AIRT 10-Q
Air T Inc (AIRT)
10-Q
2026-02-13
For: 2025-12-31
View Original
Added on
April 09, 2026
UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
FORM 10-Q
(Mark one)
| Quarterly Report Pursuant to Section 13 or 15(d) of the Securities Exchange Act of 1934 for the quarterly period ended | |||||
| Transition Report Pursuant to Section 13 or 15(d) of the Securities Exchange Act of 1934 for the transition period from _____to _____ | |||||
Commission File Number 001-35476
(Exact name of registrant as specified in its charter)
| (State or other jurisdiction of incorporation or organization) | (I.R.S. Employer Identification No.) | ||||
(Address of principal executive offices, including zip code)
(980 ) 595 – 2840
(Registrant’s telephone number, including area code)
Securities registered pursuant to Section 12(b) of the Act:
| Title of each class | Trading Symbol(s) | Name of each exchange on which registered | ||||||
*Issued by Air T Funding | ||||||||
Indicate by check mark whether the registrant (1) has filed all reports required to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during the preceding 12 months (or for such shorter period that the registrant was required to file such reports), and (2) has been subject to such filing requirements for the past 90 days.
Indicate by check mark whether the registrant has submitted electronically, every Interactive Data File required to be submitted pursuant to Rule 405 of Regulation S-T (§232.405 of this chapter) during the preceding 12 months (or for such shorter period that the registrant was required to submit such files).
Indicate by check mark whether the registrant is a large accelerated filer, an accelerated filer, a non-accelerated filer, a smaller reporting company or an emerging growth company. See the definitions of “large accelerated filer”, “accelerated filer”, “smaller reporting company”, and “emerging growth company” in Rule 12b-2 of the Exchange Act.
| Large accelerated filer | ☐ | Accelerated filer | ☐ | |||||||||||
| ☒ | Smaller reporting company | |||||||||||||
| Emerging growth company | ||||||||||||||
If an emerging growth company, indicate by check mark if the registrant has elected not to use the extended transition period for complying with any new or revised financial accounting standards provided pursuant to Section 13(a) of the Exchange Act. ☐
Indicate by check mark whether the registrant is a shell company (as defined in Rule 12b-2 of the Exchange Act).
Yes ☐ No x
Indicate the number of shares outstanding of each of the issuer's classes of common stock, as of the latest practicable date.
| Common Stock | Common Shares, par value of $.25 per share | ||||
| Outstanding Shares at January 31, 2026 | |||||
AIR T, INC. AND SUBSIDIARIES
QUARTERLY REPORT ON FORM 10-Q
TABLE OF CONTENTS
| Page | ||||||||
PART I | ||||||||
Condensed Consolidated Statements of Income (Loss) (Unaudited) For The Three and Nine Months Ended December 31, 2025 and 2024 | ||||||||
Condensed Consolidated Statements of Comprehensive Income (Loss) (Unaudited) For The Three and Nine Months Ended December 31, 2025 and 2024 | ||||||||
Condensed Consolidated Balance Sheets (Unaudited) as of December 31, 2025 and March 31, 2025 | ||||||||
Condensed Consolidated Statements of Cash Flows (Unaudited) For The Nine Months Ended December 31, 2025 and 2024 | ||||||||
Condensed Consolidated Statements of Equity (Deficit) (Unaudited) For The Three and Nine Months Ended December 31, 2025 and 2024 | ||||||||
Item 1A. | ||||||||
| Item 3. | ||||||||
| Item 5. | ||||||||
| Exhibit Index | ||||||||
| Certifications | ||||||||
| Interactive Data Files | ||||||||
3
Item 1. Financial Statements
AIR T, INC. AND SUBSIDIARIES
CONDENSED CONSOLIDATED STATEMENTS OF INCOME (LOSS)
(UNAUDITED)
| (In thousands, except per share data) | Three Months Ended December 31, | Nine Months Ended December 31, | |||||||||||||||||||||
| 2025 | 2024 | 2025 | 2024 | ||||||||||||||||||||
| Operating Revenues: | |||||||||||||||||||||||
| Overnight air cargo | $ | $ | $ | $ | |||||||||||||||||||
| Ground support equipment | |||||||||||||||||||||||
| Commercial aircraft, engines and parts | |||||||||||||||||||||||
| Digital solutions | |||||||||||||||||||||||
| Regional airline | |||||||||||||||||||||||
| Corporate and other | |||||||||||||||||||||||
| Operating Expenses: | |||||||||||||||||||||||
| Overnight air cargo | |||||||||||||||||||||||
| Ground support equipment | |||||||||||||||||||||||
| Commercial aircraft, engines and parts | |||||||||||||||||||||||
| Digital solutions | |||||||||||||||||||||||
| Regional airline | |||||||||||||||||||||||
| Corporate and other | |||||||||||||||||||||||
| General and administrative | |||||||||||||||||||||||
| Depreciation and amortization | |||||||||||||||||||||||
| Earnout remeasurement | ( | ||||||||||||||||||||||
| Gain on sale of aircraft | |||||||||||||||||||||||
| Operating (Loss) Income | ( | ||||||||||||||||||||||
| Non-operating (Expense) Income: | |||||||||||||||||||||||
| Interest expense | ( | ( | ( | ( | |||||||||||||||||||
| Income from equity method investments | |||||||||||||||||||||||
| Other | ( | ( | |||||||||||||||||||||
| ( | ( | ||||||||||||||||||||||
| (Loss) income before income taxes | ( | ( | |||||||||||||||||||||
| Income Tax Expense | |||||||||||||||||||||||
| Net (Loss) Income | ( | ( | |||||||||||||||||||||
| Net Income Attributable to Non-controlling Interests | ( | ( | ( | ( | |||||||||||||||||||
| Net (Loss) Income Attributable to Air T, Inc. Stockholders | $ | ( | $ | ( | $ | $ | |||||||||||||||||
| (Loss) Income per share (Note 6) | |||||||||||||||||||||||
4
| Basic | $ | ( | $ | ( | $ | $ | |||||||||||||||||
| Diluted | $ | ( | $ | ( | $ | $ | |||||||||||||||||
| Weighted Average Shares Outstanding: | |||||||||||||||||||||||
| Basic | |||||||||||||||||||||||
| Diluted | |||||||||||||||||||||||
See notes to condensed consolidated financial statements.
5
AIR T, INC. AND SUBSIDIARIES
CONDENSED CONSOLIDATED STATEMENTS OF COMPREHENSIVE INCOME (LOSS)
(UNAUDITED)
| Three Months Ended December 31, | Nine Months Ended December 31, | ||||||||||||||||||||||
| (In Thousands) | 2025 | 2024 | 2025 | 2024 | |||||||||||||||||||
| Net (loss) income | $ | ( | $ | ( | $ | $ | |||||||||||||||||
| Foreign currency translation gain (loss) | ( | ||||||||||||||||||||||
| Reclassification of interest rate swaps into earnings | ( | ( | |||||||||||||||||||||
| Unrealized gain (loss) on interest rate swaps | ( | ||||||||||||||||||||||
| Redemption of non-controlling interest | |||||||||||||||||||||||
| Other | ( | ||||||||||||||||||||||
| Total Other Comprehensive Gain (Loss) | ( | ||||||||||||||||||||||
| Total Comprehensive (Loss) Income | ( | ( | |||||||||||||||||||||
| Comprehensive Income Attributable to Non-controlling Interests | ( | ( | ( | ( | |||||||||||||||||||
| Comprehensive (Loss) Income Attributable to Air T, Inc. Stockholders | $ | ( | $ | ( | $ | $ | |||||||||||||||||
See notes to condensed consolidated financial statements.
6
AIR T, INC. AND SUBSIDIARIES
CONDENSED CONSOLIDATED BALANCE SHEETS
(UNAUDITED)
| (In thousands, except share amounts) | December 31, 2025 | March 31, 2025 | |||||||||
| ASSETS | |||||||||||
| Current Assets: | |||||||||||
| Cash and cash equivalents | $ | $ | |||||||||
| Marketable securities | |||||||||||
| Restricted cash | |||||||||||
| Restricted investments | |||||||||||
Accounts receivable, net of allowance for doubtful accounts of $ | |||||||||||
| Income tax receivable | |||||||||||
| Inventories, net | |||||||||||
| Prepaid expenses | |||||||||||
| Other current assets | |||||||||||
| Total Current Assets | |||||||||||
Notes Receivable - Bloomia Holdings, Inc. ("Bloomia") | |||||||||||
| Notes Receivable - Crestone Asset Management, LLC ("CAM") | |||||||||||
Assets on lease or held for lease, net of accumulated depreciation of $ | |||||||||||
Property and equipment, net of accumulated depreciation of $ | |||||||||||
Intangible assets, net of accumulated amortization of $ | |||||||||||
| Right-of-use ("ROU") assets | |||||||||||
| Equity method investments | |||||||||||
| Other assets | |||||||||||
| Goodwill | |||||||||||
| Total Assets | |||||||||||
| LIABILITIES AND STOCKHOLDERS' EQUITY | |||||||||||
| Current Liabilities: | |||||||||||
| Accounts payable | |||||||||||
| Income tax payable | |||||||||||
| Accrued expenses and other (Note 4) | |||||||||||
| Current portion of long-term debt | |||||||||||
| Current portion of long-term debt - related party (Note 13) | |||||||||||
| Current portion of earnout liability | |||||||||||
| Deferred credit - preliminary bargain purchase gain | |||||||||||
| Short-term lease liability | |||||||||||
| Total Current Liabilities | |||||||||||
Long-term debt (includes $ | |||||||||||
| Long-term debt - related party (Note 13) | |||||||||||
| Deferred income tax liabilities, net | |||||||||||
| Long-term lease liability | |||||||||||
| Long-term earnout liability | |||||||||||
Other non-current liabilities | |||||||||||
| Total Liabilities | |||||||||||
7
| Redeemable non-controlling interests | |||||||||||
| Commitments and contingencies (Note 18) | |||||||||||
| Equity (Deficit): | |||||||||||
| Air T, Inc. Stockholders' Equity (Deficit): | |||||||||||
Preferred stock, $ | |||||||||||
Common stock, $ | |||||||||||
Treasury stock, | ( | ( | |||||||||
| Additional paid-in capital | |||||||||||
| Retained earnings | |||||||||||
Accumulated other comprehensive income (loss) | ( | ||||||||||
Total Air T, Inc. Stockholders' Deficit | ( | ( | |||||||||
| Non-controlling Interests | ( | ||||||||||
Total Deficit | ( | ( | |||||||||
| Total Liabilities and Equity | $ | $ | |||||||||
See notes to condensed consolidated financial statements.
8
AIR T, INC. AND SUBSIDIARIES
CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS
(UNAUDITED)
| (In Thousands) | Nine Months Ended December 31, | ||||||||||
| 2025 | 2024 | ||||||||||
| CASH FLOWS FROM OPERATING ACTIVITIES: | |||||||||||
| Net Income | $ | $ | |||||||||
| Adjustments to reconcile Net Income to net cash (used in) provided by operating activities: | |||||||||||
| Depreciation and amortization | |||||||||||
| Income from equity method investments | ( | ( | |||||||||
| Gain on sale of aircraft | ( | ||||||||||
| Other | |||||||||||
| Change in operating assets and liabilities: | |||||||||||
| Accounts receivable | ( | ( | |||||||||
| Inventories | ( | ||||||||||
| Accounts payable | ( | ( | |||||||||
| Accrued expenses | ( | ||||||||||
| Other current assets | ( | ||||||||||
| Other | ( | ||||||||||
| Net cash (used in) provided by operating activities | ( | ||||||||||
| CASH FLOWS FROM INVESTING ACTIVITIES: | |||||||||||
| Investment in unconsolidated entities | ( | ( | |||||||||
| Distribution from unconsolidated entities | |||||||||||
| Capital expenditures related to property & equipment | ( | ( | |||||||||
| Capital expenditures related to assets on lease or held for lease | ( | ||||||||||
| Proceeds from sale of aircraft | |||||||||||
Loan advances to Bloomia | ( | ( | |||||||||
Proceeds from notes receivable - CAM and Bloomia | |||||||||||
| Acquisition of businesses, net cash acquired | ( | ||||||||||
| Other | ( | ( | |||||||||
| Net cash provided by (used in) investing activities | ( | ||||||||||
| CASH FLOWS FROM FINANCING ACTIVITIES: | |||||||||||
| Proceeds from lines of credit | |||||||||||
| Payments on lines of credit | ( | ( | |||||||||
| Proceeds from term loan | |||||||||||
| Payments on term loan | ( | ( | |||||||||
| Payments on term loan - related party | ( | ||||||||||
| Proceeds from issuance of Trust Preferred Securities ("TruPs") | |||||||||||
| Distribution to non-controlling interest | ( | ||||||||||
| Other | ( | ( | |||||||||
| Net cash provided by financing activities | |||||||||||
| Effect of foreign currency exchange rates on cash and cash equivalents | ( | ||||||||||
| NET INCREASE IN CASH AND CASH EQUIVALENTS AND RESTRICTED CASH | |||||||||||
| CASH AND CASH EQUIVALENTS AND RESTRICTED CASH AT BEGINNING OF PERIOD | |||||||||||
| CASH AND CASH EQUIVALENTS AND RESTRICTED CASH AT END OF PERIOD | |||||||||||
| CASH AND CASH EQUIVALENTS AND RESTRICTED CASH AT BEGINNING OF PERIOD: | |||||||||||
9
| Cash and cash equivalents | |||||||||||
| Restricted cash, current | |||||||||||
| Restricted cash, long-term(a) | |||||||||||
| Total cash and cash equivalents and restricted cash at beginning of period | |||||||||||
(a)Included in other assets on the consolidated balance sheets.
See notes to condensed consolidated financial statements.
10
AIR T, INC AND SUBSIDIARIES
CONDENSED CONSOLIDATED STATEMENTS OF EQUITY (DEFICIT)
(UNAUDITED)
| (In Thousands) | Common Stock | Treasury Stock | Additional Paid-In Capital | Retained Earnings | Accumulated Other Comprehensive Income (Loss) | Non-controlling Interests1 | Total Equity | ||||||||||||||||||||||||||||||||||||||||||||||
| Shares | Amount | Shares | Amount | ||||||||||||||||||||||||||||||||||||||||||||||||||
| Balance, March 31, 2025 | $ | $ | ( | $ | $ | $ | ( | $ | $ | ( | |||||||||||||||||||||||||||||||||||||||||||
Net (loss) income1 | — | — | — | — | — | ( | — | ( | |||||||||||||||||||||||||||||||||||||||||||||
| Distributions to non-controlling interests | — | — | — | — | — | — | — | ( | ( | ||||||||||||||||||||||||||||||||||||||||||||
| Stock compensation expense | — | — | — | — | — | — | — | ||||||||||||||||||||||||||||||||||||||||||||||
Foreign currency translation gain2 | — | — | — | — | — | — | — | ||||||||||||||||||||||||||||||||||||||||||||||
| Reclassification of interest rate swaps into earnings | — | — | — | — | — | — | — | ||||||||||||||||||||||||||||||||||||||||||||||
| Allocation of comprehensive income from unconsolidated investments | — | — | — | — | — | — | — | ||||||||||||||||||||||||||||||||||||||||||||||
| Allocation of comprehensive income to redeemable non-controlling interests | — | — | — | — | — | — | ( | — | ( | ||||||||||||||||||||||||||||||||||||||||||||
| Balance, June 30, 2025 | $ | $ | ( | $ | $ | $ | ( | $ | $ | ( | |||||||||||||||||||||||||||||||||||||||||||
Net income1 | — | — | — | — | — | — | |||||||||||||||||||||||||||||||||||||||||||||||
| Distributions to non-controlling interests | — | — | — | — | — | — | — | ( | ( | ||||||||||||||||||||||||||||||||||||||||||||
| Stock compensation expense | — | — | — | — | — | — | — | ||||||||||||||||||||||||||||||||||||||||||||||
Foreign currency translation gain2 | — | — | — | — | — | — | — | ||||||||||||||||||||||||||||||||||||||||||||||
| Reclassification of interest rate swaps into earnings | — | — | — | — | — | — | — | ||||||||||||||||||||||||||||||||||||||||||||||
| Unrealized loss on interest rate swaps | — | — | — | — | — | — | ( | — | ( | ||||||||||||||||||||||||||||||||||||||||||||
11
| Allocation of comprehensive income from unconsolidated investments | — | — | — | — | — | — | — | ||||||||||||||||||||||||||||||||||||||||||||||
| Allocation of comprehensive income to redeemable non-controlling interests | — | — | — | — | — | — | ( | — | ( | ||||||||||||||||||||||||||||||||||||||||||||
| Balance, September 30, 2025 | $ | $ | ( | $ | $ | $ | ( | $ | ( | $ | ( | ||||||||||||||||||||||||||||||||||||||||||
Net income (loss)1 | — | — | — | — | — | ( | — | ( | ( | ||||||||||||||||||||||||||||||||||||||||||||
| Stock compensation expense | — | — | — | — | — | — | — | ||||||||||||||||||||||||||||||||||||||||||||||
ATA 25.1 warrants (Note 18) | — | — | — | — | — | — | — | ||||||||||||||||||||||||||||||||||||||||||||||
Foreign currency translation gain2 | — | — | — | — | — | — | — | ||||||||||||||||||||||||||||||||||||||||||||||
| Reclassification of interest rate swaps into earnings | — | — | — | — | — | — | — | ||||||||||||||||||||||||||||||||||||||||||||||
| Unrealized loss on interest rate swaps | — | — | — | — | — | — | — | ||||||||||||||||||||||||||||||||||||||||||||||
| Allocation of comprehensive income from unconsolidated investments | — | — | — | — | — | — | — | ||||||||||||||||||||||||||||||||||||||||||||||
| Allocation of comprehensive income to redeemable non-controlling interests | — | — | — | — | — | — | — | ||||||||||||||||||||||||||||||||||||||||||||||
| Balance, December 31, 2025 | $ | $ | ( | $ | $ | $ | $ | ( | $ | ( | |||||||||||||||||||||||||||||||||||||||||||
| (In Thousands) | Common Stock | Treasury Stock | Additional Paid-In Capital | Retained Earnings | Accumulated Other Comprehensive Income (Loss) | Non-controlling Interests1 | Total Equity | ||||||||||||||||||||||||||||||||||||||||||||||
| Shares | Amount | Shares | Amount | ||||||||||||||||||||||||||||||||||||||||||||||||||
| Balance, March 31, 2024 | $ | $ | ( | $ | $ | $ | ( | $ | $ | ||||||||||||||||||||||||||||||||||||||||||||
Net loss1 | — | — | — | — | — | ( | — | ( | ( | ||||||||||||||||||||||||||||||||||||||||||||
| Repurchase of common stock | — | — | ( | — | — | — | — | ( | |||||||||||||||||||||||||||||||||||||||||||||
Stock option forfeiture | — | — | — | — | ( | — | — | — | ( | ||||||||||||||||||||||||||||||||||||||||||||
12
| Stock compensation expense | — | — | — | — | — | — | — | ||||||||||||||||||||||||||||||||||||||||||||||
Foreign currency translation loss2 | — | — | — | — | — | — | ( | — | ( | ||||||||||||||||||||||||||||||||||||||||||||
| Redemption of non-controlling interest | — | — | — | — | — | — | |||||||||||||||||||||||||||||||||||||||||||||||
| Unrealized gain on interest rate swaps, net of tax | — | — | — | — | — | — | — | ||||||||||||||||||||||||||||||||||||||||||||||
| Reclassification of interest rate swaps into earnings | — | — | — | — | — | — | ( | — | ( | ||||||||||||||||||||||||||||||||||||||||||||
| Balance, June 30, 2024 | $ | $ | ( | $ | $ | $ | ( | $ | $ | ||||||||||||||||||||||||||||||||||||||||||||
Net income (loss)1 | — | — | — | — | — | — | ( | ||||||||||||||||||||||||||||||||||||||||||||||
Stock option forfeiture | — | — | — | — | ( | — | — | — | ( | ||||||||||||||||||||||||||||||||||||||||||||
| Stock compensation expense | — | — | — | — | — | — | — | ||||||||||||||||||||||||||||||||||||||||||||||
Foreign currency translation gain2 | — | — | — | — | — | — | — | ||||||||||||||||||||||||||||||||||||||||||||||
| Reclassification of interest rate swaps into earnings | — | — | — | — | — | — | ( | — | ( | ||||||||||||||||||||||||||||||||||||||||||||
| Initial consolidation of CASP, LLC | — | — | — | — | — | — | — | ||||||||||||||||||||||||||||||||||||||||||||||
| Allocation of comprehensive income from unconsolidated investments | — | — | — | — | — | — | — | ||||||||||||||||||||||||||||||||||||||||||||||
| Allocation of comprehensive income to redeemable non-controlling interests | — | — | — | — | — | — | ( | — | ( | ||||||||||||||||||||||||||||||||||||||||||||
| Balance, September 30, 2024 | $ | $ | ( | $ | $ | $ | $ | $ | |||||||||||||||||||||||||||||||||||||||||||||
Net (loss) income1 | — | — | — | — | — | ( | — | ( | |||||||||||||||||||||||||||||||||||||||||||||
| Repurchase of common stock | — | — | ( | — | — | — | — | ( | |||||||||||||||||||||||||||||||||||||||||||||
13
| Stock compensation expense | — | — | — | — | — | — | — | ||||||||||||||||||||||||||||||||||||||||||||||
Foreign currency translation loss2 | — | — | — | — | — | — | ( | — | ( | ||||||||||||||||||||||||||||||||||||||||||||
| Reclassification of interest rate swaps into earnings | — | — | — | — | — | — | ( | — | ( | ||||||||||||||||||||||||||||||||||||||||||||
| Allocation of comprehensive income from unconsolidated investments | — | — | — | — | — | — | — | ||||||||||||||||||||||||||||||||||||||||||||||
| Allocation of comprehensive income to redeemable non-controlling interests | — | — | — | — | — | — | — | ||||||||||||||||||||||||||||||||||||||||||||||
| Balance, December 31, 2024 | $ | $ | ( | $ | $ | $ | ( | $ | $ | ||||||||||||||||||||||||||||||||||||||||||||
(1) Excludes amount attributable to redeemable non-controlling interests in Contrail Aviation Support, LLC ("Contrail") and Shanwick B.V. ("Shanwick")
See notes to condensed consolidated financial statements.
