Air T(AIRT) - 2026 Q1 - Quarterly Report

PART I - Financial Information This part provides the unaudited condensed consolidated financial statements and management's discussion and analysis for Air T, Inc. and its subsidiaries Item 1. Financial Statements This section presents the unaudited condensed consolidated financial statements of Air T, Inc. and its subsidiaries, including statements of income, comprehensive income, balance sheets, cash flows, equity, and detailed notes, for the periods ended June 30, 2025, and March 31, 2025 Condensed Consolidated Statements of Income (Loss) This statement details the company's operating revenues, expenses, and net loss for the three months ended June 30, 2025 and 2024 Condensed Consolidated Statements of Income (Loss) (in thousands, except per share data) | Metric | Three Months Ended June 30, 2025 | Three Months Ended June 30, 2024 | | :------------------------------------ | :------------------------------- | :------------------------------- | | Operating Revenues | $70,870 | $66,411 | | Operating Expenses | $70,424 | $66,988 | | Operating Income (Loss) | $446 | $(577) | | Non-operating (Expense) Income | $(1,253) | $680 | | (Loss) Income before income taxes | $(807) | $103 | | Income Tax (Benefit) Expense | $(136) | $71 | | Net (Loss) Income | $(671) | $32 | | Net Loss Attributable to Air T, Inc. Stockholders | $(1,636) | $(335) | | Basic Loss per share | $(0.61) | $(0.12) | | Diluted Loss per share | $(0.61) | $(0.12) | Condensed Consolidated Statements of Comprehensive Income (Loss) This statement presents the net loss and other comprehensive income components, including foreign currency translation and reclassification of interest rate swaps Condensed Consolidated Statements of Comprehensive Income (Loss) (in thousands) | Metric | Three Months Ended June 30, 2025 | Three Months Ended June 30, 2024 | | :------------------------------------ | :------------------------------- | :------------------------------- | | Net (Loss) Income | $(671) | $32 | | Foreign currency translation gain (loss) | $413 | $(50) | | Reclassification of interest rate swaps into earnings | $12 | $(203) | | Redemption of non-controlling interest | — | $146 | | Other | $(243) | $1 | | Total Other Comprehensive Gain (Loss) | $182 | $(106) | | Total Comprehensive Loss | $(489) | $(74) | | Comprehensive Income Attributable to Non-controlling Interests | $(965) | $(367) | | Comprehensive Loss Attributable to Air T, Inc. Stockholders | $(1,454) | $(441) | Condensed Consolidated Balance Sheets This statement provides a snapshot of the company's assets, liabilities, and stockholders' deficit as of June 30, 2025, and March 31, 2025 Condensed Consolidated Balance Sheets (in thousands) | Category | June 30, 2025 | March 31, 2025 | | :------------------------------------ | :-------------- | :------------- | | ASSETS | | | | Cash and cash equivalents | $14,460 | $5,932 | | Total Current Assets | $92,933 | $78,507 | | Total Assets | $190,037 | $173,778 | | LIABILITIES AND STOCKHOLDERS' DEFICIT | | | | Total Current Liabilities | $49,051 | $47,661 | | Long-term debt | $117,762 | $101,226 | | Total Liabilities | $184,745 | $168,242 | | Redeemable non-controlling interests | $8,210 | $7,054 | | Total Air T, Inc. Stockholders' Deficit | $(4,630) | $(3,216) | | Total Deficit | $(2,918) | $(1,518) | | Total Liabilities and Deficit | $190,037 | $173,778 | Condensed Consolidated Statements of Cash Flows This statement outlines the cash flows from operating, investing, and financing activities for the three months ended June 30, 2025 and 2024 Condensed Consolidated Statements of Cash Flows (in thousands) | Cash Flow Activity | Three Months Ended June 30, 2025 | Three Months Ended June 30, 2024 | | :------------------------------------------ | :------------------------------- | :------------------------------- | | Net cash (used in) provided by operating activities | $(1,095) | $113 | | Net cash (used in) provided by investing activities | $(2,724) | $2,008 | | Net cash provided by (used in) financing activities | $12,577 | $(1,291) | | Effect of foreign currency exchange rates on cash and cash equivalents | $(292) | $32 | | Net Increase in Cash and Cash Equivalents and Restricted Cash | $8,466 | $862 | | Cash and Cash Equivalents and Restricted Cash at End of Period | $15,223 | $8,705 | Condensed Consolidated Statements of Equity This statement details changes in equity components, including common stock, retained earnings, and non-controlling interests, for the period ended June 30, 2025 Condensed