AIR T INC

Previous wording

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

Current wording

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

Previous wording

We currently operate in four core industry segments:

Current wording

We currently operate in four industry segments:

Previous wording

•Commercial aircraft, engines and parts (formerly known as Commercial jet engines and parts), which 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 and;

Current wording

•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;

Previous wording

First Quarter Fiscal 2026 Compared to First Quarter Fiscal 2025

Current wording

Second Quarter Fiscal 2026 Compared to Second Quarter Fiscal 2025

Previous wording

Revenues from the overnight air cargo segment for the three-month period ended June 30, 2025 was relatively flat compared to the first quarter of the prior fiscal year.

Current wording

Revenues from the overnight air cargo segment for the three-month period ended September 30, 2025 decreased by $1.3 million (4%) compared to the second quarter of the prior fiscal year. 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 quarter.

Previous wording

The ground support equipment segment contributed approximately $15.1 million and $7.4 million to the Company’s revenues for the three-month period ended June 30, 2025 and 2024 respectively, representing a $7.7 million (104.9%) increase in the current quarter. The increase was primarily driven by the higher number of deicing trucks sold in the current year's quarter compared to the prior year's comparable quarter. At June 30, 2025, the ground support equipment segment’s order backlog was $7.2 million compared to $9.9 million at June 30, 2024.

Current wording

The ground support equipment segment contributed approximately $9.6 million and $14.5 million to the Company’s revenues for the three-month period ended September 30, 2025 and 2024 respectively, representing a $4.8 million (33%) decrease in the current fiscal year quarter. The decrease was primarily driven by a lower number of deicing trucks sold in the current quarter compared to the comparable quarter from the prior fiscal year as a result of timing on fulfilling annual orders for certain customers. At September 30, 2025, the ground support equipment segment’s order backlog was $12.9 million compared to $6.2 million at September 30, 2024.

Previous wording

The commercial aircraft, engines and parts segment contributed $22.0 million of revenues in the quarter ended June 30, 2025 compared to $26.3 million in the comparable prior year quarter, which is a decrease of $4.3 million (16.3%). The decrease was primarily driven by lower component sales in the current quarter, partially offset by an increase in lease income resulting from two assets being on lease this quarter, compared to none in the same fiscal quarter of the prior year.

Current wording

The commercial aircraft, engines and parts segment contributed $20.9 million of revenues in the quarter ended September 30, 2025 compared to $32.9 million in the comparable prior year quarter, which is a decrease of $12.0 million (37%). The decrease was largely attributable to a decline in component sales at Contrail, driven by a lower level of component inventory purchases during the preceding twelve-month period.

Previous wording

The digital solutions segment contributed $2.1 million of revenues in the quarter ended June 30, 2025 compared to $1.7 million in the prior year quarter, an increase of $0.4 million (25%). The increase is primarily due to increased software subscriptions driven by continued acquisition of new customers.

Current wording

Digital solutions segment contributed $2.2 million of revenues in the quarter ended September 30, 2025 compared to $1.8 million in the prior year quarter, an increase of $0.4 million (20%). The increase is primarily due to increased software subscriptions represented by monthly recurring revenues of $0.7 million as of September 30, 2025 versus $0.6 million as of September 30, 2024.

Previous wording

Consolidated segment operating expenses for the three-month period ended June 30, 2025 increased by $2.4 million (4.6%) compared to the same quarter in the prior fiscal year.

Current wording

Consolidated segment operating expenses for the three-month period ended September 30, 2025 decreased by $15.2 million (24%) compared to the same quarter in the prior fiscal year.

Previous wording

The commercial aircraft, engines and parts segment contributed $14.7 million and $18.5 million to the Company's operating expenses for the three-month period ended June 30, 2025 and 2024, respectively, representing a $3.9 million (20.9%) decrease in the current quarter. Lower component sales, coupled with lower profit margin on parts sold in the current quarter resulted in the decrease in operating expenses and percentage of segment net sales.

Current wording

The commercial aircraft, engines and parts segment contributed $14.4 million and $22.6 million to the Company's operating expenses for the three-month period ended September 30, 2025 and 2024, respectively, representing a $8.2 million (36%) decrease in the current quarter. Lower component sales in the current quarter resulted in the decrease in operating expenses.