(2) Cumulative translation adjustments were at a loss of $0.8 million and $0.7 million as of March 31, 2024 and December 31, 2024, respectively, and a loss of $0.4 million and a gain of $1.4 million, as of March 31, 2025 and December 31, 2025, respectively.
14
AIR T, INC. AND SUBSIDIARIES
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (UNAUDITED)
1. Financial Statement Presentation
The condensed consolidated financial statements of Air T, Inc. (“Air T”, the “Company”, “we”, “us” or “our”) have been prepared, without audit, pursuant to the rules and regulations of the Securities and Exchange Commission. Certain information and disclosures normally included in financial statements prepared in accordance with accounting principles generally accepted in the United States of America have been condensed or omitted pursuant to such rules and regulations, although the Company believes that the following disclosures are adequate to make the information presented not misleading. In the opinion of management, all adjustments (consisting only of normal recurring adjustments) considered necessary for a fair presentation of the results for the periods presented have been made.
These condensed consolidated financial statements should be read in conjunction with the consolidated financial statements and notes thereto included in the Company's Annual Report on Form 10-K for the year ended March 31, 2025. The unaudited results of operations for the period ended December 31, 2025 are not necessarily indicative of the operating results for the full year.
The accompanying financial statements have been prepared in accordance with generally accepted accounting principles applicable to a going concern, which contemplates the realization of assets and the satisfaction of liabilities in the normal course of business.
Recently Issued Accounting Pronouncements
In December 2023, the FASB issued Accounting Standards Update ("ASU") 2023-09- Income Taxes (Topic 740): Improvements to Income Tax Disclosures. The amendments in this update require the addition of specific categories to be disclosed in the rate reconciliation if they meet a quantitative threshold, disclosure of disaggregated income taxes paid to federal, state, and foreign jurisdictions, and disclosure of income or loss from continuing operations disaggregated by federal, state, and foreign jurisdictions. For public business entities, the amendments in this update are effective for fiscal years beginning after December 15, 2024. The Company is currently evaluating the impact of this amendment on its consolidated financial statements and disclosures.
In November 2024, the FASB issued ASU 2024-03- Income Statement- Reporting Comprehensive Income- Expense Disaggregation Disclosures (Subtopic 220-40): Disaggregation of Income Statement Expenses. The amendments in this update require disaggregated disclosure of income statement expenses for public business entities. The update does not change the expense captions an entity presents on the face of the income statement; rather, it requires disaggregation of certain expense captions into specified categories in disclosures within the footnotes to the financial statements. For public business entities, the amendments in this update are effective for fiscal years beginning after December 15, 2026, and interim periods within annual reporting periods beginning after December 15, 2027. The Company is currently evaluating the impact of this amendment on its condensed consolidated financial statements and disclosures.
In September 2025, the FASB issued ASU 2025-06- Intangibles- Goodwill and Other- Internal-Use Software (Subtopic 350-40): Targeted Improvements to the Accounting for Internal-Use Software. The amendments in this update modernize the accounting guidance for the costs to develop software for internal use. The new guidance amends the existing standard that refers to various stages of a software development project to align with current software development methods, such as agile programming. For public business entities, the amendments in this update are effective for fiscal years beginning after December 15, 2027, and interim periods within those annual reporting periods. The Company is currently evaluating the impact of this amendment on its consolidated financial statements and disclosures.
2. Acquisitions
2025 Royal Aircraft Services, LLC Acquisition
On May 15, 2025, Mountain Air Cargo, Inc. (“MAC”), a wholly-owned subsidiary of Air T, Inc., completed the acquisition of Royal Aircraft Services, LLC ("Royal"), a privately-held aircraft maintenance and repair company based in Hagerstown, Maryland for a purchase price of $1.2 million, net of cash acquired. The assets and liabilities of Royal were recorded at their estimated fair values at
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the date of acquisition and were not material, individually or in the aggregate, to the unaudited Condensed Consolidated Financial Statements. The acquired business is included in Overnight Air Cargo segment.
2025 Regional Express Holdings Ltd. Acquisition
On December 18, 2025, Air T Rex Acquisition, Inc., a wholly owned subsidiary of the Company (the "Purchaser" or "Air T Rex"), completed the acquisition of substantially all of the assets and operations of Rex Express Holdings Ltd ("Rex"), an Australian regional airline operator, pursuant to an share purchase agreement (the "Acquisition"). At the time of the Acquisition, Rex was subject to voluntary administration proceedings in Australia, which commenced on July 30, 2024. Voluntary administration in Australia is a formal insolvency process comparable to Chapter 11 bankruptcy proceedings in the United States, wherein court-appointed administrators assume control of the debtor entity's operations and assets. The Acquisition represents the Company's entry into the Australian regional airline market and expands the Company's international aviation services portfolio.
The acquisition was structured as a share purchase for a nominal consideration of approximately $1 , with the Company assuming $71.2 million (face value) in liabilities associated with the Commonwealth Facility Agreement ("CFA Debt") 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”).
The transaction was executed pursuant to a Deed of Company Arrangement ("DOCA"), a formal agreement between an insolvent company and its creditors that is approved by the creditors and supervised by the appointed administrators under Australian insolvency law. A key feature of the transaction structure was the establishment of a creditors trust designed to ring-fence pre-existing creditor claims and segregate funds allocated for their settlement ("the Creditors Trust"). This structure enabled Rex to exit voluntary administration and resume operations without the encumbrance of legacy creditor claims against the ongoing business.
In a voluntary administration proceeding, creditors effectively become the economic owners of the business, possessing the right to vote on the DOCA, approve the sale transaction, and receive distributions from the transaction proceeds. Accordingly, the Company has determined that the settlement of creditor claims pursuant to the DOCA constitutes consideration transferred to the previous economic owners of Rex for accounting purposes. The total consideration for the Acquisition therefore includes not only the nominal equity purchase price, but also the cash consideration transferred to creditors and the assumption of the CFA Debt. For purposes of determining the fair value of the assumed CFA Debt, the Company utilized a discounted cash flow ("DCF") approach, consistent with market practice and applicable accounting standards for the valuation of long-dated, non-tradeable debt instruments. The CFA Debt is for an initial term of 30 years and permits extension of the termination date by up to an additional 20 years (in two 10 ‑year increments) subject to specified conditions and require mandatory prepayments from Excess Cash Flow in accordance with the Intercreditor Deed. The CFA Debt does not bear interest, provided that if the Rex fails to maintain compliance with certain ‘Rex Regional Commitments’ (and a resulting event of default date occurs), interest shall accrue on the outstanding principal at a rate of 2.00 % per annum during the period of such non-compliance. As of the acquisition date, the fair value of the CFA Debt was $22.2 million.
The Acquisition was funded through a combination of cash on hand and net proceeds from the Honeywell Secured Debt, as further discussed in Note 13. Total cash consideration paid is summarized in the table below (in thousands):
| Nominal equity value | $ | ||||
Air T's payment to the Creditors Trust | |||||
| Consideration paid | $ | ||||
The Rex Acquisition was accounted for as a business combination using the acquisition method of accounting in accordance with ASC 805, Business Combinations (“ASC 805”). The purchase price has been preliminarily allocated to the tangible assets and identifiable intangible assets acquired and liabilities assumed based upon their estimated fair values, which were determined with the assistance of independent third-party valuation specialists, and which management reviewed and approved with respect to the valuation methodologies and significant assumptions used, with the exception of the following: (1) pre-acquisition contingencies which are recognized and measured in accordance with ASC 450, Contingencies (“ASC 450”) if fair value cannot be determined; (2) deferred income tax assets acquired and liabilities assumed are recognized and measured in accordance with ASC 740, Income Taxes; (3) contract assets and liabilities are measured and recognized in accordance with ASC 606, Revenue from Contracts with Customers; and (4) certain lease related assets and liabilities which are measured and recognized in accordance with ASC 842, Leases.
The following table summarizes the preliminary estimated fair values of the assets acquired and liabilities assumed as of December 18, 2025:
Fair value of assets acquired and liabilities assumed: | |||||
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| Assets: | |||||
| Cash and cash equivalents | $ | ||||
Restricted cash | |||||
| Accounts receivable, net | |||||
| Inventories, net | |||||
Other non-current assets | |||||
| Property and equipment, net | |||||
| Aircraft | |||||
| Spare aircraft engines | |||||
| Rotable aircraft parts | |||||
Land and buildings | |||||
| Other property, plant and equipment | |||||
| Intangible assets, net | |||||
| Right-of-use ("ROU") assets | |||||
| Total Assets | |||||
| Liabilities: | |||||
| Accrued expenses and other | ( | ||||
| Short-term lease liability | ( | ||||
| CFA Debt | ( | ||||
| Long-term lease liability | ( | ||||
| Other non-current liabilities | ( | ||||
| Total Liabilities | ( | ||||
| Net Assets | $ | ||||
As of December 31, 2025, the purchase price allocation is considered preliminary. The Company’s initial accounting for this acquisition is incomplete as of the date of this report. Therefore, as permitted by applicable accounting guidance, the foregoing amounts are provisional. All relevant facts and circumstances are still being considered by management prior to finalization of the purchase price allocation.
Assets acquired and liabilities assumed were recorded in the accompanying consolidated balance sheet at their estimated fair values as of December 18, 2025. The transaction is expected to result in a bargain purchase gain due to Rex's distressed financial condition and the administrators' determination, following a formal bidding process, that the Company's offer represented the optimal outcome for Rex's creditors. As the purchase price allocation is not finalized, we have recorded the preliminary bargain purchase gain as a deferred credit - preliminary bargain purchase gain within the consolidated balance sheet.
During the three and nine months ending December 31, 2025, the Company incurred transaction costs of $1.1 million and $3.0 million, respectively, which were expensed and included as a component of general and administrative expense in the condensed consolidated statement of operations. The Company is continuing to evaluate the fair values of aircraft and related equipment, right-of-use assets and lease liabilities, certain accrued liabilities and contingencies arising from the administration process, and income tax balances. Changes to these estimates during the measurement period may result in material adjustments, including to the amount of the related deferred bargain purchase gain.
| Total purchase consideration | $ | ||||
| Less: Net assets acquired | ( | ||||
| Deferred credit - preliminary bargain purchase gain | $ | ( | |||
Based on internal assessments as well as discussions with the Rex business’s management, the Company has identified the following significant tangible assets recorded within property and equipment: aircraft, spare aircraft engines, rotable aircraft parts, land and buildings and other property, plant and equipment. The estimated useful lives over which the tangible assets will be amortized are as follows: aircraft (P4Y5M ), spare aircraft engines (4.2 years), rotable aircraft parts (4.1 years), land and buildings (24.2 years) and other property, plant and equipment (2.2 years).
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As of the effective date of the Rex Acquisition, identifiable intangible assets are required to be measured at fair value, and these assets could include assets that are not intended to be used or sold or that are intended to be used in a manner other than their highest and best use. For purposes of these condensed consolidated financial statements, the fair value and weighted-average useful lives of these intangible assets have been estimated using variations of the income approach. Significant inputs used to value these intangible assets include projections of future cash flows, long-term growth rates, customer attrition rates, discount rates, royalty rates, and applicable income tax rates.
The following table sets forth the revenue and expenses of Rex that are included in the Company’s condensed consolidated statement of income, inclusive of intercompany transactions, for the period ending December 31, 2025:
| December 31, 2025 (in thousands): | Income Statement Post-Acquisition | ||||
| Revenue | $ | ||||
| Cost of Sales | |||||
| General and administrative | |||||
| Depreciation and amortization | $ | ||||
| Operating Loss | ( | ||||
| Non-operating expense | |||||
| Net loss | $ | ( | |||
Pro forma consolidated financial information
The following unaudited pro forma consolidated financial information reflects the results of operations of the Company for the three and nine months ended December 31, 2025 and 2024 as if the Rex Acquisition had occurred as of April 1, 2024:
| Three Months Ended December 31, | Nine Months Ended December 31, | ||||||||||||||||||||||
| 2025 | 2024 | 2025 | 2024 | ||||||||||||||||||||
Net revenues | $ | $ | $ | $ | |||||||||||||||||||
| Operating loss | ( | ( | ( | ( | |||||||||||||||||||
| Net loss | ( | ( | ( | ( | |||||||||||||||||||
| Loss per share: | |||||||||||||||||||||||
| Basic | $ | ( | $ | ( | $ | ( | $ | ( | |||||||||||||||
| Diluted | $ | ( | $ | ( | $ | ( | $ | ( | |||||||||||||||
The unaudited pro forma consolidated results for the three and nine-month periods were prepared using the acquisition method of accounting and are based on the historical financial information of Rex and the Company. The historical financial information has been adjusted to give effect to pro forma adjustments that are: (i) directly attributable to the acquisition, (ii) factually supportable and (iii) expected to have a continuing impact on the combined results. The unaudited pro forma consolidated results are not necessarily indicative of what the Company’s consolidated results of operations actually would have been had it completed the acquisition on April 1, 2024.
3. Revenue Recognition
Performance Obligations
Substantially all of the Company’s non-lease revenue is derived from contracts with an initial expected duration of one year or less. As a result, the Company has applied the practical expedient to exclude consideration of significant financing components from the
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determination of transaction price, to expense costs incurred to obtain a contract, and to not disclose the value of unsatisfied performance obligations. The following is a description of the Company’s performance obligations as of December 31, 2025:
| Type of Revenue | Nature, Timing of Satisfaction of Performance Obligations, and Significant Payment Terms | ||||
| Product Sales | The Company generates revenue from sales of various distinct products such as parts, aircraft equipment, printing equipment, jet engines, airframes, and scrap metal to its customers. A performance obligation is created when the Company accepts an order from a customer to provide a specified product. Each product ordered by a customer represents a performance obligation. The Company recognizes revenue when obligations under the terms of the contract are satisfied; generally, this occurs at a point in time upon shipment or when control is transferred to the customer. Transaction prices are based on contracted terms, which are at fixed amounts based on standalone selling prices. While the majority of the Company's contracts do not have variable consideration, for the limited number of contracts that do, the Company records revenue based on the standalone selling price less an estimate of variable consideration (such as rebates, discounts or prompt payment discounts). The Company estimates these amounts based on the expected incentive amount to be provided to customers and reduces revenue accordingly. Performance obligations are short-term in nature and customers are typically billed upon transfer of control. The Company records all shipping and handling fees billed to customers as revenue. The terms and conditions of the customer purchase orders or contracts are dictated by either the Company’s standard terms and conditions or by a master service agreement or by the contract. | ||||
| Support Services | The Company provides a variety of support services such as aircraft maintenance, printer maintenance, and short-term repair services to its customers. Additionally, the Company operates certain aircraft routes on behalf of FedEx. A performance obligation is created when the Company agrees to provide a particular service to a customer. For each service, the Company recognizes revenues over time as the customer simultaneously receives the benefits provided by the Company's performance. This revenue recognition can vary from when the Company has a right to invoice to the output or input method depending on the structure of the contract and management’s analysis. For repair-type services, the Company records revenue over time based on an input method of costs incurred to total estimated costs. The Company believes this is appropriate as the Company is performing labor hours and installing parts to enhance an asset that the customer controls. The vast majority of repair services are short term in nature and are typically billed upon completion of the service. Some of the Company’s contracts contain a promise to stand ready as the Company is obligated to perform certain maintenance or administrative services. For most of these contracts, the Company applies the 'as invoiced' practical expedient as the Company has a right to consideration from the customer in an amount that corresponds directly with the value of the entity's performance completed to date. A small number of contracts are accounted for as a series and recognized equal to the amount of consideration the Company is entitled to less an estimate of variable consideration (typically rebates). These services are typically ongoing and are generally billed on a monthly basis. | ||||
| Software Services | The Company provides market data related to air cargo based on primary sources and owns cloud hosted software that supports the needs of aviation businesses and helps aftermarket parts sellers automate quoting for their potential clients. For market data services, revenue is derived from contracts that grant customers the right to use the Company's web-based service for a specified term through a subscription fee. A performance obligation is created when the Company agrees to provide a subscription-based service to a customer. There is no variation in effort expended by the Company over the subscription term, therefore, revenue is recognized each month on a straight-line basis according to the consideration paid by the customer for the given time period. Generally, subscription terms are in annual increments and, when a subscription term begins, an annual fee is remitted by the customer to cover the 12-month period. The cash received is recorded as deferred revenue for the amount stated in the contract and recognized over the subscription term based on straight-line recognition. For cloud hosted software, the Company enters into service contracts which provides access to the software and customer support services. A performance obligation is created when the Company agrees to provide a particular service to a customer. For software access, revenue is recognized ratably over time for the daily performance obligation related to the customer's access to the cloud hosted software. For support services, revenue is recognized over time for the hourly performance obligation provided to the customer. Generally, subscription terms range from | ||||
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| Regional Airline Revenue | The Company provides air transport services, including regular public transport, charter services, and freight services. For regular transport services, a performance obligation is created when a ticket is purchased to transport a passenger from origin to destination. Transaction prices are based on published fares representing standalone selling prices. Generally, the fee for the transportation service is remitted by the customer prior to the transportation service being provided. The cash received is recorded as deferred revenue for the amount stated in the contract and revenue is recognized at a point-in-time upon completion of the provided transportation service. | ||||
| Leasing Revenue | Leasing revenue is recognized in accordance with ASC Topic 842. Refer to Note 11 for further details regarding the Company's leasing revenue. | ||||
The following table summarizes disaggregated revenues by type (in thousands):
| Three Months Ended December 31, | Nine Months Ended December 31, | ||||||||||||||||||||||
| 2025 | 2024 | 2025 | 2024 | ||||||||||||||||||||
| Product Sales | |||||||||||||||||||||||
| Overnight air cargo | $ | $ | $ | $ | |||||||||||||||||||
| Ground support equipment | |||||||||||||||||||||||
| Commercial aircraft, engines and parts | |||||||||||||||||||||||
| Corporate and other | |||||||||||||||||||||||
| Support Services | |||||||||||||||||||||||
| Overnight air cargo | |||||||||||||||||||||||
| Ground support equipment | |||||||||||||||||||||||
| Commercial aircraft, engines and parts | |||||||||||||||||||||||
| Corporate and other | |||||||||||||||||||||||
| Leasing Revenue | |||||||||||||||||||||||
| Ground support equipment | |||||||||||||||||||||||
| Commercial aircraft, engines and parts | |||||||||||||||||||||||
| Corporate and other | |||||||||||||||||||||||
| Software Services | |||||||||||||||||||||||
| Digital solutions | |||||||||||||||||||||||
| Regional Airline | |||||||||||||||||||||||
| Regional airline | |||||||||||||||||||||||
| Other | |||||||||||||||||||||||
| Overnight air cargo | |||||||||||||||||||||||
| Ground support equipment | |||||||||||||||||||||||
| Commercial aircraft, engines and parts | |||||||||||||||||||||||
| Regional airline | |||||||||||||||||||||||
| Corporate and other | |||||||||||||||||||||||
| Total | $ | $ | $ | $ | |||||||||||||||||||
See Note 16 for the Company's disaggregated revenues by geographic region and Note 17 for the Company’s disaggregated revenues by segment. These notes disaggregate revenue recognized from contracts with customers into categories that depict how the nature, amount, and timing of revenue and cash flows are affected by economic factors.
