Air T swings to $20M net loss in fiscal Q2 2027
Sentiment and the balance of points
Rhea-AI Sentiment reads the wording of the document, how positive or negative its language is on a 1 to 5 scale. The balance of points shown with the takes weighs what the document actually discloses, so the two can disagree, for example when a trial that missed its main goal is described in upbeat language.
Form Type
10-Q
Air T, Inc. (AIRT) reported second-quarter fiscal 2027 revenue of $146.937 million, compared with $64.150 million a year earlier, but operating results shifted from $5.508 million of income to an $11.804 million loss. Net loss attributable to Air T stockholders was $20.012 million, versus $4.355 million of income. For the six months ended September 30, 2026, revenue was $262.399 million and stockholder net loss was $35.818 million, compared with revenue of $135.020 million and income of $2.719 million in the prior-year period.
The business mix now includes Regional Express Holdings Pty Ltd, acquired by subsidiary Air T Rex Acquisition, Inc. on December 18, 2025, and Arena Aviation Partners B.V., acquired by subsidiary Crestone Air Partners, LLC for $34.1 million on June 10, 2026. Arena contributed $5.1 million in revenue and $0.6 million in net income through September 30, 2026. Six-month operating cash use was $13.207 million, and total debt, net, was $272.383 million as of September 30, 2026, versus $208.196 million as of March 31, 2026.
1 point · 0 major1 major · 1 point
How this balance works
Rhea-AI gives every point it takes from this document a weight. Minor counts 1, Moderate 3 and Major 9, so one Major point outweighs several Minor ones. The bar adds up the weights on each side, and when neither side holds more than 65% of the total the balance reads Mixed.
It reads the document as published, with the same rules for every company, and it does not look at what the market expected or at how the stock traded, so a point can be objectively good on a day the stock falls.
Rhea-AI Sentiment measures something else, the tone of the wording.
Positive
- Moderate pointReportable-segment revenue increased $84.6 million (131%) year over year.
Negative
- Major pointQuarterly stockholder net loss reached $20.012 million, versus $4.355 million income.
Filing Explained
The note had delivered 75 million dollars by September 30 as debt, with additional 2027 advances still conditional.
The filing reports that the Arena purchase completed on
By
Rex acquisition accounting remained incomplete as of
Key Figures
Quarterly revenue: $146.937 million
Quarterly net loss attributable to Air T stockholders: $20.012 million loss
Six-month revenue: $262.399 million
+5 more
8 metrics
Quarterly revenue
$146.937 million
Three months ended September 30, 2026; $64.150 million in 2025
Quarterly net loss attributable to Air T stockholders
$20.012 million loss
Three months ended September 30, 2026; $4.355 million income in 2025
Six-month revenue
$262.399 million
Six months ended September 30, 2026; $135.020 million in 2025
Six-month net loss attributable to Air T stockholders
$35.818 million loss
Six months ended September 30, 2026; $2.719 million income in 2025
Reportable-segment revenue increase
$84.6 million (131%)
Three months ended September 30, 2026, compared with the same quarter in 2025
Net cash used in operating activities
$13.207 million
Six months ended September 30, 2026; $6.504 million used in 2025
Total debt, net
$272.383 million
As of September 30, 2026; $208.196 million as of March 31, 2026
Arena acquisition purchase price
$34.1 million
Acquisition completed June 10, 2026
Key Terms
contingent consideration, measurement period, bargain purchase, equity method, +2 more
6 terms
contingent consideration financial
"The contingent consideration consists of future cash payments"
Contingent consideration is an additional payment agreed when one company buys another that will be paid later only if specific future targets are met, such as revenue, profit, or regulatory milestones. It matters to investors because it shifts risk between buyer and seller and affects the acquiring company's future cash flow and reported value — like promising a bonus after results are proven.
measurement period financial
"The final determination of the fair values will be completed within the one-year measurement period"
bargain purchase financial
"recognized an additional A$1.2 million ... to bargain purchase gain"
equity method financial
"accounting for its investment in CAM under the equity method"
An equity method investment is an accounting approach used when a company owns enough of another business to influence its decisions but not control it (commonly around 20–50% ownership). Instead of counting only dividends, the investor records its share of the other company’s profits and losses on its own income statement and adjusts the investment’s value on the balance sheet—like tracking a friend’s joint project by noting your share of their gains or setbacks. For investors, this matters because it can significantly affect reported earnings, asset values, and the apparent strength of a company’s financial results.
hypothetical liquidation at book value financial
"uses the hypothetical liquidation at book value method"
An estimate of what shareholders or creditors would receive if a company were closed and its assets sold using the values shown on its balance sheet rather than current market prices. It’s a hypothetical “what-if” cleanup calculation—like assuming you could sell a house for the exact number on your mortgage statement—and helps investors gauge a conservative floor for recovery in bankruptcy, restructuring, or worst-case valuation scenarios.
Adjusted EBITDA financial
"evaluating operating performance based on operating income and Adjusted EBITDA"
Adjusted EBITDA is a way companies measure how much money they make from their core operations, like running a business, by removing certain costs or income that aren’t part of regular business activities. It helps investors see how well a company is doing without distractions from unusual expenses or gains, making it easier to compare companies or track performance over time.
FAQ
AI-generated questions and answers. How Rhea-AI works. Not financial advice.
What were AIRT's results for the quarter ended September 30, 2026?
Air T reported $146.937 million in revenue and a $20.012 million net loss attributable to stockholders for the three months ended September 30, 2026. The comparable 2025 quarter had $64.150 million in revenue and $4.355 million of income attributable to stockholders.
How much did AIRT pay for Arena, and what was the contingent consideration?
Air T subsidiary Crestone Air Partners, LLC acquired 100% of Arena's outstanding equity interests for a $34.1 million purchase price. Consideration included $21.8 million in cash and $12.3 million of contingent consideration at fair value. Future cash payments to certain former owners equal 57.5% of specified performance-based fees collected under certain acquired servicing agreements, with no contractual cap.
What are the terms of AIRT's Multiple Advance Note?
Air T subsidiary AAM 24-1 had received $75.0 million of advances under the Multiple Advance Note as of September 30, 2026. The note bears 8.5% annual interest and matures May 31, 2035. The additional $60.0 million was scheduled in $10.0 million increments through May 30, 2027, subject to the absence of default and satisfaction of closing requirements.
How much operating cash did AIRT use in the first six months of fiscal 2027?
Air T used $13.207 million of cash in operating activities during the six months ended September 30, 2026, compared with $6.504 million in the same period of 2025.
AI-generated analysis. How Rhea-AI works. Not financial advice.
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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 October 31, 2026 | |||||
AIR T, INC. AND SUBSIDIARIES
QUARTERLY REPORT ON FORM 10-Q
TABLE OF CONTENTS
| Page | ||||||||
PART I | ||||||||
Item 1. | Financial Statements | |||||||
Condensed Consolidated Statements of Income (Loss) (Unaudited) For The Three and Six Months Ended September 30, 2026 and 2025 | 4 | |||||||
Condensed Consolidated Statements of Comprehensive Income (Loss) (Unaudited) For The Three and Six Months Ended September 30, 2026 and 2025 | 6 | |||||||
Condensed Consolidated Balance Sheets (Unaudited) as of September 30, 2026 and March 31, 2026 | 7 | |||||||
Condensed Consolidated Statements of Cash Flows (Unaudited) For The Six Months Ended September 30, 2026 and 2025 | 9 | |||||||
Condensed Consolidated Statements of Equity (Deficit) (Unaudited) For The Six Months Ended September 30, 2026 and 2025 | 10 | |||||||
Notes to Condensed Consolidated Financial Statements (Unaudited) | 13 | |||||||
Item 2. | Management's Discussion and Analysis of Financial Condition and Results of Operations | 39 | ||||||
| Item 3. | Quantitative and Qualitative Disclosures About Market Risk | 53 | ||||||
Item 4. | Controls and Procedures | 53 | ||||||
PART II | ||||||||
Item 2. | Unregistered Sales of Equity Securities and Use of Proceeds | 54 | ||||||
| Item 5. | Other Information | 54 | ||||||
Item 6. | Exhibits | 54 | ||||||
Signatures | 56 | |||||||
| 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 September 30, | Six Months Ended September 30, | |||||||||||||||||||||
| 2026 | 2025 | 2026 | 2025 | ||||||||||||||||||||
| Operating Revenues: | |||||||||||||||||||||||
| Regional airline | $ | $ | $ | $ | |||||||||||||||||||
| Overnight air cargo | |||||||||||||||||||||||
| Commercial aircraft, engines and parts | |||||||||||||||||||||||
| Ground support equipment | |||||||||||||||||||||||
| Digital solutions | |||||||||||||||||||||||
| Aviation leasing and asset management | |||||||||||||||||||||||
| Corporate and other | |||||||||||||||||||||||
| Operating Expenses: | |||||||||||||||||||||||
| Regional airline (exclusive of depreciation) | |||||||||||||||||||||||
| Overnight air cargo | |||||||||||||||||||||||
| Commercial aircraft, engines and parts | |||||||||||||||||||||||
| Ground support equipment | |||||||||||||||||||||||
| Digital solutions | |||||||||||||||||||||||
| Corporate and other | |||||||||||||||||||||||
| General and administrative | |||||||||||||||||||||||
| Depreciation and amortization | |||||||||||||||||||||||
| Earnout remeasurement | ( | ( | |||||||||||||||||||||
| Gain on sale of aircraft on lease | |||||||||||||||||||||||
| Operating (loss) income | ( | ( | |||||||||||||||||||||
| Non-operating (expense) income: | |||||||||||||||||||||||
| Interest expense | ( | ( | ( | ( | |||||||||||||||||||
| Income from equity method investments | ( | ||||||||||||||||||||||
| Gain on bargain purchase | |||||||||||||||||||||||
| 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 | $ | ( | $ | $ | ( | $ | |||||||||||||||||
4
| (Loss) income per share (Note 6) | |||||||||||||||||||||||
| 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 September 30, | Six Months Ended September 30, | ||||||||||||||||||||||
| (In thousands) | 2026 | 2025 | 2026 | 2025 | |||||||||||||||||||
| Net (loss) income | $ | ( | $ | $ | ( | $ | |||||||||||||||||