Previous wording

General and administrative expenses for the three-month period ended June 30, 2025 were relatively flat compared to the first quarter of the prior fiscal year.

Current wording

General and administrative expenses for the three-month period ended September 30, 2025 increased by $3.9 million (27%) 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.

Previous wording

The Company had net non-operating loss of $1.3 million during the quarter ended June 30, 2025, compared to net non-operating income of $0.7 million in the prior year quarter. The non-operating loss in the current year was driven by a $0.4 million increase in interest expense and a net loss of $0.3 million in the current year compared to a net income of $1.9 million in the prior year allocated to the Company from equity method investments, as detailed in Note 9 of the Notes to Condensed Consolidated Financial Statements in Part I, Item 1 of this Report on Form 10-Q.

Current wording

The Company had net non-operating income of $1.7 million during the quarter ended September 30, 2025, compared to net non-operating loss of $0.3 million in the prior year quarter. The non-operating income was driven by a $1.8 million increase in net income allocated to the Company from equity method investments, as detailed in Note 9 of the Notes to Condensed Consolidated Financial Statements in Part I, Item 1 of this Report on Form 10-Q.

Previous wording

During the three-month period ended June 30, 2024, the Company recorded income tax expense of $0.1 million at an ETR of 68.9%. The Company has computed the provision for income taxes based on the estimated annual effective tax rate excluding loss jurisdictions with no tax benefit and the application of discrete items, if any, for interim reporting. The primary factors contributing to the difference between the federal statutory rate of 21.0% and the Company's effective tax rate for the three-month period ended June 30, 2024 were the change in valuation allowance related to the Company's U.S. consolidated group, DTI, LGSS, DSI, BCCM Kenya, and the foreign rate differentials for Air T's operations located in the Netherlands and Puerto Rico.

Current wording

During the three-month period ended September 30, 2024, the Company recorded $0.3 million in income tax expense at an ETR of 10.2%. The Company has computed the provision for income taxes based on the estimated annual effective tax rate excluding loss jurisdictions with no tax benefit and the application of discrete items, if any, for interim reporting. The primary factors contributing to the difference between the federal statutory rate of 21.0% and the Company's effective tax rate for the three-month period ended September 30, 2024 were the valuation allowance related to the Company’s U.S. consolidated group, DTI, LGSS, DSI and BCCM Kenya, and the foreign rate differentials for Air T’s operations located in the Netherlands and Puerto Rico.

Previous wording

Consolidated segment revenue for the three-month period ended June 30, 2025 increased by $4.1 million (6.2%) compared to the same quarter in the prior fiscal year.

Current wording

Consolidated segment revenue for the six-month period ended September 30, 2025 decreased by $12.6 million (9%) compared to the same period in the prior fiscal year.

Previous wording

Operating expenses from the overnight air cargo segment for the three-month period ended June 30, 2025 was relatively flat compared to the first quarter of the prior fiscal year.

Current wording

Operating expenses from the ground support equipment segment for the six months ended September 30, 2025 was relatively flat compared to the six months ended September 30, 2024 but showed improvements when viewed as a percentage of net sales due to higher margins realized on deicer and part sales in the current year.

Previous wording

During the three-month period ended June 30, 2025, the Company recorded $0.1 million in income tax benefit at an ETR of 16.9%. The Company has computed the provision for income taxes based on the estimated annual effective tax rate excluding loss jurisdictions with no tax benefit and the application of discrete items, if any, for interim reporting. The primary factors contributing to the difference between the federal statutory rate of 21.0% and the Company's effective tax rate for the three-month period ended June 30, 2025 were the valuation allowance related to the Company's U.S. consolidated group, DTI, DSI, and the foreign rate differentials for Air T's operations located in the Netherlands and Puerto Rico, and the benefit from the FDII deduction.

Current wording

During the six-month period ended September 30, 2025, the Company recorded $2.1 million in income tax expense at an ETR of 32.1%. The Company has computed the provision for income taxes based on the estimated annual effective tax rate excluding loss jurisdictions with no tax benefit and the application of discrete items, if any, for interim reporting. The primary factors contributing to the difference between the federal statutory rate of 21.0% and the Company's effective tax rate for the six-month period ended September 30, 2025 were the valuation allowance related to the Company’s U.S. consolidated group, DTI and DSI, the foreign rate differentials for Air T’s operations located in the Netherlands and Puerto Rico, non-deductible transaction costs, and the benefit from the FDII deduction.

