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Item 7. Management’s Discussion and Analysis

2026-06-29 compared with 2025-06-27 · 381 added, 199 removed, 140 unchanged (81% of the section changed)

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Our goal is to prudently and strategically grow Air T's earnings power, compounding its free-cash-flow per share over time.

We currently operate in four industry segments:

We currently operate in five industry segments:

• Overnight air cargo, which operates in the air express delivery services industry;

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commercial aircraft parts sales;

procurement services and overhaul and repair services to airlines and;

procurement services and overhaul and repair services to airlines;

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

• Regional airline, which provides scheduled regional passenger, freight and charter airline services and pilot training in Australia, operating a fleet of Saab 340 aircraft serving regional communities and connecting passengers to major metropolitan centers.

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

Further, Corporate and other also comprises insignificant businesses and business interests.

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

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

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

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

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

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

On December 18, 2025, the Company introduced a new reportable segment, regional airline.

This new segment includes all reportable activities of the Company's most recent acquisition, Regional Express Holdings Pty Ltd ("Rex"), as discussed in Note 2 .

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

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

Recent Events

On December 18, 2025, the Company, through its indirect wholly owned subsidiary Air T Rex Acquisition, Inc., completed the Acquisition of all of the outstanding capital stock of Rex.

The Acquisition was completed pursuant to a share purchase agreement in the context of Rex’s voluntary administration proceedings in Australia, which commenced on July 30, 2024, and the related Deed of Company Arrangement ("DOCA") process.

The Acquisition represents a significant transaction for the Company and is expected to meaningfully affect the Company’s business, including expanding the Company’s operating footprint into Australia and adding a regulated regional airline operation to the Company’s portfolio.

The Company expects that

integrating Rex will require significant management attention and the coordination of operational oversight, safety and regulatory compliance, governance, and financial reporting processes and controls across jurisdictions, and may involve additional costs and complexity.

Rex’s results of operations have been included in the Company’s consolidated financial statements only for the period from December 18, 2025 through March 31, 2026.

As a result, the Company’s operating results for the year ending March 31, 2026 reflect only a short stub period of Rex operations and do not reflect the full-period impact of the Acquisition on the Company’s operating results, cash flows, or financial condition, and period-to-period comparisons may not be indicative of the ongoing operating results of Rex or the combined Company in future periods.

The Company recognized a $111.2 million non-cash bargain purchase gain in fiscal 2026 based on the current purchase price allocation for the Rex Acquisition on December 18, 2025.

The gain reflects the excess of the acquisition-date fair value of the net assets acquired over the consideration transferred and is subject to change over the measurement period.

The bargain purchase gain does not represent cash generated by Rex or operating income from Rex’s business.

See “ Non-Operating Income (Expense) ” below and Note 2 of Notes to Consolidated Financial Statements included under Part II, Item 8 of this report.

Unconsolidated Investments.

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

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

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

The Company also has ownership interests in Lendway and CCI.

The Company has ownership interest in Crestone Asset Management, LLC, formerly known as Contrail Asset Management LLC, an aircraft capital joint venture called Crestone JV II LLC, formerly known as Contrail JV II LLC, Blue Crest Aviation Partners 2025-01 ("BCAP"), Bloomia Holdings, Inc.

TULP ("Bloomia"), formerly known as Lendway, Inc.

("Lendway"), Cadillac Casting, Inc.

("CCI") and other smaller entities.

The operations of these companies are not consolidated into the operations of the Company.

See Note 10 of Notes to Consolidated Financial Statements included under Part II, Item 8 of this report.

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

CAM is a full-service aviation asset manager that invests in aircraft and engines on behalf of its capital partners, with a focus on current generation narrow-body aircraft approaching the end of their working lives.

CAM draws on the expertise and capabilities of interrelated aviation specialists across Air T.

CJVII is the investment fund that sits alongside CAM through which CAM acquires aircraft on behalf of its investors.

BCAP launched in August 2025 as a joint venture to acquire mid-life commercial jet aircraft in lease back transactions with airlines around the world.

BCAP leverages Air T's wider network of aviation services through CAM as the asset manager.

Bloomia is one of the largest producers of fresh-cut tulips in the United States, growing over 75 million stems annually for wholesale to retail stores.

CCI is an industry leader in ductile iron castings and major high-volume supplier of engineered cast metal components, primarily serving major automakers.

The company makes products such as engine exhaust manifolds, steering knuckles, and other cast components, primarily for the auto industry.

As a full-service foundry, its work spans from initial design and prototyping all the way through the full product lifecycle.

Forward Looking Statements

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• The risk that contracts with FedEx Corporation (“FedEx”) could be terminated or adversely modified;

• The risk that the number of aircraft operated for FedEx will be reduced;

• The risk that the number of aircraft operated for FedEx is reduced;

• The risk that GGS customers will defer or reduce significant orders for deicing equipment;

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

• The impact of any terrorist activities or armed conflict on U.S.

soil or abroad;

• Changes in U.S.

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• Changes in government regulation and technology;

• The risk that we may not successfully integrate Rex (including financial reporting, systems, and personnel), which could adversely affect our results and reporting;

• The risk that Rex’s revenues and operating costs may be volatile or unpredictable and that we may be unable to offset cost increases or revenue decreases through pricing, surcharges, cost reductions, or other measures, which could adversely affect our results;

• The risk that Rex may be unable to return aircraft to service on anticipated timelines, to retain regulated route contracts and protected airport slots, or to maintain compliance with the Rex Regional Commitments under the Commonwealth Facilities;

• The risk that the bargain purchase gain recognized in connection with the Rex acquisition may increase scrutiny by investors, regulators, creditors, or other parties regarding the valuation assumptions and accounting judgments used in determining the purchase price allocation and bargain purchase gain;

• The risk that Rex’s operations are subject to extensive regulation and oversight and that compliance failures or adverse regulatory actions could materially harm our business and results;

• The risk that the Rex transaction structure, including the Australian DOCA/administration process, could result in unexpected liabilities, claims, or delays that could materially harm our results and liquidity;

• Changes in the value of marketable securities held as investments;

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• Despite our current indebtedness levels, we and our subsidiaries may still be able to incur substantially more debt, which could further exacerbate the risks associated with our substantial leverage.

A forward-looking statement is neither a prediction nor a guarantee of future events or circumstances, and those future events or circumstances may not occur.

We are under no obligation, and we expressly disclaim any obligation, to update or alter any forward-looking statements, whether as a result of new information, future events or otherwise.

We also wish to caution investors that other factors might in the future prove to be important in affecting our results of operations.

New factors emerge from time to time.

It is not possible for management to predict all of such factors, nor can it assess the impact of each such factor on the business or the extent to which any factor, or a combination of factors, may cause actual results to differ materially from those contained in any forward-looking statements.

We undertake no obligation to update publicly or revise any forward-looking statements, whether as a result of new information, future events or otherwise.

Results of Operations

Fiscal 2026 vs.

Operating Revenue

Consolidated revenue increased by $35.2 million (12%) to $327.1 million for the fiscal year ended March 31, 2026 compared to the prior fiscal year.

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

Growth was driven by the inclusion of approximately one quarter of operations of Rex following its acquisition on December 18, 2025, strong demand in ground support equipment, and gains across overnight air cargo and digital solutions, partially offset by a decline in our commercial aircraft, engines and parts segment revenue, reflecting the adjustment of Contrail's trading activity from an elevated prior-year baseline.

