What changed in this filing

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Item 1A. Risk Factors

2026-06-29 compared with 2025-06-27 · 135 added, 66 removed, 495 unchanged (29% of the section changed)

Risk Factors.

General Business Risks

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• Withdrawal, suspension or revocation of governmental authorizations or approvals could negatively affect our business.

• We are exposed to foreign exchange rate fluctuations and, through our international operations, we may suffer losses as a result of adverse fluctuations in foreign currency exchange rates.

Risks Related to Rex

• We may not be able to successfully integrate Rex into our operations, including our financial reporting processes, which could adversely affect our business, results of operations, and financial condition.

• Rex operates in a highly regulated industry, and failure to comply with applicable laws and regulations could materially adversely affect our business.

• Rex’s ability to return its Saab 340 fleet to service depends on the availability of engine overhaul capacity, parts, and skilled labor, and failure to achieve fleet reactivation milestones could result in non-compliance with the Rex Regional Commitments and adverse consequences under the Commonwealth Facilities.

• Rex derives an important portion of its revenues and network position from state government regulated route contracts and protected airport slots that are subject to periodic re-tender, renewal, or expiration, and the loss of these arrangements could adversely affect Rex’s business.

• The Rex Acquisition involves risks related to voluntary administration proceedings in Australia and the DOCA structure, including uncertainties regarding liabilities, claims, obligations, and potential adverse impacts on customer and counterparty acceptance of Rex’s business following the proceedings.

• The recognition of a bargain purchase gain could increase scrutiny by investors and regulators, and could lead to disputes regarding valuations and assumptions.

• A significant portion of Rex’s revenues, expenses, assets, and liabilities may be denominated in Australian dollars, and fluctuations in exchange rates could adversely affect our reported results.

• We incurred and assumed significant obligations in connection with the Rex Acquisition, including obligations related to the Commonwealth Facility Agreement ("CFA") debt (the "CFA Debt"), and we may require additional liquidity to support Rex’s operations.

• Rex’s operating costs and revenues may be subject to volatility, and Rex may not be able to offset cost increases or revenue decreases through pricing or other measures.

• A substantial portion of Rex’s workforce is represented by labor unions under Enterprise Agreements, and labor disputes, work stoppages, or unsuccessful negotiations of replacement agreements could disrupt Rex’s operations and adversely affect our business and results of operations.

• Wage escalations and other cost-of-living adjustments under Rex’s Enterprise Agreements could increase Rex’s operating costs, and Rex may not be able to fully offset those increases through pricing or other measures.

Risks Related to Air T Funding

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The techniques used in these attacks change frequently and may be difficult to detect for periods of time and we may face difficulties in anticipating and implementing adequate preventative measures.

A failure or breach in security could expose our company as well as our customers and suppliers to risks of misuse of information, compromising confidential information and technology, destruction of data, production disruptions, ransom payments, and other business risks which could damage our reputation, competitive position and financial results of our operations.

A failure or breach in security could expose our company as well as our customers and suppliers to risks of misuse of information, compromising confidential

information and technology, destruction of data, production disruptions, ransom payments, and other business risks which could damage our reputation, competitive position and financial results of our operations.

Further, our technology resources may be strained due to an increase in the number of remote users.

In addition, defending ourselves against these threats may increase costs or slow operational efficiencies of our business.

If any of the foregoing were to occur, it could have a material adverse effect on our business and results of operations.

We sustained a cybersecurity attack in May 2022 involving ransomware that caused a network disruption and impacted certain of our systems.

Upon detection, we undertook steps to address the incident, including engaging a team of third-party forensic experts and notifying law enforcement.

We restored network systems and resumed normal operations.

We have taken actions to improve our existing systems such as adding multi-factor authentication and to improve employee training and security competency.

While we do not believe this event or resultant actions had or will have a material adverse effect on our business, this or similar incidents, or any other such breach of our data security infrastructure could have a material adverse effect on our business, results of operations and financial condition.

If any of the foregoing were to occur, it could have a material adverse effect on our business and results of operations and financial condition.

Although we maintain cybersecurity liability insurance, our insurance may not cover potential claims or may not be adequate to indemnify us for any liability that may be incurred.

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tariff and import/export regulations may have a negative effect on our suppliers and/or service providers and, in turn, could have a material adverse impact on our financial condition.

