the party with the power to direct the activities that most significantly impact the economic performance of Lendway. Additionally, the Company's exposure to variability of Lendway is limited to its 27.5 % ownership in Lendway's common stock and a total of $ 3.6 million of notes receivable and accrued interest from Lendway. Accordingly, the Company does not consolidate Lendway and will continue to account for its investment using the equity method of accounting. 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, with a basis difference decrease of $ 0.3 million. The Company recorded a basis difference adjustment of $ 12.0 thousand and $ 25.0 thousand in each of the three and six months ended September 30, 2025. CCI and Lendway's combined summarized unaudited financial information for the three and six months ended June 30, 2025 and 2024 is as follows (in thousands): Three Months Ended Six Months Ended June 30, 2025 June 30, 2024 June 30, 2025 June 30, 2024 Revenue $ 54,452 $ 52,662 $ 96,121 $ 98,419 Gross Profit 7,108 7,434 12,471 13,440 Operating income 2,995 1,823 4,680 3,029 Net income 1,117 755 1,485 2,081 20 Crestone Asset Management, LLC investment On May 5, 2021, the Company formed an aircraft asset management business called Crestone Asset Management, LLC ("CAM"), formerly known as Contrail Asset Management LLC, and an aircraft capital joint venture called Crestone JV II LLC ("CJVII"), formerly known as Contrail JV II LLC. The venture focuses on acquiring commercial aircraft and jet engines for leasing, trading and disassembly. 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”). In August 2025, CAM entered into an Amended and Restated Limited Liability Company Agreement as the Managing Member Blue Crest Aviation Partners 2025-01 LLC ("BCAP"). BCAP was formed as a series LLC and consists of several individual series that target investments in mid-life commercial jet aircraft on lease to airlines globally. CAM's involvement with BCAP represents an expansion of its Asset Management Function in which CAM will collect fees for the services it provides as the Managing Member of BCAP. 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. As of September 30, 2025, $ 1.5 million of the principal balance remains outstanding with minimal accrued interest. CAM's HLBV net assets, including common interests and investor interests, was $ 33.2 million and $ 29.9 million as of September 30, 2025 and 2024, respectively. Additionally, contributions from and distributions to both Air T and MRC for the three and six months ended September 30, 2025 and 2024 is as follows (in thousands): Three Months Ended Six Months Ended September 30, 2025 September 30, 2024 September 30, 2025 September 30, 2024 Contributions $ 3,520 $ — $ 7,288 $ — Distributions 3,887 676 6,402 2,277 Investment balances for the Company's equity method investees as of September 30, 2025 and March 31, 2025 is as follows (in thousands): Investment September 30, 2025 March 31, 2025 Lendway $ 1,350 $ 729 CCI 3,861 3,889 CAM 16,225 12,428 Other equity method investments 6,430 1,957 Total $ 27,866 $ 19,003 21 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 and six months ended September 30, 2025 and 2024 is as follows (in thousands): Three Months Ended Six Months Ended Investment September 30, 2025 September 30, 2024 September 30, 2025 September 30, 2024 Lendway $ 288 $ ( 206 ) $ 411 $ ( 496 ) CCI 2 77 ( 27 ) 751 CAM 3,767 2,345 3,516 3,839 Other equity method investments 122 130 260 175 Total $ 4,179 $ 2,346 $ 4,160 $ 4,269 The Company's equity method investees may, from time to time, make distributions and dividends to the Company in accordance with accumulated earnings at the investee. For the three and six months ended September 30, 2025 and 2024, the Company received distributions and dividends from equity method investees as follows (in thousands): Three Months Ended Six Months Ended Investment September 30, 2025 September 30, 2024 September 30, 2025 September 30, 2024 Lendway $ — $ — $ — $ — CCI — — — — CAM 903 676 1,731 2,277 Other equity method investments 241 118 538 1,051 Total $ 1,144 $ 794 $ 2,269 $ 3,328 10. Inventories Inventories consisted of the following (in thousands): September 30, 2025 March 31, 2025 Inventories: Raw Materials $ 7,608 $ 6,928 Work in process 2,521 2,342 Finished Goods 5,666 5,358 Aircraft parts 35,994 28,794 Total inventories 51,789 43,422 Reserves ( 5,163 ) ( 4,906 ) Total inventories, net of reserves $ 46,626 $ 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. The Company depreciates aircraft and engines on a