Consolidated Statements of Equity (in thousands) | Equity Component | Balance, March 31, 2025 | Net Income (Loss) | Distributions to NCI | Stock Compensation Expense | Foreign Currency Translation Gain | Reclassification of Interest Rate Swaps | Allocation of Comprehensive Income | Allocation of Comprehensive Income to Redeemable NCI | Balance, June 30, 2025 | | :------------------------------------ | :---------------------- | :------------------ | :------------------- | :------------------------- | :------------------------------ | :------------------------------------- | :------------------------------------------------ | :------------------------------------------------------- | :--------------------- | | Common Stock (Amount) | $758 | — | — | — | — | — | — | — | $758 | | Treasury Stock (Amount) | $(6,404) | — | — | — | — | — | — | — | $(6,404) | | Additional Paid-In Capital | $947 | — | — | $40 | — | — | — | — | $987 | | Retained Earnings | $2,130 | $(1,636) | — | — | — | — | — | — | $494 | | Accumulated Other Comprehensive Income (Loss) | $(647) | — | — | — | $413 | $12 | $5 | $(248) | $(465) | | Non-controlling Interests | $1,698 | $52 | $(38) | — | — | — | — | — | $1,712 | | Total Equity (Deficit) | $(1,518) | $(1,584) | $(38) | $40 | $413 | $12 | $5 | $(248) | $(2,918) | Notes to Condensed Consolidated Financial Statements (Unaudited) This section provides detailed explanatory notes supporting the unaudited condensed consolidated financial statements, covering accounting policies, acquisitions, and other financial disclosures 1. Financial Statement Presentation This note clarifies the basis of presentation for the unaudited condensed consolidated financial statements and discusses the impact of new accounting standards - The condensed consolidated financial statements are unaudited and prepared in accordance with GAAP, with certain information condensed or omitted per SEC rules, and are not necessarily indicative of full-year results[23][24] - The Company is evaluating the impact of new FASB ASUs 2023-09 (Income Taxes) and 2024-03 (Expense Disaggregation) on its consolidated financial statements and disclosures, effective for fiscal years beginning after December 15, 2024, and December 15, 2026, respectively[26][27] 2. Acquisitions This note details the acquisition of Royal Aircraft Services, LLC by Mountain Air Cargo, Inc. on May 15, 2025 - On May 15, 2025, Mountain Air Cargo, Inc. (a wholly-owned subsidiary) acquired Royal Aircraft Services, LLC, an aircraft maintenance and repair company, for $1.2 million, net of cash acquired, integrating it into the Overnight Air Cargo segment[28] 3. Revenue Recognition This note describes the company's revenue recognition policies across various streams and provides disaggregated revenue data - The Company generates revenue from product sales (point-in-time), support services (over time, based on input/output methods), software services (ratably over subscription terms), and leasing revenue[31][32] Disaggregated Revenues by Type (in thousands) | Revenue Type | Three Months Ended June 30, 2025 | Three Months Ended June 30, 2024 | | :-------------------------------- | :------------------------------- | :------------------------------- | | Product Sales | $44,710 | $40,515 | | Support Services | $20,649 | $23,037 | | Leasing Revenue | $2,210 | $518 | | Software Services | $2,096 | $1,678 | | Other | $1,155 | $633 | | Total | $70,870 | $66,411 | Outstanding Contract Liabilities (in thousands) | Contract Liabilities | As of June 30, 2025 | As of April 1, 2025 | Recognized as Revenue (3 months ended June 30, 2025) | | :----------------------- | :------------------ | :------------------ | :--------------------------------------------------- | | Outstanding | $7,781 | $4,199 | $(1,577) | 4. Accrued Expenses and Other This note provides a breakdown of accrued expenses and other current liabilities as of June 30, 2025, and March 31, 2025 Accrued Expenses and Other (in thousands) | Category | June 30, 2025 | March 31, 2025 | | :---------------------- | :-------------- | :------------- | | Salaries, wages and related | $6,477 | $6,235 | | Profit sharing and bonus | $827 | $2,980 | | Other Deposits | $2,965 | $513 | | Deferred Income | $4,816 | $3,686 | | Accrued insurance payable | $2,949 | $1,336 | | Other | $2,589 | $1,941 | | Total | $20,623 | $16,691 | 5. Income Taxes This note discusses the income tax benefit and expense, effective tax rates, and the impact of recent tax legislation for the periods presented - For the three months ended June 30, 2025, the Company