Contract Balances and Costs
Contract liabilities relate to deferred revenue, our unconditional right to receive consideration in advance of performance with respect to subscription revenue and advanced customer deposits with respect to product sales. The following table presents outstanding contract liabilities as of April 1, 2025 and December 31, 2025 and the amount of contract liabilities that were recognized as revenue during the nine-month period ended December 31, 2025 (in thousands):
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| Outstanding contract liabilities | Outstanding contract liabilities as of April 1, 2025 Recognized as Revenue | ||||||||||
| As of December 31, 2025 | $ | ||||||||||
| As of April 1, 2025 | $ | ||||||||||
| For the nine months ended December 31, 2025 | $ | ( | |||||||||
Contract liabilities obtained from the acquisition of Rex on December 18, 2025 were $21.3 million. Refer to Note 2 for additional information on the acquisition of Rex.
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4. Accrued Expenses and Other
| (In thousands) | December 31, 2025 | March 31, 2025 | |||||||||
| Salaries, wages and related items | $ | $ | |||||||||
| Profit sharing and bonus | |||||||||||
| Other Deposits | |||||||||||
| Deferred Income | |||||||||||
| Warranty Reserve | |||||||||||
| Accrued insurance payable | |||||||||||
| Accrued interest expense | |||||||||||
| Other | |||||||||||
| Total | $ | $ | |||||||||
5. Income Taxes
During the three-month period ended December 31, 2025, the Company recorded $0.1 million in income tax expense at an effective tax rate (“ETR”) of 6.4 %. The Company has computed the provision for income taxes based on the estimated annual effective tax rate and the application of discrete items, if any, for interim reporting. The primary factors contributing to the difference between the federal statutory rate of 21.0% and the Company's effective tax rate for the three-month period ended December 31, 2025 were the valuation allowance related to the Company's U.S. consolidated group, Delphax Technologies, Inc. (“DTI”), Delphax Solutions, Inc. (“DSI”), and Rex and its subsidiaries, the foreign rate differentials for Air T’s operations located in the Netherlands and Puerto Rico, non-deductible acquisition-related costs, and the benefit from the Foreign-Derived Intangible Income (FDII) deduction.
On July 4, 2025, the One Big Beautiful Bill Act ("OBBBA") was signed into law in the U.S., which includes a broad range of tax reform provisions affecting businesses. The Company has reflected the impact of the OBBBA in the second quarter of 2026 financial statements as required by generally accepted accounting principles. The Company is evaluating the full effects of the legislation on its estimated annual effective tax rate and cash tax position, but does not expect the legislation to have a material impact on its financial statements.
During the three-month period ended December 31, 2024, the Company recorded $0.3 million in income tax expense at an ETR of 38.7 %. The Company has computed the provision for income taxes based on the estimated annual effective tax rate excluding loss jurisdictions with no tax benefit and the application of discrete items, if any, for interim reporting. The primary factors contributing to the difference between the federal statutory rate of 21.0% and the Company's effective tax rate for the three-month period ended December 31, 2024 were the valuation allowance related to the Company’s U.S. consolidated group, DTI, Landing Gear Support Services PTE LTD (“LGSS”), DSI and BCCM Advisors (Kenya) Limited (“BCCM Kenya”), and the foreign rate differentials for Air T’s operations located in the Netherlands and Puerto Rico.
During the nine-month period ended December 31, 2025, the Company recorded $2.2 million in income tax expense at an ETR of 48.1 %. The Company has computed the provision for income taxes based on the estimated annual effective tax rate excluding loss jurisdictions with no tax benefit and the application of discrete items, if any, for interim reporting. The primary factors contributing to the difference between the federal statutory rate of 21.0% and the Company's effective tax rate for the nine-month period ended December 31, 2025, were the valuation allowance related to the Company’s U.S. consolidated group, DTI, DSI and Rex, the foreign rate differentials for Air T’s operations located in the Netherlands and Puerto Rico, non-deductible transaction costs, and the benefit from the FDII deduction.
During the nine-month period ended December 31, 2024, the Company recorded $0.8 million in income tax expense at an ETR of 30.1 %. The Company has computed the provision for income taxes based on the estimated annual effective tax rate excluding loss jurisdictions with no tax benefit and the application of discrete items, if any, for interim reporting. The primary factors contributing to the difference between the federal statutory rate of 21.0% and the Company's effective tax rate for the nine-month period ended December 31, 2024 were the valuation allowance related to the Company’s U.S. consolidated group, DTI, LGSS, DSI and BCCM Kenya, and the foreign rate differentials for Air T’s operations located in the Netherlands and Puerto Rico.
6. Net Earnings (Loss) Per Share
Basic earnings per share has been calculated by dividing net income attributable to Air T, Inc. stockholders by the weighted average number of common shares outstanding during each period. For purposes of calculating diluted earnings per share, shares issuable
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under stock options were considered potential common shares and were included in the weighted average common shares unless they were anti-dilutive.
As of December 31, 2025, of the 244,750 options outstanding under the Air T's 2020 Omnibus Stock and Incentive Plan, none were exercisable. Potential common shares outstanding are not included in the computation of diluted income per share if their effect is anti-dilutive. During the three and nine months ended December 31, 2025, the Company had 244,750 potential shares from share-based awards that were anti-dilutive. During the three and nine months ended December 31, 2024 the Company had 203,000
The computation of basic and diluted earnings per common share is as follows (in thousands, except for per share figures):
| Three Months Ended December 31, | Nine Months Ended December 31, | ||||||||||||||||||||||
| 2025 | 2024 | 2025 | 2024 | ||||||||||||||||||||
| Net (loss) income | $ | ( | $ | ( | $ | $ | |||||||||||||||||
| Net income attributable to non-controlling interests | ( | ( | ( | ( | |||||||||||||||||||
| Net (loss) income attributable to Air T, Inc. Stockholders | $ | ( | $ | ( | $ | $ | |||||||||||||||||
| (Loss) income per share: | |||||||||||||||||||||||
| Basic | $ | ( | $ | ( | $ | $ | |||||||||||||||||
| Diluted | $ | ( | $ | ( | $ | $ | |||||||||||||||||
| Weighted Average Shares Outstanding: | |||||||||||||||||||||||
| Basic | |||||||||||||||||||||||
| Diluted | |||||||||||||||||||||||
7. Intangible Assets and Goodwill
Intangible assets as of December 31, 2025 and March 31, 2025 consisted of the following (in thousands):
| December 31, 2025 | |||||||||||||||||
| Gross Carrying Amount | Accumulated Amortization | Net Book Value | |||||||||||||||
| Purchased software | $ | $ | ( | $ | |||||||||||||
| Internally developed software | ( | ||||||||||||||||
| In-place lease and other intangibles | ( | ||||||||||||||||
| Customer relationships | ( | ||||||||||||||||
| Patents | ( | ||||||||||||||||
| Government contracts | ( | ||||||||||||||||
| Tradenames | ( | ||||||||||||||||
| Other | ( | ||||||||||||||||
| ( | |||||||||||||||||
| In-process software | — | ||||||||||||||||
| Intangible assets, total | $ | $ | ( | $ | |||||||||||||
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| March 31, 2025 | |||||||||||||||||
| Gross Carrying Amount | Accumulated Amortization | Net Book Value | |||||||||||||||
| Purchased software | $ | $ | ( | $ | |||||||||||||
| Internally developed software | ( | ||||||||||||||||
| In-place lease and other intangibles | ( | ||||||||||||||||
| Customer relationships | ( | ||||||||||||||||
| Patents | ( | ||||||||||||||||
| Government contracts | |||||||||||||||||
| Tradenames | |||||||||||||||||
| Other | ( | ||||||||||||||||
| ( | |||||||||||||||||
| In-process software | — | ||||||||||||||||
| Intangible assets, total | $ | $ | ( | $ | |||||||||||||
The increase in customer relationships from March 31, 2025 to December 31, 2025 relates to the quarterly changes in foreign currency translation adjustments at Shanwick.
Intangible assets obtained from the acquisition of Rex on December 18, 2025 included government contracts, tradenames, and internally developed software totaling $1.1 million, $1.2 million, and $1.4 million, respectively. The estimated useful lives over which the intangible assets will be amortized are as follows: government contracts (1.0 years), tradenames (7.5 years), and internally developed software (5.0 years). The weighted average amortization period is 4.7 years. Refer to Note 2 for additional information on the acquisition of Rex.
Based on the intangible assets recorded at December 31, 2025 and assuming no subsequent additions to, or impairment of the underlying assets, the remaining estimated annual amortization expense is expected to be as follows:
| (In thousands) | |||||
| Year ending March 31, | Amortization | ||||
| 2026 (excluding the nine months ended December 31, 2025) | $ | ||||
| 2027 | |||||
| 2028 | |||||
| 2029 | |||||
| 2030 | |||||
| 2031 | |||||
| Thereafter | |||||
| $ | |||||
The carrying amount of goodwill as of December 31, 2025 and March 31, 2025 was $11.9 million and $10.5 million, respectively. The increase from the prior fiscal year end balance is attributable to the Royal acquisition within the overnight air cargo segment (as described in Note 2) of $1.0 million and the $0.4 million change in foreign currency translation adjustments related to the goodwill balance at Shanwick within the digital solutions segment. There was no impairment to goodwill during the nine months ended December 31, 2025.
Goodwill for relevant segments and corporate and other, at original cost, consists of the following (in thousands):
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| December 31, 2025 | March 31, 2025 | ||||||||||
| Overnight air cargo | $ | $ | |||||||||
| Commercial aircraft, engines and parts | |||||||||||
| Digital solutions | |||||||||||
| Total reportable segment goodwill, at cost | |||||||||||
| Corporate and other | |||||||||||
| Less accumulated impairment | ( | ( | |||||||||
| Goodwill, net of impairment | $ | $ | |||||||||
8. Investments in Securities and Derivative Instruments
The Company invests in exchange-traded marketable securities and accounts for that activity in accordance with ASC 321, Investments- Equity Securities. Marketable equity securities are carried at fair value, with changes in fair market value included in the determination of net income (loss). The fair market value of marketable equity securities is determined based on quoted market prices in active markets and are therefore, considered Level 1 fair value measurements.
The Company's gross unrealized gains and losses on equity securities for the three and nine months ended December 31, 2025 and 2024 were immaterial. These unrealized gains and losses are included within other income (loss) on the condensed consolidated statement of income (loss). As of December 31, 2025 and March 31, 2025, the fair value of these marketable equity securities was an asset of $1.3 million and $1.1 million, respectively, which is included within marketable securities and restricted investments in the condensed consolidated balance sheets.
9. Equity Method Investments
Bloomia Holdings, Inc. investment
The Company’s investment in Bloomia (NASDAQ: TULP), formerly Lendway, Inc. ("Lendway"), formerly Insignia Systems, Inc. ("Insignia"), has been accounted for under the equity method of accounting since Air T obtained significant influence over Bloomia in January 2018. The Company elected a three-month lag upon adoption of the equity method. On August 2, 2023, Insignia reincorporated in the state of Delaware as Lendway, Inc. Subsequent to reincorporation, Lendway sold its legacy business on August 4, 2023 and pivoted the business towards specialty agricultural finance. On February 26, 2024, Lendway acquired Bloomia B.V. ("Bloomia"), marking its first investment in specialty agriculture and underscoring its strategy of targeting high-quality agricultural assets and enterprises. On January 28, 2026, Lendway filed an amendment to its certificate of incorporation to change its name from Lendway, Inc. to Bloomia Holdings, Inc. As of December 31, 2025, the Company owned 487,000 shares of Bloomia, representing approximately 27.5 % of Bloomia's outstanding shares.
On August 15, 2024, the Company entered into a delayed draw term loan with Bloomia for up to $2.5 million with an interest rate of 8.0 % (the "Delayed Draw Term Loan"). On September 27, 2024 and January 15, 2025 the borrowing limit was increased to $3.5 million and $3.8 million, respectively. The Delayed Draw Term Loan limit increases were provided to assist with inventory purchases during the growing season and operating expenses as needed. All outstanding principal and accrued interest is due on the maturity date, which is the earlier of August 15, 2029 or by written demand of the Company after February 15, 2026. As of December 31, 2025, the Delayed Draw Term Loan has $2.2 million and $0.3 million of principal and accrued interest outstanding, respectively.
On September 15, 2025, Bloomia expanded its financing by entering into three promissory notes totaling $4.0 million among three of the largest shareholders, where Air T provided $1.1 million of additional funding (the "Promissory Note"). The notes were issued to Bloomia to assist with inventory purchase for the growing season and operating expenses as needed. The promissory note bears interest at a rate of 13.5 % with all outstanding principal and accrued interest due on the maturity date, which is June 1, 2027. Prior to the maturity date, Bloomia may prepay any accrued interest or principal outstanding without penalty. As of December 31, 2025, $1.1 million of the principal balance remains outstanding and minimal interest has been accrued.
Due to the continued subordinated financial support, Bloomia is a variable interest entity to which the Company holds several variable interests. The Company has determined that it is not the primary beneficiary, as it does not control Bloomia's Board of Directors, which is the party with the power to direct the activities that most significantly impact the economic performance of Bloomia. Additionally, the Company's exposure to variability of Bloomia is limited to its 27.5 % ownership in Bloomia's common stock and a total of $3.6 million of notes receivable and accrued interest from Bloomia. Accordingly, the Company does not consolidate Bloomia and will continue to account for its investment using the equity method of accounting.
Cadillac Casting, Inc. investment
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The Company's 20.1 % investment in Cadillac Casting, Inc. ("CCI") is accounted for under the equity method of accounting. Due to the differing fiscal year-ends, the Company has elected a three-month lag to record the CCI investment, with a basis difference decrease of $0.3 million. The Company recorded a basis difference adjustment of $12.0 thousand and $37.0 thousand in each of the three and nine months ended December 31, 2025.
CCI and Bloomia's combined summarized unaudited financial information for the three and nine months ended September 30, 2025 and 2024 were as follows (in thousands):
| Three Months Ended | Nine Months Ended | ||||||||||||||||||||||
| September 30, 2025 | September 30, 2024 | September 30, 2025 | September 30, 2024 | ||||||||||||||||||||
| Revenue | $ | $ | $ | $ | |||||||||||||||||||
| Gross Profit | |||||||||||||||||||||||
| Operating (loss) income | ( | ( | |||||||||||||||||||||
| Net loss | ( | ( | ( | ( | |||||||||||||||||||
Blue Crest Aviation Partners 2025-01 LLC investment
In August 2025, the Company entered into an Amended and Restated Limited Liability Company Agreement as one of three investor members in Blue Crest Aviation Partners 2025-01 LLC ("BCAP"). BCAP was formed as a series LLC to function as an aircraft capital joint venture targeting investments in mid-life commercial jet aircraft on lease to airlines globally. The Company's investor interest in BCAP is represented by a capital commitment of $5.1 million, which represents 10.0 % of all capital commitments for BCAP. The Company elected a three-month lag upon adoption of the equity method.
Crestone Asset Management, LLC investment
On May 5, 2021, the Company formed an aircraft asset management business called Crestone Asset Management, LLC ("CAM"), formerly known as Contrail Asset Management LLC, and an aircraft capital joint venture called Crestone JV II LLC ("CJVII"), formerly known as Contrail JV II LLC. The venture focuses on acquiring commercial aircraft and jet engines for leasing, trading and disassembly. The joint venture, CJVII, was formed as a series LLC ("CJVII Series"). It consists of several individual series that target investments in current generation narrow-body aircraft and engines, building on Contrail’s origination and asset management expertise. CAM was formed to serve two separate and distinct functions: 1) to direct the sourcing, acquisition and management of aircraft assets owned by CJVII Series as governed by the Management Agreement between CJVII and CAM (“Asset Management Function”), and 2) to directly invest into CJVII Series alongside other institutional investment partners (“Investment Function”).
In August 2025, CAM entered into an Amended and Restated Limited Liability Company Agreement as the Managing Member BCAP. CAM's involvement with BCAP represents an expansion of its Asset Management Function in which CAM will collect fees for the services it provides as the Managing Member of BCAP.
CAM has two classes of equity interests: 1) common interests and 2) investor interests. Neither interest votes as the entity is operated by a Board of Directors. The common interests of CAM relate to its Asset Management Function. The investor interests of CAM relate to the Company’s and Mill Road Capital’s (“MRC”) investments through CAM into CJVII (the Investment Function) and ultimately into the individual CJVII Series. With regard to CAM’s common interests, the Company currently owns 90 % of the economic common interests in CAM, and MRC owns the remaining 10 %. MRC invested $1.0 million directly into CAM in exchange for 10 % of the common interests. For the Asset Management Function, CAM receives origination fees, management fees, consignment fees (where applicable) and a carried interest from the direct investors into each CJVII Series. Such fee income and carried interest will be distributed to the Company and MRC in proportion to their respective common interests.
The Company determined that CAM is a variable interest entity and that the Company is not the primary beneficiary. This is primarily the result of the Company's conclusion that it does not control CAM’s Board of Directors, which has the power to direct the activities that most significantly impact the economic performance of CAM. Accordingly, the Company does not consolidate CAM and has determined to account for this investment using equity method accounting. The Company accounts for its investment in CAM using the hypothetical liquidation at book value ("HLBV") method without a reporting lag. The HLBV method uses a balance sheet approach to capture changes in the Company's claim on CAM's net assets from a period-end hypothetical liquidation at book value. This approach provides a more accurate reflection of the Company's investment in CAM, compared to recording its proportionate share of income or loss.
On October 18, 2024, the Company entered into an unsecured promissory note with CAM for $2.5 million with an interest rate of 10.0 %, through conversion of a portion of the Company's accounts receivable from CAM. All outstanding principal and accrued interest will become due and payable to the Company on the maturity date, which is October 15, 2027. Prior to the maturity, CAM
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may prepay any accrued interest or principal outstanding without penalty. As of December 31, 2025, $1.2 million of the principal balance remains outstanding with minimal accrued interest.
CAM's HLBV net assets, including common interests and investor interests, was $35.8 million and $35.4 million as of December 31, 2025 and 2024, respectively. Additionally, contributions from and distributions to both Air T and MRC for the three and nine months ended December 31, 2025 and 2024 is as follows (in thousands):
| Three Months Ended | Nine Months Ended | ||||||||||||||||||||||
| December 31, 2025 | December 31, 2024 | December 31, 2025 | December 31, 2024 | ||||||||||||||||||||
| Contributions | $ | $ | $ | $ | |||||||||||||||||||
| Distributions | |||||||||||||||||||||||
Investment balances for the Company's equity method investees as of December 31, 2025 and March 31, 2025 is as follows (in thousands):
| Investment | December 31, 2025 | March 31, 2025 | |||||||||
Bloomia | $ | $ | |||||||||
| CCI | |||||||||||
| CAM | |||||||||||
BCAP | |||||||||||
| Other equity method investments | |||||||||||
| Total | $ | $ | |||||||||
Net income (loss) attributable to Air T, Inc. stockholders for the Company's equity method investees, included in non-operating (expense) income on the condensed consolidated statements of income (loss), including basis difference adjustments, during the three and nine months ended December 31, 2025 and 2024 is as follows (in thousands):
| Three Months Ended | Nine Months Ended | ||||||||||||||||||||||
| Investment | December 31, 2025 | December 31, 2024 | December 31, 2025 | December 31, 2024 | |||||||||||||||||||
Bloomia | $ | ( | $ | ( | $ | ( | $ | ( | |||||||||||||||
| CCI | ( | ( | ( | ||||||||||||||||||||
| CAM | |||||||||||||||||||||||
BCAP | ( | ( | |||||||||||||||||||||
| Other equity method investments | |||||||||||||||||||||||
| Total | $ | $ | $ | $ | |||||||||||||||||||
The Company's equity method investees may, from time to time, make distributions and dividends to the Company in accordance with accumulated earnings at the investee. For the three and nine months ended December 31, 2025 and 2024, the Company received distributions and dividends from equity method investees as follows (in thousands):
| Three Months Ended | Nine Months Ended | ||||||||||||||||||||||
| Investment | December 31, 2025 | December 31, 2024 | December 31, 2025 | December 31, 2024 | |||||||||||||||||||
| CAM | $ | $ | $ | $ | |||||||||||||||||||
BCAP | |||||||||||||||||||||||
| Other equity method investments | |||||||||||||||||||||||
| Total | $ | $ | $ | $ | |||||||||||||||||||
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10. Inventories
Inventories consisted of the following (in thousands):
| December 31, 2025 | March 31, 2025 | ||||||||||
| Inventories: | |||||||||||
Raw materials | $ | $ | |||||||||
| Work in process | |||||||||||
Finished goods | |||||||||||
| Aircraft parts for sale | |||||||||||
Expendable parts | |||||||||||
| Total inventories | |||||||||||
| Reserves | ( | ( | |||||||||
| Total inventories, net of reserves | $ | $ | |||||||||
11. Lessor Arrangements
Equipment Leases
The Company leases equipment to third parties, primarily through Contrail. Leases for aircraft and engines to aviation customers typically have terms ranging from 1 and 4 years under operating lease agreements. The Company depreciates aircraft and engines on a straight-line basis over the assets' useful life from the acquisition date to an estimated residual value.