| Foreign currency translation gain | |||||||||||||||||||||||
| Unrealized gain (loss) on interest rate swaps | ( | ( | |||||||||||||||||||||
| Reclassification of interest rate swaps into earnings | |||||||||||||||||||||||
| Allocation of comprehensive income to (from) unconsolidated investments | ( | ||||||||||||||||||||||
| Allocation of comprehensive income to (from) redeemable non-controlling interests | ( | ( | |||||||||||||||||||||
| Total other comprehensive gain | |||||||||||||||||||||||
| 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) | September 30, 2026 | March 31, 2026 | |||||||||
| Assets | |||||||||||
| Current assets: | |||||||||||
| Cash and cash equivalents | $ | $ | |||||||||
| Marketable securities | |||||||||||
| Restricted cash | |||||||||||
Accounts receivable, net of allowance for doubtful accounts of $ | |||||||||||
| Income tax receivable | |||||||||||
| Inventories, net | |||||||||||
| Prepaid expenses | |||||||||||
| Other current assets | |||||||||||
| Total current assets | |||||||||||
| Notes receivable - Crestone Asset Management, LLC ("CAM") | |||||||||||
| Notes receivable - Bloomia Holdings, Inc. ("Bloomia") | |||||||||||
| Debt investments (Note 8) | |||||||||||
Property and equipment, net of accumulated depreciation of $ | |||||||||||
Intangible assets, net of accumulated amortization of $ | |||||||||||
| Right-of-use ("ROU") assets | |||||||||||
| Equity method investments | |||||||||||
| Goodwill | |||||||||||
| Other assets | |||||||||||
| 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 12) | |||||||||||
| Current portion of earnout liabilities | |||||||||||
| Short-term lease liabilities | |||||||||||
| Total current liabilities | |||||||||||
| Long-term debt | |||||||||||
| Deferred income tax liabilities, net | |||||||||||
| Long-term lease liabilities | |||||||||||
| Long-term earnout liabilities | |||||||||||
| Other non-current liabilities | |||||||||||
| Total liabilities | |||||||||||
| Redeemable non-controlling interests | |||||||||||
7
| Commitments and contingencies (Note 14) | |||||||||||
| Stockholders' Equity | |||||||||||
| Air T, Inc. Stockholders' Equity | |||||||||||
Preferred stock, $ | |||||||||||
Common stock, $ | |||||||||||
Treasury stock, | ( | ( | |||||||||
| Additional paid-in capital | |||||||||||
| Retained earnings | |||||||||||
| Accumulated other comprehensive income | |||||||||||
| Total Air T, Inc. Stockholders' Equity | |||||||||||
| Non-controlling interests | |||||||||||
| Total Equity | |||||||||||
| 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) | Six Months Ended September 30, | ||||||||||
| 2026 | 2025 | ||||||||||
| Cash flows from operating activities: | |||||||||||
| Net (loss) income | $ | ( | $ | ||||||||
| Adjustments to reconcile net (loss) income to net cash used in operating activities: | |||||||||||
| Depreciation and amortization | |||||||||||
| Income from equity method investments | ( | ( | |||||||||
| Gain on sale of aircraft | ( | ||||||||||
| Earnout remeasurement | ( | ||||||||||
| Other | |||||||||||
| Change in operating assets and liabilities: | |||||||||||
| Accounts receivable | ( | ||||||||||
| Inventories | ( | ( | |||||||||
| Accounts payable | ( | ( | |||||||||
| Accrued expenses | |||||||||||
| Income taxes payable | ( | ||||||||||
| Other current assets | ( | ||||||||||
| Other | |||||||||||
| Net cash used in operating activities | ( | ( | |||||||||
| Cash flows from investing activities: | |||||||||||
| Investments in unconsolidated entities | ( | ( | |||||||||
| Distributions from unconsolidated entities | |||||||||||
| Advances on debt investments | ( | ||||||||||
| Proceeds from debt investments | |||||||||||
| Capital expenditures related to property and equipment | ( | ( | |||||||||
| Proceeds from sale of aircraft | |||||||||||
| Loan advances to Bloomia | ( | ||||||||||
| Proceeds from notes receivable - CAM and Bloomia | |||||||||||
| Acquisitions of businesses, net of cash acquired | ( | ( | |||||||||
| Other | ( | ||||||||||
| Net cash (used in) provided by 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 | ( | ( | |||||||||
| Proceeds from issuance of Trust Preferred Securities ("TruPs") | |||||||||||
| Distribution to non-controlling interest | ( | ( | |||||||||
| Contribution from redeemable non-controlling interests | |||||||||||
| 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 | $ | $ | |||||||||
See notes to condensed consolidated financial statements.
9
AIR T, INC AND SUBSIDIARIES
CONDENSED CONSOLIDATED STATEMENTS OF EQUITY (DEFICIT)
(UNAUDITED)
| (In thousands) | Common Stock | Treasury Stock | |||||||||||||||||||||||||||||||||||||||||||||||||||
| Shares | Amount | Shares | Amount | Additional Paid-In Capital | Retained Earnings | Accumulated Other Comprehensive Income (Loss) | Non-controlling Interests1 | Total Equity | |||||||||||||||||||||||||||||||||||||||||||||
| Balance, March 31, 2026 | $ | $ | ( | $ | $ | $ | $ | $ | |||||||||||||||||||||||||||||||||||||||||||||
Net (loss) income1 | — | — | — | — | — | ( | — | ( | |||||||||||||||||||||||||||||||||||||||||||||
| Contributions from non-controlling interests | — | — | — | — | — | — | — | ||||||||||||||||||||||||||||||||||||||||||||||
| Repurchase of common stock | — | — | ( | — | — | — | — | ( | |||||||||||||||||||||||||||||||||||||||||||||
| Stock compensation expense | — | — | — | — | — | — | — | ||||||||||||||||||||||||||||||||||||||||||||||
Foreign currency translation gain2 | — | — | — | — | — | — | — | ||||||||||||||||||||||||||||||||||||||||||||||
| Unrealized gain on interest rate swaps | — | — | — | — | — | — | — | ||||||||||||||||||||||||||||||||||||||||||||||
| Reclassification of interest rate swaps into earnings | — | — | — | — | — | — | — | ||||||||||||||||||||||||||||||||||||||||||||||
| Allocation of comprehensive income from unconsolidated investments | — | — | — | — | — | — | ( | — | ( | ||||||||||||||||||||||||||||||||||||||||||||
| Allocation of comprehensive income to redeemable non-controlling interests | — | — | — | — | — | — | — | ||||||||||||||||||||||||||||||||||||||||||||||
| ATA 25.1 warrants | — | — | — | — | — | — | — | ||||||||||||||||||||||||||||||||||||||||||||||
| Redemption of non-controlling interest | — | — | — | — | — | — | — | ||||||||||||||||||||||||||||||||||||||||||||||
| Balance, June 30, 2026 | $ | $ | ( | $ | $ | $ | $ | $ | |||||||||||||||||||||||||||||||||||||||||||||
Net (loss) income1 | — | — | — | — | — | ( | — | ( | ( | ||||||||||||||||||||||||||||||||||||||||||||
| Repurchase of common stock | — | — | ( | — | — | — | — | ( | |||||||||||||||||||||||||||||||||||||||||||||
10
| Stock compensation expense | — | — | — | — | — | — | — | ||||||||||||||||||||||||||||||||||||||||||||||
Foreign currency translation gain2 | — | — | — | — | — | — | — | ||||||||||||||||||||||||||||||||||||||||||||||
| Unrealized gain on interest rate swaps | — | — | — | — | — | — | — | ||||||||||||||||||||||||||||||||||||||||||||||
| Reclassification of interest rate swaps into earnings | — | — | — | — | — | — | — | ||||||||||||||||||||||||||||||||||||||||||||||
| Allocation of comprehensive income to unconsolidated investments | — | — | — | — | — | — | — | ||||||||||||||||||||||||||||||||||||||||||||||
| Allocation of comprehensive income to redeemable non-controlling interests | — | — | — | — | — | — | — | ||||||||||||||||||||||||||||||||||||||||||||||
| ATA 25.1 warrants | — | — | — | — | — | — | — | ||||||||||||||||||||||||||||||||||||||||||||||
| Redemption of non-controlling interest | — | — | — | — | — | — | ( | ||||||||||||||||||||||||||||||||||||||||||||||
| Balance, September 30, 2026 | $ | $ | ( | $ | $ | $ | $ | $ | |||||||||||||||||||||||||||||||||||||||||||||
| (In thousands) | Common Stock | Treasury Stock | |||||||||||||||||||||||||||||||||||||||||||||||||||
| Shares | Amount | Shares | Amount | Additional Paid-In Capital | Retained Earnings | Accumulated Other Comprehensive Income (Loss) | Non-controlling Interests1 | Total Equity | |||||||||||||||||||||||||||||||||||||||||||||
| 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 | — | — | — | — | — | — | — | ||||||||||||||||||||||||||||||||||||||||||||||
11
| Allocation of comprehensive income from unconsolidated investments | — | — | — | — | — | — | — | ||||||||||||||||||||||||||||||||||||||||||||||
| Allocation of comprehensive loss 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 | — | — | — | — | — | — | ( | — | ( | ||||||||||||||||||||||||||||||||||||||||||||
| Allocation of comprehensive income from unconsolidated investments | — | — | — | — | — | — | — | ||||||||||||||||||||||||||||||||||||||||||||||
| Allocation of comprehensive income to redeemable non-controlling interests | — | — | — | — | — | — | ( | — | ( | ||||||||||||||||||||||||||||||||||||||||||||
| Balance, September 30, 2025 | $ | $ | ( | $ | $ | $ | ( | $ | ( | $ | ( | ||||||||||||||||||||||||||||||||||||||||||
(1) Excludes amount attributable to redeemable non-controlling interests in Contrail Aviation Support, LLC ("Contrail") and Shanwick B.V. ("Shanwick")
(2) Cumulative translation adjustments were at a loss of $0.4 million and a gain of $0.2 million as of March 31, 2025 and September 30, 2025, respectively, and a gain of $4.5 million and a gain of $6.0 million, as of March 31, 2026 and September 30, 2026, respectively.
See notes to condensed consolidated financial statements.
12
AIR T, INC. AND SUBSIDIARIES
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (UNAUDITED)
INDEX TO NOTES
| 1 | Financial Statement Presentation | 14 | ||||||
| 2 | Acquisitions | 14 | ||||||
| 3 | Revenue Recognition | 17 | ||||||
| 4 | Accrued Expenses and Other | 20 | ||||||
| 5 | Income Taxes | 20 | ||||||
| 6 | Net (Loss) Income Per Share | 20 | ||||||
| 7 | Intangible Assets and Goodwill | 20 | ||||||
| 8 | Debt Investments | 22 | ||||||
| 9 | Equity Method Investments | 22 | ||||||
| 10 | Inventories | 25 | ||||||
| 11 | Lessee Arrangements | 25 | ||||||
| 12 | Financing Arrangements | 26 | ||||||
| 13 | Segment Information | 30 | ||||||
| 14 | Commitments and Contingencies | 37 | ||||||
| 15 | Subsequent Events | 38 | ||||||
13
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, 2026. The unaudited results of operations for the period ended September 30, 2026 are not necessarily indicative of the operating results for a 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 November 2024, the Financial Accounting Standards Board ("FASB") issued Accounting Standards Update ("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. This 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.
2. Acquisitions
2026 Arena Aviation Partners B.V.
On June 10, 2026, Crestone Air Partners, LLC ("CAP"), a subsidiary of Air T, Inc., completed the acquisition of 100 % of the outstanding equity interests of Arena Aviation Partners B.V. ("Arena"), an aviation asset management and aircraft leasing company for a purchase price of $34.1 million (the "Acquisition"). The Company acquired Arena to expand its aviation leasing and asset-management platform. The acquired business is included in the aviation leasing and asset management segment.