straight-line basis over the assets' useful life from the acquisition date to an estimated residual value. On August 26, 2024, Contrail executed the operating agreement for CASP Leasing 1, LLC ("CASP"), a newly-created and 95 % owned subsidiary of Contrail. Shortly thereafter, on August 29, 2024, CASP entered into two purchase agreements to acquire, and subsequently lease, two Airbus Model A321-111 aircraft. On July 15, 2025, CASP completed the sale of these two aircraft, including their associated engines, for a total contracted sales price exceeding $ 25.0 million. In connection with the sale, CASP executed assignment, assumption, and amendment agreements under the existing leases, thereby transferring all lessor rights and obligations to the purchaser. After applying purchase price adjustments for deposits and rent payments as described in the sale and purchase agreements, CASP received net closing proceeds of $ 19.9 million. 22 For the assets currently on lease, there are no options for the lessees to purchase the assets at the end of the lease term. During the three and six months ended September 30, 2025, the Company recognized depreciation expense relating to equipment leases of $ 0.1 million and $ 0.7 million, respectively. Depreciation expense relating to equipment leases for the three and six months ended September 30, 2024 was $ 0.2 million and $ 0.3 million, respectively. Future minimum undiscounted rental payments to be received do not include contingent rentals that may be received under certain leases because amounts are based on usage. Earned contingent rent on equipment leases totaled approximately $ 0.5 million during the six months ended September 30, 2025, and was immaterial during the three months ended September 30, 2025. Contingent rent earned on equipment leases during the three and six months ended September 30, 2024 was immaterial . As of September 30, 2025, future minimum undiscounted rental payments to be received under non-cancelable leases are immaterial . Office leases The Company, through its wholly-owned subsidiary, Wolfe Lake, leases offices to third parties with lease terms between 5 and 29 years under operating lease agreements. For the offices currently on lease, there are no options for the lessees to purchase the spaces at the end of the leases. Our contractual obligations for offices currently on lease can include termination and renewal options. We utilize the reasonably certain threshold criteria in determining which options our customers will exercise. The Company depreciates the assets on a straight-line basis over the assets' useful life. During the three and six months ended September 30, 2025 and 2024, depreciation expense relating to office leases was immaterial . For each of the three months ended September 30, 2025 and 2024, the Company recognized rental and other revenues related to operating lease payments of $ 0.4 million, of which variable lease payments were $ 0.2 million. For each of the six months ended September 30, 2025 and 2024, the Company recognized rental and other revenues related to operating lease payments of $ 0.9 million, of which variable lease payments were $ 0.4 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 September 30, 2025: Year ended March 31, 2026 (excluding the 6 months ended 09/30/2025) $ 503 2027 990 2028 849 2029 774 2030 743 Thereafter 1,824 Total $ 5,683 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. 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 and six months ended September 30, 2025 and 2024 are as follows (in thousands): 23 Three Months Ended September 30, Six Months Ended September 30, 2025 2024 2025 2024 Operating lease cost $ 874 $ 749 $ 1,715 $ 1,418 Short-term lease cost 232 289 571 583 Variable lease cost 252 236 499 462 Total lease cost $ 1,358 $ 1,274 $ 2,785 $ 2,463 Amounts reported in the consolidated balance sheets for leases where we are the lessee as of September 30, 2025 and March 31, 2025 were as follows (in thousands): September 30, 2025 March 31, 2025 Operating leases Operating lease ROU assets $ 12,269 $ 13,274 Operating lease liabilities $ 13,216 $ 14,220 Weighted-average remaining lease term Operating leases 10 years, 3 months 10 years, 3 months Weighted-average discount rate Operating leases 5.68 % 5.67 % During the six months ended September 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 September 30, 2025, the remaining lease term on the operating lease was four years, two months and the useful life of leasehold improvements that exceeded the lease term ranged from four years, four months to four years, eight months . As of September 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 September 30, 2025 are as follows (in thousands): Operating Leases 2026 (excluding the six months ended September 30, 2025) $ 1,632 2027 3,062 2028 2,354 2029 1,748 2030 977 Thereafter 7,670 Total undiscounted lease payments 17,443 Interest ( 4,227 ) Total lease liabilities $ 13,216 13. Financing Arrangements Borrowings of the Company and its subsidiaries are summarized below at September 30, 2025 and March 31, 2025, respectively. 