The following table details revenue for our five segments, gross of intercompany (in thousands):

Year Ended March 31, Change

Mountain Air Cargo, Inc.

$ 101,487 $ 101,705 $ (218) — %

CSA Air, Inc.

13,945 14,283 (338) (2) %

Worldwide Aircraft Services, Inc.

11,761 8,923 2,838 32 %

Royal Aircraft Services, LLC

1,494 — 1,494 Newly Acquired May 15, 2025

Overnight Air Cargo 128,687 124,911 3,776 3 %

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

Contrail Aviation Support, LLC 30,934 70,376 (39,442) (56) %

AirCo, LLC, AirCo 1, LLC, AirCo 2, LLC and AirCo Services, LLC 2,160 3,257 (1,097) (34) %

Worthington Aviation, LLC 41,042 33,279 7,763 23 %

Jet Yard, LLC and Jet Yard Solutions, LLC 9,506 7,032 2,474 35 %

Air'Zona Aircraft Services, Inc.

1,659 2,088 (429) (21) %

Landing Gear Support Services, Inc.

4,608 3,380 1,228 36 %

Commercial Aircraft, Engines and Parts 89,909 119,412 (29,503) (25) %

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

Segments total

Global Ground Support, LLC 47,185 38,940 8,245 21 %

Ground Support Equipment 47,185 38,940 8,245 21 %

Ambry Hill Technology, LLC 937 940 (3) — %

WorldACD Market Data B.V.

8,160 6,328 1,832 29 %

Digital Solutions 9,097 7,268 1,829 25 %

Regional Express Holdings Pty Ltd

55,314 — 55,314 Newly Acquired December 18, 2025

Regional Airline 55,314 — 55,314 Newly Acquired December 18, 2025

Reportable segments total 330,192 290,531 39,661 14 %

Corporate and Other 5,074 3,570 1,504 42 %

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

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

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

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

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

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

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

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

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

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

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

Intersegment eliminations (8,176) (2,251) (5,925) 263 %

Consolidated Air T, Inc.

$ 327,090 $ 291,850 $ 35,240 12 %

Overnight Air Cargo

Revenues from the overnight air cargo segment for the fiscal year ended March 31, 2026 increased by $3.8 million (3%) compared to the prior fiscal year.

The increase was driven by WASI and Royal.

Royal was a new acquisition in May 2025, driving an additional $1.5 million in revenue with no prior-year comparable.

WASI experienced an increase in revenue of $2.8 million, driven by increases in labor revenue from expanded third-party maintenance activity and project-based revenue.

Revenues at MAC and CSA remained relatively consistent with the prior year.

Commercial Aircraft, Engines and Parts

The commercial aircraft, engines and parts segment contributed $89.9 million of revenues in the fiscal year ended March 31, 2026 compared to $119.4 million in the prior fiscal year, which is a decrease of $29.5 million (25%).

The decrease was largely attributable to a $38.8 million decrease in component sales at Contrail.

The prior year reflected an elevated level of trading activity not expected to recur at that level in the foreseeable future.

The decrease in revenue at Contrail was partially offset by activity at the other companies in this segment.

Most notably, Worthington increased by $7.8 million, or 23%, to $41.0 million, reflecting MRO volume growth and expansion in Australia.

Revenue at LGSS increased by $1.2 million, or 36%, to $4.6 million, driven by a brokered landing gear sale and incremental lease revenue.

Jet Yard Companies won new major projects and additional off-site teardown projects.

Ground Support Equipment

The ground support equipment segment contributed approximately $47.2 million and $38.9 million to the Company’s revenues for the fiscal years ended March 31, 2026 and 2025, respectively, representing an $8.2 million (21%) increase in the current fiscal year.

Revenue growth reflected new and expanded deicing contracts and catering equipment sales.

These increases were partially offset by lower overhaul revenue.

At March 31, 2026, the ground support equipment segment’s order backlog was $0.6 million compared to $14.3 million at March 31, 2025, driven by the timing of the annual USAF, which was placed in May 2026 of the current fiscal year.

Digital Solutions

The digital solutions segment contributed $9.1 million of revenues in the fiscal year ended March 31, 2026 compared to $7.3 million in the prior fiscal year, an increase of $1.8 million (25%).

Revenue at WorldACD increased $1.8 million, or 29%, to $8.2 million, reflecting growth in data analytics and airspace management engagements.

Revenue at Ambry Hill Technology, LLC remained flat at $0.9 million with annual recurring revenue at $1.1 million at March 31, 2026.

Regional Airline

Regional airline revenues were $55.3 million, representing the contribution of Rex for the period from its acquisition date of December 18, 2025 through March 31, 2026.

There is no prior-year comparable.

Revenue consisted of passenger revenue, ancillary fees, freight and charter, and government subsidy income.

Operating Income (Loss)

Consolidated segment operating results decreased by $13.1 million from $1.9 million of income in the prior fiscal year to a loss of $11.2 million for the year ended fiscal year ended March 31, 2026.

The decline was driven principally by the initial consolidation of Rex, which contributed an operating loss of $14.2 million for the period from December 18, 2025 through March 31, 2026, and a $4.0 million increase in Corporate and Other operating losses.

These were partially offset by a $5.3 million increase in GGS operating income and an increase of $1.6 million in operating income at WASI.

Following is a table detailing operating income (loss) by segment during the fiscal year ended March 31, 2026 compared to the same period in the prior fiscal year (in thousands):

Year Ended March 31, Change

Mountain Air Cargo, Inc.

$ 3,688 $ 4,977 $ (1,289) (26) %

CSA Air, Inc.

757 839 (82) (10) %

Worldwide Aircraft Services, Inc.

1,959 404 1,555 385 %

Royal Aircraft Services, LLC

(215) — (215) Newly Acquired May 15, 2025

Overnight Air Cargo 6,189 6,220 (31) — %

Contrail Aviation Support, LLC

9,870 11,343 (1,473) (13) %

AirCo, LLC, AirCo 1, LLC, AirCo 2, LLC and AirCo Services, LLC

(2,165) (2,294) 129 6 %

Worthington Aviation, LLC (1,012) (328) (684) (209) %

Jet Yard, LLC and Jet Yard Solutions, LLC

(429) (1,548) 1,119 72 %

Air'Zona Aircraft Services, Inc.

79 121 (42) (35) %

Landing Gear Support Services, Inc.

(112) (797) 685 86 %

Commercial Aircraft, Engines and Parts 6,231 6,497 (266) (4) %

Global Ground Support, LLC 4,110 (1,210) 5,320 440 %

Ground Support Equipment 4,110 (1,210) 5,320 440 %

Ambry Hill Technology, LLC (3,661) (2,798) (863) (31) %

WorldACD Market Data B.V.

2,382 1,734 648 37 %

Digital Solutions (1,279) (1,064) (215) (20) %

Segments total

Regional Express Holdings Pty Ltd

(14,236) — (14,236) Newly Acquired December 18, 2025

Regional Airline (14,236) — (14,236) Newly Acquired December 18, 2025

Reportable segments total 1,015 10,443 (9,428) (90) %

Corporate and Other (13,439) (9,429) (4,010) (43) %

Intersegment eliminations 1,227 894 333 37 %

Consolidated Air T, Inc.