The Acquisition was accounted for as a business combination using the acquisition method of accounting in accordance with ASC 805, Business Combinations (“ASC 805”). Consideration for the acquisition included cash of $21.8 million and contingent consideration with a fair value of $12.3 million. The contingent consideration consists of future cash payments to certain former owners of Arena equal to 57.5 % of specified performance-based fees collected under certain servicing agreements acquired as part of the transaction. Payments are not contingent upon continued employment. The ultimate amount payable depends on future collections associated with the underlying agreements and is not subject to a contractual cap. The contingent consideration was recorded as a liability at its acquisition-date fair value and will be remeasured to fair value at each reporting date until settled, with changes recognized in earnings. For purposes of determining the fair value of the contingent consideration, the Company utilized a discounted cash flow ("DCF") approach, consistent with market practice and applicable accounting standards to estimate the fair value based on the absence of observable market inputs. The DCF values forecasted expected future payments based on the performance-based fees expected to be collected over the term of the earnout. The fair value of the contingent consideration would have been materially different if there was a significant change to the projected performance-based fees and the credit spread of 5.0 % used to discount projected future payments of the earnout.
14
The purchase price was allocated to identifiable assets and liabilities based on information available on the date of the acquisition. The current purchase price allocation resulted in goodwill of $8.1 million.
The allocation of the purchase price is preliminary and will potentially change in future periods as fair value estimates of the assets acquired and liabilities assumed are finalized, including those related to intangible assets, deferred taxes, and other acquisition-date estimates. The final determination of the fair values will be completed within the one-year measurement period. The cash portion of the purchase price was paid at closing, and transaction costs associated with the acquisition of $2.9 million were expensed as incurred and recognized within general and administrative expenses.
During the three months ended September 30, 2026, the Company recorded measurement period adjustments to the preliminary opening balance sheet of Arena, primarily related to the finalization of the valuation of customer relationship intangible assets and the related deferred tax liability, in addition to payroll tax liabilities and uncertain tax positions and associated indemnification assets. These adjustments resulted in a $0.2 million increase in intangible assets, a $0.1 million increase in deferred tax liabilities, a $4.6 million increase in tax liabilities, a $4.6 million increase in indemnification assets, a $0.3 million decrease in accounts payable, and a corresponding $0.1 million decrease in goodwill. The measurement adjustments were based on facts and circumstances that existed as of the acquisition date and did not result from intervening events subsequent to that date. The effect of the measurement period adjustments on the Company's results of operations for prior periods was not material.
The following table summarizes the current acquisition-date fair values of the assets acquired and liabilities assumed as of June 10, 2026 (in thousands):
| Fair Value of Assets Acquired and Liabilities Assumed | Amount | |||||||
| Assets: | ||||||||
| Cash and cash equivalents | $ | |||||||
| Accounts receivable, net of allowance for doubtful accounts | ||||||||
| Tax receivable | ||||||||
| Prepaid expenses | ||||||||
| Other current assets | ||||||||
| Property and equipment | ||||||||
| ROU assets | ||||||||
| Intangible assets | ||||||||
| Indemnification assets | ||||||||
| Equity method investments | ||||||||
| Goodwill | ||||||||
| Total assets | ||||||||
| Liabilities: | ||||||||
| Accounts payable | ||||||||
| Accrued expenses and other | ||||||||
| Tax liabilities | ||||||||
| Deferred tax liability | ||||||||
| Other liabilities | ||||||||
| Current lease liability | ||||||||
| Non-current lease liability | ||||||||
| Equity | ||||||||
| Total liabilities | ||||||||
| Net assets acquired | $ | |||||||
As of the effective date of the acquisition, identifiable intangible assets are required to be measured at fair value. For purposes of these condensed consolidated financial statements, the fair value and weighted-average useful lives of these intangible assets have been estimated using the excess earnings method under the income approach. Significant inputs used to value these intangible assets include
15
probability of renewal, contributory asset charge, long-term growth rates, discount rates, and applicable income tax rates. For purposes of determining the fair value of the identifiable intangible assets, the Company utilized a discounted cash flow ("DCF") approach, consistent with market practice and applicable accounting standards to estimate the fair value based on the absence of observable market inputs. The DCF values forecasted associated cash flows related to the customer relationships at Arena that drive the income for the acquired business. The fair value of the customer relationships would have been materially different if there was a significant change to the cash flows associated with the customer relationships and/or the discount rate applied to the cash flows for the existing contracts and institutional investor relationships of 21.0 % and 25.0 %, respectively.
The following table sets forth the identifiable intangible assets and their useful lives as of June 10, 2026 (in thousands):
| Identifiable Intangible Assets | Useful Life in Years | Fair Value | ||||||||||||
| Customer relationships - existing contracts | $ | |||||||||||||
| Customer relationships - institutional investor relationships | $ | |||||||||||||
Revenues of $5.1 million and a net income of $0.6 million attributable to Arena are included in our condensed consolidated statements of income (loss) for the period beginning on June 10, 2026 and ending on September 30, 2026. Revenues of $4.5 million and net income of $1.0 million attributable to Arena are included in our condensed consolidated statements of income (loss) for the three months ended September 30, 2026.
2025 Regional Express Holdings Pty Ltd
On December 18, 2025, Air T Rex Acquisition, Inc., a wholly owned subsidiary of the Company, acquired substantially all of the outstanding capital stock of Regional Express Holdings Pty Ltd ("Rex"), an Australian regional airline operator that had been in voluntary administration, pursuant to a Deed of Company Arrangement and a related Creditors Trust. Consideration transferred was $10.2 million, and the Company recognized a gain on bargain purchase of $111.2 million during the year ended March 31, 2026 within non-operating (expense) income. The acquisition established the Company’s regional airline segment. A complete description of the transaction, including the acquisition-date fair values of the assets acquired and liabilities assumed and the calculation of the gain on bargain purchase, is included in Note 2 to the consolidated financial statements in the Company’s Annual Report on Form 10-K for the fiscal year ended March 31, 2026.
The initial accounting for the Rex acquisition remains incomplete. The amounts recorded for 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 are provisional pending completion of the Company’s valuation analyses. During the three months ended September 30, 2026, a measurement period adjustment was identified related to a receivable from the Administrators of A$1.2 million as of the opening balance sheet date. As a result of the measurement period adjustment, the Company also recognized an additional A$1.2 million, or US$0.9 million to bargain purchase gain, which is recorded in the period the measurement period adjustment was identified. This is the only difference for the opening balance sheet as of the acquisition date from those reported in the Company’s Annual Report on Form 10-K for the fiscal year ended March 31, 2026. The measurement period will end no later than December 18, 2026. Changes to these provisional amounts during the remainder of the measurement period may result in material adjustments to the fair values of the assets acquired and liabilities assumed and to the gain on bargain purchase.
The results of operations of Rex are included in the Company’s condensed consolidated financial statements for the three and six months ended September 30, 2026. Because Rex was acquired subsequent to September 30, 2025, no amounts related to Rex are included in the comparative prior year period.
Pro Forma Consolidated Financial Information
The unaudited pro forma consolidated results for the six months ended September 30, 2026 and 2025 were prepared using the acquisition method of accounting and are based on the historical financial information of Arena, 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 acquisitions, (ii) factually supportable and (iii) expected to have a continuing impact on the combined results.
The unaudited pro forma consolidated financial information presents the Company's results as if the acquisitions had occurred on April 1, 2025, and is not indicative of what the Company’s consolidated results of operations actually would have been had it completed the acquisitions on April 1, 2025. The pro forma adjustments do not include any of the cost savings and other synergies anticipated from the acquisitions (in thousands).
| Six Months Ended September 30, 2026 | Six Months Ended September 30, 2025 | ||||||||||
| Revenue | $ | $ | |||||||||
| Net Loss | ( | ( | |||||||||
16
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 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 September 30, 2026:
| Type of Revenue | Nature, Timing of Satisfaction of Performance Obligations, and Significant Payment Terms | ||||
| 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. | ||||
| 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 and such amounts are 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 Corporation ("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. | ||||
17
| 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 that provide 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 three to | ||||
| Aviation Leasing and Asset Management Revenue | The Company provides aircraft asset management and investment services on behalf of joint venture investors, generating revenue through origination fees, sourcing and due diligence fees, administrative fees, and management incentive fees. These fees are recognized as revenue when earned at the close of a given transaction, with each lease rent payment, upon sale of an asset or completion of a lease contract, or when performance-based uncertainty is resolved. | ||||
| Leasing Revenue | Leasing revenue is recognized in accordance with ASC Topic 842. | ||||
18
The following table summarizes disaggregated revenues by type (in thousands):
| Three Months Ended September 30, | Six Months Ended September 30, | ||||||||||||||||||||||
| 2026 | 2025 | 2026 | 2025 | ||||||||||||||||||||
| Regional Airline | |||||||||||||||||||||||
| Regional airline | $ | $ | $ | $ | |||||||||||||||||||
| Product Sales | |||||||||||||||||||||||
| Overnight air cargo | |||||||||||||||||||||||
| Commercial aircraft, engines and parts | |||||||||||||||||||||||
| Ground support equipment | |||||||||||||||||||||||
| Corporate and other | |||||||||||||||||||||||
| Support Services | |||||||||||||||||||||||
| Overnight air cargo | |||||||||||||||||||||||
| Commercial aircraft, engines and parts | |||||||||||||||||||||||
| Ground support equipment | |||||||||||||||||||||||
| Corporate and other | |||||||||||||||||||||||
| Other | |||||||||||||||||||||||
| Regional airline | |||||||||||||||||||||||
| Overnight air cargo | |||||||||||||||||||||||
| Commercial aircraft, engines and parts | |||||||||||||||||||||||
| Ground support equipment | |||||||||||||||||||||||
| Corporate and other | ( | ||||||||||||||||||||||
| Software Services | |||||||||||||||||||||||
| Digital Solutions | |||||||||||||||||||||||
| Aviation Leasing and Asset Management | |||||||||||||||||||||||
| Aviation leasing and asset management | |||||||||||||||||||||||
| Leasing Revenue | |||||||||||||||||||||||
| Commercial aircraft, engines and parts | |||||||||||||||||||||||
| Corporate and other | |||||||||||||||||||||||
| Total | $ | $ | $ | $ | |||||||||||||||||||
See Note 13 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, timing, and uncertainty of revenue and cash flows are affected by economic factors.
Contract Balances and Costs
19
4. Accrued Expenses and Other
| (In thousands) | September 30, 2026 | March 31, 2026 | |||||||||
| Salaries, wages and related items | $ | $ | |||||||||
| Profit sharing and bonus | |||||||||||
| Deferred income | |||||||||||
| Accrued interest expense | |||||||||||
| Other | |||||||||||
| Total | $ | $ | |||||||||
5. Income Taxes
The Company recorded income tax expense of $3.3 million and $4.0 million for the three and six months ended September 30, 2026, respectively, representing effective tax rates (“ETR”) of (20.6 )% and (12.8 )%, respectively. The Company computes its provision for income taxes using the estimated annual effective tax rate applied to year-to-date income or loss, adjusted for discrete items, if any. Entities generating losses for which a full valuation allowance is recorded are excluded from the estimated annual effective tax rate calculation and are calculated separately. 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 and six months ended September 30, 2026 were the valuation allowance related to the Company’s U.S. consolidated group, Delphax Technologies, Inc. (“DTI”), Delphax Solutions, Inc. ("DSI"), Rex and its subsidiaries, and the foreign rate differentials for Air T’s operations located in Australia, Ireland, the Netherlands, and Puerto Rico, partially offset by the benefit from the Foreign-Derived Intangible Income (“FDII”) deduction and foreign tax credits. Income tax expense for the periods, despite a pre-tax loss and full valuation allowance on the Company’s U.S. consolidated group, is primarily attributable to the U.S. consolidated group being in an estimated taxable income position for the year, principally due to the recognition of a previously deferred gain and limitations on the deductibility of interest expense.