The United States has recently enacted and proposed to enact significant new tariffs.

has recently enacted and proposed to enact significant new tariffs.

Additionally, President Trump has directed various federal agencies to further evaluate key aspects of U.S.

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trade policies, treaties and tariffs.

There continues to exist significant uncertainty about the future relationship between the United States and other countries with respect to such trade policies, treaties and tariffs.

These developments, or the perception that any of them could occur, may have a material adverse effect on global economic conditions and the stability of global financial markets, and may significantly impact the cost of our products and services, and other parts and supplies sourced internationally or impact the cost of service providers located outside of the United States, which in turn could negatively impact us.

There continues to exist significant uncertainty about the future relationship between the U.S.

and other countries with respect to such trade policies, treaties and tariffs.

Risks Related to Our Structure and Financing/Liquidity Risks

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Nick Swenson, our President, Chief Executive Officer and Chairman of the Board, beneficially owns an aggregate of 1,352,938 shares of our Common Stock, which represents approximately 50.06% of the voting power of our outstanding Common Stock.

Since our President, CEO/Chairman owns a majority of the voting power for the election of our directors, and we do meet the definition of a “controlled company.” As a result, these requirements would not apply to us as long as we remain a “controlled company.”

We currently do not, and we do not expect to, rely on this exemption and we currently comply with, and we expect to continue to comply with, all relevant corporate governance requirements under the Nasdaq listing standards.

Our President, CEO/Chairman owns a majority of the voting power for the election of our directors, and thus we would meet the definition of a “controlled company.” As a result, these requirements would not apply to us as long as we remain a “controlled company.”

Although we qualify as a “controlled company,” we currently do not, and we do not expect to, rely on this exemption and we currently comply with, and we expect to continue to comply with, all relevant corporate governance requirements under the Nasdaq listing standards.

However, if we were to utilize some or all of these exemptions, you may not have the same protections afforded to stockholders of companies that are subject to all of the Nasdaq listing standards that relate to corporate governance.

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Our inability to maintain sufficient liquidity could limit our operational flexibility and also impact our ability to make payments on our obligations as they come due.

obligations to our creditors as they become due, despite the fact that the timing and amounts of our revenues do not match the timing under our debt service obligations.

In addition to being capital intensive and highly leveraged, our aircraft and engine business requires that we maintain sufficient liquidity to enable us to contribute the non-financed portion of engine and aircraft purchases as well as to service our payment obligations to our creditors as they become due, despite the fact that the timing and amounts of our revenues do not match the timing under our debt service obligations.

Our restricted cash is unavailable for general corporate purposes.

Accordingly, our ability to successfully execute our business strategy and maintain our operations depends on our ability to continue to maintain sufficient liquidity, cash and available credit under our credit facilities.

Accordingly, our

ability to successfully execute our business strategy and maintain our operations depends on our ability to continue to maintain sufficient liquidity, cash and available credit under our credit facilities.

Our liquidity could be adversely impacted if we are subjected to one or more of the following:

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Our ability to restructure or refinance our debt will depend on the condition of the capital markets and our financial condition at such time.

Any refinancing of our debt could be at higher interest rates and might require us to comply with more onerous covenants, which could further restrict our business operations.

Any refinancing

of our debt could be at higher interest rates and might require us to comply with more onerous covenants, which could further restrict our business operations.

The terms of our debt instruments may restrict us from adopting some of these alternatives.

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In addition, once completed, acquisitions entail further risks, including:

unanticipated costs and liabilities of the acquired businesses, including environmental liabilities, that could materially adversely affect our results of operations;

unanticipated costs and liabilities of the acquired businesses, including environmental liabilities, that could

materially adversely affect our results of operations;

difficulties in assimilating acquired businesses, preventing the expected benefits from the transaction from being realized or achieved within the anticipated time frame;

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securities laws is recorded, processed, summarized and reported within the required time periods.

Our policies and procedures governing

disclosures may not ensure that all material information regarding us is disclosed in a proper and timely fashion or that we will be successful in preventing the disclosure of material information to a single person or a limited group of people before such information is generally disseminated.

Our policies and procedures governing disclosures may not ensure that all material information regarding us is disclosed in a proper and timely fashion or that we will be successful in preventing the disclosure of material information to a single person or a limited group of people before such information is generally disseminated.