24 In connection with the acquisition of Royal on May 15, 2025, 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 to 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. On September 3, 2025, the Alerus Loan Parties under the Revolving Credit Agreement with Alerus entered into Amendment No. 5 to Credit Agreement, the Amended and Restated Revolving Credit Note, and the Amended and Restated Term Note A. Pursuant to Amendment No. 5 to Credit Agreement, the Overline Note provisions and note were eliminated. Pursuant to the Amended and Restated Revolving Credit Note, the revolving credit commitment to make revolving credit loans and to issue letters of credit was increased to an aggregate principal amount not to exceed $ 20.0 million. The interest rate on the Revolving Credit Note was decreased to the greater of 5.00 % or 1-month SOFR plus 1.90 %. The maturity date was extended to August 28, 2027. The financial covenants are to be measured semi-annually at December and March of each year and the Alerus Loan Parties are to deliver quarterly financial statements to Alerus. Pursuant to the Amended and Restated Term Note A, Term Note A was amended and restated by the Alerus Loan Parties in the principal amount of $ 9.2 million. The maturity date remains August 15, 2029. The Term Note A interest rate was revised to 1-month SOFR plus 2.00 %. 25 The following table provides certain information about the current financing arrangements of the Company and its subsidiaries (other than related party obligations) as of September 30, 2025: (In Thousands) September 30, 2025 March 31, 2025 Maturity Date Interest Rate Unused commitments as of September 30, 2025 Type of Debt Air T Debt Debt - Air T Funding Trust Preferred Securities 1 $ 35,500 $ 35,342 6/7/2049 8.00 % Recourse Total 35,500 35,342 Alerus Loan Parties Debt Revolver - Alerus 16,639 6,050 8/28/2027 Greater of 5.00 % or 1-month SOFR + 1.90 % $ 3,361 Recourse Overline Note - Alerus — — 10/31/2025 Greater of 5.00 % or 1-month SOFR + 2.00 % — Recourse Term Note A - Alerus 9,061 9,827 8/15/2029 1-month SOFR + 2.00 % Recourse Term Note C - Alerus 1,000 — 5/15/2030 Greater of 5.00 % or 1-month SOFR + 2.25 % Recourse Total 26,700 15,877 Contrail Debt Revolver - ONB — 3,127 11/24/2025 1-month SOFR + 3.56 % 25,000 Limited recourse 2 Term Note J - ONB — 8,750 9/12/2028 1-month SOFR + 3.86 % Limited recourse 2 Total — 11,877 Wolfe Lake Debt Term Loan - Bridgewater 8,921 9,059 12/2/2031 3.65 % Non-recourse Total 8,921 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 1,057 1,298 2/1/2027 3.50 % Non-recourse Term Loan B - ING 1,174 1,082 5/1/2027 4.00 % Non-recourse Total 5,731 5,880 WASI Debt Promissory Note - Seller's Note 161 398 1/1/2026 6.00 % Non-recourse Total 161 398 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. 26 AAM 24-1 Debt Promissory Notes - Honeywell 40,000 30,000 5/31/2035 8.50 % Non-recourse Total 40,000 30,000 MAC Debt Term Loan - Bank of America, N.A. 2,214 2,271 2/21/2030 1-month SOFR + 0.11 % + 1.75 % Non-recourse Total 2,214 2,271 Total Debt 119,227 110,704 Unamortized Premiums and Debt Issuance Costs ( 801 ) ( 379 ) Total Debt, net $ 118,426 $ 110,325 At September 30, 2025, our contractual financing obligations, including payments due by period, are as follows (in thousands): Due by Amount September 30, 2026 $ 3,447 September 30, 2027 23,257 September 30, 2028 2,102 September 30, 2029 5,049 September 30, 2030 2,488 Thereafter 82,884 119,227 Unamortized Premiums and Debt Issuance Costs ( 801 ) $ 118,426 Interest Expense, net - Net interest expense for the Company and its subsidiaries were as follows for the three and six months ended September 30, 2025 and 2024: Three Months Ended September 30, Six Months Ended September 30, 2025 2024 2025 2024 Air T $ 743 $ 979 $ 1,454 $ 1,952 Jet Yard — 12 — 31 Alerus Loan Parties 370 177 741 177 Contrail 156 332 465 690 AirCo 1 — 125 — 251 Wolfe Lake 85 113 170 175 Air T Acquisition 22.1 25 83 115 150 WASI 4 11 9 23 AAM 24-1 736 310 1,435 633 MAC 38 — 96 — Other 95 20 80 26 Total $ 2,252 $ 2,162 $ 4,565 $ 4,108 Cash paid for interest totaled $ 3.8 million during the six months ended September 30, 2025. 