For the assets currently on lease, there are no options for the lessees to purchase the assets at the end of the lease term. Depreciation expense relating to equipment leases during the nine months ended December 31, 2025 was $0.7 million, and was immaterial during the three months ended December 31, 2025. Depreciation expense relating to equipment leases for the three and nine months ended December 31, 2024 was $0.6 million and $0.9 million, respectively.
Future minimum undiscounted rental payments to be received do not include contingent rentals that may be received under certain leases because amounts are based on usage. Earned contingent rent on equipment leases totaled approximately $0.5 million during the nine months ended December 31, 2025, and was immaterial during the three months ended December 31, 2025. Earned contingent rent on equipment leases during both the three and nine months ended December 31, 2024 totaled approximately $0.7
Office leases
The Company, through its wholly-owned subsidiary, Wolfe Lake, leases offices to third parties with lease terms between 5 and 29 years under operating lease agreements. For the offices currently on lease, there are no options for the lessees to purchase the spaces at the end of the leases. Our contractual obligations for offices currently on lease can include termination and renewal options. We utilize the reasonably certain threshold criteria in determining which options our customers will exercise. The Company depreciates the assets on a straight-line basis over the assets' useful life. During the three and nine months ended December 31, 2025 and 2024, depreciation expense relating to office leases was immaterial
For each of the three months ended December 31, 2025 and 2024, the Company recognized rental and other revenues related to operating lease payments of $0.4 0.2 1.3 0.5 million and $0.6 million, respectively. Future minimum rental payments to be received do not include variable lease payments that may be received under certain leases because amounts are based on usage. The following table sets forth the undiscounted cash flows for future minimum base rents to be received from customers for office leases in effect as of December 31, 2025:
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| Year ended March 31, | |||||
| 2026 (excluding the nine months ended December 31, 2025) | $ | ||||
| 2027 | |||||
| 2028 | |||||
| 2029 | |||||
| 2030 | |||||
| Thereafter | |||||
| Total | $ | ||||
12. Lessee Arrangements
The Company has operating leases for the use of real estate, machinery, and office equipment. The majority of our leases have a lease term of 2 to 5 years; however, we have certain leases with longer terms of up to 30 years. Many of our leases include options to extend the lease for an additional period. The lease term for all of the Company’s leases includes the non-cancellable period of the lease, plus any additional periods covered by either a Company option to extend the lease that the Company is reasonably certain to exercise, or an option to extend the lease controlled by the lessor that is considered likely to be exercised.
Payments due under the lease contracts include fixed payments plus, for some of our leases, variable payments. Variable payments are typically operating costs associated with the underlying asset and are recognized when the event, activity, or circumstance in the lease agreement on which those payments are assessed occurs. Our leases do not contain residual value guarantees.
The Company has elected to combine lease and non-lease components as a single component and not to recognize leases on the balance sheet with an initial term of one year or less.
The interest rate implicit in lease contracts is typically not readily determinable, and as such the Company utilizes the incremental borrowing rate to calculate lease liabilities, which is the rate incurred to borrow on a collateralized basis over a similar term, an amount equal to the lease payments in a similar economic environment.
The components of lease cost for the three and nine months ended December 31, 2025 and 2024 are as follows (in thousands):
| Three Months Ended December 31, | Nine Months Ended December 31, | ||||||||||||||||||||||
| 2025 | 2024 | 2025 | 2024 | ||||||||||||||||||||
| Operating lease cost | $ | $ | $ | $ | |||||||||||||||||||
| Short-term lease cost | |||||||||||||||||||||||
| Variable lease cost | |||||||||||||||||||||||
| Total lease cost | $ | $ | $ | $ | |||||||||||||||||||
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Amounts reported in the consolidated balance sheets for leases where we are the lessee as of December 31, 2025 and March 31, 2025 were as follows (in thousands):
| December 31, 2025 | March 31, 2025 | ||||||||||
| Operating leases | |||||||||||
| Operating lease ROU assets | $ | $ | |||||||||
| Operating lease liabilities | $ | $ | |||||||||
| Weighted-average remaining lease term | |||||||||||
| Operating leases | |||||||||||
| Weighted-average discount rate | |||||||||||
| Operating leases | % | % | |||||||||
During the nine months ended December 31, 2025 and 2024, the Company had ROU assets that were obtained in exchange for new operating lease liabilities in the amount of $3.7 million and $3.8 million, respectively, of which $3.7 million was obtained through the acquisitions of Royal and Rex during the nine months ended December 31, 2025.
The Company has an operating lease between entities under common control where the useful life of certain leasehold improvements exceeds the related lease term. As of December 31, 2025, the remaining lease term on the operating lease was three years, eleven months and the useful life of leasehold improvements that exceeded the lease term ranged from four years, one month to four years, five months . As of December 31, 2025, the unamortized balance of such leasehold improvements was $0.2 million.
Maturities of lease liabilities under non-cancellable leases where we are the lessee as of December 31, 2025 are as follows (in thousands):
| Operating Leases | |||||
| 2026 (excluding the nine months ended December 31, 2025) | $ | ||||
| 2027 | |||||
| 2028 | |||||
| 2029 | |||||
| 2030 | |||||
| Thereafter | |||||
| Total undiscounted lease payments | |||||
| Interest | ( | ||||
| Total lease liabilities | $ | ||||
13. Financing Arrangements
Borrowings of the Company and its subsidiaries are summarized below at December 31, 2025 and March 31, 2025, respectively.
In connection with the acquisition of Royal on May 15, 2025, the Air'Zona, CSA, GGS, MAC, WASI, Worthington, Jet Yard, Jet Yard Solutions, and Royal ("the Alerus Loan Parties") under the Revolving Credit Agreement with Alerus entered into Amendment No. 4 to Credit Agreement and Consent and Term Loan C with Alerus in the amount of $1.1 million. The purpose of the Amendment and Term Note was to provide a term loan to finance the full purchase price of the acquisition, to add Royal as an Alerus Loan Party to the Alerus credit agreement, as amended and to memorialize Alerus’ consent to the Royal acquisition. The new term loan matures May 15, 2030 and bears interest at the greater of 5.00 % or the CME one-month term SOFR rate plus 2.25 %. Monthly payments on Term Note C commenced June 15, 2025 and are equal to $12.5 thousand plus accrued interest. The term loan is secured by the terms of the Security Agreement dated as of August 29, 2024.
On May 30, 2025, the Company, along with AAM 24-1 (the "Issuer"), entered into new transaction documents with two Institutional Investors that replaced the Second Note Purchase Agreement ("Second NPA") transaction documents. Pursuant to the Third Note Purchase Agreement ("Third NPA") with the Institutional Investors, the Issuer agreed to issue and sell a Multiple Advance Senior Secured Note in an aggregate principal amount of up to $100.0 million (the “Multiple Advance Note”). For purposes of clarity and the avoidance of doubt, as of the closing date, the Institutional Investors advanced an additional $10.0 million to the Issuer and have collectively advanced under the Multiple Advance Note to the Issuer the aggregate amount of $40.0 million. Provided no default or
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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 | $ | ||||
| January 30, 2026 | $ | ||||
| May 30, 2026 | $ | ||||
| September 30, 2026 | $ | ||||
| January 30, 2027 | $ | ||||
| May 30, 2027 | $ | ||||
The Multiple Advance Note bears annual interest at a rate of 8.5 % which is computed on the basis of a 30/360-day year and actual days elapsed and is payable semi-annually in arrears, pursuant to the terms of the Multiple Advance Note. The maturity date of the Multiple Advance Note is May 31, 2035. The Multiple Advance Note contains standard and customary events of default including, but not limited to, failure to make payments when due under the Multiple Advance Note, failure to comply with certain covenants contained in the Multiple Advance Note, or bankruptcy or insolvency of, or certain monetary judgments against the Issuer or the Company. The prior notes were cancelled and replaced by the Multiple Advance Note. Funds advanced under the Multiple Advance Note may be reinvested for a period of six years from the date of closing.
The Issuer may prepay all or a portion of the outstanding principal and accrued but unpaid interest at any time, provided that (i) if the Issuer prepays all or any portion of the Multiple Advance Note within one year from the Issue Date, the Issuer is required to pay the Investors a prepayment premium equal to 2.0 % of the amount being prepaid, and (ii) if the Issuer prepays all or any portion of the Multiple Advance Note after the first anniversary of the Issue Date but on or prior to the second anniversary of the Issue Date, the Issuer is required to pay the Investors a prepayment premium equal to 1.0 % of the amount being prepaid. If the Issuer elects to prepay a portion of the outstanding principal and accrued but unpaid interest, then in no event can such prepayment be for an amount less than $1.0 million.
The various equity interests that were assigned by the Company to the Issuer on or about the closing date of the original financings continue to serve as collateral for the repayment of the Multiple Advance Note as do all of the issued and outstanding capital stock of the Issuer owned by the Company, and the 320,000 Trust Preferred Securities, held by the Issuer.
On September 3, 2025, the Alerus Loan Parties under the Revolving Credit Agreement with Alerus entered into Amendment No. 5 to Credit Agreement, the Amended and Restated Revolving Credit Note, and the Amended and Restated Term Note A.
Pursuant to Amendment No. 5 to Credit Agreement, the Overline Note provisions and note were eliminated.
Pursuant to the Amended and Restated Revolving Credit Note, the revolving credit commitment to make revolving credit loans and to issue letters of credit was increased to an aggregate principal amount not to exceed $20.0 million. The interest rate on the Revolving Credit Note was decreased to the greater of 5.00 % or 1-month SOFR plus 1.90 %. The maturity date was extended to August 28, 2027. The financial covenants are to be measured semi-annually at December and March of each year and the Alerus Loan Parties are to deliver quarterly financial statements to Alerus.
Pursuant to the Amended and Restated Term Note A, Term Note A was amended and restated by the Alerus Loan Parties in the principal amount of $9.2 million. The maturity date remains August 15, 2029. The Term Note A interest rate was revised to 1-month SOFR plus 2.00 %.
Pursuant to Amendment No. 5 to Credit Agreement, the Alerus Loan Parties must maintain a debt service coverage ratio of at least 1.25 to 1.00 measured on December 31 and March 31 of each year and a leverage ratio not to exceed 3.00 to 1.00 measured annually on March 31.
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On November 24, 2025, Air T Acquisition 22.1, LLC ("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 loan requires ATA 22.1 to maintain marketable securities pledged as collateral in an amount that is at all times not less than the outstanding principal amount of the term loan, measured as of the end of each calendar month. Additional 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.
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 , at any time during each annual period ending on the anniversary of the date of the revolving loan. 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 maintaining, as of the last day of each fiscal quarter, a quarterly rolling cash flow coverage ratio of not less than 1.25 to 1.00; maintaining a tangible net worth of at least $15.0 million at all times; 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.
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 commencing on April 10, 2026 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, as defined in Note 2, 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 December 31, 2025, the carrying value of the Contingent Payment Agreement was $1.1 million.
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On December 17, 2025, as part of the Company's acquisition of Rex, further discussed in Note 2, the Company assumed approximately $71.2 million in liabilities associated with the Commonwealth Facility Agreement originally dated November 11, 2024, with the Commonwealth. The Company determined the fair value of the CFA Debt using a discounted cash flow approach, consistent with market practice and applicable accounting standards for valuing long-dated, non-tradeable debt instruments. As of December 31, 2025, the carrying value of the CFA Debt was $22.5 million.
On December 17, 2025, Rex and the Commonwealth entered into (i) an amendment and restatement of the Commonwealth Facility Agreement originally dated November 11, 2024 (the “Perpetual Facility Agreement”), and (ii) a new facility agreement (the “New Facility Agreement” and, together with the Perpetual Facility Agreement, the “Commonwealth Facilities”).
The Perpetual Facility Agreement is for an initial term of 30 years and permits extension of the termination date by up to an additional 20 years (in two 10 ‑year increments) subject to specified conditions and require mandatory prepayments from Excess Cash Flow in accordance with the Intercreditor Deed. The Perpetual Facility Agreement does not bear interest, provided that if Rex fails to maintain compliance with certain ‘Rex Regional Commitments’ (and a resulting event of default date 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 Perpetual Facility Agreement on December 17, 2025 was approximately $22.5 million, estimated using a DCF approach, consistent with market practice and applicable accounting standards for the valuation of long-dated, non-tradeable debt instruments, and is considered a Level 3 fair value measurement. The DCF values the forecasted cash flows that related to Rex operations that are required to be used to prepay the note over its term. The fair value of the debt would have been different if there was a significant change to the cash flows for prepayment and the discount rate applied to the cash flows. The range of inputs for the valuation of the discount rate were between 12 % and 18 %, and the weighted average discount rate was 15 %. The carrying value exceeded the estimated fair value primarily due to the Perpetual Facility Agreement bearing no contractual interest.
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 Perpetual Facility Agreement, require mandatory prepayments from Excess Cash Flow in accordance with the Intercreditor Deed. Excess Cash Flow is calculated as available cash flow for that relevant period less required debt payments for that relevant period (excluding capitalized interest).
The following table provides certain information about the current financing arrangements of the Company and its subsidiaries (other than related party obligations) as of December 31, 2025:
| (In Thousands) | December 31, 2025 | March 31, 2025 | Maturity Date | Interest Rate | Unused commitments as of December 31, 2025 | Type of Debt | |||||||||||||||||||||||||||||
| Air T Debt | |||||||||||||||||||||||||||||||||||
| Debt - Air T Funding Trust Preferred Securities1 | $ | $ | 6/7/2049 | Recourse | |||||||||||||||||||||||||||||||
| Total | |||||||||||||||||||||||||||||||||||
| Alerus Loan Parties Debt | |||||||||||||||||||||||||||||||||||
| Revolver - Alerus | 8/28/2027 | Greater of | $ | Recourse | |||||||||||||||||||||||||||||||
| Overline Note - Alerus | 10/31/2025 | Greater of | Recourse | ||||||||||||||||||||||||||||||||
1 Does not include $13.0 million held by wholly-owned subsidiaries of the Company.
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| Term Note A - Alerus | 8/15/2029 | 1-month SOFR + | Recourse | ||||||||||||||||||||||||||||||||
| Term Note C - Alerus | 5/15/2030 | Greater of | Recourse | ||||||||||||||||||||||||||||||||
| Total | |||||||||||||||||||||||||||||||||||
| Contrail Debt | |||||||||||||||||||||||||||||||||||
| Revolver - Alerus | 11/24/2027 | 1-month SOFR + | Limited recourse2 | ||||||||||||||||||||||||||||||||
| Revolver - ONB | 11/24/2025 | 1-month SOFR + | Limited recourse3 | ||||||||||||||||||||||||||||||||
| Term Note J - ONB | 9/12/2028 | 1-month SOFR + | Limited recourse3 | ||||||||||||||||||||||||||||||||
| Total | |||||||||||||||||||||||||||||||||||
| Wolfe Lake Debt | |||||||||||||||||||||||||||||||||||
| Term Loan - Bridgewater | 12/2/2031 | Non-recourse | |||||||||||||||||||||||||||||||||
| Total | |||||||||||||||||||||||||||||||||||
| ATA 22.1 Debt | |||||||||||||||||||||||||||||||||||
| Term Loan - Alerus | 11/24/2032 | Greater of | Non-recourse | ||||||||||||||||||||||||||||||||
| Term Loan - Bridgewater | 2/8/2027 | Non-recourse | |||||||||||||||||||||||||||||||||
| Term Loan A - ING | 2/1/2027 | Non-recourse | |||||||||||||||||||||||||||||||||
| Term Loan B - ING | 5/1/2027 | Non-recourse | |||||||||||||||||||||||||||||||||
| Total | |||||||||||||||||||||||||||||||||||
| WASI Debt | |||||||||||||||||||||||||||||||||||
| Promissory Note - Seller's Note | 1/1/2026 | Non-recourse | |||||||||||||||||||||||||||||||||
| Total | |||||||||||||||||||||||||||||||||||
| AAM 24-1 Debt | |||||||||||||||||||||||||||||||||||
| Promissory Notes - Honeywell | 5/31/2035 | Non-recourse | |||||||||||||||||||||||||||||||||
| Total | |||||||||||||||||||||||||||||||||||
| MAC Debt | |||||||||||||||||||||||||||||||||||
| Term Loan - Bank of America, N.A. | 2/21/2030 | 1-month SOFR + | Non-recourse | ||||||||||||||||||||||||||||||||
| Total | |||||||||||||||||||||||||||||||||||
| REX Debt | |||||||||||||||||||||||||||||||||||
2 Includes Air T's guarantee of approximately $2.0 million.
3 Includes Air T's guarantee of approximately $1.6 million.
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| Term Loan - Commonwealth 4 | 11/11/2054 | Non-recourse | |||||||||||||||||||||||||||||||||
| Line of Credit - Commonwealth | 12/17/2032 | Non-recourse | |||||||||||||||||||||||||||||||||
| Total | |||||||||||||||||||||||||||||||||||
| ATA 25.1 | |||||||||||||||||||||||||||||||||||
Term Note - Institutional Investors | 12/15/2031 | Recourse | |||||||||||||||||||||||||||||||||
| Total | |||||||||||||||||||||||||||||||||||
| Total Debt | |||||||||||||||||||||||||||||||||||
| Unamortized Premiums and Debt Issuance Costs | ( | ( | |||||||||||||||||||||||||||||||||
| Total Debt, net | $ | $ | |||||||||||||||||||||||||||||||||
ATA 22.1's term loans with ING include several covenants that are measured once a year at December 31, including but not limited to, a negative covenant requiring a debt service coverage ratio of at least 1.10 to 1.00 and a senior net leverage ratio not greater than 1.50 to 1.00.
AAM 24-1's promissory notes with the Institutional Investors also contain affirmative and negative covenants, including covenants on the utilization of loan proceeds, TruPs dividends, distributions from AAM 24-1's investments and other reporting requirements.
The MAC term loan with Bank of America, N.A. contains a number of covenants, including but not limited to: providing financial information and statements, maintaining a fixed coverage ratio of at least 1.25 to 1.00, a limit on other debts and other liens, maintenance of assets, a limit on loans and investments, a prohibition on a change of ownership and additional negative covenants.
At December 31, 2025, our contractual financing obligations, including payments due by period, are as follows (in thousands):
| Due by | Amount | ||||
| December 31, 2026 | $ | ||||
| December 31, 2027 | |||||
| December 31, 2028 | |||||
| December 31, 2029 | |||||
| December 31, 2030 | |||||
| Thereafter | |||||
| Unamortized Premiums and Debt Issuance Costs | ( | ||||
| $ | |||||
Interest Expense, net - Net interest expense for the Company and its subsidiaries were as follows for the three and nine months ended December 31, 2025 and 2024:
4 Reported at fair value which was lower than the debt's $72.2 million (A$107.8 million) face value as of December 31, 2025. The fair value was estimated using a DCF approach, consistent with market practice and applicable accounting standards for the valuation of long-dated, non-tradeable debt instruments.
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| Three Months Ended December 31, | Nine Months Ended December 31, | ||||||||||||||||||||||
| 2025 | 2024 | 2025 | 2024 | ||||||||||||||||||||
| Air T | $ | $ | $ | $ | |||||||||||||||||||
| Jet Yard | |||||||||||||||||||||||
| Alerus Loan Parties | |||||||||||||||||||||||
| Contrail | |||||||||||||||||||||||
| AirCo 1 | |||||||||||||||||||||||
| Wolfe Lake | |||||||||||||||||||||||
| ATA 22.1 | |||||||||||||||||||||||
| WASI | |||||||||||||||||||||||
| AAM 24-1 | |||||||||||||||||||||||
| MAC | |||||||||||||||||||||||
| Air T Acquisition 25.1 | |||||||||||||||||||||||
| Other | ( | ( | ( | ||||||||||||||||||||
| Total | $ | $ | $ | $ | |||||||||||||||||||
Cash paid for interest totaled $6.9 million during the nine months ended December 31, 2025.