The Company recorded income tax expense of $2.2 million and $2.1 million for the three and six months ended September 30, 2025, respectively, representing ETRs of 30.4 % and 32.1 %, respectively. The Company computed its provision for income taxes using the estimated annual effective tax rate, excluding loss jurisdictions with no tax benefit, applied to year-to-date income or loss, adjusted for discrete items, if any. 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 and six months 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 acquisition-related costs, and the benefit from the FDII deduction.
6. Net (Loss) Income Per Share
Basic loss per share has been calculated by dividing net (loss) income attributable to Air T, Inc. stockholders by the weighted average number of common shares outstanding during each period. For purposes of calculating diluted loss per share, shares issuable under stock options were considered potential common shares and were included in the weighted average common shares unless they were anti-dilutive.
As of September 30, 2026, of the 212,000 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 (loss) income per share if their effect is anti-dilutive. During both the three and six months ended September 30, 2026, the Company had 212,000 245,000
7. Intangible Assets and Goodwill
Intangible assets consisted of the following (in thousands):
20
| September 30, 2026 | |||||||||||||||||
| 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 | — | ||||||||||||||||
| Web domain | — | ||||||||||||||||
| Intangible assets, total | $ | $ | ( | $ | |||||||||||||
| March 31, 2026 | |||||||||||||||||
| 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 | $ | $ | ( | $ | |||||||||||||
Intangible assets obtained through the acquisition of Arena consisted of customer relationships for existing contracts and institutional investors and are included as part of customer relationships. Refer to Note 2 for additional information on the acquisition of Arena and related intangible assets.
As discussed in Note 9, the Company received a distribution of the rights to servicing agreements from CAM during the six months ended September 30, 2026. The fair value on distribution of the servicing agreements was $15.6 million and is included within customer relationships. The asset was deemed to have a useful life of five years . For purposes of determining the fair value of the identifiable intangible asset, the Company utilized a DCF approach, consistent with market practice and applicable accounting standards to estimate the fair value based on the absence of observable market inputs. The DCF values forecasted associated cash flows related to the servicing agreements that made up the asset management function at CAM. The fair value of the servicing agreements would have been materially different if there was a significant change to the cash flows associated with the servicing agreements and/or the discount rate applied to the cash flows for the servicing agreements of 14.5 %.
The increase in customer relationships from March 31, 2026 to September 30, 2026 was primarily driven by the Arena acquisition and distribution from CAM. In addition, changes in foreign currency translation rates can result in changes to intangible asset balances displayed above.
Based on the intangible assets recorded at September 30, 2026 and assuming no subsequent additions to, or impairment of the underlying assets, and no changes in foreign currency exchange rates, the remaining estimated annual amortization expense is expected to be as follows (in thousands):
21
| Year ending March 31, | Amortization Expense | ||||
| 2027 (excluding the six months ended September 30, 2026) | $ | ||||
| 2028 | |||||
| 2029 | |||||
| 2030 | |||||
| 2031 | |||||
| 2032 | |||||
| Thereafter | |||||
| $ | |||||
Amortization expense totaled $2.8 million and $0.3 million for the three months ended September 30, 2026 and 2025, respectively. Amortization expense totaled $3.7 million and $0.6 million for the six months ended September 30, 2026 and 2025, respectively.
Goodwill for relevant segments and corporate and other, at original cost, consisted of the following (in thousands):
| September 30, 2026 | March 31, 2026 | ||||||||||
| Overnight air cargo | $ | $ | |||||||||
| Commercial aircraft, engines and parts | |||||||||||
| Digital solutions | |||||||||||
| Aviation leasing and asset management | |||||||||||
| Total reportable segment goodwill, at cost | |||||||||||
| Corporate and other | |||||||||||
| Less accumulated impairment | ( | ( | |||||||||
| Goodwill, net of impairment | $ | $ | |||||||||
8. Debt Investments
The Company participates in profit participation notes receivable ("PPN") as part of the Company's investment strategy in association with its aircraft investments. The Company has subscribed to one PPN with Blue Crest Prospector Pico Duarte DAC ("Pico Duarte") and a second PPN with Blue Crest Aerie 1 DAC ("Aerie"). The issuer of the PPN utilizes the funds received to purchase aircraft investments that are on lease with a third party to generate income to repay the PPNs with interest. The Pico Duarte PPN does not have a stated interest rate, but accrues interest at 100 % of the associated profits, as dictated by the respective agreements. The Aerie PPN accrues interest at the greater of 4.0 % per annum or 100 % of the accumulated net accounting profits, as dictated by the respective agreement. Both PPNs do not dictate any repayment schedule beyond repayment at maturity. As of September 30, 2026, $0.2 million of unpaid accrued interest was outstanding under the notes and included within other assets on the condensed consolidated balance sheets. The following table summarizes the terms of the related notes in addition to the principal outstanding (in thousands):
| Principal Outstanding | ||||||||||||||||||||||||||
| PPN | September 30, 2026 | March 31, 2026 | Maximum Participation | Maturity Date | ||||||||||||||||||||||
| Pico Duarte | $ | $ | $ | 2/22/2046 | ||||||||||||||||||||||
| Aerie | 3/30/2046 | |||||||||||||||||||||||||
| Total debt investments | $ | $ | ||||||||||||||||||||||||
9. Equity Method Investments
Bloomia Holdings, Inc. investment
22
The Company’s investment in Bloomia (NASDAQ: TULP), formerly Lendway, Inc., formerly Insignia Systems, Inc., is accounted for under the equity method of accounting. The Company has elected a three-month lag upon original adoption of the equity method. As of September 30, 2026, the number of Bloomia's shares owned by the Company was 1,605,549 , representing approximately 33.2 % of the outstanding shares.
In April 2026, as part of a rights offering by Bloomia, the Company exchanged the full balance of its notes receivable with Bloomia, totaling $4.0 million of principal and unpaid interest, for 994,989 shares of Bloomia's common stock in addition to purchasing 123,456 shares for $0.5 million. Due to the subordinated financial support, Bloomia is a variable interest entity to which the Company holds variable interests in the common stock. The Company has determined 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 33.2 % ownership in Bloomia's common stock. Accordingly, the Company does not consolidate Bloomia and will continue to account for this investment using the equity method of accounting.
Cadillac Casting, Inc. investment
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 of $0.3 million.
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 initial investor interest in BCAP was represented by a capital commitment of $5.1 million, which represents 10.0 % of all capital commitments for BCAP, which has been fully satisfied. The Company elected a three-month lag upon adoption of the equity method.
Crestone Asset Management, LLC investment
In May 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 October 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. On June 10, 2026, as part of the transactions described below, the entire balance and all outstanding unpaid interest was repaid.
On June 10, 2026, the Company, through its wholly owned subsidiary Air T Acquisition 26.1, LLC (“ATA 26.1”), and Aviation Growth Initiatives, LLC (“AGI”), a management-affiliated entity formed by executives of the Company’s wholly owned subsidiary Crestone Air Partners, Inc., entered into a Membership Interest Purchase Agreement with the MRC Common Members, pursuant to which ATA 26.1 and AGI each acquired 5 % of the Common Interests of CAM previously held by the MRC Common Members for cash consideration of $3.1 million each ($6.2 million in the aggregate), increasing the Company’s aggregate Common Interest ownership (together with ATA 26.1) from 90 % to 95 %, with AGI holding the remaining 5 %. Immediately following this purchase, the Company, ATA 26.1, and AGI entered into a Redemption Agreement with CAM, pursuant to which CAM redeemed approximately 99 % of the Common Interests held by each of them on a pro rata basis (leaving a residual 1 % Common Interest) in exchange for CAM’s assignment of its entire right, title, and interest in a portfolio of servicing agreements (the “Servicing Agreements”) that had historically constituted CAM’s Asset Management Function with a fair value of $15.6 million, allocated ratably based on Common Interests held immediately prior to the redemption. In connection with these transactions, the parties also amended CAM’s Second Amended and Restated Limited Liability Company Agreement (the “LLC Amendment”) to replace the CAM board seat previously designated for MRC with a Company/AGI-affiliated designee, and to replace MRC’s prior board-level veto rights with a direct contractual consent right held by the MRC Investor Members over specified significant actions of CAM, including approval of new investment opportunities, amendments to CAM’s governing documents, changes in distribution or fee allocations, and extraordinary transactions such as a merger, liquidation, or dissolution of CAM.
Following these transactions, CAM continues to be a variable interest entity, and management has concluded that the Company continues not to be CAM’s primary beneficiary. Although the Company and AGI now control CAM’s Board of Directors, the MRC Investor Members retain a substantive consent right over the activities that most significantly affect CAM’s economic performance, such that power over those activities continues to be shared between the Company/AGI-controlled Board and the unrelated MRC
23
Investor Members. Accordingly, the Company continues to account for its investment in CAM under the equity method. 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.
The Company recognized a gain of $1.8 million in connection with the redemption of its Common Interests in CAM. This gain is included in income (loss) from equity method investments, and represents the difference between the fair value of the servicing agreements received and the carrying amount of the Company’s common interests surrendered.