$ (11,197) $ 1,908 $ (13,105) (687) %

Overnight Air Cargo

The overnight air cargo segment contributed $6.2 million to the Company's operating income during both fiscal years ended March 31, 2026 and 2025, remaining relatively flat over both periods.

MAC experienced a $1.3 million decrease in operating income while WASI had a $1.6 million increase in operating income.

MAC's decrease in operating income was driven by increased pilot labor costs.

WASI experienced higher gross margins due to growth on expanded labor and project revenue.

Commercial Aircraft, Engines and Parts

The commercial aircraft, engines and parts segment contributed $6.2 million and $6.5 million to the Company's operating income for the fiscal years ended March 31, 2026 and 2025, respectively, representing a slight decrease of $0.3 million (4%).

Contrail's decrease is a result of decreased component sales, substantially offset by the gain of $7.0 million recognized on the sale of two aircraft that were held on lease during the current fiscal year.

Worthington's operating loss increased to $1.0 million.

Revenue growth of 23% was accompanied by gross margin compression of approximately 18% as costs did not scale proportionally with volume.

Operating expenses as a percentage of revenue were 18%, above the prior-year level, reflecting planned additions to commercial and executive leadership infrastructure.

Operating loss at Jet Yard Companies improved by $1.1 million, or 72%, to $0.4 million.

Increases in services project revenue of over $2.5 million more than offset shortfalls in aircraft induction and storage volumes.

Ground Support Equipment

Operating income from the ground support equipment segment was $4.1 million for the fiscal year ended March 31, 2026, compared to an operating loss of $1.2 million for the fiscal year ended March 31, 2025, representing a $5.3 million improvement.

The improvement reflects gross margin increase of approximately $6.4 million year-over-year, driven by favorable volume and mix, pricing and efficiency gains on expanded deicing contracts, and favorable manufacturing spend and absorption variances compared to the prior year.

Digital Solutions

The digital solutions segment incurred an operating loss of $1.3 million and $1.1 million in the fiscal years ended March 31, 2026 and 2025, respectively.

The change is attributable to an increase in operating loss at Ambry Hill of $0.9 million, partially offset by an increase in operating income at WorldACD of $0.6 million.

WorldACD experienced additional revenue growth in the current year at high incremental margins while Ambry Hill experienced an increase in operating loss from increased personnel costs among a period of stagnant revenue.

Regional Airline

Regional airline operating loss was $14.2 million for the fiscal year ended March 31, 2026 resulting from the acquisition of Rex with no prior-year comparable.

The reported operating loss represents approximately three and a half months of operations from the acquisition date through March 31, 2026.

The operating loss reflects ongoing direct and indirect operating costs during the ramp-up period following acquisition, $8.8 million of depreciation and amortization, $3.4 million of non-recurring landholder duty charges as a direct result of the Acquisition and $2.0 million of non-recurring post-acquisition integration costs.

The results were also affected by the timing of the Acquisition relative to Rex's seasonal demand pattern, as January and February are historically Rex's lowest months for ticket sales due to the post-holiday travel slowdown.

Consistent with this seasonality, March 2026 marked the first month of the consolidation period in which Rex generated positive operating income, reflecting the seasonal recovery in passenger revenue that follows these slower months.

Corporate and Other

Total $ 1,908 $ 1,264 $ 644

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

income of $1.3 million in the prior fiscal year.

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

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

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

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

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

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

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

Twelve Months Ended Change

Corporate and other operating loss increased $4.0 million, or 43%, to $13.4 million.

The increase was primarily driven by $3.7 million of transaction and integration costs associated with the Rex acquisition and higher costs associated with expanded corporate infrastructure to support a larger consolidated group.

Adjusted EBITDA

The Company calculates Adjusted EBITDA by removing the impact of specific items and adding back the amounts of interest expense and depreciation and amortization to earnings before income taxes.

When calculating Adjusted EBITDA, the Company does not add back depreciation expense for assets that are on lease.

See Part II, Item 7 section, Non-GAAP Financial Measures for additional information and reconciliation of consolidated EBITDA to operating income (loss).

The table below provides Adjusted EBITDA for the Company's five segments and Corporate and other for the fiscal years ended March 31, 2026 and 2025 (in thousands):

Year Ended Change

March 31, 2026 March 31, 2025

Mountain Air Cargo, Inc.

$ 4,134 $ 5,298 $ (1,164)

CSA Air, Inc.

Worldwide Aircraft Services, Inc.

2,160 616 1,544

Royal Aircraft Services, LLC

(182) — (182)

Overnight Air Cargo 6,926 6,777 149

Ground Support Equipment (773) (949) 176

Contrail Aviation Support, LLC

9,989 12,567 (2,578)

AirCo, LLC, AirCo 1, LLC, AirCo 2, LLC and AirCo Services, LLC

(2,002) (1,878) (124)

Worthington Aviation, LLC (719) 197 (916)

Jet Yard, LLC and Jet Yard Solutions, LLC

(23) (1,133) 1,110

Air'Zona Aircraft Services, Inc.

Landing Gear Support Services, Inc.

(47) (714) 667

Commercial Aircraft, Engines and Parts 7,330 9,213 (1,883)

Digital Solutions (272) 149 (421)

Segments total

Global Ground Support, LLC 4,251 (773) 5,024

Ground Support Equipment 4,251 (773) 5,024

Ambry Hill Technology, LLC (3,563) (2,704) (859)

WorldACD Market Data B.V.

3,135 2,432 703

Digital Solutions (428) (272) (156)

Regional Express Holdings Pty Ltd

Regional Airline 10 — 10

Reportable segments total 18,089 14,945 3,144

Corporate and Other (8,862) (8,476) (386)

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

Intersegment eliminations 898 894 4

Consolidated Air T, Inc.

$ 10,125 $ 7,363 $ 2,762

Consolidated Adjusted EBITDA for the fiscal year ended March 31, 2026 was $10.1 million, an increase of $2.8 million compared to the prior fiscal year.

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

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

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

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

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

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

The increase was driven primarily by (i) a $5.0 million increase at Global Ground Support (ii) a $1.5 million increase at WASI and (iii) the consolidation of Rex, which contributed $0.0 million of Adjusted EBITDA for the period from December 18, 2025 through March 31, 2026 with no prior-year comparable.

This is partially offset by a $2.6 million decrease in Contrail's Adjusted EBITDA due to lower component trading volumes.

Adjusted EBITDA for the overnight air cargo segment increased by $0.1 million in the current fiscal year, as WASI's substantial improvement offset declines at MAC and CSA.

The segment included $0.1 million of severance expenses recorded at MAC in fiscal 2026, and $0.1 million of non-recurring post-acquisition integration costs at Royal.

Adjusted EBITDA for the commercial aircraft, engines and parts segment was $7.3 million, a decrease of $1.9 million from the prior fiscal year.

Contrail's revenue-driven decline was partially offset by improvement at Jet Yard Companies and LGSS.

The earnout remeasurement gain of $0.7 million and inventory write-down of $0.9 million are recorded within this segment.

Adjusted EBITDA for the ground support equipment segment increased by $5.0 million in the current fiscal year.

The improvement reflects an $8.2 million revenue increase generating approximately $6.4 million of incremental gross margin and the elimination of elevated inventory carrying costs and overhead variances that weighed on fiscal 2025 results.