recorded a $0.1 million income tax benefit at an effective tax rate (ETR) of 16.9%, primarily due to valuation allowances, foreign rate differentials, and the Foreign-Derived Intangible Income (FDII) deduction[35] - For the three months ended June 30, 2024, the Company recorded income tax expense of $71.0 thousand at an ETR of 68.9%, influenced by valuation allowances and foreign rate differentials[37] - The 'One Big Beautiful Bill Act,' signed July 4, 2025, is being evaluated for its full effects but is not expected to materially impact the financial statements for the period ended June 30, 2025, as it was enacted after the quarter-end[36] 6. Net Loss Per Share This note presents the basic and diluted net loss per share attributable to Air T, Inc. stockholders for the three months ended June 30, 2025 and 2024 Net Loss Per Share (in thousands, except per share figures) | Metric | Three Months Ended June 30, 2025 | Three Months Ended June 30, 2024 | | :------------------------------------ | :------------------------------- | :------------------------------- | | Net Loss Attributable to Air T, Inc. Stockholders | $(1,636) | $(335) | | Basic Loss per share | $(0.61) | $(0.12) | | Diluted Loss per share | $(0.61) | $(0.12) | | Weighted Average Shares Outstanding (Basic) | 2,703 | 2,761 | | Weighted Average Shares Outstanding (Diluted) | 2,703 | 2,761 | 7. Intangible Assets and Goodwill This note provides details on the net book value of intangible assets and changes in goodwill by segment Intangible Assets, Net Book Value (in thousands) | Intangible Asset Category | June 30, 2025 | March 31, 2025 | | :-------------------------- | :-------------- | :------------- | | Purchased software | $298 | $316 | | Internally developed software | $2,601 | $2,547 | | In-place lease and other | $609 | $634 | | Customer relationships | $6,305 | $6,005 | | Patents | $24 | $25 | | Other | $431 | $423 | | In-process software | $170 | $70 | | Total Intangible Assets | $10,438 | $10,020 | - Goodwill increased from $10.5 million at March 31, 2025, to $11.9 million at June 30, 2025, primarily due to the Royal acquisition ($1.0 million) and foreign currency translation adjustments at Shanwick ($0.3 million)[42] Goodwill by Segment (at cost, in thousands) | Goodwill by Segment | June 30, 2025 | March 31, 2025 | | :-------------------------------- | :-------------- | :------------- | | Overnight air cargo | $1,121 | $76 | | Commercial aircraft, engines and parts | $4,227 | $4,227 | | Digital solutions | $6,555 | $6,239 | | Total reportable segment goodwill | $11,903 | $10,542 | 8. Investments in Securities and Derivative Instruments This note describes the company's use of interest rate swaps and the fair value measurement of marketable equity securities - The Company uses interest rate swaps for risk management, but as of June 30, 2025, all previously designated cash flow hedging instruments are no longer effective hedges[44] - A new floating-to-fixed interest rate swap for a $2.3 million loan was entered into on February 28, 2025, with fair value changes recognized directly into earnings, as hedge accounting was not applied[45] - Marketable equity securities are carried at fair value (Level 1), with immaterial gross unrealized gains and losses for the three months ended June 30, 2025 and 2024[48][49] 9. Equity Method Investments This note details the company's significant equity method investments and their contribution to net income or loss - The Company holds significant equity method investments in Lendway, Inc. (27.5% ownership), Cadillac Casting, Inc. (20.1% ownership), and Crestone Asset Management, LLC (90% economic common interests)[50][52][56] Equity Method Investment Balances (in thousands) | Investment | June 30, 2025 | March 31, 2025 | | :-------------------------- | :-------------- | :------------- | | Lendway | $858 | $729 | | CCI | $3,860 | $3,889 | | CAM | $13,385 | $12,428 | | Other equity method investments | $1,797 | $1,957 | | Total | $19,900 | $19,003 | Net (Loss) Income Attributable to Air T, Inc. Stockholders from Equity Method Investees (in thousands) | Investment | Three Months Ended June 30, 2025 | Three Months Ended June 30, 2024 | | :-------------------------- | :------------------------------- | :------------------------------- | | Lendway | $123 | $(290) | | CCI | $(29) | $674 | | CAM | $(251) | $1,495 | | Other equity method investments | $138 | $44 | | Total | $(19) | $1,923 | 10. Inventories This note provides a breakdown of inventories, net of reserves, by category as of June 30, 2025, and