Risks Related to Our Segment Operations

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These risks may reduce the commercial aircraft, engines and parts segment’s engine utilization rates, lease margins, maintenance reserve revenues and proceeds from engine sales, and result in higher legal, technical, maintenance, storage and insurance costs related to repossession and the cost of engines being off-lease.

As a result of the foregoing and other factors, the availability of engines for lease or sale periodically experiences cycles of oversupply and undersupply of given engine models and generally.

As a result of the foregoing and other factors, the availability of engines for lease or sale periodically experiences cycles of oversupply and undersupply of given engine models.

The incidence of an oversupply of engines may produce substantial decreases in engine lease rates and the appraised and resale value of engines and may increase the time and costs incurred to lease or sell engines.

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Our dry-lease agreements with FedEx provide for the lease of specified aircraft by us in return for the payment of monthly rent with respect to each aircraft leased.

The dry-lease agreements provide for the reimbursement by FedEx of our costs, without mark up, incurred in connection with the operation of the leased aircraft for the following:

The dry-lease agreements provide for the reimbursement by FedEx of our costs, without markup, incurred in connection with the operation of the leased aircraft for the following:

fuel, landing fees, third-party maintenance, parts and certain other direct operating costs.

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Because of our dependence on FedEx, we are subject to the risks that may affect FedEx’s operations.

These risks are discussed in FedEx’s periodic reports filed with the SEC including its Annual Report on Form 10-K for the fiscal year ended May 31, 2024.

These risks include but are not limited to the following:

• Global economic and geopolitical conditions and developments in the markets in which it operates;

• Additional changes in international trade policies and relations could significantly reduce the volume of goods transported globally and adversely affect its business and result of operations;

• Its transportation businesses are affected by the price and availability of jet and vehicle fuel;

• Its ability to successfully implement its business strategy and transformation program

• A significant data breach or other disruption to its technology infrastructure could disrupt its operations and result in the loss of critical sensitive or confidential information;

• Failure to adjust its air network to remove costs related to services currently provided to the USPS could adversely affect our profitability;

• Insurance and claims expenses could have material adverse effect on it;

• The effects of any international conflicts or terrorist activities on the transportation infrastructure;

• The failure of third-party service providers to perform as expected, or disruptions in relationships with those providers or their provision of services to FedEx;

• The effects of a widespread outbreak of an illness or any other communicable disease or public health crisis;

• Failure to successfully implement its business strategy and effectively respond to changes in market dynamics and customer preferences;

• Its ongoing assessment of the role of FedEx Freight in its portfolio structure may not result in any consummated transaction or other outcome;

• It depends on the strong reputation and the value of the FedEx brand;

• The effect of intense competition;

• Its businesses are capital intensive, and it must make capital decisions based upon projected volume levels;

• Its ability to execute and effectively operate, integrate, leverage, and grow acquired businesses and realize the anticipated benefits of acquisitions, joint ventures, and strategic alliances and investments;

• Labor-related disruptions and potential changes in labor laws;

• Its ability to attract and retain employee talent, meet its purchased transportation needs, or maintain its company culture, as well as increases in labor and purchased transportation costs;

• Challenges to the status of service providers providing certain linehaul and pickup-and-delivery operations as direct and exclusive employers of drivers providing these services is being challenged;

• Potential changes to pilot flight and duty time regulations could impair its operations and impose substantial costs;

• Increasing costs, the volatility of costs and funding requirements, and other legal mandates for employee benefits, especially pension and healthcare benefits;

• It could be affected by global climate change or by legal, regulatory, or market responses to such change;

• It may be unable to achieve or demonstrate progress on our goal of carbon neutrality for global operations by calendar 2040;

• Its inability to quickly and effectively restore operations following adverse weather or a localized disaster or disturbance in a key geography;

• Government regulation and enforcement are evolving and unfavorable changes could harm its business;

• It could be subject to adverse changes in regulations and interpretations or challenges to its tax positions;

• The regulatory environment for global aviation or other transportation rights may affect its operations and increase operating costs;

• Its business is subject to complex and evolving U.S.

and foreign laws and regulations regarding data protection.

We derive a significant portion of our revenue from business with FedEx.

Accordingly, adverse developments affecting FedEx or its transportation network could adversely affect our business, results of operations, financial condition and cash flows.