14. EMPLOYEE AND NON-EMPLOYEE DIRECTOR STOCK OPTIONS
Air T, Inc. maintains the 2020 Omnibus Stock and Incentive Plan for the benefit of certain eligible employees and directors. Compensation expense is recognized over the requisite service period for stock options which are expected to vest based on their grant-date fair values. The Company uses either the Black-Scholes option pricing model or Monte Carlo simulations to value stock options the Company grants. The key assumptions for the valuation methodologies include the expected term of the option, stock price volatility, risk-free interest rate and dividend yield. Many of these assumptions are judgmental and highly sensitive in the determination of compensation expense.
On December 29, 2020, the Company’s Board of Directors unanimously approved the Omnibus Stock and Incentive Plan (the "Plan"), which was subsequently approved by the Company's stockholders at the August 18, 2021 Annual Meeting of Stockholders. The total number of shares authorized under the Plan is 420,000 . Through December 31, 2025, options to purchase up to 399,300 shares have been granted under the Plan. Of the shares granted under the Plan, 349,800 vest annually over a period of ten years based on a specified service condition ("vested awards") and expire ten years after vesting. However, the ability to exercise vested awards, occurring at the conclusion of each annual vesting period, is contingent upon the Company's stock price meeting predetermined milestones outlined in the options agreements (the "market condition"). If the market condition is not fulfilled at the annual vesting period on June 30 of every year, the vested awards may not be exercisable at any subsequent point. On the preceding four vesting dates, June 30, 2025, 2024, 2023 and 2022, a total of 129,050 no 195,250 granted options that may become exercisable on future vesting dates under the Plan. No options were exercisable as of December 31, 2025.
On August 5, 2025, Air T granted 49,500 options under the Plan with a different vesting schedule. Beginning August 6, 2026 and each anniversary date thereafter through August 6, 2035, 10 % of the granted options will vest. For all the options granted, half will have a strike price of $30 and the other half will have a strike price of $50 . Should a grantee quit or services cease being provided, any options that have not vested will be forfeited. Options that vest each August 6 will be exercisable for a period of ten years after they become vested, meaning vested options that were not exercised will expire from August 6, 2036 through August 6, 2045. Management valued the granted options using the Monte Carlo Simulation method, noting the fair value on August 5, 2025 was $0.8 million. Expenses are recognized based on a straight-line basis.
For the three and nine months ended December 31, 2025, total compensation cost recognized under the Plan was $48.0 thousand and $129.0 thousand.
36
15. Shares Repurchased
16. Geographical Information
The net book value of tangible long-lived assets, which include property and equipment as well as assets on lease, net of accumulated depreciation, located in the United States, the Company's country of domicile, and held outside the United States, are summarized in the following table as of December 31, 2025 and March 31, 2025 (in thousands):
| December 31, 2025 | March 31, 2025 | ||||||||||
| United States | $ | $ | |||||||||
| Australia | |||||||||||
| Bulgaria | |||||||||||
Other Foreign | |||||||||||
| Total tangible long-lived assets, net | $ | $ | |||||||||
Total revenue, in and outside the United States, is summarized in the following table for the three and nine months ended December 31, 2025 and December 31, 2024 (in thousands):
37
| Three Months Ended December 31, | Nine Months Ended December 31, | ||||||||||||||||||||||
| 2025 | 2024 | 2025 | 2024 | ||||||||||||||||||||
| Operating Revenues: | |||||||||||||||||||||||
| Overnight Air Cargo | |||||||||||||||||||||||
| United States | $ | $ | $ | $ | |||||||||||||||||||
| Foreign | |||||||||||||||||||||||
| Total Overnight Air Cargo | |||||||||||||||||||||||
| Commercial Aircraft, Engines and Parts | |||||||||||||||||||||||
| United States | |||||||||||||||||||||||
| Foreign | |||||||||||||||||||||||
| Total Commercial Aircraft, Engines and Parts | |||||||||||||||||||||||
| Ground Support Equipment | |||||||||||||||||||||||
| United States | |||||||||||||||||||||||
| Foreign | |||||||||||||||||||||||
| Total Ground Support Equipment | |||||||||||||||||||||||
| Digital Solutions | |||||||||||||||||||||||
| United States | |||||||||||||||||||||||
| Foreign | |||||||||||||||||||||||
| Total Digital Solutions | |||||||||||||||||||||||
| Regional Airline | |||||||||||||||||||||||
| United States | |||||||||||||||||||||||
| Foreign | |||||||||||||||||||||||
| Total Regional Airline | |||||||||||||||||||||||
| Corporate and Other | |||||||||||||||||||||||
| United States | |||||||||||||||||||||||
| Foreign | |||||||||||||||||||||||
| Total Corporate and Other | |||||||||||||||||||||||
| Total revenue | $ | $ | $ | $ | |||||||||||||||||||
17. Segment Information
Air T's portfolio of businesses are managed on a highly decentralized basis. These businesses are aggregated into operating segments in a manner that reflects how Air T views the business activities. The Company's chief operating decision maker is the Chief Executive Officer. The Chief Executive Officer is ultimately responsible for significant capital allocation decisions and evaluating operating performance. In assessing performance for the Company's businesses, the chief operating decision maker ("CODM") reviews operating income and Adjusted EBITDA. Certain operating segments are aggregated into reportable segments.
Effective as of the third quarter of fiscal year 2026, the Company introduced a new reportable segment named, "Regional Airline". This new segment includes all reportable activity as it relates to the operating business of Rex, the business acquired by the Company as discussed in Note 2.
Effective as of the fourth quarter of fiscal year 2025, the Company renamed the ground equipment sales segment to ground support equipment and renamed the commercial jet engines and parts segment to commercial aircraft, engines and parts to better align the descriptions of the segments with their activities.
Additionally, the Company elected to separately disclose the digital solutions segment, as of the fourth quarter of fiscal year 2025, to align presentation in the financial statements with a key anticipated long-term growth area for the Company. Digital solutions was
38
previously classified as part of insignificant business activities. As a result of this change, prior period segment information has been recast to conform to our current presentation in our financial statements.
The Company's five
| Reportable Segment | Principal Business Activities | |||||||
| Overnight Air Cargo | Overnight Air Cargo primarily operates under its relationship with FedEx spanning over | |||||||
| Commercial Aircraft, Engines and Parts (formerly known as Commercial Jet Engines and Parts) | The Commercial Aircraft, Engines and Parts segment manages and leases aviation assets; supplies surplus and aftermarket commercial jet engine components; provides commercial aircraft disassembly/part-out services; commercial aircraft parts sales; procurement services and overhaul and repair services to airlines. | |||||||
| Ground Support Equipment (formerly known as Ground Support Sales) | Ground Support Equipment manufactures and provides mobile deicers and other specialized equipment products to passenger and cargo airlines, airports, the military and industrial customers. | |||||||
| Digital Solutions | Digital Solutions develops and provides digital aviation and other business services to customers within the aviation industry to generate recurring subscription revenues. Until the fourth quarter of the fiscal year 2025, Digital Solutions had been reported as part of the central corporate function referred to as Corporate and Other. | |||||||
| Regional Airline | The Regional Airline segment's primary operations focus on sustaining and growing essential regional passenger and cargo air connectivity. The segment consists of Regional Express Airlines, which operates a fleet of Saab 340 aircraft that provide vital connections between Australia's regional centers and capital cities for its customers | |||||||
The information that follows shows data of Air T's reportable segments reconciled to amounts reflected in our Consolidated Financial Statements. Intersegment eliminations are included to reconcile segment totals to consolidated amounts.
The cost and expense information presented below is based on the information regularly provided to the CODM. Further, asset information is not included in the information regularly provided to the CODM as it is not a key determining factor in the performance of the Company's reportable segments.
The Company also has a "Corporate and Other" category which includes unallocated Air T holding company costs that are not directly attributable to the ongoing operating activities of our reportable segments in addition to revenues and expenses for non-reportable operating businesses and investments.
Segment data is summarized in the following tables (in thousands):
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| Three Months Ended December 31, 2025 | |||||||||||||||||||||||||||||||||||
| Overnight Air Cargo | Commercial Aircraft, Engines and Parts | Ground Support Equipment | Digital Solutions | Regional Airline | Total | ||||||||||||||||||||||||||||||
| Revenue from external customers | $ | $ | $ | $ | $ | $ | |||||||||||||||||||||||||||||
| Intersegment revenue | |||||||||||||||||||||||||||||||||||
| Reconciliation of revenue | |||||||||||||||||||||||||||||||||||
| Other revenue1 | |||||||||||||||||||||||||||||||||||
| Elimination of intersegment revenue2 | ( | ||||||||||||||||||||||||||||||||||
| Total consolidated revenue | $ | ||||||||||||||||||||||||||||||||||
| Cost of sales: | |||||||||||||||||||||||||||||||||||
| Cost of sales from external sources | |||||||||||||||||||||||||||||||||||
| Intersegment operating expense | |||||||||||||||||||||||||||||||||||
| Less:3 | |||||||||||||||||||||||||||||||||||
| General and administrative | |||||||||||||||||||||||||||||||||||
| Other segment items4 | |||||||||||||||||||||||||||||||||||
| Segment profit (loss) | ( | ( | ( | ( | |||||||||||||||||||||||||||||||
| Reconciliation of profit (loss) | |||||||||||||||||||||||||||||||||||
Other revenue1 | |||||||||||||||||||||||||||||||||||
Other cost of sales1 | ( | ||||||||||||||||||||||||||||||||||
Other expenses1 | ( | ||||||||||||||||||||||||||||||||||
| Interest expense | ( | ||||||||||||||||||||||||||||||||||
| Income from equity method investments | |||||||||||||||||||||||||||||||||||
| Other non-operating expense5 | |||||||||||||||||||||||||||||||||||
| Other corporate expenses | ( | ||||||||||||||||||||||||||||||||||
| Elimination of intersegment profits | |||||||||||||||||||||||||||||||||||
| Income before income taxes | $ | ( | |||||||||||||||||||||||||||||||||
1 Revenue, cost of sales, and expenses from segments below the quantitative thresholds or that do not constitute a business segment are attributable to an investment advisory business, a laser printer manufacturer, and a commercial property owned by the Company.
2 Elimination of intersegment revenue includes eliminations related to Other revenue in the tables above totaling $44.0 thousand for the three months ended December 31, 2025. After eliminations, Other revenue from third parties is $1.3 million for the three months ended December 31, 2025.
3 The significant expense categories and amounts align with the segment-level information that is regularly provided to the chief operating decision maker. Intersegment expenses are included within the amounts shown.
4 Other segment items consist of depreciation and amortization and remeasurement of the earnout liability.
5 Other corporate expenses consist of unallocated expenses that are related to the activities of Corporate and other in support of the overall business. Unallocated expenses include, but are not limited to: shared services that are not allocated, costs associated with the corporate headquarters and, expenses related to identifying and pursuing new corporate business initiatives.
40
| Three Months Ended December 31, 2024 | |||||||||||||||||||||||||||||||||||
| Overnight Air Cargo | Commercial Aircraft, Engines and Parts | Ground Support Equipment | Digital Solutions | Regional Airline | Total | ||||||||||||||||||||||||||||||
| Revenue from external customers | $ | $ | $ | $ | $ | $ | |||||||||||||||||||||||||||||
| Intersegment revenue | |||||||||||||||||||||||||||||||||||
| Reconciliation of revenue | |||||||||||||||||||||||||||||||||||
| Other revenue1 | |||||||||||||||||||||||||||||||||||
| Elimination of intersegment revenue2 | ( | ||||||||||||||||||||||||||||||||||
| Total consolidated revenue | $ | ||||||||||||||||||||||||||||||||||
| Cost of sales: | |||||||||||||||||||||||||||||||||||
| Cost of sales from external sources | |||||||||||||||||||||||||||||||||||
| Intersegment operating expense | |||||||||||||||||||||||||||||||||||
| Less:3 | |||||||||||||||||||||||||||||||||||
| General and administrative | |||||||||||||||||||||||||||||||||||
| Other segment items4 | |||||||||||||||||||||||||||||||||||
| Segment profit (loss) | ( | ||||||||||||||||||||||||||||||||||
| Reconciliation of profit (loss) | |||||||||||||||||||||||||||||||||||
Other revenue1 | |||||||||||||||||||||||||||||||||||
Other cost of sales1 | ( | ||||||||||||||||||||||||||||||||||
Other expenses1 | ( | ||||||||||||||||||||||||||||||||||
| Interest expense | ( | ||||||||||||||||||||||||||||||||||
| Income from equity method investments | |||||||||||||||||||||||||||||||||||
| Other non-operating expense | ( | ||||||||||||||||||||||||||||||||||
| Other corporate expenses5 | ( | ||||||||||||||||||||||||||||||||||
| Elimination of intersegment profits | |||||||||||||||||||||||||||||||||||
| Income before income taxes | $ | ( | |||||||||||||||||||||||||||||||||
1 Revenue, cost of sales, and expenses from segments below the quantitative thresholds or that do not constitute a business segment are attributable to an investment advisory business, a laser printer manufacturer, and a commercial property owned by the Company.
2 Elimination of intersegment revenue includes eliminations related to Other revenue in the tables above totaling $44.0 thousand for the three months ended December 31, 2024. After eliminations, Other revenue from third parties is $0.8 million for the three months ended December 31, 2024.
3 The significant expense categories and amounts align with the segment-level information that is regularly provided to the chief operating decision maker. Intersegment expenses are included within the amounts shown.
4 Other segment items consist of depreciation and amortization and remeasurement of the earnout liability.
5 Other corporate expenses consist of unallocated expenses that are related to the activities of Corporate and other in support of the overall business. Unallocated expenses include, but are not limited to: shared services that are not allocated, costs associated with the corporate headquarters and, expenses related to identifying and pursuing new corporate business initiatives.
41
| Nine Months Ended December 31, 2025 | |||||||||||||||||||||||||||||||||||
| Overnight Air Cargo | Commercial Aircraft, Engines and Parts | Ground Support Equipment | Digital Solutions | Regional Airline | Total | ||||||||||||||||||||||||||||||
| Revenue from external customers | $ | $ | $ | $ | $ | $ | |||||||||||||||||||||||||||||
| Intersegment revenue | |||||||||||||||||||||||||||||||||||
| Reconciliation of revenue | |||||||||||||||||||||||||||||||||||
| Other revenue1 | |||||||||||||||||||||||||||||||||||
| Elimination of intersegment revenue2 | ( | ||||||||||||||||||||||||||||||||||
| Total consolidated revenue | $ | ||||||||||||||||||||||||||||||||||
| Cost of sales: | |||||||||||||||||||||||||||||||||||
| Cost of sales from external sources | |||||||||||||||||||||||||||||||||||
| Intersegment operating expense | |||||||||||||||||||||||||||||||||||
| Less:3 | |||||||||||||||||||||||||||||||||||
| General and administrative | |||||||||||||||||||||||||||||||||||
| Gain on sale of aircraft | ( | ( | |||||||||||||||||||||||||||||||||
| Other segment items4 | |||||||||||||||||||||||||||||||||||
| Segment profit (loss) | ( | ( | |||||||||||||||||||||||||||||||||
| Reconciliation of profit (loss) | |||||||||||||||||||||||||||||||||||
Other revenue1 | |||||||||||||||||||||||||||||||||||
Other cost of sales1 | ( | ||||||||||||||||||||||||||||||||||
Other expenses1 | ( | ||||||||||||||||||||||||||||||||||
| Interest expense | ( | ||||||||||||||||||||||||||||||||||
| Income from equity method investments | |||||||||||||||||||||||||||||||||||
| Other non-operating income5 | |||||||||||||||||||||||||||||||||||
| Other corporate expenses | ( | ||||||||||||||||||||||||||||||||||
| Elimination of intersegment profits | |||||||||||||||||||||||||||||||||||
| Income before income taxes | $ | ||||||||||||||||||||||||||||||||||
1 Revenue, cost of sales, and expenses from segments below the quantitative thresholds or that do not constitute a business segment are attributable to an investment advisory business, a laser printer manufacturer, and a commercial property owned by the Company.
2 Elimination of intersegment revenue includes eliminations related to Other revenue in the tables above totaling $133.0 thousand for the nine months ended December 31, 2025. After eliminations, Other revenue from third parties is $4.0 million for the nine months ended December 31, 2025.
3 The significant expense categories and amounts align with the segment-level information that is regularly provided to the chief operating decision maker. Intersegment expenses are included within the amounts shown.
4 Other segment items consist of depreciation and amortization and remeasurement of the earnout liability.
5 Other corporate expenses consist of unallocated expenses that are related to the activities of Corporate and other in support of the overall business. Unallocated expenses include, but are not limited to: shared services that are not allocated, costs associated with the corporate headquarters and, expenses related to identifying and pursuing new corporate business initiatives.
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| Nine Months Ended December 31, 2024 | |||||||||||||||||||||||||||||||||||
| Overnight Air Cargo | Commercial Aircraft, Engines and Parts | Ground Support Equipment | Digital Solutions | Regional Airline | Total | ||||||||||||||||||||||||||||||
| Revenue from external customers | $ | $ | $ | $ | $ | $ | |||||||||||||||||||||||||||||
| Intersegment revenue | |||||||||||||||||||||||||||||||||||
| Reconciliation of revenue | |||||||||||||||||||||||||||||||||||
| Other revenue1 | |||||||||||||||||||||||||||||||||||
| Elimination of intersegment revenue2 | ( | ||||||||||||||||||||||||||||||||||
| Total consolidated revenue | $ | ||||||||||||||||||||||||||||||||||
| Cost of sales: | |||||||||||||||||||||||||||||||||||
| Cost of sales from external sources | |||||||||||||||||||||||||||||||||||
| Intersegment operating expense | |||||||||||||||||||||||||||||||||||
| Less:3 | |||||||||||||||||||||||||||||||||||
| General and administrative | |||||||||||||||||||||||||||||||||||
| Other segment items4 | |||||||||||||||||||||||||||||||||||
| Segment profit (loss) | ( | ( | |||||||||||||||||||||||||||||||||
| Reconciliation of profit (loss) | |||||||||||||||||||||||||||||||||||
Other revenue1 | |||||||||||||||||||||||||||||||||||
Other cost of sales1 | ( | ||||||||||||||||||||||||||||||||||
Other expenses1 | ( | ||||||||||||||||||||||||||||||||||
| Interest expense | ( | ||||||||||||||||||||||||||||||||||
| Income from equity method investments | |||||||||||||||||||||||||||||||||||
| Other non-operating income | ( | ||||||||||||||||||||||||||||||||||
| Other corporate expenses5 | ( | ||||||||||||||||||||||||||||||||||
| Elimination of intersegment profits | |||||||||||||||||||||||||||||||||||
| Income before income taxes | $ | ||||||||||||||||||||||||||||||||||
1 Revenue, cost of sales, and expenses from segments below the quantitative thresholds or that do not constitute a business segment are attributable to an investment advisory business, a laser printer manufacturer, and a commercial property owned by the Company.
2 Elimination of intersegment revenue includes eliminations related to Other revenue in the tables above totaling $131.0 thousand for the nine months ended December 31, 2024. After eliminations, Other revenue from third parties is $2.4 million for the nine months ended December 31, 2024.
3 The significant expense categories and amounts align with the segment-level information that is regularly provided to the chief operating decision maker. Intersegment expenses are included within the amounts shown.
4 Other segment items consist of depreciation and amortization and remeasurement of the earnout liability.
5 Other corporate expenses consist of unallocated expenses that are related to the activities of Corporate and other in support of the overall business. Unallocated expenses include, but are not limited to: shared services that are not allocated, costs associated with the corporate headquarters and, expenses related to identifying and pursuing new corporate business initiatives.