Previous wording

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 of 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 June 30, 2025.

Current wording

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 September 30, 2025.

Previous wording

As of June 30, 2025, the Company held approximately $15.0 million in cash and cash equivalents and restricted cash, of which, $0.4 million related to cash reserved for insurance claims payments of Space Age Insurance Company's ("SAIC"), a wholly-owned subsidiary of the Company. The Company also held $0.8 million in restricted investments held as statutory reserve of SAIC. The Company has an aggregate of approximately $29.1 million in available funds under its lines of credit as of June 30, 2025.

Current wording

As of September 30, 2025, the Company held approximately $17.5 million in cash and cash equivalents and restricted cash. The Company has an aggregate of approximately $28.4 million in available funds under its lines of credit as of September 30, 2025.

Previous wording

As of June 30, 2025, the Company’s working capital amounted to $43.9 million, a increase of $13.0 million compared to March 31, 2025 primarily driven by an increase in cash and cash equivalents of $8.5 million, a $1.4 million increase in inventory along with a $3.0 million decrease in short-term debt.

Current wording

As of September 30, 2025, the Company’s working capital amounted to $49.4 million, an increase of $18.5 million compared to March 31, 2025, primarily driven by a $8.1 million increase in inventory and a $11.5 million increase in cash and cash equivalents.

Previous wording

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 commence 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.

Current wording

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.

Previous wording

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 Note Purchase Agreement, 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):

Current wording

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):

Previous wording

Following is a table of changes in cash flow for the three months ended June 30, 2025 and 2024 (in thousands):

Current wording

Following is a table of changes in cash flow for the six months ended September 30, 2025 and 2024 (in thousands):

Previous wording

Net cash used in investing activities for the three-month period ended June 30, 2025 was $2.7 million compared to net cash provided by investing activities of $2.0 million in the prior year period. The cash used in investing activities was primarily driven by investments in unconsolidated entities of $2.0 million in the current year period that did not occur in the prior year period, acquisition Royal of $1.2 million in addition to $1.5 million lower distributions received from unconsolidated entities in the current year period compared to the prior year period.

Current wording

Net cash provided by investing activities for the six-month period ended September 30, 2025 was $13.9 million compared to net cash used in investing activities of $14.2 million in the prior year period. The cash provided by investing activities in the current six-month period was primarily driven by proceeds of $19.9 million from the sale of the two Airbus Model A321-111 aircraft, partially offset by investments in unconsolidated entities of $6.8 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.

Previous wording

Net cash provided by financing activities for the three-month period ended June 30, 2025 was $12.6 million compared to net cash used in financing activities of $1.3 million in the prior year period. The cash provided by financing activities in the current year three-month period was primarily driven by $16.1 million more proceeds on the Company's term loans and revolving lines of credit. These changes were partially offset by $3.1 million more payments made on the Company's revolving lines of credit.

Current wording

Net cash provided by financing activities for the six-month period ended September 30, 2025 was $3.7 million compared to net cash provided by financing activities of $12.5 million in the prior year period. The year-over-year decrease in net cash provided by financing activities was primarily due to a $13.4 million and $4.2 million increase on payments made on the Company's revolving lines of credit and term loans, respectively, partially offset by a $11.1 million increase in proceeds from the Company's revolving lines of credit.

Previous wording

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 certain assets that are on lease, as the Company believes this expense matches with the corresponding revenue earned on these leased assets.

Current wording

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.

Previous wording

The tables below provide a reconciliation of operating income (loss) to Adjusted EBITDA for the three months ended June 30, 2025 and 2024 (in thousands):

Current wording

The tables below provide a reconciliation of operating income (loss) to Adjusted EBITDA for the three and six months ended September 30, 2025 and 2024 (in thousands):

Previous wording

The table below provides Adjusted EBITDA by segment for the three months ended June 30, 2025 and 2024 (in thousands):

Current wording

The table below provides Adjusted EBITDA by segment for the three and six months ended September 30, 2025 and 2024 (in thousands):

Previous wording

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”), 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.

Current wording

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.

Previous wording

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 Air T Funding does not file periodic reports with the SEC under the Securities Exchange Act of 1934, as amended.

Current wording

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.