FedEx’s periodic reports filed with the SEC, including its Annual Report on Form 10-K for the fiscal year ended May 31, 2025 and subsequent Quarterly Reports on Form 10-Q, describe risks relating to macroeconomic and geopolitical conditions, trade policies, fuel prices and availability, network and technology disruptions, labor and transportation regulation, competition, and

weather or other disruptions affecting transportation infrastructure.

If any of those risks adversely affect FedEx, our business with FedEx may also be adversely affected.

A material reduction in the aircraft we fly for FedEx could materially adversely affect our business and results of operations.

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Under our leases, our lessees are primarily responsible for maintaining our aircraft and engines and complying with all governmental requirements applicable to the lessee and the aircraft and engines, including operational, maintenance, government agency oversight, registration requirements and airworthiness directives.

However, over time, certain lessees have experienced, and may experience in the future, difficulties in meeting their maintenance and recordkeeping obligations as specified by the terms of our leases.

However, over time, certain lessees have experienced, and may experience in the future, difficulties in meeting their maintenance and recordkeeping obligations as

specified by the terms of our leases.

Failure by our lessees to maintain our assets in accordance with requirements could negatively affect the value and desirability of our assets and expose us to increased maintenance costs that may not be sufficiently covered by supplemental maintenance rents paid by such lessees.

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Any of these events may adversely affect the value of the engine, unless and until remedied, and reduce our revenues and increase our expenses.

If an engine is damaged during a lease and we are unable to recover from the lessee or though insurance, we may incur a loss.

If an engine is damaged during a lease and we are unable to recover from the lessee or through insurance, we may incur a loss.

We may experience losses and delays in connection with repossession of engines or aircraft when a lessee defaults.

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Department of Homeland Security, through the U.S.

Customs and Border Protection, enforces regulations related to the import of engines and aircraft into the United States for maintenance or lease and imports of parts for installation on our engines and aircraft.

Customs and Border Protection, enforces regulations related to the import of engines and aircraft into the U.S.

for maintenance or lease and imports of parts for installation on our engines and aircraft.

Restriction Lists .

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For example, the U.S.

Foreign Corrupt Practices Act (the “ FCPA ”) and similar world-wide anti-bribery laws generally prohibit improper payments to foreign officials for the purpose of influencing any official act or decision or securing any improper advantage.

Foreign Corrupt Practices Act (the

“ FCPA ”) and similar world-wide anti-bribery laws generally prohibit improper payments to foreign officials for the purpose of influencing any official act or decision or securing any improper advantage.

The scope and enforcement of such anti-corruption laws and regulations may vary.

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Natural and other disasters can also significantly affect fuel availability and prices.

The cost of fuel represents a major expense to airlines that is not within their control, and significant increases in fuel costs or hedges that inaccurately assess the direction of fuel costs can materially and adversely affect their operating results.

operating results.

Due to the competitive nature of the aviation industry, operators may be unable to pass on increases in fuel prices to their customers by increasing fares in a manner that fully offsets the increased fuel costs they may incur.

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Our legal rights and the relative difficulty of repossession vary significantly depending on the jurisdiction in which an aircraft or engines are located.

We may need to obtain a court order or consents for de-registration or re-export, a process that can differ substantially from county to country.

We may need to obtain a court order or consents for de-registration or re-export, a process that can differ substantially from country to country.

When a defaulting lessee is in bankruptcy, protective administration, insolvency or similar proceedings, additional limitations may also apply.

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If our lessees fail to discharge aircraft liens for which they are responsible, we may be obligated to pay to discharge the liens.

In the normal course of their businesses, our lessees are likely to incur aircraft and engine liens that secure the payment of airport fees and taxes, custom duties, Eurocontrol and other air navigation charges, landing charges, crew wages, and other liens that may attach to our aircraft.

that may attach to our aircraft.

Aircraft may also be subject to mechanic’s liens as a result of routine maintenance performed by third parties on behalf of our customers.

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In some jurisdictions, aircraft and engine liens may give the holder thereof the right to detain or, in limited cases, sell or cause the forfeiture of the aircraft.

If we are obliged to pay a large amount to discharge a lien, or if we are unable take possession of our aircraft subject to a lien in a timely and cost-effective manner, it could materially and adversely affect our financial results.

If we are obliged to pay a large amount to discharge a lien, or if we are unable to take possession of our aircraft subject to a lien in a timely and cost-effective manner, it could materially and adversely affect our financial results.