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| Three Months Ended December 31, 2025 | |||||||||||||||||||||||||||||||||||||||||||||||
| Overnight Air Cargo | Commercial Aircraft, Engines and Parts | Ground Support Equipment | Digital Solutions | Regional Airline | Total Reportable segments | Corporate and Other | Total | ||||||||||||||||||||||||||||||||||||||||
| Depreciation and amortization | $ | $ | $ | $ | $ | $ | $ | $ | |||||||||||||||||||||||||||||||||||||||
| Capital Expenditures | |||||||||||||||||||||||||||||||||||||||||||||||
| Three Months Ended December 31, 2024 | |||||||||||||||||||||||||||||||||||||||||
| Overnight Air Cargo | Commercial Aircraft, Engines and Parts | Ground Support Equipment | Digital Solutions | Total Reportable segments | Corporate and Other | Total | |||||||||||||||||||||||||||||||||||
| Depreciation and amortization | $ | $ | $ | $ | $ | $ | $ | ||||||||||||||||||||||||||||||||||
| Capital Expenditures | |||||||||||||||||||||||||||||||||||||||||
| Nine Months Ended December 31, 2025 | |||||||||||||||||||||||||||||||||||||||||||||||
| Overnight Air Cargo | Commercial Aircraft, Engines and Parts | Ground Support Equipment | Digital Solutions | Regional Airline | Total Reportable segments | Corporate and Other | Total | ||||||||||||||||||||||||||||||||||||||||
| Depreciation and amortization | $ | $ | $ | $ | $ | $ | $ | $ | |||||||||||||||||||||||||||||||||||||||
| Capital Expenditures | |||||||||||||||||||||||||||||||||||||||||||||||
| Nine Months Ended December 31, 2024 | |||||||||||||||||||||||||||||||||||||||||
| Overnight Air Cargo | Commercial Aircraft, Engines and Parts | Ground Support Equipment | Digital Solutions | Total Reportable segments | Corporate and Other | Total | |||||||||||||||||||||||||||||||||||
| Depreciation and amortization | $ | $ | $ | $ | $ | $ | $ | ||||||||||||||||||||||||||||||||||
| Capital Expenditures | |||||||||||||||||||||||||||||||||||||||||
| Reconciliation of operating income (loss) and elimination of intersegment loss was as follows: | |||||||||||||||||||||||||||||
| Three Months Ended December 31, 2025 | |||||||||||||||||||||||||||||
| (in thousands) | Overnight Air Cargo | Commercial Aircraft, Engines and Parts | Ground Support Equipment | Digital Solutions | Regional Airline | Reportable Segment Total | Corporate and Other | Eliminations | Total | ||||||||||||||||||||
| Operating income (loss) from external sources | $ | $ | ( | $ | $ | ( | $ | ( | $ | ( | $ | ( | $ | — | $ | ( | |||||||||||||
| Intersegment operating (loss) income | — | ( | — | ( | ( | ( | — | ||||||||||||||||||||||
| Operating income (loss) | ( | ( | ( | ( | ( | ( | |||||||||||||||||||||||
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| Three Months Ended December 31, 2024 | |||||||||||||||||||||||||||||
| Overnight Air Cargo | Commercial Aircraft, Engines and Parts | Ground Support Equipment | Digital Solutions | Regional Airline | Reportable Segment Total | Corporate and Other | Eliminations | Total | |||||||||||||||||||||
| Operating income (loss) from external sources | $ | $ | $ | $ | ( | $ | $ | $ | ( | $ | — | $ | |||||||||||||||||
| Intersegment operating (loss) income | ( | ( | — | — | — | ( | ( | — | |||||||||||||||||||||
| Operating income (loss) | ( | ( | |||||||||||||||||||||||||||
| Nine Months Ended December 31, 2025 | |||||||||||||||||||||||||||||
| (in thousands) | Overnight Air Cargo | Commercial Aircraft, Engines and Parts | Ground Support Equipment | Digital Solutions | Regional Airline | Reportable Segment Total | Corporate and Other | Eliminations | Total | ||||||||||||||||||||
| Operating income (loss) from external sources | $ | $ | $ | $ | ( | $ | ( | $ | $ | ( | $ | — | $ | ||||||||||||||||
| Intersegment operating (loss) income | — | ( | — | ( | ( | ( | — | ||||||||||||||||||||||
| Operating income (loss) | ( | ( | ( | ||||||||||||||||||||||||||
| Nine Months Ended December 31, 2024 | |||||||||||||||||||||||||||||
| Overnight Air Cargo | Commercial Aircraft, Engines and Parts | Ground Support Equipment | Digital Solutions | Regional Airline | Reportable Segment Total | Corporate and Other | Eliminations | Total | |||||||||||||||||||||
| Operating income (loss) from external sources | $ | $ | $ | ( | $ | ( | $ | $ | $ | ( | $ | — | $ | ||||||||||||||||
| Intersegment operating (loss) income | ( | ( | — | — | — | ( | ( | — | |||||||||||||||||||||
| Operating income (loss) | ( | ( | ( | ||||||||||||||||||||||||||
18. Commitments and Contingencies
Put/Call Options and Earnout
Contrail entered into an Operating Agreement (the “Contrail Operating Agreement”) in connection with the acquisition of Contrail providing for the governance of and the terms of membership interests in Contrail and including put and call options with the Seller to require Contrail to purchase all of the Seller’s equity membership interests in Contrail, such options commencing on the fifth anniversary of the acquisition, which occurred on July 18, 2021. On May 30, 2024, Contrail entered into a Membership Interest Redemption and Earnout Agreement (the "Redemption Agreement") with the Seller. Pursuant to the Redemption Agreement, Contrail
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agreed to purchase and redeem from the Seller, 16 % of its 21 % interest in Contrail, with the earnout period being retroactive to April 1, 2024. The purchase price for the redeemed interest is $4.6 million in the form of a secured, subordinated promissory note, plus an earnout amount valued at $1.1 million. Under the Redemption Agreement, the Seller is entitled to an annual earnout payment equal to 9.14 % of Contrail's adjusted EBITDA over $7.0 million in each fiscal year beginning on March 31, 2025 and continuing through March 31, 2029. Pursuant to the Redemption Agreement, Contrail is required to calculate the earnout payments annually within 30 days following the completion of the annual audits of the Company and Contrail and payment of any amount due is required following satisfaction of a procedure to address any objections to the calculated amount. The earnout pursuant to the Redemption Agreement is a Level 3 fair value measurement that is valued at $0.4 million as of December 31, 2025. For the three and nine months ended December 31, 2025, no change in fair value and a gain on the decrease in fair value of the liability of $0.7 million was recognized, respectively.
In connection with the Redemption Agreement, the parties agreed to certain technical amendments to the First Amended and Restated Operating Agreement of Contrail and entered into a new Put and Call Agreement with respect to the remaining 5 % interest in Contrail held by the Seller. Pursuant to the new Put and Call Agreement, commencing April 1, 2026 and at any time thereafter, either Contrail or the Seller has the option to elect by written notice to purchase or sell all of the remaining 5 % interest in Contrail held by the Seller. The purchase price for the 5 % interest is equal to 5 % of the Contrail Equity Value, which is defined as an amount equal to nine times the average Adjusted EBITDA of Contrail's most recent three completed fiscal years at the time an option notice is delivered. The purchase price for the 5 % interest is to be paid in equal quarterly installments over a three-year period, together with interest at the then current ten-year Treasury bond yield plus 2.5 % adjusted annually. The Company has presented this redeemable non-controlling interest in Contrail ("Contrail RNCI") between the liabilities and equity sections of the accompanying condensed consolidated balance sheets. In addition, the Company has elected to recognize changes in the redemption value immediately as they occur and adjust the carrying amount of the instrument to equal the greater of fair value on the date of the agreement, adjusted for allocable income and loss, or the redemption value at the end of each reporting period.
In February 2022, in connection with the Company's acquisition of GdW, a consolidated subsidiary of Shanwick, the Company entered into a shareholder agreement with the 30.0 % non-controlling interest owners of Shanwick, providing for the governance of and the terms of membership interests in Shanwick. The shareholder agreement includes the Shanwick Put/Call Option with regard to the 30.0 % non-controlling interest. The non-controlling interest holders are the executive management of the underlying business. The Shanwick Put/Call Option grants the Company an option to purchase the 30.0 % interest at the call option price that equals the average EBIT over the three Financial Years prior to the exercise of the Call Option multiplied by eight . In addition, the Shanwick Put/Call Option also grants the non-controlling interest owners an option to require the Company to purchase from them their respective ownership interests at the Put Option price, that is equal to the average EBIT over the three Financial Years prior to the exercise of the Put Option multiplied by seven and one-half. The Call Option and the Put Option may be exercised at any time from the fifth anniversary of the shareholder agreement and then only at the end of each fiscal year of Air T ("Shanwick RNCI").
The Company has presented the Shanwick RNCI between the liabilities and equity sections of the accompanying condensed consolidated balance sheets. In addition, the Company has elected to recognize changes in the redemption value immediately as they occur and adjust the carrying amount of the instrument to equal the estimated redemption value at the end of each reporting period. As the Shanwick RNCI will be redeemed at established multiples of EBIT, it is considered redeemable at other than fair value. Changes in its estimated redemption value are recorded on our consolidated statements of operations within non-controlling interests.
The Shanwick RNCI and Contrail RNCI are measured at the higher of their carrying value or their redemption value. As of December 31, 2025, the balances were comprised of the following (in thousands):
| Shanwick RNCI | Contrail RNCI | Total | ||||||||||||||||||
| Beginning Balance as of April 1, 2025 | $ | $ | $ | |||||||||||||||||
| Distribution to non-controlling members | ( | ( | ( | |||||||||||||||||
| Net income attributable to non-controlling interests | ||||||||||||||||||||
| Other comprehensive income attributable to the RNCI | ||||||||||||||||||||
| Redemption value adjustments | ||||||||||||||||||||
| Ending Balance as of December 31, 2025 | $ | $ | $ | |||||||||||||||||
Crestone Asset Management, LLC and CJVII, LLC
For CAM's Investment Function, as described in Note 9, CAM's initial commitment to CJVII was approximately $51.0 million. The Company and MRC have commitments to CAM in the respective amounts of $7.0 million and $44.0 million. These represent the
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investor interests of CAM, separate and distinct from the common interests. Any investment returns on CAM’s investor interests are shared pro-rata between the Company and MRC for each individual investment at the CJVII Series. Per its Operating Agreement, CAM is comprised of only two Series: the Onshore and the Offshore Series. Participation in each is determined solely based on whether a potential investment at the CJVII Series is a domestic (Onshore) or international (Offshore) investment. As of December 31, 2025, for its Investment Function, the Company has contributed $19.7 million to CAM’s Offshore Series and $1.0 million to CAM’s Onshore Series. The Company fulfilled its Investment Function initial commitment to CAM in fiscal year 2023.
In connection with the formation of CAM, MRC has a fixed price put option of $1.0 million to sell its common equity in CAM to the Company at each of the first three (3 ) anniversary dates. At the later of (a) five (5 ) years after execution of the agreement and (b) distributions to MRC per the waterfall equal to their capital contributions, Air T has a call option and MRC has a put option on the MRC common interests in CAM ("secondary put and call option"). If either party exercises the option, the exercise price will be fair market value if Air T pays in cash at closing or 112.5 % of fair market value if Air T opts to pay in three (3 ) equal annual installments after exercise. With respect to the secondary put and call option, as it is priced at fair value, the Company determined that there is no potential loss or gain upon exercise that would need to be recognized.
Acquisition 25.1 Warrant Issuances
On December 17, 2025, ATA 25.1 sold for nominal consideration ten year warrants to purchase an aggregate of 19 % of the equity interests of ATA 25.1 to three Air T employees (the "Holder(s)") that worked closely on the acquisition of Rex. The warrants vest at the earliest of certain conditions or five years from their issuance for a cumulative exercise price of $1.4 million with an option for each Holder to net settle in shares of ATA 25.1 if the fair value were to exceed the exercise price. If a Holder departs the Company or any subsidiaries voluntarily, the Company has the option to repurchase the warrant from the Holder for the greater of $2.0 million or the fair market value of the warrant. Additionally, each Holder agrees to guarantee a pro rata portion of the Investor Note, as defined in Note 13, and share in any excess cash flow on an as exercised basis if there is no claim on cash flows for any current or future debt holder. On the issuance date, the warrants were fair valued at $780 thousand, which will be recognized over the five year vesting period as an expense. The warrants are considered equity securities and, at the time of their issuance, held no value.
19. Guarantees
Nonfinancial Guarantees
From time to time, we may issue guarantees or indemnifications to third parties assuring performance of lease agreements pertaining to aircraft assets owned by certain CJVII Series ("nonfinancial guarantees"). Air T's performance under these guarantees would be triggered by failure of the series to perform in accordance with the terms stated in the lease agreements.
Nonfinancial guarantees and indemnifications are recorded at fair value at their inception. We regularly review our performance risk under these arrangements, and in the event it becomes probable that we will be required to perform under a guarantee or indemnity, the amount of probable payment will be recorded.
The maximum potential payments for nonfinancial guarantees were $4.3 million and $4.4 million at December 31, 2025 and March 31, 2025, respectively. There were no
20. Subsequent Events
Management performs an evaluation of events that occur after the balance sheet date but before consolidated financial statements are issued for potential recognition or disclosure of such events in its consolidated financial statements.
Management is not aware of any events that occur after the balance sheet date but before consolidated financial statements are issued that would materially affect the accuracy of those statements as of the date of issuance.
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Item 1A. Risk Factors.
Except as set forth below, there have been no material changes from the risk factors previously disclosed in our Annual Report on Form 10-K for the fiscal year ended March 31, 2025. The risks described in our Annual Report on Form 10-K continue to apply. This Quarterly Report on Form 10-Q should be read in conjunction with the risk factors and other information disclosed in that Annual Report.
Risks Related to the Rex Acquisition
We may not be able to successfully integrate Rex into our operations, including our financial reporting processes, which could
adversely affect our business, results of operations, and financial condition.
During the quarter ended December 31, 2025, Air T Rex completed the Acquisition of Rex. Integrating Rex into the Company involves substantial risks, including, among others: integrating financial reporting processes, policies, and internal controls; implementing consistent accounting policies and reporting timelines; integrating information technology systems; retaining key personnel; and coordinating governance, compliance, and risk management across jurisdictions. Integration activities are complex and may require significant management attention and additional costs. If we are unable to integrate Rex effectively or within anticipated timeframes, our results of operations, cash flows, and ability to timely produce accurate financial statements could be adversely affected.
Rex operates in a highly regulated industry, and failure to comply with applicable laws and regulations could materially adversely affect our business.
Rex’s operations are subject to extensive regulation and oversight, including requirements relating to safety, maintenance, training, operational performance, and consumer and other regulatory compliance. Compliance failures, safety incidents, adverse regulatory findings, operational restrictions, reputational harm, or other disruptions could result in fines, penalties, increased costs, reduced demand, and limitations on Rex’s operations, any of which could materially adversely affect our business and results of operations.
The Rex Acquisition involves risks related to voluntary administration proceedings in Australia and the DOCA structure, including uncertainties regarding liabilities, claims, obligations, and potential adverse impacts on customer and counterparty acceptance of Rex’s business following the proceedings.
The Rex Acquisition was executed pursuant to the DOCA and related transaction structure. Matters arising from voluntary administration proceedings and the DOCA may involve uncertainty regarding the identification, timing, and resolution of liabilities, claims, contingencies, and other obligations. In addition, the proceedings and the DOCA may affect perceptions of Rex among customers, suppliers, and other counterparties, and such parties may be reluctant to do business with Rex or may require more onerous commercial terms. If liabilities, claims, contingencies, or compliance obligations are greater than anticipated, if disputes arise, or if we experience delays in resolving administration-related matters, or if customer or counterparty acceptance is adversely affected, our results of operations, financial condition, and liquidity could be adversely affected.
Risks Related to Accounting and the Bargain Purchase Gain
Our purchase accounting for the Rex Acquisition is preliminary and may change, which could materially affect our reported results, including the amount of any bargain purchase gain.
The Rex Acquisition was accounted for as a business combination using the acquisition method of accounting, and we recorded assets acquired and liabilities assumed at their estimated fair values as of the acquisition date. The valuation of assets acquired and liabilities assumed requires significant judgment and estimates. Our purchase accounting may be refined during the measurement period as additional information becomes available, including with respect to the identification and valuation of assets acquired and liabilities assumed, contingencies, and income tax balances. Changes in these estimates could result in material adjustments to our condensed consolidated financial statements, including changes to the recorded bargain purchase gain and related tax impacts.
The recognition of a bargain purchase gain could increase scrutiny by investors and regulators, and could lead to disputes regarding valuations and assumptions.
A bargain purchase gain results when the estimated fair value of net assets acquired exceeds the consideration transferred. Determining fair value involves significant judgments and estimates and may require assumptions regarding future cash flows, discount rates, market multiples, and other inputs. If our assumptions or estimates prove inaccurate, if additional information results in adjustments to purchase accounting, or if valuations are challenged, our reported results could be adversely affected.
Risks Related to Foreign Operations, Currency, and Financing Exposure
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A significant portion of Rex’s revenues, expenses, assets, and liabilities may be denominated in Australian dollars, and fluctuations in exchange rates could adversely affect our reported results.
To the extent Rex’s revenues, expenses, assets, and liabilities are denominated in Australian dollars, changes in exchange rates between the Australian dollar and the U.S. dollar may affect the Company’s reported revenues, expenses, and cash flows, and may create volatility in our condensed consolidated financial statements. We may not be able to effectively mitigate currency-related impacts.
We incurred and assumed significant obligations in connection with the Rex Acquisition, including obligations related to CFA Debt, and we may require additional liquidity to support Rex’s operations.
In connection with the Rex Acquisition, we assumed CFA Debt and may require additional liquidity to support Rex’s ongoing operations. Regional airline operations can be capital intensive and may require significant working capital and liquidity to fund operating expenses and other obligations. If Rex’s cash flows are insufficient to support operations and obligations as they come due, we may need to obtain additional financing or other sources of liquidity. There can be no assurance that additional financing will be available on acceptable terms, if at all. Our inability to access liquidity could materially adversely affect our results of operations and financial condition.
Rex’s operating costs and revenues may be subject to volatility, and Rex may not be able to offset cost increases or revenue decreases through pricing or other measures.
Rex may be exposed to volatility in certain operating costs and revenues that can be difficult to predict and mitigate. If Rex is unable to offset increases in operating costs through pricing, surcharges, cost reductions, or other measures, or if Rex is unable to mitigate revenue decreases through pricing, volume, or other initiatives, its operating results could be adversely affected, which could materially adversely affect the Company’s consolidated results.
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Item 2. Management's Discussion and Analysis of Financial Condition and Results of Operations.
FORWARD-LOOKING STATEMENTS
This section entitled "Management’s Discussion and Analysis of Financial Condition and Results of Operations" (“MD&A”) is intended to provide a reader of our financial statements with a narrative from the perspective of management on our financial condition, results of operations, liquidity, and certain other factors that may affect our future results. The MD&A provides a narrative analysis explaining the reasons for material changes in the Company’s (i) financial condition during the period from the most recent fiscal year-end, March 31, 2025, to and including December 31, 2025 and (ii) results of operations during the current fiscal period(s) as compared to the corresponding period(s) of the preceding fiscal year.
This Quarterly Report on Form 10-Q, including the MD&A, contains “forward-looking statements” within the meaning of the Private Securities Litigation Reform Act of 1995. These statements reflect our current views with respect to future events and financial performance. The words “believe,” “expect,” “anticipate,” “intend,” “estimate,” “forecast,” “project,” “should,” "will," "continue" and similar expressions are intended to identify “forward-looking statements” within the meaning of the Private Securities Litigation Reform Act of 1995. Any and all forecasts and projections in this document are “forward looking statements” and are based on management’s current expectations or beliefs. From time to time, we may also provide oral and written forward-looking statements in other materials we release to the public, such as press releases, presentations to securities analysts or investors, or other communications by us. Any or all of our forward-looking statements in this report and in any public statements we make could be materially different from actual results. Accordingly, we wish to caution investors that any forward-looking statements made by or on behalf of us are subject to uncertainties and other factors that could cause actual results to differ materially from such statements, because of, among other things, potential risks and uncertainties, such as:
•An inability to finance our operations through bank or other financing or through the sale or issuance of debt or equity securities;
•Economic and industry conditions in the Company’s markets;
•The risk that contracts with FedEx Corporation (“FedEx”) could be terminated or adversely modified;
•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;
•Changes in U.S. and foreign trade regulations and tariffs;
•The Company’s ability to manage its cost structure for operating expenses, or unanticipated capital requirements, and match them to shifting customer service requirements and production volume levels;
•The Company's ability to meet debt service covenants and to refinance existing debt obligations;
•The risk of injury or other damage arising from accidents involving the Company’s overnight air cargo operations, equipment or parts sold and/or services provided;
•Market acceptance of the Company’s commercial and military equipment and services;
•Competition from other providers of similar equipment and services;
•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 the preliminary purchase price allocation for the Rex acquisition, including the determination and measurement of any bargain purchase gain and related tax treatment, may be revised as valuations and other inputs are finalized during the measurement period, which revisions could materially change our reported results of operations and financial position from period to period;
•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;
•Mild winter weather conditions reducing the demand for deicing equipment;
•Market acceptance and operational success of the Company’s aircraft asset management business and related aircraft capital joint venture; and
•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.
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.
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We undertake no obligation to update publicly or revise any forward-looking statements, whether as a result of new information, future events or otherwise.