March 31, 2025 Inventories, Net of Reserves (in thousands) | Inventory Category | June 30, 2025 | March 31, 2025 | | :----------------- | :-------------- | :------------- | | Raw Materials | $7,275 | $6,928 | | Work in process | $3,078 | $2,342 | | Finished Goods | $4,084 | $5,358 | | Aircraft parts | $30,440 | $28,794 | | Reserves | $(4,991) | $(4,906) | | Total Inventories, net | $39,886 | $38,516 | 11. Lessor Arrangements This note outlines the company's leasing activities as a lessor, including depreciation expense and future minimum rental payments - The Company leases equipment (aircraft and engines) and offices to third parties[65] - Depreciation expense for equipment leases was $0.6 million in Q1 2026 (vs. $0.1 million in Q1 2025), and for office leases was $0.1 million in both periods[69] - Earned contingent rent on equipment leases totaled approximately $0.5 million for the three months ended June 30, 2025, with no contingent rent in the prior year period[66] Future Minimum Rental Payments to be Received (in thousands) | Year Ended March 31, | Equipment Leases | Office Leases | | :------------------------------------ | :--------------- | :------------ | | 2026 (excluding Q1 2026) | $2,192 | $765 | | 2027 | $3,361 | $990 | | 2028 | $2,843 | $849 | | 2029 | — | $774 | | 2030 | — | $743 | | Thereafter | — | $1,824 | | Total | $8,396 | $5,945 | 12. Lessee Arrangements This note details the company's lease costs, operating lease balances, and maturities of lease liabilities as a lessee Components of Lease Cost (in thousands) | Lease Cost Component | Three Months Ended June 30, 2025 | Three Months Ended June 30, 2024 | | :------------------- | :------------------------------- | :------------------------------- | | Operating lease cost | $841 | $668 | | Short-term lease cost | $279 | $294 | | Variable lease cost | $246 | $226 | | Total lease cost | $1,366 | $1,188 | Operating Lease Balances (in thousands, except terms/rates) | Metric | June 30, 2025 | March 31, 2025 | | :-------------------------- | :-------------- | :-------------- | | Operating lease ROU assets | $12,898 | $13,274 | | Operating lease liabilities | $13,848 | $14,220 | | Weighted-average remaining lease term | 10 years, 2 months | 10 years, 3 months | | Weighted-average discount rate | 5.68% | 5.67% | Maturities of Lease Liabilities (in thousands) | Operating Leases | Amount | | :------------------------------------ | :----- | | 2026 (excluding Q1 2026) | $2,450 | | 2027 | $3,065 | | 2028 | $2,358 | | 2029 | $1,750 | | 2030 | $977 | | Thereafter | $7,669 | | Total undiscounted lease payments | $18,269 | | Interest | $(4,421) | | Total lease liabilities | $13,848 | 13. Financing Arrangements This note describes new and existing debt facilities, including term loans, note purchase agreements, and their respective terms - On May 15, 2025, the Alerus Loan Parties secured a $1.1 million Term Loan C to finance the Royal acquisition, maturing May 15, 2030, with interest at the greater of 5.00% or 1-month SOFR + 2.25%[79] - On May 30, 2025, AAM 24-1 entered into a Third Note Purchase Agreement for a Multiple Advance Senior Secured Note up to $100.0 million, with $40.0 million advanced to date and an additional $60.0 million committed in $10.0 million increments through May 2027, bearing 8.5% annual interest[80][81] Summary of Borrowings (in thousands) | Debt Type | June 30, 2025 | March 31, 2025 | Maturity Date | Interest Rate | | :-------------------------------- | :-------------- | :------------- | :------------ | :-------------------------------- | | Trust Preferred Securities | $35,450 | $35,342 | 6/7/2049 | 8.00% | | Alerus Loan Parties (Total) | $23,406 | $15,877 | Various | Various | | Contrail Debt (Total) | $8,143 | $11,877 | Various | Various | | Wolfe Lake Debt | $8,989 | $9,059 | 12/2/2031 | 3.65% | | Air T Acquisition 22.1 (Total) | $5,903 | $5,880 | Various | Various | | WASI Debt | $280 | $398 | 1/1/2026 | 6.00% | | AAM 24-1 Debt | $40,000 | $30,000 | 5/31/2035 | 8.50% | | MAC Debt | $2,242 | $2,271 | 2/21/2030 | 1-month SOFR + 0.11% + 1.75% | | Total Debt, net | $123,842 | $110,325 | | | 14. Shares Repurchased This note provides information on the company's common stock repurchase program and activity during the quarter - The Company has an authorized program to repurchase up to 1,125,000 shares of its common stock, with 752,228 shares remaining available as of June 30, 2025[179] - No shares were repurchased by the Company during the three months ended June 30, 2025[89][180] 15. Geographical Information This note presents