14. EMPLOYEE AND NON-EMPLOYEE STOCK OPTIONS 27 Air T, Inc. maintains the 2020 Omnibus Stock and Incentive Plan for the benefit of certain eligible employees and directors. 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 either the Black-Scholes option pricing model or Monte Carlo simulations to value stock options the Company grants. The key assumptions for the valuation methodologies 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. 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 September 30, 2025, options to purchase up to 399,300 shares have been granted under the Plan. Of the shares granted on the Plan, 349,800 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. On the preceding four vesting dates, June 30, 2025, 2024, 2023 and 2022, a total of 129,050 shares satisfied the service condition; however, they did not meet the market condition to become exercisable. For the three and six months ended September 30, 2025, no unvested shares were forfeited due to employee departures. As of September 30, 2025, there were 195,250 granted options that may become exercisable on future vesting dates under the Plan. No options were exercisable as of September 30, 2025. On August 5, 2025, Air T granted 49,500 options under the Plan with a different vesting schedule. Beginning August 6, 2026 and each anniversary date thereafter through August 6, 2035, 10 % of the granted options will vest. For all the options granted, half will have a strike price of $ 30 and the other half will have a strike price of $ 50 . Should an employee quit or services cease being provided, any options that have not vested will be forfeited. Options that vest each August 6 will be exercisable for a period of ten years after they become vested, meaning vested options that were not exercised will expire from August 6, 2036 through August 6, 2045. Management valued the granted options using the Monte Carlo Simulation method, noting the fair value on August 5, 2025 was $ 0.8 million. Expenses are recognized based on a straight-line basis. For the three and six months ended September 30, 2025, total compensation cost recognized under the Plan was $ 41.0 thousand and $ 81.0 thousand. 15. 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 six months ended September 30, 2025. As of September 30, 2025, 752,228 shares may be repurchased pursuant to this program. 16. 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 September 30, 2025 and March 31, 2025 (in thousands): September 30, 2025 March 31, 2025 United States $ 19,807 $ 20,422 Foreign 90 14,525 Total tangible long-lived assets, net $ 19,897 $ 34,947 The net book value of tangible long-lived assets located within each individual foreign country at September 30, 2025 and March 31, 2025 is listed below (in thousands): 28 September 30, 2025 March 31, 2025 Bulgaria $ — $ 14,435 Other 90 90 Total tangible long-lived assets, net $ 90 $ 14,525 Total revenue, in and outside the United States, is summarized in the following table for the three and six months ended September 30, 2025 and September 30, 2024 (in thousands): Three Months Ended September 30, Six Months Ended September 30, 2025 2024 2025 2024 Operating Revenues: Overnight Air Cargo United States $ 28,455 $ 31,137 $ 57,701 $ 60,680 Foreign 1,469 50 2,812 890 Total Overnight Air Cargo 29,924 31,187 60,513 61,570 Commercial Aircraft, Engines and Parts United States 11,263 22,695 24,765 41,155 Foreign 9,617 10,231 18,075 18,021 Total Commercial Aircraft, Engines and Parts 20,880 32,926 42,840 59,176 Ground Support Equipment United States 8,962 13,872 23,655 19,671 Foreign 675 582 1,052 2,138 Total Ground Support Equipment 9,637 14,454 24,707 21,809 Digital Solutions United States 464 553 955 855 Foreign 1,745 1,283 3,350 2,660 Total Digital Solutions 2,209 1,836 4,305 3,515 Corporate and Other United States 1,338 730 2,474 1,551 Foreign 162 109 181 33 Total Corporate and Other 1,500 839 2,655 1,584 Total revenue $ 64,150 $ 81,242 $ 135,020 $ 147,654 17. 