Adjusted EBITDA for the digital solutions segment decreased by $0.2 million in the current fiscal year, as WorldACD's improvement was offset by wider losses at Ambry Hill Technology.

Adjusted EBITDA of the regional airline segment was $0.0 million.

The significant add-backs to its operating loss of $14.2 million include $8.8 million of depreciation and amortization, $2.0 million of non-recurring post-acquisition integration expenses and $3.4 million of landholder duty charges, a one-time transaction-based tax imposed by Australian state and territory governments on the transfer of interests in landholding entities, incurred as a direct result of the Acquisition.

Corporate and Other Adjusted EBITDA decreased $0.4 million to $(8.9) million.

The significant add-backs to its operating loss of $13.4 million include $3.7 million of acquisition and integration expenses attributable to the Rex acquisition and $0.6 million of depreciation and amortization.

Excluding these non-recurring items, underlying Corporate overhead increased reflecting incremental costs to support the expanded consolidated group.

Non-Operating Income (Expense)

Following is a table detailing non-operating income (expense) during the year ended March 31, 2026 compared to the same twelve months in the prior fiscal year (in thousands):

Year Ended March 31, Change

Interest expense, net (8,387) (6,916) (1,471)

Income from equity method investments 1,700 1,689 11

Interest expense $ (12,040) $ (8,387) $ (3,653)

(Loss) income from equity method investments (1,740) 1,700 (3,440)

Gain on bargain purchase 111,190 — 111,190

Other (193) (209) 16

Total $ (6,896) $ (5,219) $ (1,677)

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

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

$ 97,217 $ (6,896) $ 104,113

The Company had a net non-operating income of $97.2 million for the fiscal year ended March 31, 2026 compared to a net non-operating loss of $6.9 million in the prior fiscal year.

The increase in non-operating income was driven by the $111.2 million gain on bargain purchase of Rex during fiscal 2026, a $3.4 million decrease in operating results allocated to the Company from its equity method investments and an increase in interest expense of $3.7 million driven by additional borrowings on the AAM 24-1 promissory notes and the ATA 25.1 term note entered into during fiscal 2026.

Refer to Note 10 and Note 13 , respectively, of the Notes to Consolidated Financial Statements included under Part II, Item 8 of this Report on Form 10-K.

The gain on bargain purchase recognized in connection with the Rex Acquisition is a non-cash accounting gain recognized under ASC 805 because the acquisition-date fair value of the net assets acquired exceeded the consideration transferred.

The gain does not represent cash generated by Rex or operating income from Rex’s business.

For the fiscal year ended March 31, 2026, the Company reported an operating loss of $11.2 million, including a $14.2 million operating loss from the regional airline segment for the period from December 18, 2025 through March 31, 2026.

The $111.2 million bargain purchase gain increased non-operating income and was the primary reason the Company reported earnings before income taxes of $86.0 million and net income of $78.0 million.

Without this non-cash accounting gain, the Company would have reported a loss before income taxes of approximately $25.2 million for fiscal 2026.

The gain also materially contributed to the increase in the Company’s stockholders’ equity from a deficit of $3.2 million at March 31, 2025 to $79.8 million at March 31, 2026.

During the year ended March 31, 2026, the Company recorded $1.4 million of income tax expense, which yielded an effective rate of 1.6%.

The primary factors contributing to the difference between the federal statutory rate of 21% and the Company’s effective tax rate for the fiscal year ended March 31, 2025 were the foreign rate differentials and changes in valuation allowance.

The primary factors contributing to the difference between the federal statutory rate of 21.0% and the Company’s effective tax rate for the fiscal year ended March 31, 2026 was the bargain purchase gain from the acquisition of Rex and changes in valuation allowance.

The net change in the valuation allowance was $10.9 million for the year ended March 31, 2026.

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

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

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

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

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

During the fiscal year ended March 31, 2025, the Company recorded $0.4 million of income tax expense at an effective tax rate of (8.5)%.

4 unchanged sentences

Market Outlook

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

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

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

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

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

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

Liquidity and Capital Resources

As of March 31, 2025, the Company held approximately $6.5 million in total cash, cash equivalents and restricted cash, of which, $0.5 million related to cash reserved for payments of SAIC's insurance claims.

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

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

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

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

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

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

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

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

As mentioned in Note 12 of Notes to Consolidated Financial Statements included under Part II, Item 8 , on May 30, 2024, Contrail, a majority-owned subsidiary of the Company, entered into a Membership Interest Redemption and Earnout Agreement (the "Redemption Agreement") with OCAS, Inc.

(the "Seller").

Pursuant to the Redemption Agreement, Contrail agreed to purchase and redeem from the Seller, 16% of its 21% interest in Contrail, effective as of April 1, 2024.

price for the redeemed interest is $4.6 million, plus an earnout amount.

The cash purchase price is payable pursuant to a secured, subordinated promissory note ("OCAS Loan"), payable beginning on May 1, 2024 and monthly thereafter for a 12-month period of interest payments only with the outstanding balance amortized and paid over the following three years.

Interest accrues on the principal amount at an annual rate equal to the 10-year Treasury bond yield plus 375 basis points, compounded monthly.

The rate adjusts on each anniversary date of the note.

The payment obligation under the note may be deferred if Contrail’s forecast indicates that any payment following the first 12-month period would cause a loan default or a loan default exists.

Initially, the payment obligation would revert back to interest only, unless a default exists, in which case no payment would be required.

If Contrail is unable to make a payment for 12 months, then interest shall cease to accrue.

The note is expressly subordinated to the payment in full of all indebtedness of Contrail on or prior to the date of the note or thereafter created.

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

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

The New Credit Agreement provides for a secured revolving credit facility ("Revolver - Alerus") in an initial maximum principal amount of up to $14.0 million.

Availability under the Revolver - Alerus is subject to a borrowing base and provides for a sub-facility for the issuance of letters of credit in an aggregate amount not to exceed $3.0 million, with the outstanding amount of any such letters of credit reducing availability for borrowings under the revolving credit facility.

Revolver - Alerus matures on February 28, 2026 and balance outstanding will bear interest at a rate per annum equal to the greater of 5.00% or one-month SOFR plus 2.00%.

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

1 to Credit Agreement ("Amendment No.

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

In addition to the Revolver - Alerus, the New Credit Agreement provides for two secured term loans – Term Note A ("Term Note A - Alerus") and Term Note B ("Term Note B - Alerus").

Term Note A - Alerus is a loan in the principal amount of $10.7 million that matures on August 15, 2029 that bears interest at a rate per annum equal to the greater of 5.00% or one-month SOFR plus 2.00%.

Term Note A - Alerus requires monthly payments of principal commencing September 15, 2024 with such payments set at a seven year level principal amortization and a payment of $3.2 million due at maturity.

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

Term Note B - Alerus is a loan in the principal amount of $2.3 million that matures on August 15, 2029 and bears interest at a rate per annum equal to the greater of 5.00% or one-month SOFR plus 2.00%.

Term Note B - Alerus requires monthly payments of principal commencing September 15, 2024 with such payments set at a 25 year level principal amortization and a payment of $1.8 million due at maturity.