If our lessees encounter financial difficulties and we restructure or terminate our leases, we are likely to obtain less favorable lease terms.

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We are subject to governmental regulation and our failure to comply with these regulations could cause the government to withdraw or revoke our authorizations and approvals to do business and could subject us to penalties and sanctions that could harm our business.

Governmental agencies throughout the world, including the FAA, highly regulate the manufacture, repair and operation of aircraft operated in the United States and equivalent regulatory agencies in other countries, such as the EASA in Europe, regulate aircraft operated in those countries.

Governmental agencies throughout the world, including the FAA, highly regulate the manufacture, repair and operation of aircraft operated in the U.S.

and equivalent regulatory agencies in other countries, such as the EASA in Europe, regulate aircraft operated in those countries.

With the aircraft, engines and related parts that we purchase, lease and sell to our customers, we include documentation certifying that each part complies with applicable regulatory requirements and meets applicable standards of airworthiness established by the FAA or the equivalent regulatory agencies in other countries.

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The extent of casualty losses and loss of income in connection with such events is a function of the severity of the event and the total amount of exposure in the affected area.

Additional consequences of severe weather could include increased insurance premiums and deductibles or a decrease in the availability of coverage.

consequences of severe weather could include increased insurance premiums and deductibles or a decrease in the availability of coverage.

Environmentally hazardous conditions could potentially adversely affect us.

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Furthermore, payment of amounts due on the Junior Subordinated Debentures could adversely affect the Company’s cash flow and liquidity and financial condition.

The Company has the option to extend the interest payment period could delay interest payments on the Trust Preferred Securities.

The Company's option to extend the interest payment period could delay interest payments on the Trust Preferred Securities.

So long as no Debenture Event of Default (as defined herein) has occurred and is continuing, at any time on or after, June 7, 2024, the Company has the right under the Indenture to defer the payment of interest on the Junior Subordinated Debentures at any time or from time to time for a period not exceeding 20 consecutive quarters with respect to each Extension Period, provided that no Extension Period may extend beyond the Stated Maturity of the Junior Subordinated Debentures.

As a consequence of any such deferral, quarterly Distributions on the Trust Preferred Securities by Air T Funding will be deferred (and the amount of Distributions to which holders of the Trust Preferred Securities are entitled will accumulate additional amounts thereon at the rate of 8% per annum, compounded quarterly, from the relevant payment date for such Distributions, to the extent permitted by applicable law) during any such Extension Period.

the extent permitted by applicable law) during any such Extension Period.

During any such Extension Period, the Company will be prohibited from making certain payments or distributions with respect to the Company’s capital stock (including dividends on or redemptions of common or preferred stock) and from making certain payments with respect to any debt securities of the Company that rank pari passu with or junior in interest to the Junior Subordinated Debentures;

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Upon the occurrence and during the continuation of a Tax Event or an Investment Company Event, the Company has the right to redeem the Junior Subordinated Debentures in whole (but not in part) at 100% of the principal amount together with accrued but unpaid interest to the date fixed for redemption within 90 days following the occurrence of such Tax Event or Investment Company Event and therefore cause a mandatory redemption of the Trust Preferred Securities.

A “Tax Event” means the receipt by the Company and Air T Funding of an opinion of counsel experienced in such matters to the effect that, as a result of any amendment to, or change (including any announced prospective change) in, the laws (or any regulations thereunder) of the United States or any political subdivision or taxing authority thereof or therein, or as a result of any official administrative pronouncement or judicial decision interpreting or applying such laws or regulations, which amendment or change is effective or such pronouncement or decision is announced on or after the original issuance of the Trust Preferred Securities, there is more than an insubstantial risk that (i) Air T Funding is, or will be within 90 days of the date of such opinion, subject to United States federal income tax with respect to income received or accrued on the Junior Subordinated Debentures, (ii) interest payable by the Company on the Junior Subordinated Debentures is not, or within 90 days of such opinion, will not be, deductible by the Company, in whole or in part, for United States federal income tax purposes, or (iii) Air T Funding is, or will be within 90 days of the date of the opinion, subject to more than a de minimis amount of other taxes, duties or other governmental charges.

or any political subdivision or taxing authority thereof or therein, or as a result of any official administrative pronouncement or judicial decision interpreting or applying such laws or regulations, which amendment or change is effective or such pronouncement or decision is announced on or after the original issuance of the Trust Preferred Securities, there is more than an insubstantial risk that (i) Air T Funding is, or will be within 90 days of the date of such opinion, subject to U.S.

federal income tax with respect to income received or accrued on the Junior Subordinated Debentures, (ii) interest payable by the Company on the Junior Subordinated Debentures is not, or within 90 days of such opinion, will not be, deductible by the Company, in whole or in part, for U.S.

federal income tax purposes, or (iii) Air T Funding is, or will be within 90 days of the date of the opinion, subject to more than a de minimis amount of other taxes, duties or other governmental charges.