the company's total tangible long-lived assets and operating revenues disaggregated by geographical region Total Tangible Long-Lived Assets, Net (in thousands) | Location | June 30, 2025 | March 31, 2025 | | :------------- | :-------------- | :------------- | | United States | $20,025 | $20,422 | | Foreign | $14,164 | $14,525 | | Total | $34,189 | $34,947 | Total Operating Revenues by Region (in thousands) | Location | Three Months Ended June 30, 2025 | Three Months Ended June 30, 2024 | | :------------- | :------------------------------- | :------------------------------- | | United States | $58,977 | $54,829 | | Foreign | $11,803 | $11,487 | | Total Revenue | $70,870 | $66,411 | 16. Segment Information This note outlines the company's four reportable segments, their revenue from external customers, and segment profit or loss - The Company operates in four reportable segments: Overnight Air Cargo, Commercial Aircraft, Engines and Parts, Ground Support Equipment, and Digital Solutions[97] - Effective Q4 FY2025, the Company renamed two segments and separately disclosed Digital Solutions to better align with business activities and anticipated long-term growth[95][96] Revenue from External Customers by Segment (in thousands) | Segment | Three Months Ended June 30, 2025 | Three Months Ended June 30, 2024 | | :-------------------------------- | :------------------------------- | :------------------------------- | | Overnight Air Cargo | $30,589 | $30,383 | | Commercial Aircraft, Engines and Parts | $21,960 | $26,250 | | Ground Support Equipment | $15,070 | $7,354 | | Digital Solutions | $2,096 | $1,678 | | Total Segment Revenue | $69,715 | $65,665 | Segment Profit (Loss) (in thousands) | Segment | Three Months Ended June 30, 2025 | Three Months Ended June 30, 2024 | | :-------------------------------- | :------------------------------- | :------------------------------- | | Overnight Air Cargo | $1,466 | $1,831 | | Commercial Aircraft, Engines and Parts | $456 | $1,082 | | Ground Support Equipment | $1,338 | $(775) | | Digital Solutions | $(250) | $(464) | | Total Segment Profit (Loss) | $3,010 | $1,674 | 17. Commitments and Contingencies This note details the company's redeemable non-controlling interests, earnout liabilities, and stock incentive plan - Contrail has a redeemable non-controlling interest (RNCI) with an earnout liability valued at $1.1 million as of June 30, 2025, and a put/call option for the remaining 5% interest commencing April 1, 2026[105][106][107] - Shanwick also has a redeemable non-controlling interest (RNCI) with put/call options exercisable from the fifth anniversary of the shareholder agreement (February 2022), measured at the higher of carrying or redemption value[108][109] - The 2020 Omnibus Stock and Incentive Plan authorized 420,000 shares, with 199,000 granted options outstanding as of June 30, 2025; however, no options were exercisable due to unmet market conditions[114] 18. Guarantees This note describes the company's nonfinancial guarantees for lease agreements and their associated carrying values - The Company may issue nonfinancial guarantees for lease agreements of aircraft assets, with maximum potential payments of $4.4 million at June 30, 2025 and March 31, 2025[115][117] - The carrying value of recorded liabilities related to these nonfinancial guarantees was $0 at both June 30, 2025 and March 31, 2025[117] 19. Subsequent Events This note reports on significant events occurring after the balance sheet date, including the sale of aircraft assets - On July 15, 2025, CASP, a 95%-owned subsidiary of Contrail, completed the sale of two Airbus aircraft and associated engines for over $18.0 million, transferring lessor rights and obligations to the purchaser[118] Item 2. Management's Discussion and Analysis of Financial Condition and Results of Operations This section provides management's perspective on the Company's financial condition, results of operations, and liquidity for the three months ended June 30, 2025, compared to the prior year, along with an overview of business segments and forward-looking statements Forward-Looking Statements This section highlights the inherent uncertainties and risks associated with forward-looking statements in the report - The report contains forward-looking statements that reflect current views on future events and financial performance, subject to uncertainties and factors that could cause actual results to differ materially, including financing, economic conditions, contract risks, and market acceptance[120][121][124] Overview