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

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

The obligations of the Original Alerus Loan Parties under the New Credit Agreement and the notes are secured by a first priority security interest in substantially all of the Original Alerus Loan Parties' current assets, including accounts receivable and inventory.

The Company is not a borrower under the New Credit Agreement but has guaranteed the obligations of the Original Alerus Loan Parties owed to the Alerus.

In addition, Air T, Inc.

has pledged a brokerage account of marketable securities held at a securities intermediary to secure the obligations.

Furthermore, the obligations are further secured by a deed of trust on approximately 4.626 acres of real estate that includes a 13,000 square foot office building in Denver, North Carolina.

In connection with the closing of the New Credit Agreement, the Company and its subsidiaries used proceeds from the new financing to satisfy and discharge all obligations, and terminated all commitments, under the Company’s existing secured credit facility with Minnesota Bank & Trust ("MBT").

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

As mentioned in Note 12 of Notes to Consolidated Financial Statements included under Part II, Item 8 , on September 12, 2024, Contrail entered into the Fifth Amendment to the Master Loan Agreement dated June 24, 2019 and Supplement #11 to the Master Loan Agreement, and Term Note J with ONB.

Term Note J is a term loan in the principal amount of $10.0 million.

The loan bears a variable monthly interest rate at the 1-month SOFR Rate plus 3.86% and requires equal monthly payments of principal and interest until the loan maturity date of September 12, 2028.

The loan requires compliance with covenants that require minimum Tangible Net Worth of $15.0 million and a Quarterly Cash Flow Coverage of not less than 1.25 to 1.0.

In order to induce ONB to enter into these agreements, Contrail and OCAS, Inc.

entered into a subordination agreement dated September 12, 2024 to address certain loan matters and to establish the priority of repayment of Contrail’s debt to ONB over the OCAS Loan in the original principal amount of $4.6 million.

As mentioned in Note 1 2 of Notes to Consolidated Financial Statements included under Part II, Item 8 of this report, on October 16, 2024, the Company and AAM 24-1, LLC, a wholly-owned subsidiary of the Company ("AAM 24-1") entered into

a Second Note Purchase Agreement (the “Second NPA”) with two institutional investors (the "Institutional Investors").

The Second NPA amended and restated the terms of the Company’s previously disclosed Note Purchase Agreement (the “Original NPA”), which was filed in a Current Report on Form 8-K on February 26, 2024.

Under the Original NPA, AAM 24-1 had issued and sold $15.0 million of 8.5% senior secured notes.

The Second NPA amended and restated the amount issued and sold to $30.0 million of 8.5% senior secured notes (collectively the "Notes" to the Institutional Investors, which includes the $15.0 million from the Original NPA bringing the total indebtedness to $30.0 million.

The Notes mature on March 1, 2031 and bear an annual interest at a rate of 8.5%.

In addition to the 160,000 previously pledged TruPs, 160,000 newly-issued shares of TruPs held by AAM 24-1 are now pledged to the Institutional Investors, in connection with the closing of the Second NPA.

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

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

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

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

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

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

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

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

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

2 to Credit Agreement and Consent (“Amendment No.

2”) on February 21, 2025.

Amendment No.

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

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

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

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

3 to Credit Agreement ("Amendment No.

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

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

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

In connection with Amendment No.

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

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

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

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

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

As of March 31, 2026, the Company held approximately $25.3 million in cash and cash equivalents and restricted cash, of which, $4.8 million is reserved as collateral under the terms of certain merchant facilities.

The Company has an aggregate of approximately $57.3 million in available funds under its lines of credit as of March 31, 2026.

As of March 31, 2026, the Company’s working capital amounted to $64.5 million, an increase of $33.6 million compared to March 31, 2025, primarily driven by a $38.6 million increase in inventory, a $14.4 million increase in cash and cash equivalents, and a $16.0 million increase in accounts receivable, partially offset by a $33.0 million increase in accrued expenses and other current liabilities and a $19.2 million increase in accounts payable.

The increases in accounts receivable, accounts payable, and accrued expenses and other current liabilities are substantially a result of the acquisition of Rex.

The increase in inventory was primarily attributable to the Rex acquisition and purchases of engines and airframes by the commercial aircraft, engines and parts segment, and the increase in cash and cash equivalents was primarily driven by proceeds from debt.

As mentioned in Note 13 of Notes to Consolidated Financial Statements included under Part II, Item 8 of this Report on Form 10-K, 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 a part of the Alerus Loan Parties to the Alerus credit agreement, as amended and to memorialize Alerus’ consent to the Royal acquisition.

The new term loan matures May 15, 2030 and bears interest at the greater of five (5.0%) percent or the CME one-month term SOFR rate plus 2.25%.

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

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

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

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

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

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

As a result, management believes it is probable that the cash on hand and current financings, net cash provided by operations from its remaining operating segments, together with amounts available under our current revolving lines of credit, as amended, will be sufficient to meet obligations as they become due in the ordinary course of business for at least 12 months following the date these financial statements are issued.

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

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.

As mentioned in Note 13 of Notes to Consolidated Financial Statements included under Part II, Item 8 of this Report on Form 10-K, on May 30, 2025, the Company, along with its wholly owned subsidiary AAM 24-1 (the "Issuer"), entered into new transaction documents with the Institutional Investors that replaced the Second NPA transaction documents.

Pursuant to the Third NPA with the Institutional Investors, the Issuer agreed to issue and sell a Multiple Advance Senior Secured Note in an aggregate principal amount of up to $100.0 million (the “Multiple Advance Note”).

For purposes of clarity and the avoidance of doubt, as of the closing date, the Institutional Investors advanced an additional $10.0 million to the Issuer and, as of March 31, 2026, 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 two percent (2.0%) of the amount being prepaid, and (ii) if the Issuer prepays all or any portion of the Multiple Advance Note after the first anniversary of the Issue Date but on or prior to the second anniversary of the Issue Date, the Issuer is required to pay the Investors a prepayment premium equal to one percent (1.0%) of the amount being prepaid.

If the Issuer elects to prepay a portion of the outstanding principal and accrued but unpaid interest, then in no event can such prepayment be for an amount less than $1.0 million.

The various equity interests that were assigned by the Company to the Issuer on or about the closing date of the original financings continue to serve as collateral for the repayment of the Multiple Advance Note as does 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.

As of March 31, 2026, the Issuer was in compliance with all applicable covenants under the Multiple Advance Note, and an additional $20.0 million was advanced under the facility in $10.0 million increments in October 2025 and March 2026.

As mentioned in Note 13 of Notes to Consolidated Financial Statements included under Part II, Item 8 of this Report on Form 10-K, 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%.

As of December 31, 2025, the Company was in compliance with all covenants applicable under the Revolving Credit Agreement, the Amended and Restated Revolving Credit Note, and the Amended and Restated Term Note A.

As mentioned in Note 13 of Notes to Consolidated Financial Statements included under Part II, Item 8 of this Report on Form 10-K, on November 24, 2025, the Company's wholly-owned subsidiary ATA 22.1 entered into a $6.0 million term loan with Alerus.

The loan proceeds were used to repay amounts due on the $3.5 million term loan from Bridgewater Bank.

The new term loan is due on or before November 24, 2032 and has an interest rate of the greater of 5.00% or 1-month SOFR plus 1.90%.

Interest on the outstanding principal amount of the loan is due on the 15th day of each month and annual principal payments are due on September 30th of each year, commencing September 2026.