An “Investment Company Event” means the receipt by the Company and Air T Funding of an opinion of counsel experienced in such matters to the effect that, as a result of any change in law or regulation or a change in interpretation or application of law or regulation by any legislative body, court, governmental agency or regulatory authority, Air T Funding is or will be considered an “investment company” that is required to be registered under the Investment Company Act, which change becomes effective on or after the original issuance of the Trust Preferred Securities.

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In the event that (i) there is a Debenture Event of Default (as defined herein) with respect to the Junior Subordinated Debentures (see “Description of the Junior Subordinated Debentures -- Events of Default”), (ii) the Property Trustee fails to pay any distribution on the Trust Preferred Securities for 30 days (subject to deferral of distributions), (iii) the Property Trustee fails to pay the redemption price on the Trust Preferred Securities when due upon redemption, (iv) the Property Trustee fails to observe a covenant in the Trust Agreement for the Trust Preferred Securities for 60 days after receiving a Notice of Default, or (v) the Property Trustee is declared bankrupt or insolvent and not replaced by the Company within 60 days, the holders of a majority of the outstanding Trust Preferred Securities will be able to remove the Property Trustee and the Indenture Trustee (but not the Administrative Trustees who may only be removed by the Company as holder of the Trust's common securities).

Risks Related to Rex

We may not be able to successfully integrate Rex into our operations, including our financial reporting processes, which could adversely affect our business, results of operations, and financial condition.

During the quarter ended December 31, 2025, Air T Rex completed the Acquisition of Rex.

Integrating Rex into the Company involves substantial risks, including, among others:

integrating financial reporting processes, policies, and internal controls;

implementing consistent accounting policies and reporting timelines;

integrating information technology systems;

retaining key personnel;

and coordinating governance, compliance, and risk management across jurisdictions.

Integration activities are complex and may require significant management attention and additional costs.

If we are unable to integrate Rex effectively or within anticipated timeframes, our results of operations, cash flows, and ability to timely produce accurate financial statements could be adversely affected.

Rex operates in a highly regulated industry, and failure to comply with applicable laws and regulations could materially adversely affect our business.

Rex’s operations are subject to extensive regulation and oversight, including requirements relating to safety, maintenance, training, operational performance, and consumer and other regulatory compliance.

Compliance failures, safety incidents, adverse regulatory findings, operational restrictions, reputational harm, or other disruptions could result in fines, penalties, increased costs, reduced demand, and limitations on Rex’s operations, any of which could materially adversely affect our business and results of operations.

Rex’s ability to return its Saab 340 fleet to service depends on the availability of engine overhaul capacity, parts, and skilled labor, and failure to achieve fleet reactivation milestones could result in non-compliance with the Rex Regional Commitments and adverse consequences under the Commonwealth Facilities.

A significant portion of Rex’s owned Saab 340 fleet was out of service at the time of the Acquisition pending heavy maintenance and engine overhauls, and Rex’s operating plan depends on returning aircraft to service on an anticipated schedule.

The fleet reactivation program requires, among other things, the timely availability of engine maintenance, repair and overhaul capacity from third-party providers, serviceable engines and parts, and licensed aircraft maintenance engineers, pilots, and other

skilled personnel, each of which is in limited supply and subject to intense competition from larger carriers.

Unscheduled engine removals and other unplanned maintenance events can reduce the number of aircraft in service at any given time.

In addition, the Saab 340 is no longer in production, which may constrain the long-term availability of parts, engines, and third-party support for Rex’s fleet.

Under the Rex Regional Commitments associated with the Commonwealth Facilities, Rex has committed, on a commercially reasonable best-efforts basis, to operate minimum numbers of Saab 340 aircraft in accordance with an agreed schedule that increases over time and to maintain minimum weekly service levels on certain routes on which Rex is the sole operator.