CAM's HLBV net assets, including common interests and investor interests, were $12.8 million and $33.2 million as of September 30, 2026 and 2025, respectively. Additionally, contributions from and distributions to both Air T and MRC for the three and six months ended September 30, 2026 and 2025 were as follows (in thousands):
| Three Months Ended September 30, | Six Months Ended September 30, | ||||||||||||||||||||||
| 2026 | 2025 | 2026 | 2025 | ||||||||||||||||||||
| Contributions | $ | $ | $ | $ | |||||||||||||||||||
| Distributions | |||||||||||||||||||||||
Investment balances for the Company's equity method investees as of September 30, 2026 and March 31, 2026 were as follows (in thousands):
| Investment | September 30, 2026 | March 31, 2026 | ||||||||||||
| CAM | $ | $ | ||||||||||||
| BCAP | ||||||||||||||
| Bloomia | ||||||||||||||
| CCI | ||||||||||||||
| 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 six months ended September 30, 2026 and 2025 is as follows (in thousands):
| Three Months Ended September 30, | Six Months Ended September 30, | |||||||||||||||||||||||||
| Investment | 2026 | 2025 | 2026 | 2025 | ||||||||||||||||||||||
| CAM | $ | $ | $ | $ | ||||||||||||||||||||||
| BCAP | ( | |||||||||||||||||||||||||
| Bloomia | ( | ( | ||||||||||||||||||||||||
| CCI | ( | |||||||||||||||||||||||||
| 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 six months ended September 30, 2026 and 2025, the Company received distributions and dividends from equity method investees as follows (in thousands):
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| Three Months Ended September 30, | Six Months Ended September 30, | |||||||||||||||||||||||||
| Investment | 2026 | 2025 | 2026 | 2025 | ||||||||||||||||||||||
| CAM | $ | $ | $ | $ | ||||||||||||||||||||||
| BCAP | ||||||||||||||||||||||||||
| Bloomia | ||||||||||||||||||||||||||
| CCI | ||||||||||||||||||||||||||
| Other equity method investments | ||||||||||||||||||||||||||
| Total | $ | $ | $ | $ | ||||||||||||||||||||||
10. Inventories
(In thousands) | September 30, 2026 | March 31, 2026 | |||||||||
| Inventories: | |||||||||||
| Raw materials | $ | $ | |||||||||
| Work in process | |||||||||||
| Finished goods | |||||||||||
| Aircraft parts | |||||||||||
| Expendable parts | |||||||||||
| Total inventories | |||||||||||
| Reserves | ( | ( | |||||||||
| Total inventories, net of reserves | $ | $ | |||||||||
11. 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 six months ended September 30, 2026 and 2025 are as follows (in thousands):
| Three Months Ended September 30, | Six Months Ended September 30, | ||||||||||||||||||||||
| 2026 | 2025 | 2026 | 2025 | ||||||||||||||||||||
| Operating lease cost | $ | $ | $ | $ | |||||||||||||||||||
| Short-term lease cost | |||||||||||||||||||||||
| Variable lease cost | |||||||||||||||||||||||
| Total lease cost | $ | $ | $ | $ | |||||||||||||||||||
25
Amounts reported in the condensed consolidated balance sheets for leases where we are the lessee as of September 30, 2026 and March 31, 2026 were as follows (in thousands):
| September 30, 2026 | March 31, 2026 | ||||||||||
| Operating leases | |||||||||||
| Operating lease ROU assets | $ | $ | |||||||||
| Operating lease liabilities | $ | $ | |||||||||
| Weighted-average remaining lease term | |||||||||||
| Operating leases | |||||||||||
| Weighted-average discount rate | |||||||||||
| Operating leases | % | % | |||||||||
During the six months ended September 30, 2026, the Company had ROU assets that were obtained in exchange for new operating lease liabilities in the amount of $5.7 million.
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 September 30, 2026, the remaining lease term on the operating lease was three years, two months and the useful life of leasehold improvements that exceeded the lease term ranged from three years, four months to three years, eight months . As of September 30, 2026, 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 September 30, 2026 are as follows (in thousands):
| Operating Leases | |||||
| 2027 (excluding the six months ended September 30, 2026) | $ | ||||
| 2028 | |||||
| 2029 | |||||
| 2030 | |||||
| 2031 | |||||
| Thereafter | |||||
| Total undiscounted lease payments | |||||
| Interest | ( | ||||
| Total lease liabilities | $ | ||||
12. Financing Arrangements
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”). 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 agreed 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, of which the Issuer has received all contractually required advances through September 30, 2026 (in thousands):
| September 30, 2025 | $ | ||||
| January 30, 2026 | |||||
May 30, 20261 | |||||
| September 30, 2026 | |||||
| January 30, 2027 | |||||
| May 30, 2027 | |||||
26
1 The Investors advanced $15.0 million for the scheduled $10.0 million issuance on May 30, 2026. For the remaining scheduled issuances, the Company has the flexibility to choose which advance amount will be reduced by $5.0 million. As of the date the condensed consolidated financial statements are issued, the Company has not made that determination.
As of September 30, 2026, the Issuer has collectively received a total of $75.0 million of advances from the Investors.
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 June 2, 2026, Contrail entered into a subordinated promissory note with OCAS, Inc. ("OCAS"), the former minority owner of Contrail, in the amount of $3.5 million ("Term Loan - OCAS II") with an economic effective date of April 1, 2026. The note was made pursuant to Contrail's purchase and redemption of OCAS' 5 % membership interest in Contrail. The note matures on April 1, 2029 and bears interest at an annual rate equal to the ten year Treasury bond yield plus 2.50 % which is compounded monthly on the basis of a 365-day year for the actual number of days elapsed. The rate adjusts on each anniversary date of the note.
On June 15, 2026, Air’Zona Aircraft Services, Inc., CSA Air, Inc., Global Ground Support, LLC, Jet Yard, LLC, Jet Yard Solutions, LLC, Mountain Air Cargo, Inc., Worldwide Aircraft Services, Inc., Royal Aircraft Services, LLC and Worthington Aviation, LLC, each a subsidiary or affiliate of the Company (collectively, the “Alerus Loan Parties”), entered into Amendment No. 6 to Credit Agreement with Alerus Financial, National Association (“Alerus”), as lender. In connection with Amendment No. 6, the Alerus Loan Parties executed an Overline Note with Alerus in the original principal amount of $2.8 million (the “Overline Note”). The Overline Note bears interest at a fluctuating annual rate equal to the greater of 5.00 % or 1-month term SOFR plus 2.50 % and matures on the earlier of October 15, 2026 or the termination of the overline commitment in accordance with the Alerus Credit Agreement.
On September 1, 2026, the Alerus Loan Parties entered into Amendment No. 7 to Credit Agreement ("Amendment No. 7") with Alerus. In connection with Amendment No. 7, the Alerus Loan Parties executed an Amended and Restated Revolving Credit Note in the original principal amount of $25.0 million (the “Revolving Note”), which amends and restates, without repayment or novation, the prior $20.0 million revolving note, and a Consolidated Term Note in the original principal amount of $11.5 million (the “Consolidated Term Note”), which consolidates, without repayment or novation, the outstanding balances of Term Loan A, Term Loan C and the Overline Note. The Revolving Note matures on August 27, 2029. Under the Consolidated Term Note, principal is payable in monthly installments through August 15, 2031, with all remaining principal due on August 27, 2031.
Amendment No. 7 provides an accordion option under which the Alerus Loan Parties may request an additional revolving commitment of up to $3.5 million for one 120-day period during each fiscal year of the Company, subject to specified conditions, including pro forma compliance with the financial covenants. Outstanding accordion loans must be repaid at the end of the applicable accordion commitment period.
Borrowings under the Revolving Note and any accordion note bear interest at a fluctuating annual rate equal to the greater of 5.00 % and 1-month term SOFR plus a leverage-based applicable margin. The Consolidated Term Note bears interest at 1-month term SOFR plus the same applicable margin. The applicable margin is initially 2.50 % and ranges from 2.25 % to 2.75 % based on the Alerus Loan Parties' leverage ratio. Amendment No. 7 also establishes a 0.25 % annual unused commitment fee on the unused revolving commitment and provides that the leverage ratio may not exceed 3.00 to 1.00.
The following table provides certain information about the current financing arrangements of the Company and its subsidiaries (other than related party obligations) as of September 30, 2026 and March 31, 2026:
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| (Dollars In Thousands) | September 30, 2026 | March 31, 2026 | Maturity Date | Interest Rate | Unused commitments as of September 30, 2026 | Type of Debt | |||||||||||||||||||||||||||||
| Air T Debt | |||||||||||||||||||||||||||||||||||
| Debt - Air T Funding Trust Preferred Securities2 | $ | $ | 6/7/2049 | Recourse | |||||||||||||||||||||||||||||||
| Total | |||||||||||||||||||||||||||||||||||
| Alerus Loan Parties Debt | |||||||||||||||||||||||||||||||||||
| Revolver - Alerus | 8/27/2029 | Greater of | $ | Recourse | |||||||||||||||||||||||||||||||
| Accordion Note - Alerus | 1/23/2027 | Greater of | Recourse | ||||||||||||||||||||||||||||||||
| Consolidated Term Note - Alerus | 8/27/2031 | 1-month SOFR + | Recourse | ||||||||||||||||||||||||||||||||
| 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 recourse3 | ||||||||||||||||||||||||||||||||
| Term Loan - OCAS II | 4/1/2029 | 10-year Treasury yield + | Non-recourse | ||||||||||||||||||||||||||||||||
| Term Loan - OCAS I | 11/28/2026 | 10-year Treasury yield + | Non-recourse | ||||||||||||||||||||||||||||||||
| Total | |||||||||||||||||||||||||||||||||||
| Wolfe Lake Debt | |||||||||||||||||||||||||||||||||||
| Term Loan - Bridgewater | 12/2/2031 | Non-recourse | |||||||||||||||||||||||||||||||||
| Total | |||||||||||||||||||||||||||||||||||
| Air T Acquisition 22.1 ("ATA 22.1") Debt | |||||||||||||||||||||||||||||||||||
| Term Loan - Alerus | 11/24/2032 | Greater of | Non-recourse | ||||||||||||||||||||||||||||||||
| Term Loan A - ING | 2/1/2027 | Non-recourse | |||||||||||||||||||||||||||||||||
| Term Loan B - ING | 5/1/2027 | Non-recourse | |||||||||||||||||||||||||||||||||
| Total | |||||||||||||||||||||||||||||||||||
| AAM 24-1 Debt | |||||||||||||||||||||||||||||||||||
2 Does not include $13.0 million held by wholly-owned subsidiaries of the Company.
3 Includes Air T's guarantee of approximately $2.0 million.
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| Promissory Notes - Institutional Investors | 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 | |||||||||||||||||||||||||||||||||||
| Term Loan - Commonwealth | 11/11/2054 | Non-recourse | |||||||||||||||||||||||||||||||||
| Line of Credit - Commonwealth | 12/17/2032 | Non-recourse | |||||||||||||||||||||||||||||||||
| Total | |||||||||||||||||||||||||||||||||||
| ATA 25.1 Debt | |||||||||||||||||||||||||||||||||||
| Term Note - Institutional Investors | 12/15/2031 | Recourse | |||||||||||||||||||||||||||||||||
| Total | |||||||||||||||||||||||||||||||||||
| Total Debt | |||||||||||||||||||||||||||||||||||
| Unamortized Premiums and Debt Issuance Costs | ( | ( | |||||||||||||||||||||||||||||||||
| Total Debt, net | $ | $ | |||||||||||||||||||||||||||||||||
4 Effective July 1, 2026, the interest rate was amended from 12.00 % to 6.00 %.
At September 30, 2026, our contractual financing obligations, including payments due by period, are as follows (in thousands):
| Due by | Amount | |||||||
| September 30, 2027 | $ | |||||||
| September 30, 2028 | ||||||||
| September 30, 2029 | ||||||||
| September 30, 2030 | ||||||||
| September 30, 2031 | ||||||||
| Thereafter | ||||||||
| Unamortized Premiums and Debt Issuance Costs | ( | |||||||
| $ | ||||||||
Net interest expense for the Company and its subsidiaries was as follows for the three and six months ended September 30, 2026 and 2025:
29
| Three Months Ended September 30, | Change | Six Months Ended September 30, | Change | ||||||||||||||||||||||||||||||||
| Net Interest Expense by entity: | 2026 | 2025 | 2026 | 2025 | |||||||||||||||||||||||||||||||
| Rex | $ | $ | $ | $ | $ | $ | |||||||||||||||||||||||||||||
| Air T Funding Trust Preferred Securities | |||||||||||||||||||||||||||||||||||
| ATA 25.1 (Rex's parent entity) | |||||||||||||||||||||||||||||||||||
| AAM 24-1 | |||||||||||||||||||||||||||||||||||
| Alerus Loan Parties | |||||||||||||||||||||||||||||||||||
| Contrail | |||||||||||||||||||||||||||||||||||
| Wolfe Lake | ( | ( | |||||||||||||||||||||||||||||||||
| MAC | ( | ( | ( | ||||||||||||||||||||||||||||||||
| ATA 22.1 | ( | ( | ( | ( | |||||||||||||||||||||||||||||||
| Other | ( | ||||||||||||||||||||||||||||||||||
| Total | $ | $ | $ | $ | $ | $ | |||||||||||||||||||||||||||||
Cash paid for interest totaled $9.4 million and $3.8 million during the six months ended September 30, 2026 and 2025, respectively.