Our MD&A should be read in conjunction with the Consolidated Financial Statements and related Notes included in Item 1 of Part 1 of this Quarterly Report on Form 10-Q and our Annual Report on Form 10-K for the fiscal year ended March 31, 2025 (including the information presented therein under Risk Factors), as well other publicly available information.
Overview
Air T, Inc. (the “Company,” “Air T,” “we” or “us”) is a holding company with a portfolio of operating businesses and financial assets. Our goal is to prudently and strategically diversify Air T’s earnings power and compound the growth in its free cash flow per share over time.
We currently operate in four industry segments:
•Overnight air cargo, which operates in the air express delivery services industry;
•Ground support equipment (formerly known as Ground equipment sales), which manufactures and provides mobile deicers and other specialized equipment products to passenger and cargo airlines, airports, the military and industrial customers;
•Commercial aircraft, engines and parts (formerly known as Commercial jet engines and parts), which manages and leases aviation assets; supplies surplus and after market commercial jet engine components; provides commercial aircraft disassembly/part-out services; commercial aircraft parts sales; procurement services and overhaul and repair services to airlines and;
•Digital solutions, which develops and provides digital aviation and other business services to customers within the aviation industry to generate recurring subscription revenues.
•Regional airline, which provides scheduled regional passenger and cargo airline services in Australia, operating a fleet of 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 third quarter of fiscal year 2026, the Company introduced a new reportable segment named, "Regional Airline". This new segment includes all reportable activity as it relates to the company's acquisition of Rex, as discussed in Note 2.
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 elected to separately disclose the digital solutions segment to better align our financial statement presentation with a key anticipated long-term growth area for the Company. Digital solutions was previously classified as part of insignificant business activities. As a result of this change, prior period segment information has been recast to conform to our current presentation in our financial statements and related notes.
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 and Adjusted EBITDA.
Recent Events
On December 18, 2025, the Company, through Air T Rex, LLC, completed the Acquisition of substantially all of the assets and operations of Rex. The Acquisition was completed pursuant to an asset purchase agreement in the context of Rex’s voluntary administration proceedings in Australia, which commenced on July 30, 2024, and the related 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.
Because the Acquisition closed on December 18, 2025, Rex’s results of operations have been included in the Company’s consolidated financial statements only for the period from December 18, 2025 through December 31, 2025. As a result, the Company’s operating
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results for the quarter ended December 31, 2025 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.
Results of Operations
Third Quarter Fiscal 2026 Compared to Third Quarter Fiscal 2025
Operating Revenue
Consolidated revenue for the three-month period ended December 31, 2025 decreased by $6.7 million (8.7%) compared to the same quarter in the prior fiscal year.
Following is a table detailing revenue by segment, net of intercompany during the three months ended December 31, 2025 compared to the same quarter in the prior fiscal year (in thousands):
| Three Months Ended December 31, | Change | |||||||||||||||||||
| 2025 | 2024 | |||||||||||||||||||
| Overnight Air Cargo | $ | 30,581 | $ | 30,592 | $ | (11) | — | % | ||||||||||||
| Ground Support Equipment | 12,783 | 11,846 | 937 | 8 | % | |||||||||||||||
| Commercial Aircraft, Engines, and Parts | 18,824 | 32,688 | (13,864) | (42) | % | |||||||||||||||
| Digital Solutions | 2,454 | 1,965 | 489 | 25 | % | |||||||||||||||
Regional Airline | 5,182 | — | 5,182 | 100 | % | |||||||||||||||
| Segments total | $ | 69,824 | $ | 77,091 | $ | (7,267) | (9) | % | ||||||||||||
Revenues from the overnight air cargo segment for the three-month period ended December 31, 2025 decreased by an immaterial amount (0%) compared to the third quarter of the prior fiscal year.
The ground support equipment segment contributed approximately $12.8 million and $11.8 million to the Company’s revenues for the three-month period ended December 31, 2025 and 2024 respectively, representing a $0.9 million (8%) increase in the current fiscal year quarter. The increase was primarily attributable to higher sales of high-lift catering equipment. At December 31, 2025, the ground support equipment segment’s order backlog was $12.9 million compared to $6.2 million at December 31, 2024.
The commercial aircraft, engines and parts segment contributed $18.8 million of revenues in the quarter ended December 31, 2025 compared to $32.7 million in the comparable prior year quarter, which is a decrease of $13.9 million (42%). The decrease was largely attributable to a decline in component sales at Contrail from aging component inventory. The aging inventory resulted from lower component inventory purchases during the preceding twelve-month period due to increased competition in acquiring component inventory as a result of market-wide initiatives. The Company is working to rebuild component inventory to historic levels.
Digital solutions segment contributed $2.5 million of revenues in the quarter ended December 31, 2025 compared to $2.0 million in the prior year quarter, an increase of $0.5 million (25%). The increase is primarily due to increased software subscriptions represented by monthly recurring revenues of $0.8 million as of December 31, 2025 versus $0.7 million as of December 31, 2024.
Regional airline revenues were $5.2 million for the three months ended December 31, 2025 compared to none in the prior year period. The reported revenues represent approximately two weeks of operations from the acquisition date through December 31, 2025. The increase is attributable to the acquisition of Rex on December 18, 2025, as discussed in Note 2 of the Notes to Condensed Consolidated Financial Statements in Part I, Item 1 of this Report on Form 10-Q.
Operating Expenses
Consolidated segment operating expenses for the three-month period ended December 31, 2025 decreased by $3.9 million (6%) compared to the same quarter in the prior fiscal year.
Following is a table detailing operating expenses by segment during the three months ended December 31, 2025 compared to the same quarter in the prior fiscal year (in thousands):
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| Three Months Ended December 31, | Change | ||||||||||||||||
| 2025 | 2024 | ||||||||||||||||
| Overnight Air Cargo: | |||||||||||||||||
| Operating expense | $ | 26,039 | $ | 25,625 | $ | 414 | |||||||||||
| Percentage of segment net sales | 85 | % | 84 | % | |||||||||||||
| Ground Support Equipment: | |||||||||||||||||
| Operating expense | 9,585 | 10,252 | (667) | ||||||||||||||
| Percentage of segment net sales | 75 | % | 87 | % | |||||||||||||
| Commercial Aircraft, Engines and Parts: | |||||||||||||||||
| Operating expense | 14,090 | 23,685 | (9,595) | ||||||||||||||
| Percentage of segment net sales | 75 | % | 72 | % | |||||||||||||
Regional Airline: | |||||||||||||||||
| Operating expense | 5,480 | — | 5,480 | ||||||||||||||
| Percentage of segment net sales | 106 | % | — | % | |||||||||||||
| Digital Solutions: | |||||||||||||||||
| Operating expense | 825 | 635 | 190 | ||||||||||||||
| Percentage of segment net sales | 34 | % | 32 | % | |||||||||||||
| Segments total | 56,019 | 60,197 | (4,178) | ||||||||||||||
The overnight air cargo segment contributed $26.0 million and $25.6 million to the Company's operating expenses for the three-month period ended December 31, 2025 and 2024, respectively, representing a $0.4 million (2%) increase in the current quarter. Operating expenses remained relatively consistent period-over-period.
The ground support equipment segment contributed approximately $9.6 million and $10.3 million to the Company's operating expenses for the three-month period ended December 31, 2025 and 2024, respectively, representing a $0.7 million (7%) decrease in the current quarter. The decrease was primarily driven by an improved product and customer mix, as well as lower non-material spending during the quarter.
The commercial aircraft, engines and parts segment contributed $14.1 million and $23.7 million to the Company's operating expenses for the three-month period ended December 31, 2025 and 2024, respectively, representing a $9.6 million (41%) decrease in the current quarter. Lower component sales in the current quarter resulted in the decrease in operating expenses.
The digital solutions segment contributed $0.8 million of operating expenses in the quarter ended December 31, 2025 compared to $0.6 million in the prior year quarter, reflecting a relatively flat year-over-year trend.
Regional airline operating expenses were $5.5 million for the three months ended December 31, 2025 compared to none in the prior year period, resulting from the acquisition of Rex on December 18, 2025, as discussed in Note 2 of the Notes to Condensed Consolidated Financial Statements in Part I, Item 1 of this Report on Form 10-Q. The reported operating expenses represent approximately two weeks of operations from the acquisition date through December 31, 2025. The operating loss during this initial period is attributable to fixed operating costs associated with maintaining flight operations, aircraft and crew, regulatory compliance requirements, and transaction-related integration expenses.
General and administrative
| Three Months Ended December 31, | Change | ||||||||||||||||
| 2025 | 2024 | ||||||||||||||||
| General and administrative | $ | 16,650 | $ | 14,181 | $ | 2,469 | |||||||||||
| Percentage of total net sales | 23 | % | 18 | % | |||||||||||||
General and administrative expenses for the three-month period ended December 31, 2025 increased by $2.5 million (17%) compared to the first quarter of the prior fiscal year. The increase was primarily driven by acquisition-related costs incurred during the current year, as well as higher payroll and employee-related expenses.
Non-Operating Income (Expense)
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Following is a table detailing non-operating income (expense) during the three months ended December 31, 2025 compared to the same quarter in the prior fiscal year (in thousands):
| Three Months Ended December 31, | Change | ||||||||||||||||
| 2025 | 2024 | ||||||||||||||||
| Interest expense | $ | (2,380) | $ | (2,561) | $ | 181 | |||||||||||
| Income from equity method investments | 4,233 | 661 | 3,572 | ||||||||||||||
| Gain on bargain purchase | — | — | — | ||||||||||||||
| Other | 47 | (420) | 467 | ||||||||||||||
| $ | 1,900 | $ | (2,320) | $ | 4,220 | ||||||||||||
The Company had net non-operating income of $1.9 million during the quarter ended December 31, 2025, compared to net non-operating loss of $2.3 million in the prior year quarter. The non-operating income was driven by a $3.6 million increase in net income allocated to the Company from equity method investments. Refer to Note 2 and Note 9, respectively, of the Notes to Condensed Consolidated Financial Statements in Part I, Item 1 of this Report on Form 10-Q.
Provision for Income Taxes
During the three-month period ended December 31, 2025, the Company recorded $0.1 million in income tax benefit at an ETR of 6.4%. The Company has computed the provision for income taxes based on the estimated annual effective tax rate and the application of discrete items, if any, for interim reporting. The primary factors contributing to the difference between the federal statutory rate of 21.0% and the Company's effective tax rate for the three-month period ended December 31, 2025 were the valuation allowance related to the Company's U.S. consolidated group, DTI, DSI, and Rex and its subsidiaries, the foreign rate differentials for Air T’s operations located in the Netherlands and Puerto Rico, non-deductible acquisition-related costs, and the benefit from the Foreign-Derived Intangible Income (FDII) deduction.
On July 4, 2025, the OBBBA was signed into law in the U.S., which includes a broad range of tax reform provisions affecting businesses. The Company has reflected the impact of the OBBBA in the second quarter of 2026 financial statements as required by generally accepted accounting principles. The Company is evaluating the full effects of the legislation on its estimated annual effective tax rate and cash tax position, but does not expect the legislation to have a material impact on its financial statements.
During the three-month period ended December 31, 2024, the Company recorded $0.3 million in income tax expense at an ETR of 38.7%. The Company has computed the provision for income taxes based on the estimated annual effective tax rate excluding loss jurisdictions with no tax benefit and the application of discrete items, if any, for interim reporting. The primary factors contributing to the difference between the federal statutory rate of 21.0% and the Company's effective tax rate for the three-month period ended December 31, 2024 were the valuation allowance related to the Company’s U.S. consolidated group, DTI, LGSS, DSI and BCCM Kenya, and the foreign rate differentials for Air T’s operations located in the Netherlands and Puerto Rico.
First Nine Months of Fiscal 2026 Compared to First Nine Months of Fiscal 2025
Operating Revenue
Consolidated segment revenue for the nine-month period ended December 31, 2025 decreased by $19.4 million (9%) compared to the same period in the prior fiscal year.
Following is a table detailing revenue by segment, net of intercompany eliminations, during the nine months ended December 31, 2025 compared to the same period in the prior fiscal year (in thousands):
| Nine Months Ended December 31, | Change | |||||||||||||||||||
| 2025 | 2024 | |||||||||||||||||||
| Overnight Air Cargo | $ | 91,094 | $ | 92,162 | $ | (1,068) | (1) | % | ||||||||||||
| Ground Support Equipment | 37,490 | 33,655 | 3,835 | 11 | % | |||||||||||||||
| Commercial Aircraft, Engines, and Parts | 61,665 | 91,865 | (30,200) | (33) | % | |||||||||||||||
| Digital Solutions | 6,759 | 5,479 | 1,280 | 23 | % | |||||||||||||||
Regional Airline | 5,182 | — | 5,182 | 100 | % | |||||||||||||||
| Segments total | 202,190 | 223,161 | (20,971) | (9) | % | |||||||||||||||
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Revenues from the overnight air cargo segment for the nine months ended December 31, 2025 decreased by $1.1 million (1%) compared to the nine months ended December 31, 2024. The decrease was principally attributable to lower flight admin fees driven by increased soft and hard parked aircraft when compared to the prior year comparable period.
The ground support equipment segment's revenue for the nine-month period ended December 31, 2025 was $37.5 million compared to $33.7 million in the same period in the prior fiscal year, an increase of $3.8 million (11%). Truck sales grew substantially, led by higher sales of high-lift catering units and deicers. Spare parts and service revenues also increased, driven by aging customer fleets and a colder, more severe winter season.
The commercial aircraft, engines and parts segment contributed $61.7 million of revenues in the nine months ended December 31, 2025 compared to $91.9 million in the comparable prior year nine months period. The decrease was largely attributable to a decline in component sales at Contrail from aging component inventory. The aging inventory resulted from lower component inventory purchases during the preceding twelve-month period due to increased competition in acquiring component inventory as a result of market-wide initiatives. The Company is working to rebuild component inventory to historic levels.
The digital solutions segment contributed $6.8 million of revenues in the nine months ended December 31, 2025 compared to $5.5 million in the prior year nine-month period, an increase of $1.3 million (23%). The increase was primarily due to increased software subscriptions represented by monthly recurring revenues of $0.8 million as of December 31, 2025 versus $0.7 million as of December 31, 2024.
Regional airline revenues were $5.2 million for the nine months ended December 31, 2025 compared to none in the prior year period. The reported revenues represent approximately two weeks of operations from the acquisition date through December 31, 2025. The increase is attributable to the acquisition of Rex on December 18, 2025, as discussed in Note 2 of the Notes to Condensed Consolidated Financial Statements in Part I, Item 1 of this Report on Form 10-Q.
Operating Expenses
Consolidated segment operating expenses for the nine-month period ended December 31, 2025 decreased by $16.9 million (10%) compared to the same period in the prior fiscal year.
Following is a table detailing operating expenses by segment during the nine months ended December 31, 2025 compared to the same period in the prior fiscal year (in thousands):
| Nine Months Ended December 31, | Change | ||||||||||||||||
| 2025 | 2024 | ||||||||||||||||
| Overnight Air Cargo: | |||||||||||||||||
| Operating expense | $ | 76,860 | $ | 77,661 | $ | (801) | |||||||||||
| Percentage of segment net sales | 84 | % | 84 | % | |||||||||||||
| Ground Support Equipment: | |||||||||||||||||
| Operating expense | 28,427 | 29,181 | (754) | ||||||||||||||
| Percentage of segment net sales | 76 | % | 87 | % | |||||||||||||
| Commercial Aircraft, Engines and Parts: | |||||||||||||||||
| Operating expense | 43,173 | 65,177 | (22,004) | ||||||||||||||
| Percentage of segment net sales | 70 | % | 71 | % | |||||||||||||
Regional Airline: | |||||||||||||||||
| Operating expense | 5,480 | — | 5,480 | ||||||||||||||
| Percentage of segment net sales | 106 | % | — | % | |||||||||||||
| Digital Solutions: | |||||||||||||||||
| Operating expense | 2,423 | 1,873 | 550 | ||||||||||||||
| Percentage of segment net sales | 36 | % | 34 | % | |||||||||||||
| Segments total | 156,363 | 173,892 | (17,529) | ||||||||||||||
The overnight air cargo segment contributed $76.9 million and $77.7 million to the Company's operating expenses for the nine-month period ended December 31, 2025 and 2024, respectively, representing a $0.8 million (1%) decrease in the current period. Operating expenses remained relatively consistent period-over-period.
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Operating expenses from the ground support equipment segment for the nine months ended December 31, 2025 was relatively flat compared to the nine months ended December 31, 2024, representing a $0.8 million (3%) decrease. However, ground support equipment improved its operating expenses as a percentage of net sales from 87% for the nine-month period ended December 31, 2024 to 76% for the nine months ended December 31, 2025. The improvement was due to higher margins realized on deicers, part sales and service revenue in the current year.
The commercial aircraft, engines and parts segment contributed $43.2 million and $65.2 million to the Company's operating expenses for the nine months ended December 31, 2025 and 2024, respectively, representing a $22.0 million (34%) decrease in the current period. Lower component sales in the current year resulted in the decrease in operating expenses.
The digital solutions segment contributed $2.4 million of operating expenses in the nine months ended December 31, 2025 compared to $1.9 million in the prior year comparable period, which represented 36% and 34% of segment net sales, reflecting a relatively flat year-over-year trend.
Regional airline operating expenses were $5.5 million for the nine months ended December 31, 2025 compared to none in the prior year period, resulting from the acquisition of Rex on December 18, 2025, as discussed in Note 2 of the Notes to Condensed Consolidated Financial Statements in Part I, Item 1 of this Report on Form 10-Q. The reported operating expenses represent approximately two weeks of operations from the acquisition date through December 31, 2025. The operating loss during this initial period is attributable to fixed operating costs associated with maintaining flight operations, aircraft and crew, regulatory compliance requirements, and transaction-related integration expenses.
General and Administrative
| Nine Months Ended December 31, | Change | ||||||||||||||||
| 2025 | 2024 | ||||||||||||||||
| General and administrative | $ | 49,782 | $ | 42,617 | $ | 7,165 | |||||||||||
| Percentage of total net sales | 24 | % | 19 | % | |||||||||||||
General and administrative expenses for the nine month period ended December 31, 2025 increased by $7.2 million (17%) compared to the prior year comparable period. The increase was primarily driven by acquisition-related costs incurred during the current year, as well as higher payroll and employee-related expenses.
Non-Operating Income (Expense)
Following is a table detailing non-operating income (expense) during the nine months ended December 31, 2025 compared to the same nine months in the prior fiscal year (in thousands):
| Nine Months Ended December 31, | Change | ||||||||||||||||
| 2025 | 2024 | ||||||||||||||||
| Interest expense | $ | (6,945) | $ | (6,670) | $ | (275) | |||||||||||
| Income from equity method investments | 8,393 | 4,930 | 3,463 | ||||||||||||||
| Gain on bargain purchase | — | — | — | ||||||||||||||
| Other | 525 | (241) | 766 | ||||||||||||||
| $ | 1,973 | $ | (1,981) | $ | 3,954 | ||||||||||||
The Company had a net non-operating income of $2.0 million for the nine months ended December 31, 2025 compared to a net non-operating loss of $2.0 million in the prior year nine-month period. The non-operating income was driven by a $3.5 million increase in net income allocated to the Company from equity method investments. Refer to Note 2 and Note 9, respectively, of the Notes to Condensed Consolidated Financial Statements in Part I, Item 1 of this Report on Form 10-Q.
Provision for Income Taxes
During the nine-month period ended December 31, 2025, the Company recorded $2.2 million in income tax expense at an ETR of 48.1%. The Company has computed the provision for income taxes based on the estimated annual effective tax rate excluding loss jurisdictions with no tax benefit and the application of discrete items, if any, for interim reporting. The primary factors contributing to the difference between the federal statutory rate of 21.0% and the Company's effective tax rate for the nine-month period ended December 31, 2025, were the valuation allowance related to the Company’s U.S. consolidated group, DTI, DSI and Rex, the foreign
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rate differentials for Air T’s operations located in the Netherlands and Puerto Rico, non-deductible transaction costs, and the benefit from the FDII deduction.
During the nine-month period ended December 31, 2024, the Company recorded $0.8 million in income tax expense at an ETR of 30.1%. The Company has computed the provision for income taxes based on the estimated annual effective tax rate excluding loss jurisdictions with no tax benefit and the application of discrete items, if any, for interim reporting. The primary factors contributing to the difference between the federal statutory rate of 21.0% and the Company's effective tax rate for the nine-month period ended December 31, 2024 were the valuation allowance related to the Company’s U.S. consolidated group, DTI, LGSS, DSI and BCCM Kenya, and the foreign rate differentials for Air T’s operations located in the Netherlands and Puerto Rico.