The loan may be prepaid at any time without penalty.

The loan is secured by all the assets and membership interests of ATA 22.1 and 200,000 shares of TruPs owned by ATA 22.1, as well as an investment account of Air T.

Events of default of the loan are enumerated in the loan agreement, including, among other events, the failure to pay an amount due timely or a change of control transaction.

The covenants include:

(i) affirmative covenants such as notice, reporting and financial statement delivery requirements, inspection rights, compliance with environmental laws, performance of contracts and a liquidity requirement of not less than $0.4 million;

and, (ii) negative covenants such as a limitation on debt and liens, merger or change of control and limitations on investments, dispositions, sales/leasebacks, restricted payments, prepayments or amendments of debt and transactions with affiliates and restrictive agreements.

As of March 31, 2026, ATA 22.1 and the Company were in compliance with all financial and non-financial covenants applicable under the term loan.

As mentioned in Note 13 of Notes to Consolidated Financial Statements included under Part II, Item 8 of this Report on Form 10-K, on November 24, 2025, Contrail entered into a Master Loan Agreement and Supplement No.

1 to Master Loan Agreement (collectively the “Master Loan Agreement”) with Alerus.

The agreement provides for a $15.0 million revolving loan facility that is evidenced by a Promissory Note Revolving Note dated November 24, 2025 in the principal amount of $15.0 million.

The funds are to be used for the purchases of engines and working capital needs.

The revolving loan carries interest at the rate of 1-month SOFR plus 3.11% and the loan requires payments of interest only until maturity at November 24, 2027.

There is no penalty on prepayment and the loan includes a 30-day resting period requirement if Contrail’s debt service coverage ratio exceeds 1.25 to 1.00.

The loan contains normal and customary default provisions and is secured by a security interest in all of Contrail’s assets.

In addition, the loan is secured by a payment guaranty of Air T, in an aggregate amount not to exceed $2.0 million plus collection and collateral recovery costs.

The Master Loan Agreement contains additional terms regarding the transaction, including affirmative covenants such as a requirement related to the delivery of annual audited and quarterly unaudited financial statements of Contrail and Air T;

the right to inspect, examine and appraise collateral;

insurance requirements as well as negative covenants such as making restricted payments other than permitted redemptions, indebtedness, mergers and acquisitions, investments, lines of business and transactions with affiliates as well as change of control restrictions.

As of March 31, 2026, Contrail and the Company were in compliance with all financial and non-financial covenants applicable under the Master Loan Agreement.

As mentioned in Note 13 of Notes to Consolidated Financial Statements included under Part II, Item 8 of this Report on Form 10-K, on December 15, 2025, the Company and its wholly-owned subsidiary Air T Acquisition 25.1, LLC ("ATA 25.1"), entered into a Note Purchase Agreement (the “Agreement”) with two Institutional Investors (the "Investors"), which Investors had previously entered into the Third Note Purchase Agreement with the Company.

Pursuant to the Agreement, ATA 25.1 issued to the Investors a 11.5% Senior Secured Note due December 15, 2031 in the aggregate principal amount of $40.0 million (the “Investor Note”).

The loan proceeds were made immediately available to ATA 25.1’s wholly-owned subsidiary Air T Lending 25.1, LLC, (“ATL 25.1”) and used to provide financing to Rex pursuant to the Syndicated Loan Note Subscription Agreement – Project Mustang dated December 17, 2025 between and among ATL 25.1, Rex and additional parties (the “New Cap Note Facility”).

The New Cap Note Facility provides a A$50.0 million line of credit, matures on December 15, 2030, and bears interest at 12.0% per annum.

Interest on the New Cap Note Facility must be paid equally between cash and capitalization (i.e., paid-in-kind through the issuance of additional debt), during the initial period, as defined in the Intercreditor Deed (i.e., the period commencing on December 17, 2025 and ending on the earlier of the date the applicable availability period in the New Facility Agreement (as defined below) has ended and the facilities under such loan agreement are fully drawn).

Interest under the New Cap Note Facility is first payable on December 31, 2025, and such interest is payable quarterly thereafter.

The New Cap Note Facility further permits the Rex Companies to incur other unsecured financial indebtedness up to an aggregate limit of A$10.0 million.

Interest on the Investor Note accrues at the rate of 11.5% per annum on the basis of a 30/360-day year (and actual days elapsed) and is payable quarterly in arrears.

The Investor Note matures on December 15, 2031 and may not be prepaid, in whole or in part, prior to June 15, 2027 unless the prepayment premium specified therein has been paid.

The Investor Note is secured by a pledge of all equity interests of ATA 25.1 and is guaranteed by the Company, which guarantee generally covers 25% of principal and interest due under the Investor Note and related documents.

The Agreement includes customary covenants and events of default and restricts, among other things, change of control transactions, dividends and other restricted payments by ATA 25.1.

In connection with the Investor Note, the Company, ATA 25.1, Air T Rex Acquisition, Inc., a wholly-owned subsidiary of ATA 25.1 ("Air T Rex"), and the Investors entered into a Contingent Payment Agreement that provides the Investors with the right to receive up to A$8.0 million (the "Maximum Contingent Payment Amount") of contingent payments after the Investor Note has been repaid in full, based on the gross revenues of Air T Rex and its direct and indirect subsidiaries on a consolidated basis.

Upon full repayment of the Investor Note, ATA 25.1 shall pay the Investors contingent payments equal to 0.5% of the aggregate gross revenue of Air T Rex and its direct and indirect subsidiaries for each fiscal year beginning with the year the Investor Note has been repaid in full and continuing until the Investors have received an aggregate of the Maximum Contingent Payment Amount.

Each annual payment is capped at A$2.0 million, with any excess above the cap treated as a rollover amount that carries forward to subsequent years until the Maximum Contingent Payment amount is reached.

The Company determined the fair value of the Contingent Payment Agreement using a Monte Carlo simulation to estimate the potential contingent payments.

As of March 31, 2026, the carrying value of the Contingent Payment Agreement was $1.3 million.

As mentioned in Note 13 of Notes to Consolidated Financial Statements included under Part II, Item 8 of this Report on Form 10-K, in December 2025, as part of the Company's acquisition of Rex , the Company assumed approximately A$107.8 million in liabilities associated with the Commonwealth Facility Agreement originally dated November 11, 2024, with the Commonwealth of Australia, as represented by the Department of Infrastructure, Transport, Regional Development, Communications, Sport and the Arts (the “Commonwealth”).

As mentioned in Note 13 of Notes to Consolidated Financial Statements included under Part II, Item 8 of this Report on Form 10-K, in December 2025, Rex and the Commonwealth entered into (i) an amendment and restatement of the Commonwealth Facility Agreement originally dated November 11, 2024 (the “Commonwealth Term Loan”), and (ii) a new facility agreement (the “New Facility Agreement” and, together with the Commonwealth Term Loan, the “Commonwealth Facilities”).

The Commonwealth Term Loan is for an initial term of 30 years and permits extension of the termination date by up to an additional 20 years (in 2 10‑year increments) subject to specified conditions and required mandatory prepayments from Excess Cash Flow in accordance with the Intercreditor Deed.