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 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 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 29 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: 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. Until the fourth quarter of the fiscal year 2025, Digital Solutions had 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): 30 Three Months Ended September 30, 2025 Overnight Air Cargo Commercial Aircraft, Engines and Parts Ground Support Equipment Digital Solutions Total Revenue from external customers $ 29,924 $ 20,880 $ 9,637 $ 2,209 $ 62,650 Intersegment revenue 1,152 583 — — 1,735 31,076 21,463 9,637 2,209 64,385 Reconciliation of revenue Other revenue 1 1,544 Elimination of intersegment revenue 2 ( 1,779 ) Total consolidated revenue $ 64,150 Cost of sales: Cost of sales from external sources 24,922 14,427 6,539 762 Intersegment operating expense 1,152 517 — — 26,074 14,944 6,539 762 Less: 3 General and administrative 3,250 6,742 1,445 1,512 12,949 Gain from sale of aircraft — ( 7,034 ) — — ( 7,034 ) Other segment items 4 137 34 34 213 418 Segment profit (loss) 1,615 6,777 1,619 ( 278 ) 9,733 Reconciliation of profit (loss) Other revenue 1 1,544 Other cost of sales 1 ( 364 ) Other expenses 1 ( 1,276 ) Interest expense ( 2,252 ) Income from equity method investments 4,179 Other non-operating expense ( 201 ) Other corporate expenses 5 ( 4,271 ) Elimination of intersegment profits 142 Income before income taxes $ 7,234 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 September 30, 2025. After eliminations, Other revenue from third parties is $ 1.5 million for the three months ended September 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. 31 Three Months Ended September 30, 2024 Overnight Air Cargo Commercial Aircraft, Engines and Parts Ground Support Equipment Digital Solutions Total Revenue from external customers $ 31,187 $ 32,926 $ 14,454 $ 1,836 $ 80,403 Intersegment revenue 14 484 — — 498 31,201 33,410 14,454 1,836 80,901 Reconciliation of revenue Other revenue 1 882 Elimination of intersegment revenue 2 ( 541 ) Total consolidated revenue $ 81,242 Cost of sales: Cost of sales from external sources 26,326 22,582 12,395 682 Intersegment operating expense 20 540 — — 26,346 23,122 12,395 682 Less: 3 General and administrative 2,942 6,446 1,546 1,163 12,097 Other segment items 4 112 648 95 202 1,057 Segment profit (loss) 1,801 3,194 418 ( 211 ) 5,202 Reconciliation of profit (loss) Other revenue 1 882 Other cost of sales 1 ( 207 ) Other expenses 1 ( 1,110 ) Interest expense ( 2,162 ) Income from equity method investments 2,346 Other non-operating expense ( 505 ) Other corporate expenses 5 ( 1,391 ) Elimination of intersegment profits 244 Income before income taxes $ 3,299 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 September 30, 2024. After eliminations, Other revenue from third parties is $ 0.8 million for the three months ended September 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. 32 Six Months Ended September 30, 2025 Overnight Air Cargo Commercial Aircraft, Engines and Parts Ground Support Equipment Digital Solutions Total Revenue from external customers $ 60,513 $ 42,840 $ 24,707 $ 4,305 $ 132,365 Intersegment revenue 2,014 1,051 — — 3,065 62,527 43,891 24,707 4,305 135,430 Reconciliation of revenue Other revenue 1 2,743 Elimination of intersegment revenue 2 ( 3,153 ) Total consolidated revenue $ 135,020 Cost of sales: Cost of sales from external sources 50,821 29,084 18,842 1,598 Intersegment operating expense 2,014 953 — — 52,835 30,037 18,842 1,598 Less: 3 General and administrative 6,336 12,865 2,838 2,814 24,853 Gain on sale of aircraft — ( 7,034 ) — — ( 7,034 ) Other segment items 4 275 389 70 420 1,154 Segment profit (loss) 3,081 7,634 2,957 ( 527 ) 13,145 Reconciliation of profit (loss) Other revenue 1 2,743 Other cost of sales 1 ( 780 ) Other expenses 1 ( 2,394 ) Interest expense ( 4,565 ) Income from equity method investments 4,160 Other non-operating income 478 Other corporate expenses 5 ( 6,646 ) Elimination of intersegment profits 286 Income before income taxes $ 6,427 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 $ 88.0 thousand for the six months ended September 30, 2025. After eliminations, Other revenue from third parties is $ 2.7 million for the six months ended September 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 Six Months Ended September 30, 2024 Overnight Air Cargo Commercial Aircraft, Engines and Parts Ground Support Equipment Digital Solutions Total Revenue from external customers $ 61,570 $ 59,176 $ 21,809 $ 3,515 $ 146,070 Intersegment revenue 14 848 — — 862 61,584 60,024 21,809 3,515 146,932 Reconciliation of revenue Other revenue 1 1,671 Elimination of intersegment revenue 2 ( 949 ) Total consolidated revenue $ 147,654 Cost of sales: Cost of sales from external sources 52,036 41,493 18,929 1,238 Intersegment operating expense 28 829 — — 52,064 42,322 18,929 1,238 Less: 3 General and administrative 5,680 12,413 