13. Segment Information
Air T's portfolio of businesses is 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 ("CODM") is the Chief Executive Officer. The CODM is ultimately responsible for significant capital allocation decisions and evaluating operating performance. In assessing performance for the Company's businesses, the CODM reviews operating income and Adjusted EBITDA. Certain operating segments are aggregated into reportable segments.
On June 10, 2026, the Company acquired Arena and received a distribution of servicing agreement rights for CAM as discussed in Note 2 and Note 9, respectively. The acquisition and resulting distribution of the servicing agreement rights are reported in the new aviation leasing and asset management segment based on new business operations not previously part of the consolidated Company.
The Company's six
30
| Reportable Segment | Principal Business Activities | |||||||
| 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 Holdings Pty Ltd, which operates a fleet of Saab 340 aircraft that provide vital connections between Australia's regional centers and capital cities for its customers. | |||||||
| Overnight Air Cargo | The overnight air cargo segment primarily operates under its relationship with FedEx, which spans over | |||||||
| Commercial Aircraft, 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 | The ground support equipment segment manufactures and provides mobile deicers and other specialized equipment products to passenger and cargo airlines, airports, the military and industrial customers. | |||||||
| Digital Solutions | The digital solutions segment develops and provides digital aviation and other business services to customers within the aviation industry to generate recurring subscription revenues. | |||||||
| Aviation Leasing and Asset Management | The aviation leasing and asset management segment originates and structures asset acquisitions and related financings and provides lease administration, technical and risk management, and remarketing services for aircraft and engines on lease to airline customers globally. Aviation leasing and asset management further monetizes assets at the end of their economic lives through engine separation and continued component leasing, aircraft disassembly, and sale of airframe and engine materials in coordination with other specialized aviation businesses. | |||||||
The information that follows shows data of Air T's reportable segments reconciled to amounts reflected in our condensed 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 segments.
Segment data is summarized in the following tables (in thousands):
31
| Three Months Ended September 30, 2026 | |||||||||||||||||||||||||||||||||||||||||
| Regional Airline | Overnight Air Cargo | Commercial Aircraft, Engines and Parts | Ground Support Equipment | Digital Solutions | Aviation Leasing and Asset Management | 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 | |||||||||||||||||||||||||||||||||||||||||
| Depreciation and amortization | |||||||||||||||||||||||||||||||||||||||||
| Earnout remeasurement | |||||||||||||||||||||||||||||||||||||||||
| Segment profit (loss) | $ | ( | $ | $ | $ | $ | ( | $ | ( | ( | |||||||||||||||||||||||||||||||
| Reconciliation of profit (loss) | |||||||||||||||||||||||||||||||||||||||||
Other revenue1 | |||||||||||||||||||||||||||||||||||||||||
Other cost of sales1 | ( | ||||||||||||||||||||||||||||||||||||||||
| Other depreciation and amortization | ( | ||||||||||||||||||||||||||||||||||||||||
Other expenses1 | ( | ||||||||||||||||||||||||||||||||||||||||
| Interest expense | ( | ||||||||||||||||||||||||||||||||||||||||
| Loss from equity method investments | ( | ||||||||||||||||||||||||||||||||||||||||
| Gain on bargain purchase | |||||||||||||||||||||||||||||||||||||||||
| Other non-operating expense | |||||||||||||||||||||||||||||||||||||||||
| Other corporate expenses4 | ( | ||||||||||||||||||||||||||||||||||||||||
| Elimination of intersegment profits | |||||||||||||||||||||||||||||||||||||||||
| (Loss) 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 September 30, 2026. After eliminations, Other revenue from third parties is $0.9 million for the three months ended September 30, 2026.
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 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.
32
| Three Months Ended September 30, 2025 | |||||||||||||||||||||||||||||
| Overnight Air Cargo | Commercial Aircraft, Engines and Parts | Ground Support Equipment | Digital Solutions | 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 from sale of aircraft | ( | ( | |||||||||||||||||||||||||||
| Depreciation and amortization | |||||||||||||||||||||||||||||
| Earnout remeasurement | ( | ( | |||||||||||||||||||||||||||
| Segment profit (loss) | $ | $ | $ | $ | ( | ||||||||||||||||||||||||
| Reconciliation of profit (loss) | |||||||||||||||||||||||||||||
Other revenue1 | |||||||||||||||||||||||||||||
Other cost of sales1 | ( | ||||||||||||||||||||||||||||
| Other depreciation and amortization | ( | ||||||||||||||||||||||||||||
Other expenses1 | ( | ||||||||||||||||||||||||||||
| Interest expense | ( | ||||||||||||||||||||||||||||
| Income from equity method investments | |||||||||||||||||||||||||||||
| Other non-operating expense | ( | ||||||||||||||||||||||||||||
| Other corporate expenses4 | ( | ||||||||||||||||||||||||||||
| 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 September 30, 2025. After eliminations, Other revenue from third parties is $1.5 million for the three months ended September 30, 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 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.
33
| Six Months Ended September 30, 2026 | |||||||||||||||||||||||||||||||||||||||||
| Regional Airline | Overnight Air Cargo | Commercial Aircraft, Engines and Parts | Ground Support Equipment | Digital Solutions | Aviation Leasing and Asset Management | 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 | |||||||||||||||||||||||||||||||||||||||||
| Depreciation and amortization | |||||||||||||||||||||||||||||||||||||||||
| Earnout remeasurement | |||||||||||||||||||||||||||||||||||||||||
| Segment profit (loss) | $ | ( | $ | $ | $ | $ | $ | ( | ( | ||||||||||||||||||||||||||||||||
| Reconciliation of profit (loss) | |||||||||||||||||||||||||||||||||||||||||
Other revenue1 | |||||||||||||||||||||||||||||||||||||||||
Other cost of sales1 | ( | ||||||||||||||||||||||||||||||||||||||||
| Other depreciation and amortization | ( | ||||||||||||||||||||||||||||||||||||||||
Other expenses1 | ( | ||||||||||||||||||||||||||||||||||||||||
| Interest expense | ( | ||||||||||||||||||||||||||||||||||||||||
| Income from equity method investments | |||||||||||||||||||||||||||||||||||||||||
| Gain on bargain purchase | |||||||||||||||||||||||||||||||||||||||||
| Other non-operating expense | |||||||||||||||||||||||||||||||||||||||||
| Other corporate expenses4 | ( | ||||||||||||||||||||||||||||||||||||||||
| Elimination of intersegment profits | |||||||||||||||||||||||||||||||||||||||||
| (Loss) 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 $88.0 thousand for the six months ended September 30, 2026. After eliminations, Other revenue from third parties is $2.4 million for the six months ended September 30, 2026.
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 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.
34
| Six Months Ended September 30, 2025 | |||||||||||||||||||||||||||||
| Overnight Air Cargo | Commercial Aircraft, Engines and Parts | Ground Support Equipment | Digital Solutions | 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 | ( | ( | |||||||||||||||||||||||||||
| Depreciation and amortization | |||||||||||||||||||||||||||||
| Earnout remeasurement | ( | ( | |||||||||||||||||||||||||||
| Segment profit (loss) | $ | $ | $ | $ | ( | ||||||||||||||||||||||||
| Reconciliation of profit (loss) | |||||||||||||||||||||||||||||
Other revenue1 | |||||||||||||||||||||||||||||
Other cost of sales1 | ( | ||||||||||||||||||||||||||||
| Other depreciation and amortization | ( | ||||||||||||||||||||||||||||
Other expenses1 | ( | ||||||||||||||||||||||||||||
| Interest expense | ( | ||||||||||||||||||||||||||||
| Income from equity method investments | |||||||||||||||||||||||||||||
| Other non-operating income | |||||||||||||||||||||||||||||
| Other corporate expenses4 | ( | ||||||||||||||||||||||||||||
| 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 $88.0 thousand for the six months ended September 30, 2025. After eliminations, Other revenue from third parties is $2.7 million for the six months ended September 30, 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 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.
35
| Three Months Ended September 30, | Six Months Ended September 30, | ||||||||||||||||||||||
| 2026 | 2025 | 2026 | 2025 | ||||||||||||||||||||
| Capital Expenditures | Capital Expenditures | ||||||||||||||||||||||
| Regional Airline | $ | $ | $ | $ | |||||||||||||||||||
| Overnight Air Cargo | |||||||||||||||||||||||
| Commercial Aircraft, Engines and Parts | |||||||||||||||||||||||
| Ground Support Equipment | |||||||||||||||||||||||
| Digital Solutions | |||||||||||||||||||||||
| Aviation Leasing and Asset Management | |||||||||||||||||||||||
| Total Reportable Segments | |||||||||||||||||||||||
| Corporate and Other | |||||||||||||||||||||||
| Total | $ | $ | $ | $ | |||||||||||||||||||
The reconciliation of operating income (loss) and elimination of intersegment loss is as follows:
| Three Months Ended September 30, 2026 | Three Months Ended September 30, 2025 | ||||||||||||||||||||||||||||||||||
| Operating Income (Loss) From External Sources | Intersegment Operating (Loss) Income | Operating Income (Loss) | Operating Income (Loss) From External Sources | Intersegment Operating (Loss) Income | Operating Income (Loss) | ||||||||||||||||||||||||||||||
| Regional Airline | $ | ( | $ | ( | $ | ( | $ | $ | $ | ||||||||||||||||||||||||||
| Overnight Air Cargo | ( | ||||||||||||||||||||||||||||||||||
| Commercial Aircraft, Engines and Parts | ( | ||||||||||||||||||||||||||||||||||
| Ground Support Equipment | |||||||||||||||||||||||||||||||||||
| Digital Solutions | ( | ( | ( | ( | |||||||||||||||||||||||||||||||
| Aviation Leasing and Asset Management | ( | ( | |||||||||||||||||||||||||||||||||
| Total Reportable Segments | ( | ( | ( | ( | |||||||||||||||||||||||||||||||
| Corporate and Other | ( | ( | ( | ( | ( | ( | |||||||||||||||||||||||||||||
| Eliminations | |||||||||||||||||||||||||||||||||||
| Total | $ | ( | $ | — | $ | ( | $ | $ | — | $ | |||||||||||||||||||||||||
36
| Six Months Ended September 30, 2026 | Six Months Ended September 30, 2025 | ||||||||||||||||||||||||||||||||||
| Operating Income (Loss) From External Sources | Intersegment Operating (Loss) Income | Operating Income (Loss) | Operating Income (Loss) From External Sources | Intersegment Operating (Loss) Income | Operating Income (Loss) | ||||||||||||||||||||||||||||||
| Regional Airline | $ | ( | $ | ( | $ | ( | $ | $ | $ | ||||||||||||||||||||||||||
| Overnight Air Cargo | ( | ||||||||||||||||||||||||||||||||||
| Commercial Aircraft, Engines and Parts | ( | ( | |||||||||||||||||||||||||||||||||
| Ground Support Equipment | |||||||||||||||||||||||||||||||||||
| Digital Solutions | ( | ( | |||||||||||||||||||||||||||||||||
| Aviation Leasing and Asset Management | ( | ( | |||||||||||||||||||||||||||||||||
| Total Reportable Segments | ( | ( | ( | ( | |||||||||||||||||||||||||||||||
| Corporate and Other | ( | ( | ( | ( | ( | ( | |||||||||||||||||||||||||||||
| Eliminations | |||||||||||||||||||||||||||||||||||
| Total | $ | ( | $ | — | $ | ( | $ | $ | — | $ | |||||||||||||||||||||||||
14. Commitments and Contingencies
Redeemable Non-Controlling Interests Put/Call Options
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 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. In June 2026, the Company purchased and redeemed from the Seller their remaining 5 % ownership of Contrail in exchange for a $3.5 million Secured Subordinated Promissory Note (the "Put Note"), $0.5 million below the redemption value where the excess was recorded as an increase to additional paid-in capital. The Put Note accrues interest on the principal amount at an initial rate of 6.8 % and adjusts annually to the equivalent of the ten-year Treasury bond yield, adjusted on each anniversary date of the note, plus 2.5 %. The interest under the note compounds monthly.