The Commonwealth Term Loan does not bear interest, provided that if Rex fails to maintain compliance with certain ‘Rex Regional Commitments’ (and a resulting event of default occurs), interest shall accrue on the outstanding principal at a rate of 2.00% per annum during the period of such non-compliance.

The fair value of the Commonwealth Term Loan on the date of the Rex acquisition was approximately $22.2 million, estimated using a DCF approach, consistent with market practice and applicable accounting standards to estimate the fair value based on the absence of observable market inputs.

The New Facility Agreement bears interest at 12.0% per annum (which rate shall increase by 2.00% per annum if the Rex Companies fail to maintain compliance with certain “Rex Regional Commitments” regarding flight service levels and route profitability).

The interest rate applicable to the New Facility Agreement is subject to adjustment from time to time in accordance with the Intercreditor Deed to match the interest rate applicable to the New Cap Note Facility.

The New Facility Agreement matures on December 17, 2032 and provides for differing availability periods:

(i) a three-year availability period for the A$40.0 million facility for engine care and maintenance;

and (ii) a two-year availability period for the A$20.0 million business operations facility.

The Commonwealth Facilities are secured by general security deeds and certain real property and aircraft‑related security and, among other things:

(i) include a financial covenant requiring the Rex Companies to maintain a minimum cash balance of A$5.0 million at all times until the New Cap Note Facility is fully drawn, (ii) require application of Excess Cash Flow as mandatory prepayments pursuant to the Intercreditor Deed, (iii) under the New Facility Agreement, provide for mandatory prepayments from asset sale proceeds, insurance proceeds not applied to repair or replacement, and Excess Cash Flow, (iv) restrict the sale or disposal of assets outside the ordinary course of business, subject to a basket for disposals where the market value or consideration does not exceed A$1.0 million in any financial year;

and (v) under the Commonwealth Term Loan, requires mandatory prepayments from Excess Cash Flow in accordance with the Intercreditor Deed.

As of March 31, 2026, the Rex Companies were in compliance with all financial and non-financial covenants applicable under the Commonwealth Facilities, including the Rex Regional Commitments and minimum cash balance requirements.

The Company believes that it has sufficient cash on hand and available liquidity, to meet its obligations as they become due in the ordinary course of business for at least 12 months following the date these financial statements are issued.

Following is a table of changes in cash flow for the fiscal years ended March 31, 2026 and 2025 (in thousands):

Year Ended March 31, Change

Net Cash Provided by Operating Activities $ 23,496 $ 17,178 $ 6,318

Net cash (used in) provided by operating activities $ (25,044) $ 23,496 $ (48,540)

Net cash used in investing activities (21,803) (20,189) (1,614)

Net Cash Used in Financing Activities (4,801) (13,910) 9,109

Effect of foreign currency exchange rates 408 (16) 424

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

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

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

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

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

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

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

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

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

Net cash provided by (used in) financing activities 65,399 (4,801) 70,200

Effect of foreign currency exchange rates on cash and cash equivalents (39) 408 (447)

Net increase (decrease) in cash and cash equivalents and restricted cash $ 18,513 $ (1,086) $ 19,599

Net cash used in operating activities for the fiscal year ended March 31, 2026 was $25.0 million compared to net cash provided by operating activities of $23.5 million in the prior fiscal year.

The decrease of $48.5 million was primarily driven by a $44.7 million unfavorable change in inventory activity during the fiscal year ended March 31, 2026 compared to the inventory activity during the prior fiscal year and by the $11.2 million operating loss for the fiscal year ended March 31, 2026 compared to operating income of $1.9 million in the prior year period.

Partially offsetting these changes was a $13.6 million favorable change in accounts payable.

The increase in inventory was primarily driven by sales in excess of inventory purchases in the prior year period versus increased expansion of inventory in the current year period, while the increase in accounts payable was primarily due to the timing of payments at year end.

Net cash used in investing activities for the fiscal year ended March 31, 2026 was $21.8 million compared to $20.2 million in the prior year period.

The cash used in investing activities in the current year period was primarily driven by investments in unconsolidated entities of $15.2 million, capital expenditures of $16.5 million primarily driven by purchases of engines and

rotable assets at Rex, proceeds of $19.9 million from the sale of the two Airbus Model A321-111 aircraft, and loan advances of $1.5 million to Bloomia and another unrelated entity.

Cash used in investing activities in the prior year period was primarily driven by investments in unconsolidated entities of $7.0 million and capital expenditures of $14.6 million related to the purchase of the two aircraft that were sold in the current year period.

Net cash provided by financing activities for the fiscal year ended March 31, 2026 was $65.4 million compared to net cash used in financing activities of $4.8 million in the prior year period.

The increase was primarily due to a $51.4 million increase and $19.7 million decrease in proceeds and payments, respectively, on the Company's term loans.

Off-Balance Sheet Arrangements

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In fiscal 2026, we faced sourcing challenges that impacted our ability to procure raw materials and certain commodities, which resulted in delays and increased costs.

These disruptions were driven by supply chain market constraints and macroeconomic

conditions, including inflation and labor market shortages.

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

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

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The Company uses adjusted earnings before taxes, interest, and depreciation and amortization ("Adjusted EBITDA"), a non-GAAP financial measure as defined by the SEC, to evaluate the Company's financial performance.

This performance measure is not defined by accounting principles generally accepted in the United States and should be considered in addition to, and not in lieu of, GAAP financial measures.

This performance measure is not defined by accounting principles generally accepted in the U.S.

and should be considered in addition to, and not in lieu of, GAAP financial measures.

Adjusted EBITDA is defined as earnings before taxes, interest, and depreciation and amortization, adjusted for specified items.

The Company calculates Adjusted EBITDA by removing the impact of specific items and adding back the amounts of interest expense and depreciation and amortization to earnings before income taxes.

When calculating Adjusted EBITDA, the Company does not add back depreciation expense for aircraft engines that are on lease, as the Company believes this expense matches with the corresponding revenue earned on engine leases.

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

When calculating Adjusted EBITDA, the Company does not add back depreciation expense for assets that are on lease, as the Company believes this expense matches with the corresponding revenue earned on leased assets.

Management believes that Adjusted EBITDA is a useful measure of the Company's performance because it provides investors additional information about the Company's operations allowing better evaluation of underlying business performance and better period-to-period comparability.

Adjusted EBITDA is not intended to replace or be an alternative to operating income (loss) from continuing operations, the most directly comparable amounts reported under GAAP.

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

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

Twelve Months Ended

Adjusted EBITDA is not intended to replace or be an alternative to operating income (loss), the most directly comparable amounts reported under GAAP.

The tables below provide a reconciliation of operating income (loss) to Adjusted EBITDA for the fiscal years ended March 31, 2026 and 2025 (in thousands):

March 31, 2026 March 31, 2025

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

Operating (loss) income $ (11,197) $ 1,908

Depreciation and amortization (excluding leased assets depreciation) 1

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

Loss on sale of property and equipment 15 18

TruPs issuance expenses 212 347

Inventory write-down and reserves 850 1,463

(Gain) loss on sale of property and equipment (65) 15

Securities issuance expenses 136 212

Share-based compensation 175 88

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Earnout remeasurement (666) 435

Adjusted EBITDA $ 7,363 $ 6,190

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

Twelve Months Ended

March 31, 2025 March 31, 2024

Overnight Air Cargo $ 6,808 $ 7,144

Ground Support Equipment (773) (949)

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

Digital Solutions (272) 149

Segments total

15,595 12,463

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

Landholder duty charges 3,444 —

Acquisition and integration expenses 5,687 —

Adjusted EBITDA $ 10,125 $ 7,363

(1) There was depreciation expense of $0.7 million and $1.4 million excluded during the fiscal years ended March 31, 2026 and 2025, respectively.