This section provides a high-level introduction to Air T, Inc.'s business model, strategic focus, and core operating segments - Air T, Inc. is a holding company focused on prudently and strategically diversifying its earnings power and compounding the growth in free cash flow per share over time[123] - The Company operates in four core industry segments: Overnight Air Cargo, Ground Support Equipment, Commercial Aircraft, Engines and Parts, and Digital Solutions[124][131] - Effective as of the fourth quarter of fiscal year 2025, the Company renamed two segments and separately disclosed the Digital Solutions segment to better align with its activities and anticipated long-term growth[126][127] Results of Operations This section analyzes the company's financial performance, including revenue, expenses, and non-operating items, for the current and prior fiscal quarters Operating Revenue This section details the consolidated and segment-specific operating revenue changes for the three months ended June 30, 2025 - 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[129] Revenue by Segment (in thousands) | Segment | Three Months Ended June 30, 2025 | Three Months Ended June 30, 2024 | Change | Change (%) | | :-------------------------------- | :------------------------------- | :------------------------------- | :----- | :--------- | | Overnight Air Cargo | $30,589 | $30,383 | $206 | 1% | | Ground Support Equipment | $15,070 | $7,354 | $7,716 | 105% | | Commercial Aircraft, Engines and Parts | $21,960 | $26,250 | $(4,290) | (16)% | | Digital Solutions | $2,096 | $1,678 | $418 | 25% | | Segments total | $69,715 | $65,665 | $4,050 | 6% | - Ground Support Equipment revenue increased 105% due to higher deicing truck sales, while Commercial Aircraft, Engines and Parts revenue decreased 16% due to lower component sales, partially offset by increased lease income[130][132] - Digital Solutions revenue grew 25% from new software subscriptions[133] Operating Expenses This section analyzes the consolidated and segment-specific operating expense changes for the three months ended June 30, 2025 - 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[134] Operating Expenses by Segment (in thousands) | Segment | Three Months Ended June 30, 2025 | Three Months Ended June 30, 2024 | Change | | :-------------------------------- | :------------------------------- | :------------------------------- | :----- | | Overnight Air Cargo | $25,899 | $25,709 | $190 | | Ground Support Equipment | $12,303 | $6,533 | $5,770 | | Commercial Aircraft, Engines and Parts | $14,656 | $18,533 | $(3,877) | | Digital Solutions | $836 | $556 | $280 | | Segments total | $53,694 | $51,331 | $2,363 | - Ground Support Equipment operating expenses increased 88.3% due to higher sales, but the percentage increase was less than revenue due to higher margins[135] - Commercial Aircraft, Engines and Parts operating expenses decreased 20.9% due to lower component sales and profit margins[136] - Digital Solutions operating expenses increased 50.4% due to headcount-related expenses[137] General and administrative This section reviews the general and administrative expenses and their proportion of total net sales General and Administrative Expenses (in thousands) | Metric | Three Months Ended June 30, 2025 | Three Months Ended June 30, 2024 | Change | | :-------------------------- | :------------------------------- | :------------------------------- | :----- | | General and administrative | $15,031 | $14,612 | $419 | | Percentage of total net sales | 21% | 22% | | - General and administrative expenses remained relatively flat year-over-year[138] Non-operating income (expense) This section explains the changes in non-operating income and expense, primarily driven by interest and equity method investments - The Company reported a 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[139] - This shift was driven by a $0.4 million increase in interest expense and a net loss of $0.3 million from equity method investments in the current quarter, compared to a $1.9 million net income from equity method investments in the prior year[139] Provision for Income Taxes This section discusses the income tax benefit or expense and effective tax rates for the current and prior fiscal quarters - The Company recorded a $0.1 million income tax benefit in Q1 2026 (ETR 16.9%) versus a $0.1 million expense in Q1 2025 (ETR 68.9%), primarily due to valuation allowances, foreign rate differentials, and the FDII deduction[140][142] Critical Accounting Policies and Estimates This