If Rex fails to maintain compliance with the Rex Regional Commitments and a resulting event of default occurs, interest would accrue on the Commonwealth Term Loan at 2.00% per annum, the interest rate under the New Facility Agreement would increase by 2.00% per annum during the period of non-compliance, and the Commonwealth could exercise remedies under the Commonwealth Facilities and related security arrangements, which are secured by security interests over substantially all of the assets of the Rex group.

Any of these outcomes could materially adversely affect our business, financial condition, results of operations, and cash flows.

Rex derives an important portion of its revenues and network position from state government regulated route contracts and protected airport slots that are subject to periodic re-tender, renewal, or expiration, and the loss of these arrangements could adversely affect Rex’s business.

Rex operates six regulated routes in Queensland under contracts with the Queensland Department of Transport and Main Roads that expire on December 31, 2026, subject to extension options exercisable by the State, and three regulated routes in Western Australia under a deed of agreement that expires on June 30, 2028.

These contracts are awarded through periodic competitive tenders, and certain of them carry government subsidy payments.

There can be no assurance that Rex will retain these contracts upon re-tender or that any renewed contracts will be on terms as favorable as existing terms.

In addition, Rex’s retention of certain slots at Sydney Airport used for regional services has been supported by ministerial directions to the Sydney Airport slot manager;

if these protections lapse and Rex is unable to satisfy applicable slot usage requirements while portions of its fleet remain out of service, Rex could lose slots that are important to its network.

The loss of regulated route contracts, reductions in government subsidies, or the loss of protected slots could materially adversely affect Rex’s revenues and results of operations and its ability to comply with the Rex Regional Commitments.

The Rex Acquisition involves risks related to voluntary administration proceedings in Australia and the DOCA structure, including uncertainties regarding liabilities, claims, obligations, and potential adverse impacts on customer and counterparty acceptance of Rex’s business following the proceedings.

The Rex Acquisition was executed pursuant to the DOCA and related transaction structure.

Matters arising from voluntary administration proceedings and the DOCA may involve uncertainty regarding the identification, timing, and resolution of liabilities, claims, contingencies, and other obligations.

In addition, the proceedings and the DOCA may affect perceptions of Rex among customers, suppliers, and other counterparties, and such parties may be reluctant to do business with Rex or may require more onerous commercial terms.

If liabilities, claims, contingencies, or compliance obligations are greater than anticipated, if disputes arise, or if we experience delays in resolving administration-related matters, or if customer or counterparty acceptance is adversely affected, our results of operations, financial condition, and liquidity could be adversely affected.

Risks Related to Accounting and the Bargain Purchase Gain

The recognition of a bargain purchase gain could increase scrutiny by investors and regulators, and could lead to disputes regarding valuations and assumptions.

A bargain purchase gain results when the estimated fair value of net assets acquired exceeds the consideration transferred.

In connection with the Rex Acquisition, the Company recognized a bargain purchase gain based on the current acquisition-date fair value determinations subject to change during the measurement period.

Determining fair value involves significant judgments and estimates, including assumptions regarding future cash flows, discount rates, market multiples, and other inputs.

If the valuations, assumptions, or accounting judgments used in the final purchase price allocation are challenged by investors, regulators, or other parties, our reported results, reputation, and investor perceptions could be adversely affected.

Risks Related to Foreign Operations, Currency, and Financing Exposure

A significant portion of Rex’s revenues, expenses, assets, and liabilities may be denominated in Australian dollars, and fluctuations in exchange rates could adversely affect our reported results.

To the extent Rex’s revenues, expenses, assets, and liabilities are denominated in Australian dollars, changes in exchange rates between the Australian dollar and the U.S.

dollar may affect the Company’s reported revenues, expenses, and cash flows, and may create volatility in our consolidated financial statements.

We may not be able to effectively mitigate currency-related impacts.

We incurred and assumed significant obligations in connection with the Rex Acquisition, including obligations related to CFA Debt, and we may require additional liquidity to support Rex’s operations.

In connection with the Rex Acquisition, we assumed CFA Debt and may require additional liquidity to support Rex’s ongoing operations.

Regional airline operations can be capital intensive and may require significant working capital and liquidity to fund operating expenses and other obligations.

If Rex’s cash flows are insufficient to support operations and obligations as they come due, we may need to obtain additional financing or other sources of liquidity.