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").
In June 2026, in connection with CAP's acquisition of Arena, CAP entered into a shareholder agreement to issue 102,459 Class B preferred units (the "Class B Units") of CAP to an unrelated third party in exchange for $10.0 million to help finance the acquisition of Arena. The Class B Units represent 10.25 % of CAP's total equity interests and include a put/call option with regard to the 10.25 % non-controlling interest. The put/call option grants CAP an option to purchase on the fourth anniversary and the owners of the Class B Units the option to sell on the fifth anniversary the 10.25 % interest at an amount equal to the greater of an amount equal to the applicable Applicable Liquidation Preference (the "Class B Redemption Value") to the 10.25 % or the fair market value. The Class B Redemption Value is calculated as 1.5 times the original issue price of the Class B Units less any distributions paid or accrued. The put/call option gives the owner of the 10.25 % interest the option to require CAP to purchase their interest at an amount equal to the applicable liquidation preference ("CAP RNCI").
The Company has presented the Shanwick RNCI, Contrail RNCI and CAP 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
37
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 for the Shanwick RNCI. The CAP RNCI represents preferred equity in a consolidated subsidiary and the redemption features become exercisable after a period of five years . The redemption value adjustment of $5.0 million will be accreted over five years . Based on the defined redemption properties, the Shanwick RNCI and CAP RNCI are considered redeemable at other than fair value. Changes in the estimated redemption values are recorded on our condensed consolidated statements of income (loss) within non-controlling interests.
The Shanwick RNCI and CAP RNCI are measured at the higher of their carrying value or their redemption value. As of September 30, 2026, the balances were comprised of the following (in thousands):
| Shanwick RNCI | Contrail RNCI | CAP RNCI | Total | |||||||||||||||||||||||
| Beginning Balance as of April 1, 2026 | $ | $ | $ | $ | ||||||||||||||||||||||
| Contribution from non-controlling members | ||||||||||||||||||||||||||
| Distribution to non-controlling members | ( | ( | ( | ( | ||||||||||||||||||||||
| Net income (loss) attributable to non-controlling interests | ( | ( | ||||||||||||||||||||||||
| Other comprehensive loss attributable to the RNCI | ( | ( | ||||||||||||||||||||||||
| Redemption value adjustments | ( | |||||||||||||||||||||||||
| Redemption of non-controlling interests | ( | ( | ||||||||||||||||||||||||
| Ending Balance as of September 30, 2026 | $ | $ | $ | $ | ||||||||||||||||||||||
15. 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 the Company's consolidated financial statements.
Management is not aware of any events that occurred after the balance sheet date but before the consolidated financial statements were issued that would materially affect the accuracy of those statements as of the date of issuance.
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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, 2026, to and including September 30, 2026 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 will be reduced;
•The risk that Global Ground Support ("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 Regional Express Holdings Pty Ltd ("Rex") (including financial reporting, systems, and personnel), which could adversely affect our results and reporting;
•The risk that Rex’s revenues and operating costs may be volatile or unpredictable and that we may be unable to offset cost increases or revenue decreases through pricing, surcharges, cost reductions, or other measures, which could adversely affect our results;
•The risk that Rex may be unable to return aircraft to service on anticipated timelines, to retain regulated route contracts and protected airport slots, or to maintain compliance with the Rex Regional Commitments under the Commonwealth Facilities;
•The risk that the bargain purchase gain recognized in connection with the Rex acquisition may increase scrutiny by investors, regulators, creditors, or other parties regarding the valuation assumptions and accounting judgments used in determining the purchase price allocation and bargain purchase gain;
•The risk that Rex’s operations are subject to extensive regulation and oversight and that compliance failures or adverse regulatory actions could materially harm our business and results;
•The risk that the Rex transaction structure, including the Australian DOCA/administration process, could result in unexpected liabilities, claims, or delays that could materially harm our results and liquidity;
•Changes in the value of marketable securities held as investments;
•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 ventures; 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
39
each such factor on the business or the extent to which any factor, or a combination of factors, may cause actual results to differ materially from those contained in any forward-looking statements.
We undertake no obligation to update publicly or revise any forward-looking statements, whether as a result of new information, future events or otherwise.
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, 2026 (including the information presented therein under Risk Factors), as well as 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 six industry segments:
•Regional airline, which provides scheduled regional passenger, freight and charter airline services and pilot training in Australia, operating a fleet of 57 Saab 340B and 340B+ twin-engine turboprop aircraft, 30 of which were active as of September 30, 2026, serving regional communities and connecting passengers to major metropolitan centers;
•Overnight air cargo, which operates in the air express delivery services industry;
•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;
•Ground support equipment, which manufactures and provides mobile deicers and other specialized equipment products to passenger and cargo airlines, airports, the military and industrial customers;
•Digital solutions, which develops and provides digital aviation and other business services to customers within the aviation industry to generate recurring subscription revenues; and
•Aviation leasing and asset management, which originates and structures asset acquisitions and related financings and provides lease administration, technical and risk management, and remarketing services for aircraft and engines on lease to airline customers globally.
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.
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.
RESULTS OF OPERATIONS
Second Quarter Fiscal 2027 Compared to Second Quarter Fiscal 2026
Operating Revenue
Reportable segment revenue for the three-month period ended September 30, 2026 increased by $84.6 million (131%) compared to the same quarter in the prior fiscal year.
40
Following is a table detailing revenue by segment during the three months ended September 30, 2026 compared to the same quarter in the prior fiscal year (dollars in thousands):
| Three Months Ended September 30, | Change | ||||||||||||||||||||||
| 2026 | 2025 | ||||||||||||||||||||||
| Regional Airline | $ | 56,762 | $ | — | $ | 56,762 | Acquired December 18, 2025 | ||||||||||||||||
| Mountain Air Cargo, Inc. ("MAC") | 27,623 | 24,039 | 3,584 | 15 | % | ||||||||||||||||||
| C.S.A Air, Inc. ("CSA") | 3,302 | 3,502 | (200) | (6) | % | ||||||||||||||||||
| Worldwide Aircraft Services, Inc. ("WASI") | 3,210 | 3,067 | 143 | 5 | % | ||||||||||||||||||
| Royal Aircraft Services, LLC ("Royal") | 398 | 468 | (70) | (15) | % | ||||||||||||||||||
| Overnight Air Cargo | 34,533 | 31,076 | 3,457 | 11 | % | ||||||||||||||||||
| Contrail Aviation Support, LLC ("Contrail") | 13,256 | 7,244 | 6,012 | 83 | % | ||||||||||||||||||
| AirCo Companies ("AirCo") | 1,178 | 359 | 819 | 228 | % | ||||||||||||||||||
| Worthington Aviation, LLC ("Worthington") | 9,258 | 9,522 | (264) | (3) | % | ||||||||||||||||||
| Jet Yard Companies ("Jet Yard") | 2,710 | 3,224 | (514) | (16) | % | ||||||||||||||||||
| Air'Zona Aircraft Services, Inc. ("Air'Zona") | 450 | 363 | 87 | 24 | % | ||||||||||||||||||
| Landing Gear Support Services, Inc. ("LGSS") | 1,655 | 751 | 904 | 120 | % | ||||||||||||||||||
| Commercial Aircraft, Engines and Parts | 28,507 | 21,463 | 7,044 | 33 | % | ||||||||||||||||||
| Ground Support Equipment | 18,856 | 9,637 | 9,219 | 96 | % | ||||||||||||||||||
| Digital Solutions | 2,602 | 2,209 | 393 | 18 | % | ||||||||||||||||||
| Aviation Leasing and Asset Management | 7,754 | — | 7,754 | New June 10, 2026 | |||||||||||||||||||
| Reportable segments total | 149,014 | 64,385 | 84,629 | 131 | % | ||||||||||||||||||
| Corporate and Other | 913 | 1,544 | (631) | (41) | % | ||||||||||||||||||
| Intersegment eliminations | (2,990) | (1,779) | (1,211) | 68 | % | ||||||||||||||||||
| Consolidated Air T, Inc. | $ | 146,937 | $ | 64,150 | $ | 82,787 | 129 | % | |||||||||||||||
Regional airline revenues for the three-month period ended September 30, 2026 were $56.8 million, representing a full quarter of Rex operations, which was acquired on December 18, 2025. There is no prior-year comparable. Revenue consisted of passenger revenue, ancillary fees, freight and charter, and government subsidy income.
Revenues from the overnight air cargo segment for the three-month period ended September 30, 2026 increased by $3.5 million (11%) compared to the second quarter of the prior fiscal year. The increase was principally attributable to higher pricing on flight administrative fees and billable labor at MAC when compared to the prior year comparable quarter.
The commercial aircraft, engines and parts segment contributed $28.5 million of revenues in the quarter ended September 30, 2026 compared to $21.5 million in the comparable prior year quarter, which is an increase of $7.0 million (33%). The increase was largely attributable to increased component sales at Contrail, primarily driven by an increase in sales to a single customer. LGSS and AirCo also contributed to the revenue growth due to strategic investments in aircraft inventory that were not in place during the prior year comparable quarter. Jet Yard saw reduced revenue, primarily due to the prior year quarter's revenue including some larger projects that did not recur in the current quarter.
The ground support equipment segment contributed $18.9 million and $9.6 million to the Company’s revenues for the three-month period ended September 30, 2026 and 2025 respectively, representing a $9.2 million (96%) increase. The increase was primarily driven by a higher number of deicing trucks sold in the current quarter as a result of timing on fulfilling annual orders for a large customer. At September 30, 2026, the ground support equipment segment’s order backlog was $11.6 million compared to $12.9 million at September 30, 2025.