section confirms that no significant changes were made to the company's critical accounting policies and estimates during the quarter - No significant changes were made to the Company's critical accounting policies and estimates during the three months ended June 30, 2025[144] Seasonality This section addresses the historical seasonal patterns affecting the ground support equipment segment's revenues and operating income - The ground support equipment segment business has historically been seasonal, with revenues and operating income typically lower in the first and fourth fiscal quarters as commercial deicers are usually delivered prior to the winter season[145] Systems and Network Security This section acknowledges the potential legal, financial, and reputational risks associated with cybersecurity breaches - The Company acknowledges cybersecurity risks, noting that breaches could lead to significant legal and financial liability, reputational harm, and revenue loss, despite employed security measures[146] Inflation This section highlights the material uncertainties and risks posed by future economic developments, including inflation and increased interest rates - Future economic developments, including inflation and increased interest rates, present material uncertainty and risk to the Company's financial condition and results of operations, with issues expected to continue beyond the current fiscal year[147] Liquidity and Capital Resources This section discusses the company's cash position, available credit, working capital changes, and new financing arrangements - As of June 30, 2025, the Company held $15.0 million in cash and cash equivalents and restricted cash, with an aggregate of approximately $29.1 million in available funds under its lines of credit[148] - Working capital increased by $13.0 million to $43.9 million at June 30, 2025, primarily driven by an $8.5 million increase in cash, a $1.4 million increase in inventory, and a $3.0 million decrease in short-term debt[149] - New financing includes a $1.1 million Term Loan C for the Royal acquisition and a Third Note Purchase Agreement for a Multiple Advance Senior Secured Note up to $100.0 million, with $40.0 million advanced to date and an additional $60.0 million committed in increments through May 2027[150][151][154] - Management believes it has sufficient cash on hand and available liquidity to meet its obligations for at least 12 months following the financial statements' issuance date[157] Cash Flows This section analyzes the changes in cash flows from operating, investing, and financing activities for the three months ended June 30, 2025 Changes in Cash Flow (in thousands) | Cash Flow Activity | Three Months Ended June 30, 2025 | Three Months Ended June 30, 2024 | Change | | :------------------------------------------ | :------------------------------- | :------------------------------- | :----- | | Net cash (used in) provided by operating activities | $(1,095) | $113 | $(1,208) | | Net cash (used in) provided by investing activities | $(2,724) | $2,008 | $(4,732) | | Net cash provided by (used in) financing activities | $12,577 | $(1,291) | $13,868 | | Net Increase in Cash and Cash Equivalents and Restricted Cash | $8,466 | $862 | $7,604 | - The $1.2 million decrease in operating cash flow was primarily due to an unfavorable change in inventory ($3.8 million), partially offset by a $1.6 million increase in net income after adjustments and $1.3 million higher customer deposits[158] - Net cash used in investing activities increased by $4.7 million, driven by $2.0 million in investments in unconsolidated entities, the $1.2 million Royal acquisition, and $1.5 million lower distributions from unconsolidated entities[159] - Net cash provided by financing activities increased by $13.9 million, primarily due to $16.1 million more proceeds from term loans and revolving lines of credit, partially offset by $3.1 million more payments on revolving lines of credit[160] Non-GAAP Financial Measures (Adjusted EBITDA) This section defines Adjusted EBITDA as a non-GAAP measure and provides its reconciliation to operating income and segment-wise breakdown - Adjusted EBITDA, a non-GAAP financial measure, is used to evaluate the Company's financial performance by removing the impact of specific items and adding back interest expense and depreciation/amortization (excluding certain leased assets)[161][162][163] Reconciliation of Operating Income (Loss) to Adjusted EBITDA (in thousands) | Metric | Three Months Ended June 30, 2025 | Three Months Ended