There can be no assurance that additional financing will be available on acceptable terms, if at all.

Our inability to access liquidity could materially adversely affect our results of operations and financial condition.

Rex’s operating costs and revenues may be subject to volatility, and Rex may not be able to offset cost increases or revenue decreases through pricing or other measures.

Rex may be exposed to volatility in certain operating costs and revenues that can be difficult to predict and mitigate.

In particular, jet fuel is one of Rex’s largest operating costs;

jet fuel prices are volatile, are influenced by global crude oil prices, refining margins, and geopolitical events, and are denominated in U.S.

Rex does not currently hedge its fuel price or related currency exposure, and certain competitors that maintain fuel hedging programs may have a relative cost advantage during periods of elevated fuel prices.

If Rex is unable to offset increases in operating costs through pricing, surcharges, cost reductions, or other measures, or if Rex is unable to mitigate revenue decreases through pricing, volume, or other initiatives, its operating results could be adversely affected, which could materially adversely affect the Company’s consolidated results.

A substantial portion of Rex's workforce is represented by labor unions under Enterprise Agreements, and labor disputes, work stoppages, or unsuccessful negotiations of replacement agreements could disrupt Rex's operations and adversely affect our business and results of operations.

As of March 31, 2026, approximately 739 of Rex's 969 employees, or approximately 76% of Rex's workforce, were covered by one of five Enterprise Agreements ("EBAs") negotiated under the Australian Fair Work Act 2009 with the Transport Workers Union, the Australian Services Union / United Services Union, the Australian Licensed Aircraft Engineers Association, the Flight Attendants Association of Australia, and the Australian Federation of Air Pilots.

Rex's pilots, flight attendants, aircraft engineers, network operations and call center personnel, and ground services personnel are each represented by one of these unions.

As of March 31, 2026, two of Rex's five EBAs — the Airline Collective Agreement covering ASU/USU-represented employees, and the Aircraft Engineers Agreement covering ALAEA-represented employees — had passed their nominal expiry dates and remained in effect pending the approval of replacement agreements.

In-principle agreements to replace each of those EBAs had been reached and were in drafting at the date of this Report, but no assurance can be given that either replacement agreement will be approved by the Fair Work Commission on the contemplated terms or within the contemplated timeframe.

In addition, the Pilots' Agreement covering AFAP-represented pilots has a nominal expiry date of June 30, 2026, and negotiations for a replacement agreement had commenced as of the date of this Report.

If Rex is unable to negotiate replacement EBAs on acceptable terms, or if Rex experiences a labor dispute, strike, work stoppage, slowdown, or other industrial action involving any of its represented employee groups, Rex's ability to operate flights on its scheduled routes and to meet its obligations to passengers, customers, and counterparties (including under the Commonwealth Facility Agreement and related Rex Regional Commitments) could be materially impaired.

Pilots, aircraft engineers, and flight attendants are highly specialized and difficult to replace, and Rex may not be able to recruit replacement personnel quickly or on acceptable terms in the event of any extended labor disruption.

Any of these outcomes could materially adversely affect our business, financial condition, results of operations, cash flows, and reputation.

Wage escalations and other cost-of-living adjustments under Rex's Enterprise Agreements could increase Rex's operating costs, and Rex may not be able to fully offset those increases through pricing or other measures.

Each of Rex's EBAs provides for scheduled annual wage increases over the term of the agreement, with a contractual catch-up mechanism that applies the greater of the Australian Consumer Price Index or the applicable industry Award Percentage, up to a stated ceiling.

Inflationary conditions in Australia, including Australian CPI levels that have at times exceeded the contractual floor, could result in wage increases at or near the contractual ceiling for one or more agreements.

In addition, certain replacement EBAs that were approved in the period leading up to and shortly after our fiscal year end include enhancements

beyond base-salary increases, including, in the case of the ALAEA Aircraft Engineers Agreement, increased overtime payments and additional leave for seven-day shift workers.

Labor costs represent a significant portion of Rex's total operating costs.

If Rex is unable to fully offset increased labor costs through ticket pricing, cost reductions in other areas, productivity improvements, or other measures, including under the route-and-service commitments associated with the Commonwealth Facility Agreement, Rex's operating margins, cash flows, and results of operations could be adversely affected, which could in turn adversely affect the Company's consolidated results.

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

What changed 10-K

Item 1A. Risk Factors