3,047 2,551 23,691 Other segment items 4 210 819 190 400 1,619 Segment profit (loss) 3,630 4,470 ( 357 ) ( 674 ) 7,069 Reconciliation of profit (loss) Other revenue 1 1,671 Other cost of sales 1 ( 491 ) Other expenses 1 ( 2,016 ) Interest expense ( 4,108 ) Income from equity method investments 4,269 Other non-operating income 179 Other corporate expenses 5 ( 3,507 ) Elimination of intersegment profits 336 Income before income taxes $ 3,402 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 $ 87.0 thousand for the six months ended September 30, 2024. After eliminations, Other revenue from third parties is $ 1.6 million for the six months ended September 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 September 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 137 298 34 213 682 145 827 Capital Expenditures 81 47 15 — 143 33 176 Three Months Ended September 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 112 368 95 202 777 172 949 Capital Expenditures 70 14,612 158 — 14,840 — 14,840 Six Months Ended September 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 275 1,055 70 420 1,820 291 2,111 Capital Expenditures 146 213 15 — 374 33 407 Six Months Ended September 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 210 558 190 400 1,358 351 1,709 Capital Expenditures 261 14,674 212 — 15,147 32 15,179 35 Reconciliation of operating income (loss) and elimination of intersegment loss was as follows: Three Months Ended September 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 $ 1,615 $ 6,838 $ 1,619 $ ( 278 ) $ 9,794 $ ( 4,286 ) $ — $ 5,508 Intersegment operating (loss) income — ( 61 ) — — ( 61 ) ( 81 ) 142 — Operating income (loss) 1,615 6,777 1,619 ( 278 ) 9,733 ( 4,367 ) 142 5,508 Three Months Ended September 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 $ 1,808 $ 3,372 $ 418 $ ( 211 ) $ 5,387 $ ( 1,767 ) $ — $ 3,620 Intersegment operating (loss) income ( 7 ) ( 178 ) — — ( 185 ) ( 59 ) 244 — Operating income (loss) 1,801 3,194 418 ( 211 ) 5,202 ( 1,826 ) 244 3,620 Six Months Ended September 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 $ 3,081 $ 7,790 $ 2,957 $ ( 527 ) $ 13,301 $ ( 6,947 ) $ — $ 6,354 Intersegment operating (loss) income — ( 156 ) — — ( 156 ) ( 130 ) 286 — Operating income (loss) 3,081 7,634 2,957 ( 527 ) 13,145 ( 7,077 ) 286 6,354 Six Months Ended September 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 $ 3,644 $ 4,696 $ ( 357 ) $ ( 674 ) $ 7,309 $ ( 4,247 ) $ — $ 3,062 Intersegment operating (loss) income ( 14 ) ( 226 ) — — ( 240 ) ( 96 ) 336 — Operating income (loss) 3,630 4,470 ( 357 ) ( 674 ) 7,069 ( 4,343 ) 336 3,062 36 18. 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 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 $ 0.4 million as of September 30, 2025. For the three and six months ended September 30, 2025, a gain has been recorded due to an increase in fair value of $ 0.3 million and $ 0.7 million, respectively. 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. 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 September 30, 2025, the balances were comprised of the following (in thousands): 37 Shanwick RNCI Contrail RNCI Total Beginning Balance as of April 1, 2025 $ 5,176 $ 1,878 $ 7,054 Distribution to non-controlling members — ( 377 ) ( 377 ) Net income attributable to non-controlling interests 258 392 650 Other comprehensive income attributable to the RNCI 254 — 254 Redemption value adjustments ( 70 ) 709 639 Ending Balance as of September 30, 2025 $ 5,618 $ 2,602 $ 8,220 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 September 30, 2025, for its Investment Function, the Company has contributed $ 19.6 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 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. 19. 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 $ 4.6 million and $ 4.4 million at September 30, 2025 and March 31, 2025, respectively. There were no liabilities recorded related to the nonfinancial guarantees at both September 30, 2025 and March 31, 2025. 20. Subsequent Events On October 21, 2025, the Company and a wholly-owned, indirect subsidiary of the Company delivered a Sale and Implementation Deed with the Court-Appointed Administrators of Regional Express Holdings Limited (Rex). If creditor, court and other approvals are received, the Company then expects to close the proposed transaction by calendar year end. The proposed transaction provides for the Company's indirect subsidiary to acquire all of the outstanding capital stock of Rex, which operates the leading regional airline in Australia. 38