June 30, 2024 | | :------------------------------------------ | :------------------------------- | :------------------------------- | | Operating income (loss) | $446 | $(577) | | Depreciation and amortization (excluding certain leased assets depreciation) | $702 | $760 | | Asset impairment, restructuring or impairment charges | $40 | $378 | | Gain on sale of property and equipment | $(1) | — | | Securities issuance expenses | $30 | $101 | | Share-based compensation | $39 | $16 | | Severance expenses | — | $179 | | Deal-sourcing expenses | $210 | — | | Adjusted EBITDA | $1,466 | $857 | Adjusted EBITDA by Segment (in thousands) | Segment | Three Months Ended June 30, 2025 | Three Months Ended June 30, 2024 | | :-------------------------------- | :------------------------------- | :------------------------------- | | Overnight Air Cargo | $1,613 | $1,947 | | Ground Support Equipment | $1,374 | $(511) | | Commercial Aircraft, Engines and Parts | $754 | $1,665 | | Digital Solutions | $(86) | $(312) | | Corporate and Other | $(2,189) | $(1,932) | | Adjusted EBITDA | $1,466 | $857 | Issuer and guarantor subsidiary summarized information This section provides details on Air T Funding's Trust Preferred Securities and Air T, Inc.'s guarantee obligations - Air T Funding, a statutory business trust, issues Alpha Income Trust Preferred Securities (8.0% Cumulative Securities) which are fully and unconditionally guaranteed by Air T, Inc. on a senior unsecured basis[166][167] - As of June 30, 2025, $48.5 million in Trust Preferred Securities are outstanding, with $13.0 million held by wholly-owned subsidiaries of the Company[173] - Air T has the right to defer interest payments on the Junior Subordinated Debentures (which back the Trust Preferred Securities) for up to 20 consecutive quarters, with restrictions on other payments during such deferral periods[171][172] Item 3. Quantitative and Qualitative Disclosures About Market Risk This section refers to the Company's Annual Report on Form 10-K for detailed market risk disclosures, stating that there have been no material changes in market risk exposures since March 31, 2025 - The Company's exposures to market risk have not changed materially since March 31, 2025[175] Item 4. Controls and Procedures The Chief Executive Officer and Chief Financial Officer concluded that the Company's disclosure controls and procedures were effective as of June 30, 2025, and there were no material changes to internal control over financial reporting during the quarter - The Certifying Officers concluded that the Company's disclosure controls and procedures were effective as of June 30, 2025[176] - There has been no material change in the Company's internal control over financial reporting during the quarter ended June 30, 2025[177] PART II -- OTHER INFORMATION This part includes disclosures on unregistered sales of equity securities, other information, and a list of exhibits Item 2. Unregistered Sales of Equity Securities and Use of Proceeds This section details the Company's authorized common stock repurchase program, noting that no shares were repurchased during the quarter ended June 30, 2025 - The Company has an authorized program to repurchase up to 1,125,000 shares of its common stock, with 752,228 shares remaining available as of June 30, 2025[179] - No shares were repurchased by the Company during the quarter ended June 30, 2025[180] Item 5. Other Information This section states that no Rule 10b5-1 or non-Rule 10b5-1 trading arrangements were adopted or terminated by the Company's directors or officers during the quarter ended June 30, 2025 - None of the Company's directors or officers adopted or terminated a 'Rule 10b5-1 trading arrangement' or a 'non-Rule 10b5-1 trading arrangement' during the quarter ended June 30, 2025[181] Item 6. Exhibits This section provides a comprehensive list of all exhibits filed as part of this Quarterly Report on Form 10-Q, including corporate governance documents, financing agreements, and certifications - The report includes a detailed list of exhibits, such as the Restated Certificate of Incorporation, Trust Agreements, Bills of Sale for aircraft, and Section 302/1350 Certifications[182][183][184] Signatures This section confirms the official signing and submission of the Quarterly Report on Form 10-Q by the registrant, Air T, Inc., through its Chief Financial Officer - The report was duly signed on August 13, 2025, by Tracy Kennedy, Chief Financial Officer (Principal Financial Officer and Principal Accounting Officer) of Air T, Inc[188]