Critical Accounting Policies and Estimates
The Company’s significant accounting policies are fully described in Note 1 to the condensed consolidated financial statements and in the notes to the consolidated financial statements included in the Company’s Annual Report on Form 10-K for the year ended March 31, 2025. The preparation of the Company’s condensed 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. Management bases these estimates and assumptions upon the best information available at the time of the estimates or assumptions. The Company’s estimates and assumptions could change materially as conditions within and beyond our control change. Accordingly, actual results could differ materially from estimates. There were no significant changes to the Company’s critical accounting policies and estimates during the three-months ended December 31, 2025.
Seasonality
The ground support equipment segment business has historically been seasonal, with the revenues and operating income typically being lower in the first and fourth fiscal quarters as commercial deicers are typically delivered prior to the winter season. Other segments have typically not experienced material seasonal trends.
Systems and Network Security
Although we have employed significant resources to develop our security measures against breaches, our cybersecurity measures may not detect or prevent all attempts to compromise our systems, including hacking, viruses, malicious software, break-ins, phishing attacks, security breaches or other attacks and similar disruptions that may jeopardize the security of information stored in and transmitted by our systems. Breaches of our cybersecurity measures could result in unauthorized access to our systems, misappropriation of information or data, deletion or modification of client information or other interruption to our business operations. As techniques used to obtain unauthorized access to sabotage systems change frequently and may not be known until launched against us or our third-party service providers, we may be unable to anticipate, or implement adequate measures to protect against these attacks. If we are unable to avert these attacks and security breaches in the future, we could be subject to significant legal and financial liability, our reputation would be harmed and we could sustain substantial revenue loss from lost sales and customer dissatisfaction. We may not have the resources or technical sophistication to anticipate or prevent rapidly evolving types of cyber-attacks. Cyber-attacks may target us or other participants, or the communication infrastructure on which we depend. Actual or anticipated attacks and risks may cause us to incur significantly higher costs, including costs to deploy additional personnel and network protection technologies, train employees, and engage third-party experts and consultants. Cybersecurity breaches would not only harm our reputation and business, but also could materially decrease our revenue and net income.
Inflation
Future economic developments such as inflation and increased interest rates as well as further business issues present uncertainty and risk with respect to our financial condition and results of operations. We expect that issues caused by economic and business issues will continue beyond the current fiscal year. The fluidity of this situation precludes any prediction as to the ultimate adverse impact these issues on economic and market conditions and our businesses in particular, and, as a result, presents material uncertainty and risk with respect to us and our results of operations. The Company believes the estimates and assumptions underlying the Company’s consolidated financial statements are reasonable and supportable based on the information available as of December 31, 2025.
Liquidity and Capital Resources
As of December 31, 2025, the Company held approximately $42.2 million in cash and cash equivalents and restricted cash, of which $4.7 million is reserved as collateral under the terms of certain merchant facilities. The Company has an aggregate of approximately $53.6 million in available funds under its lines of credit as of December 31, 2025.
As of December 31, 2025, the Company’s working capital, excluding the deferred bargain purchase gain of $95.8 million that does not represent future uses of cash or resources, amounted to $89.2 million, an increase of $58.4 million compared to March 31, 2025, primarily driven by a $26.9 million increase in inventory, a $31.4 million increase in cash and cash equivalents, $19.3 million increase in accounts receivable, and the deferred credit related to the preliminary bargain purchase gain associated with the acquisition of Rex. These increases were substantially attributable to the acquisition of Rex. Excluding Rex, the Company's working capital amounted to
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$59.3 million, an increase of $28.4 million, primarily driven by an increase in cash and cash equivalents of $14.9 million and inventories of $11.5 million. The increase in cash and cash equivalents was primarily driven by proceeds from debt and the increase in inventories was primarily driven by purchases of engines and airframes by the commercial aircraft, engines and parts segment.
As mentioned in Note 13 of Notes to Condensed Consolidated Financial Statements included under Part I, Item 1 of this Report on Form 10-Q, 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%) 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 $12.5 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 Condensed Consolidated Financial Statements included under Part I, Item 1 of this Report on Form 10-Q, on May 30, 2025, the Company, along with AAM 24-1 (the "Issuer"), entered into new transaction documents with the Institutional Investors that replaced the Second NPA transaction documents. Pursuant to the Third NPA with the Institutional Investors, the Issuer agreed to issue and sell a Multiple Advance Senior Secured Note in an aggregate principal amount of up to $100.0 million (the “Multiple Advance Note”). For purposes of clarity and the avoidance of doubt, as of the closing date, the Institutional Investors advanced an additional $10.0 million to the Issuer and have collectively advanced under the Multiple Advance Note to the Issuer the aggregate amount of $40.0 million. Provided no default or event of default of the Issuer exists, and subject to satisfaction of all requirements for any closing as set forth in the Third 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 (in thousands):
| 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 December 31, 2025, the Issuer was in compliance with all applicable covenants under the Multiple Advance Note, and an additional $10.0 million was advanced under the facility in October 2025.
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As mentioned in Note 13 of Notes to Condensed Consolidated Financial Statements included under Part I, Item 1 of this Report on Form 10-Q, 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 Condensed Consolidated Financial Statements included under Part I, Item 1 of this Report on Form 10-Q, On November 24, 2025, 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 loan 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 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 December 31, 2025, 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 Condensed Consolidated Financial Statements included under Part I, Item 1 of this Report on Form 10-Q, 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 requirement related to the delivery of annual and quarterly 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 December 31, 2025, Contrail and the Company were in compliance with all
financial and non-financial covenants applicable under the Master Loan Agreement.
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As mentioned in Note 13 of Notes to Condensed Consolidated Financial Statements included under Part I, Item 1 of this Report on Form 10-Q, On December 15, 2025, the Company and its wholly-owned subsidiary ATA 25.1, entered into a Note Purchase Agreement (the “Agreement”) with two Institutional Investors (the "Investors"). 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 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 commencing on April 10, 2026 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, a wholly-owned subsidiary of ATA 25.1, and the Investors entered into a Contingent Payment Agreement that provides the Investors with the right to receive up to A$8.0 million 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.
As mentioned in Note 13 of Notes to Condensed Consolidated Financial Statements included under Part I, Item 1 of this Report on Form 10-Q, on December 17, 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 Condensed Consolidated Financial Statements included under Part I, Item 1 of this Report on Form 10-Q, on December 17, 2025, Rex and the Commonwealth entered into (i) an amendment and restatement of the Commonwealth Facility Agreement originally dated November 11, 2024 (the “Perpetual Facility Agreement”), and (ii) a new facility agreement (the “New Facility Agreement” and, together with the Perpetual Facility Agreement, the “Commonwealth Facilities”). The Perpetual Facility Agreement is for an initial term of 30 years and permits extension of the termination date by up to an additional 20 years (in two 10‑year increments) subject to specified conditions and require mandatory prepayments from Excess Cash Flow in accordance with the Intercreditor Deed. The Perpetual Facility Agreement does not bear interest, provided that if the Rex fails to maintain compliance with certain ‘Rex Regional Commitments’ (and a resulting event of default date 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 Perpetual Facility Agreement on December 17, 2025 was approximately $22.5 million, estimated using a DCF approach, consistent with market practice and applicable accounting standards for the valuation of long-dated, non-tradeable debt instruments.
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 Perpetual Facility Agreement, require mandatory prepayments from Excess Cash Flow in accordance with the Intercreditor Deed. As of December 31, 2025, 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.
Cash Flows
Following is a table of changes in cash flow for the nine months ended December 31, 2025 and 2024 (in thousands):
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| Nine Months Ended December 31, | |||||||||||
| 2025 | 2024 | ||||||||||
| Net cash (used in) provided by operating activities | $ | (25,000) | $ | 19,377 | |||||||
| Net cash provided by (used in) investing activities | 6,993 | (16,800) | |||||||||
| Net cash provided by financing activities | 53,747 | 7,987 | |||||||||
| Effect of foreign currency exchange rates on cash and cash equivalents | (317) | 360 | |||||||||
| Net Increase in Cash and Cash Equivalents and Restricted Cash | $ | 35,423 | $ | 10,924 | |||||||
Net cash used in operating activities was $25.0 million for the nine-month period ended December 31, 2025 compared to net cash provided by operating activities of $19.4 million in the prior year nine-month period, representing a decrease of $44.4 million. The decrease was primarily attributable to a $33.9 million decrease in cash flow from inventory, a $7.0 million current year period gain on sale of two Airbus Model A321-111 aircraft, and $3.5 million increase in income from equity method investments. The change in inventory was primarily driven by the purchase of two engines and multiple airframes for tear-down in the current year period while the prior year period saw high sales of component inventory that was not replenished, as previously discussed as a reason for changes in operating revenue in Item 2.
Net cash provided by investing activities for the nine-month period ended December 31, 2025 was $7.0 million compared to net cash used in investing activities of $16.8 million in the prior year period. The cash provided by investing activities in the current nine-month period was primarily driven by proceeds of $19.9 million from the sale of the two Airbus Model A321-111 aircraft and distributions from unconsolidated entities of $4.1 million, partially offset by investments in unconsolidated entities of $10.8 million and cash used in acquisitions, net of cash acquired in each transaction, of $6.4 million. Cash used in investing activities in the prior year period was primarily driven by 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 nine-month period ended December 31, 2025 was $53.7 million compared to net cash provided by financing activities of $8.0 million in the prior year period. The year-over-year increase in net cash provided by financing activities was primarily due to a $41.4 million increase and $14.0 million decrease in proceeds and payments, respectively, on the Company's term loans, partially offset by a $7.9 million increase in payments on the Company's lines of credit.
Non-GAAP Financial Measures
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.
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 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. 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. 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 three and nine months ended December 31, 2025 and 2024 (in thousands):
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| Three months ended | Nine months ended | ||||||||||||||||||||||
| 12/31/2025 | 12/31/2024 | 12/31/2025 | 12/31/2024 | ||||||||||||||||||||
| Operating (loss) income from continuing operations | $ | (3,780) | $ | 1,424 | $ | 2,574 | $ | 4,486 | |||||||||||||||
| Depreciation and amortization (excluding leased assets depreciation) | 1,585 | 552 | 3,017 | 2,262 | |||||||||||||||||||
Inventory write-down and reserves | 819 | 274 | 1,058 | 776 | |||||||||||||||||||
| Gain on sale of property and equipment | (94) | — | (74) | (8) | |||||||||||||||||||
| Securities issuance expenses | 19 | 19 | 68 | 147 | |||||||||||||||||||
| Share-based compensation | 48 | 31 | 129 | 48 | |||||||||||||||||||
| Severance expenses | — | — | — | 217 | |||||||||||||||||||
| Earnout remeasurement | — | 392 | (666) | 651 | |||||||||||||||||||
| Deal-sourcing expense | 1,145 | — | 2,982 | — | |||||||||||||||||||
| Post-acquisition integration expenses | $ | 436 | $ | — | $ | 436 | $ | — | |||||||||||||||
| Adjusted EBITDA | $ | 178 | $ | 2,692 | $ | 9,524 | $ | 8,579 | |||||||||||||||
(1) There was no depreciation expense on leased assets excluded during the three months ended December 31, 2025 and there was $0.7 million excluded during the nine months ended December 31, 2025. Depreciation expense on leased assets excluded was $0.8 million for both the three and nine months ended December 31, 2024. | |||||||||||||||||||||||
The table below provides Adjusted EBITDA by segment for the three and nine months ended December 31, 2025 and 2024 (in thousands):
| Three months ended | Nine months ended | ||||||||||||||||||||||
| 12/31/2025 | 12/31/2024 | 12/31/2025 | 12/31/2024 | ||||||||||||||||||||
| Overnight Air Cargo | $ | 1,018 | $ | 1,981 | $ | 4,432 | $ | 5,878 | |||||||||||||||
| Ground Support Equipment | 1,657 | 223 | 4,684 | 225 | |||||||||||||||||||
| Commercial Aircraft, Engines and Parts | (171) | 2,948 | 7,527 | 8,753 | |||||||||||||||||||
| Digital Solutions | (54) | (55) | (348) | (448) | |||||||||||||||||||
| Regional airline | $ | (532) | $ | — | $ | (532) | $ | — | |||||||||||||||
| Segments total | $ | 1,918 | $ | 5,097 | $ | 15,763 | $ | 14,408 | |||||||||||||||
| Corporate and Other | (1,740) | (2,405) | (6,239) | (5,829) | |||||||||||||||||||
| Adjusted EBITDA | $ | 178 | $ | 2,692 | $ | 9,524 | $ | 8,579 | |||||||||||||||
Issuer and guarantor subsidiary summarized information
Air T Funding is a statutory business trust formed under Delaware law in September 2018. Air T Funding exists for the exclusive purposes of (i) issuing and selling its Alpha Income Trust Preferred Securities (also referred to as the 8.0% Cumulative Securities, Capital Securities or “Trust Preferred Securities” or "TruPs"), par value $25.00 per share, (ii) using the proceeds from the sale of the Trust Preferred Securities to acquire Junior Subordinated Debentures issued by the Company, and (iii) engaging in only those other activities necessary, advisable or incidental thereto (such as registering the transfer of the Trust Preferred Securities). Accordingly, the Junior Subordinated Debentures are the sole assets of Air T Funding, and payments by the Company under the Junior Subordinated Debentures and a related expense agreement are the sole revenues of Air T Funding. Air T Funding’s business and affairs are conducted by a Property Trustee, a Delaware Trustee and two individual Administrative Trustees who are officers of Air T.
Distributions on the Trust Preferred Securities are payable to record holders at the annual rate of 8% of the stated $25.00 liquidation amount, payable quarterly in arrears on the 15th day of February, May, August, and November in each year. 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 of 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 condensed Consolidated Financial Statements included under Part I, Item 1 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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All of the Common Securities of Air T Funding are owned by Air T. 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 Trust Preferred Securities are subject to mandatory redemption at any time on or after June 7, 2024. Upon the repayment or redemption at any time, in whole or in part, of any Junior Subordinated Debentures, the proceeds from such repayment or redemption would be applied to redeem a like amount of the Trust Preferred Securities, at the liquidation amount plus any accumulated and unpaid distributions. 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.
The Company also has an optional right to redeem the Junior Subordinated Debentures (i) 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. 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.
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. Distributions to which holders of Trust Preferred Securities are entitled will accumulate additional amounts thereon at the rate per annum of 8% thereof, compounded quarterly from the relevant Distribution Date, to the extent permitted under applicable law. During any such Extension Period, the Company may not (i) declare or pay any dividends or distributions on, or redeem, purchase, acquire, or make a liquidation payment with respect to, any of the Company’s capital stock (which includes common and preferred stock) or (ii) make any payment of principal, interest or premium, if any, on or repay, repurchase or redeem any debt securities of the Company that rank pari passu with or junior in interest to the Junior Subordinated Debentures or make any guarantee payments with respect to any guarantee by the Company of the debt securities of any subsidiary of the Company if such guarantee ranks pari passu with or junior in interest to the Junior Subordinated Debentures (other than (a) dividends or distributions in common stock of the Company, (b) any declaration of a dividend in connection with the implementation of a stockholders’ rights plan, or the issuance of stock under any such plan in the future, or the redemption or repurchase of any such rights pursuant thereto, (c) payments under the guarantee and (d) purchases of common stock for issuance under any of the Company’s benefit plans for its directors, officers or employees). Prior to the termination of any such Extension Period, the Company may further extend such Extension Period, provided that such extension does not cause such Extension Period to exceed 20 consecutive quarters or extend beyond the stated maturity. Upon the termination of any such Extension Period and the payment of all amounts then due, and subject to the foregoing limitations, the Company may elect to begin a new Extension Period. Subject to the foregoing, there is no limitation on the number of times that the Company may elect to begin an Extension Period. The Company has no current intention of exercising its right to defer payments of interest by extending the interest payment period on the Junior Subordinated Debentures.
Air T Funding has a term of 30 years, but may terminate earlier as provided in the Trust Agreement, as amended. The Trust Agreement was most recently amended on March 3, 2021 and on January 28, 2022 and currently allows for the issuance of up to $100.0 million of Trust Preferred Securities. As of December 31, 2025, there are $48.6 million in Trust Preferred Securities outstanding ($13.0 million held by the wholly-owned subsidiaries of the Company).
The Trust is a “finance subsidiary” of Air T within the meaning of Rule 3‑10 of Regulation S‑X under the Securities Act of 1933, as amended, and as a result the Air T Funding does not file periodic reports with the SEC under the Securities Exchange Act of 1934, as amended.
Item 3. Quantitative and Qualitative Disclosures About Market Risk
For quantitative and qualitative disclosures about market risk, see Item 7A “Quantitative and Qualitative Disclosures About Market Risk” of our Annual Report on Form 10-K for the year ended March 31, 2025. Our exposures to market risk have not changed materially since March 31, 2025.
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Item 4. Controls and Procedures
Our Chief Executive Officer and Chief Financial Officer, referred to collectively herein as the Certifying Officers, are responsible for establishing and maintaining our disclosure controls and procedures. The Certifying Officers have reviewed and evaluated the effectiveness of the Company’s disclosure controls and procedures (as defined in Rules 240.13a-15(e) and 15d-15(e) promulgated under the Securities Exchange Act of 1934) as of December 31, 2025. Based on that review and evaluation, which included inquiries made to certain other employees of the Company, the Certifying Officers have concluded that the Company’s current disclosure controls and procedures, as designed and implemented, are effective in ensuring that information relating to the Company required to be disclosed in the reports that the Company files or submits under the Securities Exchange Act of 1934 is recorded, processed, summarized and reported within the time periods specified in the Securities and Exchange Commission’s rules and forms, including ensuring that such information is accumulated and communicated to the Company’s management, including the Chief Executive Officer and the Chief Financial Officer, as appropriate to allow timely decisions regarding required disclosure. It should be noted that the design of any system of controls is based in part upon certain assumptions about the likelihood of future events, and there can be no assurance that any design will succeed in achieving the stated goals under all potential future conditions, regardless of how remote.
There has not been any change in the Company’s internal control over financial reporting in connection with the evaluation required by Rule 13a-15(d) under the Exchange Act that occurred during the quarter ended December 31, 2025 that has materially affected, or is reasonably likely to materially affect, our internal control over financial reporting.
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PART II -- OTHER INFORMATION
Item 2. Unregistered Sales of Equity Securities and Use of Proceeds
(c) On May 14, 2014, the Company announced that its Board of Directors had authorized a program to repurchase up to 750,000 (retrospectively adjusted to 1,125,000 after the stock split in June 2019) shares of the Company’s common stock from time to time on the open market or in privately negotiated transactions, in compliance with SEC Rule 10b-18, over an indefinite period. As of December 31, 2025, 752,228 shares may be repurchased pursuant to this program.
No shares were repurchased during the quarter ended December 31, 2025.
Item 5. Other information
(c) Insider Trading Arrangements
During the quarter ended December 31, 2025, none of our directors or officers (as defined in Section 16 of the Exchange Act), adopted terminated
Item 6. Exhibits
(a) Exhibits
| No. | Description | ||||
| 10.1 | |||||
10.2 | |||||
10.3 | |||||
10.4 | |||||
10.5 | |||||
10.6 | |||||
10.7 | |||||
10.8 | |||||
10.9 | |||||
10.10 | |||||
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10.11 | |||||
10.12 | |||||
10.13 | |||||
10.14 | |||||
10.15 | |||||
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10.17 | |||||
10.18 | |||||
10.19 | |||||
10.20 | |||||
10.21 | |||||
10.22 | |||||
10.23 | |||||
10.24 | |||||
10.25 | |||||
10.26 | |||||
| 22.1 | |||||
| 31.1 | |||||
| 31.2 | |||||
| 32.1 | |||||
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| 101 | The following financial information from the Quarterly Report on Form 10-Q for the quarter ended December 31, 2025, formatted in XBRL (Extensible Business Reporting Language): (i) Condensed Consolidated Statements of Income, (ii) the Condensed Consolidated Balance Sheets, (iii) the Condensed Consolidated Statements of Cash Flows, (iv) the Condensed Consolidated Statements of Stockholders Equity, and (v) the Notes to the Condensed Consolidated Financial Statements. | ||||
* Portions of this exhibit have been omitted for confidential treatment.
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SIGNATURES
Pursuant to the requirements of the Securities Exchange Act of 1934, the registrant has duly caused this report to be signed on its behalf by the undersigned thereunto duly authorized.
| AIR T, INC. | ||||||||
| Date: February 13, 2026 | ||||||||
| /s/ Tracy Kennedy | ||||||||
| Tracy Kennedy, Chief Financial Officer (Principal Financial Officer and Principal Accounting Officer) | ||||||||
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