Issuer and guarantor subsidiary summarized information

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The Trust Preferred Securities issued by the Trust are fully and unconditionally and jointly and severally guaranteed on a senior unsecured basis by Air T.

Air T guarantees the payment of distributions by Air T Funding and payments on liquidation or redemption of the Trust Preferred Securities (subordinate to the right to payment of senior and subordinated debt of Air T, as defined in Note 1 2 of Notes to Consolidated Financial Statements included under Part I, Item 1 of this report).

Air T guarantees the payment of distributions by Air T Funding and payments on liquidation or redemption of the Trust Preferred Securities (subordinate to the right to payment of senior and subordinated debt of Air T, as defined in Note 13 of Notes to Consolidated Financial Statements included under Part II, Item 8 of this report).

If Air T Funding has insufficient funds to pay distributions on the Trust Preferred Securities (i.e., if Air T has failed to make required payments under the Junior Subordinated Debentures), a holder of the Trust Preferred Securities would have the right to institute a legal proceeding directly against Air T to enforce payment of such distributions.

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The common securities rank pari passu, and payments will be made thereon pro rata, with the Trust Preferred Securities, except that upon the occurrence and during the continuance of an event of default under the Trust Agreement, as amended resulting from an event of default under the indenture, the rights of the Company as holder of the common securities to payment in respect of distributions and payments upon liquidation, redemption or otherwise would be subordinated to the rights of the holders of the Trust Preferred Securities.

The Company has an optional right to repay the Junior Subordinated Debentures (i) to Air T Funding on or after June 7, 2024, in whole at any time or in part from time to time at a redemption price equal to the accrued and unpaid interest on the Junior Subordinated Debentures so redeemed to the date fixed for redemption, plus 100% of the principal amount thereof, or (ii) at any time, in whole (but not in part), upon the occurrence of a Tax Event, an Investment Company Event or a Capital Treatment Event (each as defined in the indenture) at a redemption price equal to the accrued and unpaid interest on the Junior Subordinated Debentures so redeemed to the date fixed for redemption, plus 100% of the principal amount thereof.

Subordinated Debentures so redeemed to the date fixed for redemption, plus 100% of the principal amount thereof, or (ii) at any time, in whole (but not in part), upon the occurrence of a Tax Event, an Investment Company Event or a Capital Treatment Event (each as defined in the indenture) at a redemption price equal to the accrued and unpaid interest on the Junior Subordinated Debentures so redeemed to the date fixed for redemption, plus 100% of the principal amount thereof.

In the event a Tax Event, an Investment Company Event or Capital Treatment Event has occurred and is continuing and the Company does not elect to redeem the Junior Subordinated Debentures and thereby cause a mandatory redemption of the Trust Preferred Securities or to liquidate Air T Funding and cause the Junior Subordinated Debentures to be distributed to holders of the Trust securities in liquidation of Air T Funding, such Trust Preferred Securities will remain outstanding and additional sums may be payable on the Junior Subordinated Debentures.

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If less than all of the Junior Subordinated Debentures are to be repaid or redeemed on a redemption date, then the proceeds from such repayment or redemption would be allocated to the redemption of the Trust Preferred Securities pro rata.

time for a period not exceeding 20 consecutive quarters with respect to each such period (each, an “Extension Period”), provided that no Extension Period may extend beyond the stated maturity of the Junior Subordinated Debentures on June 7, 2049.

So long as no Debenture event of default has occurred and is continuing, at any time on or after June 7, 2024, the Company has the right under the indenture to defer the payment of interest on the Junior Subordinated Debentures at any time or from time to time for a period not exceeding 20 consecutive quarters with respect to each such period (each, an “Extension Period”), provided that no Extension Period may extend beyond the stated maturity of the Junior Subordinated Debentures on June 7, 2049.

As a consequence of any such election, quarterly distributions on the Trust Preferred Securities will be deferred by Air T Funding during any such Extension Period.

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

The regional airline segment experiences seasonal variation in passenger demand.

Rex's network is oriented toward business, government, and regional connectivity travel rather than leisure travel.

Demand for this travel typically softens during the Australian summer when corporate and government activity slows over the December-to-March period.

Adverse weather associated with the northern Australian wet season during these months can further disrupt regional flight operations.

Consequently, Rex's weakest demand typically occurs in the latter part of our third fiscal quarter and throughout our fourth fiscal quarter, which ends March 31.

Other segments are typically not susceptible to material seasonal trends.

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The Company’s significant accounting policies are described in Note 1 of Notes to Consolidated Financial Statements included under Part II, Item 8 of this report.

The preparation of the Company’s consolidated financial statements in conformity with accounting principles generally accepted in the United States requires the use of estimates and assumptions to determine certain assets, liabilities, revenues and expenses.

The preparation of the Company’s consolidated financial statements in conformity with accounting principles generally accepted in the U.S.

requires the use of estimates and assumptions to determine certain assets, liabilities, revenues and expenses.

Management bases these estimates and assumptions upon the best information available at the time of the estimates or assumptions.

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Accordingly, actual results could differ materially from estimates.

The Company believes that the following are its most critical accounting policies:

The Company believes that the following matters are its most critical accounting policies:

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

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

These estimates could vary significantly from actual amounts based upon future

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

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

Business Combinations - The Company accounts for acquisitions of businesses using the acquisition method of accounting under ASC 805.

Under this method, the total purchase consideration is allocated to the tangible and intangible assets acquired and the liabilities assumed based on their estimated fair values at the acquisition date.

Any excess of the purchase consideration over the estimated fair value of the net identifiable assets acquired is recorded as goodwill whereas any excess of the estimated fair value of the net identifiable assets acquired over the purchase consideration is recorded as a bargain purchase gain.

Acquisition-related transaction costs are expensed as incurred.

Determining the fair value of assets acquired and liabilities assumed requires management to make significant estimates and assumptions, particularly with respect to acquired intangible assets, such as customer relationships, developed technology, and trade names, and the CFA debt.

These fair values are generally estimated using income-based valuation approaches—such as the multi-period excess earnings method or the relief-from-royalty method—which rely on assumptions including projected revenues and cash flows, revenue growth rates, customer attrition rates, royalty rates, the economic useful life of the asset, and the discount rate applied to future cash flows.

Management may engage independent third-party valuation specialists to assist in these determinations.

Contingent consideration arising from a business combination is recognized at its acquisition-date fair value and remeasured to fair value at each subsequent reporting date until settled, with changes recognized in earnings.

The Company finalizes its purchase price allocation within the measurement period, which may extend up to one year from the acquisition date, as additional information about facts and circumstances existing at the acquisition date is obtained.

Because these estimates and assumptions are inherently uncertain, the use of different assumptions could result in materially different fair values, which would affect the amounts recorded as goodwill, identifiable intangible assets, and bargain purchase gains, as well as future amortization and potential impairment charges.

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

What changed 10-K

Item 7. Management’s Discussion and Analysis