The digital solutions segment contributed $2.6 million of revenues in the quarter ended September 30, 2026 compared to $2.2 million in the prior year quarter, an increase of $0.4 million (18%). The increase was primarily due to continued growth in data analytics and airspace management engagements.
Aviation leasing and asset management revenues for the three-month period ended September 30, 2026 were $7.8 million, representing a full quarter of activity for Crestone and Arena, which have comprised the segment since the acquisition of Arena on June 10, 2026. There is no prior year revenue to report. Revenue consisted of origination, due diligence, disposition, and asset management fees.
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Operating (Loss) Income
Following is a table detailing operating (loss) income by segment during the three months ended September 30, 2026 compared to the same quarter in the prior fiscal year (dollars in thousands):
| Three Months Ended September 30, | Change | ||||||||||||||||||||||
| 2026 | 2025 | ||||||||||||||||||||||
| Regional Airline | $ | (9,982) | $ | — | $ | (9,982) | Acquired December 18, 2025 | ||||||||||||||||
| MAC | 1,834 | 779 | 1,055 | 135 | % | ||||||||||||||||||
| CSA | 212 | 198 | 14 | 7 | % | ||||||||||||||||||
| WASI | 464 | 624 | (160) | (26) | % | ||||||||||||||||||
| Royal | (69) | 14 | (83) | (593) | % | ||||||||||||||||||
| Overnight Air Cargo | 2,441 | 1,615 | 826 | 51 | % | ||||||||||||||||||
| Contrail | 1,152 | 7,347 | (6,195) | (84) | % | ||||||||||||||||||
| AirCo | (364) | (747) | 383 | 51 | % | ||||||||||||||||||
| Worthington | (54) | (143) | 89 | 62 | % | ||||||||||||||||||
| Jet Yard | 314 | 438 | (124) | (28) | % | ||||||||||||||||||
| Air'Zona | 26 | (14) | 40 | 286 | % | ||||||||||||||||||
| LGSS | 122 | (104) | 226 | 217 | % | ||||||||||||||||||
| Commercial Aircraft, Engines and Parts | 1,196 | 6,777 | (5,581) | (82) | % | ||||||||||||||||||
| Ground Support Equipment | 2,658 | 1,619 | 1,039 | 64 | % | ||||||||||||||||||
| Digital Solutions | (115) | (278) | 163 | 59 | % | ||||||||||||||||||
| Aviation Leasing and Asset Management | (4,661) | — | (4,661) | New June 10, 2026 | |||||||||||||||||||
| Reportable segments total | (8,463) | 9,733 | (18,196) | (187) | % | ||||||||||||||||||
| Corporate and Other | (3,576) | (4,367) | 791 | 18 | % | ||||||||||||||||||
| Intersegment eliminations | 235 | 142 | 93 | 65 | % | ||||||||||||||||||
| Consolidated Air T, Inc. | $ | (11,804) | $ | 5,508 | $ | (17,312) | (314) | % | |||||||||||||||
Consolidated operating loss for the quarter ended September 30, 2026 was $11.8 million, compared to consolidated operating income of $5.5 million in the comparable quarter of the prior year.
The regional airline segment incurred an operating loss of $10.0 million for the three-month period ended September 30, 2026. There was no prior-year comparable result as Rex was acquired on December 18, 2025. Depreciation and amortization attributable to Rex was $9.4 million, and general and administrative expenses attributable to Rex were $7.9 million for the quarter ended September 30, 2026. Fuel expense continued to be the primary driver of the loss, with the increase driven principally by higher per-liter fuel prices rather than increased consumption. Rex does not hedge its fuel price or related Australian dollar/U.S. dollar exposure and purchases fuel at prevailing market prices, mitigating higher costs through fare adjustments, capacity management, and fuel levy arrangements with certain state governments. Higher unscheduled engine removals, together with lower engine throughput from third-party maintenance, repair and overhaul providers, also contributed to the loss by reducing the number of aircraft available for service below planned levels.
The overnight air cargo segment's operating income for the three-month period ended September 30, 2026 was $2.4 million compared to operating income of $1.6 million in the same quarter in the prior fiscal year. The increase was mainly driven by higher revenue, as outlined in the revenue discussion above. In addition, higher gross margins related to both flight operations and maintenance at MAC drove operating income higher.
The commercial aircraft, engines, and parts segment generated operating income of $1.2 million in the current year quarter compared to an operating income of $6.8 million in the prior year quarter. This decrease of $5.6 million was primarily attributable to a $7.0 million gain on sale of an aircraft in the prior year quarter, which did not recur in the current quarter. Partially offsetting the impact of this transaction was the overall revenue increase in this segment as discussed above.
The ground support equipment segment's operating income for the quarter ended September 30, 2026 was $2.7 million compared to the prior year comparable quarter's operating income of $1.6 million. This increase was primarily attributable to the higher sales in the current quarter as a result of the timing of customer purchases as noted in the segment revenue discussion above.
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The digital solutions segment generated an operating loss of $0.1 million in the current year quarter, compared to an operating loss of $0.3 million in the prior year comparable quarter. The improvement was primarily driven by two factors: revenue growth at higher incremental margins and lower labor costs as AI-driven tools improved efficiency.
Aviation leasing and asset management generated an operating loss of $4.7 million in the current year quarter, representing a full quarter of operations after the Arena acquisition and quarter-to-date activity related to Crestone Air Partners. The operating loss reflects ongoing direct and indirect operating costs during the initial post-acquisition period, an unfavorable earnout remeasurement of $3.3 million, $2.2 million of depreciation and amortization, $7.0 million of general and administrative expenses and $0.5 million of post-acquisition integration costs.
Adjusted EBITDA
The table below provides Adjusted EBITDA, as described and reconciled on a consolidated basis to operating (loss) income as described in Non-GAAP Financial Measures below, for the three months ended September 30, 2026 and 2025 (in thousands):
| Three Months Ended September 30, | Change | ||||||||||||||||
| 2026 | 2025 | ||||||||||||||||
| Regional Airline | $ | (949) | $ | — | $ | (949) | |||||||||||
| MAC | 1,932 | 863 | 1,069 | ||||||||||||||
| CSA | 228 | 210 | 18 | ||||||||||||||
| WASI | 509 | 687 | (178) | ||||||||||||||
| Royal | (60) | 42 | (102) | ||||||||||||||
| Overnight Air Cargo | 2,609 | 1,802 | 807 | ||||||||||||||
| Contrail | 1,238 | 7,152 | (5,914) | ||||||||||||||
| AirCo | (363) | (664) | 301 | ||||||||||||||
| Worthington | 70 | (87) | 157 | ||||||||||||||
| Jet Yard | 422 | 533 | (111) | ||||||||||||||
| Air'Zona | 40 | (1) | 41 | ||||||||||||||
| LGSS | 124 | (51) | 175 | ||||||||||||||
| Commercial Aircraft, Engines and Parts | 1,531 | 6,882 | (5,351) | ||||||||||||||
| Ground Support Equipment | 2,707 | 1,653 | 1,054 | ||||||||||||||
| Digital Solutions | 97 | (65) | 162 | ||||||||||||||
| Aviation Leasing and Asset Management | 1,330 | — | 1,330 | ||||||||||||||
| Reportable segments total | 7,325 | 10,272 | (2,947) | ||||||||||||||
| Corporate and Other | (3,189) | (2,532) | (657) | ||||||||||||||
| Intersegment eliminations | 235 | 142 | 93 | ||||||||||||||
| Consolidated Air T, Inc. | $ | 4,371 | $ | 7,882 | $ | (3,511) | |||||||||||
Adjusted EBITDA loss for the regional airline segment was $0.9 million for the quarter ended September 30, 2026, with no prior-year comparable. As with the operating loss discussion above, Rex's depreciation and amortization add-back of $9.4 million for the quarter is the largest reconciling item between its operating loss and its Adjusted EBITDA.
Adjusted EBITDA for the overnight air cargo businesses increased by $0.8 million to $2.6 million when comparing the three months ended September 30, 2026 and 2025, which is consistent with the operating income improvement discussed above.
Adjusted EBITDA for the commercial aircraft, engines and parts businesses decreased by $5.4 million to $1.5 million when comparing the three months ended September 30, 2026 and 2025, driven by the same factors discussed under operating income above, primarily a one time sale of aircraft leased by Contrail for a gain of $7.0 million in the prior fiscal year.
Adjusted EBITDA for the ground support equipment segment increased by $1.1 million to $2.7 million when comparing the three months ended September 30, 2026 and 2025. The increase was primarily attributable to the same factors that drove this segment's operating income, as discussed above.
Adjusted EBITDA for the digital solutions businesses increased by $0.2 million to $0.1 million when comparing the three months ended September 30, 2026 and 2025, which is consistent with the operating income improvement discussed above.
Adjusted EBITDA for the aviation leasing and asset management segment was $1.3 million for the quarter, with no prior-year comparable. As with the operating loss discussion above, the unfavorable earnout remeasurement of $3.3 million, depreciation and
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amortization add-back of $2.2 million, and post-acquisition integration costs of $0.5 million for the quarter are the largest reconciling items between its operating loss and its Adjusted EBITDA.
Non-Operating (Expense) Income
Following is a table detailing non-operating (expense) income during the three months ended September 30, 2026 compared to the same quarter in the prior fiscal year (in thousands):
| Three Months Ended September 30, | Change | ||||||||||||||||
| 2026 | 2025 | ||||||||||||||||
| Interest expense | $ | (5,846) | $ | (2,252) | $ | (3,594) | |||||||||||
| Income from equity method investments | (1,203) | 4,179 | (5,382) | ||||||||||||||
| Gain on bargain purchase | 872 | — | 872 | ||||||||||||||
| Other | 1,777 | (201) | 1,978 | ||||||||||||||
| $ | (4,400) | $ | 1,726 | $ | (6,126) | ||||||||||||
The Company had a net non-operating loss of $4.4 million during the quarter ended September 30, 2026, compared to net non-operating income of $1.7 million in the prior year quarter. The change was driven by a $5.4 million decrease 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, as well as an increase in interest expense of $3.6 million.
Provision for Income Taxes
During the three-month period ended September 30, 2026, the Company recorded $3.3 million in income tax expense at an effective tax rate (“ETR”) of (20.6)%. The Company has computed the provision for income taxes based on the estimated annual effective tax rate applied to the year-to-date income or loss 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, 2026 were the valuation allowance related to the Company’s U.S. consolidated group, Delphax Technologies, Inc. (“DTI”), Delphax Solutions, Inc. (“DSI”), and Regional Express Holdings Limited (“REX”) and its subsidiaries, and the foreign rate differentials for Air T’s operations located in Australia, Ireland, the Netherlands, and Puerto Rico, partially offset by the benefit from the Foreign-Derived Intangible Income (“FDII”) deduction and foreign tax credits. Income tax expense for the period, despite a pre-tax loss, is primarily attributable to the U.S. consolidated group being in an estimated taxable income position for the year, principally due to the recognition of a previously deferred gain and limitations on the deductibility of interest expense, notwithstanding the full valuation allowance on the Company’s U.S. consolidated group.
During the three-month period ended September 30, 2025, the Company recorded $2.2 million in income tax expense at an ETR of 30.4%. 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, 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 acquisition-related costs, and the benefit from the FDII deduction.
First Six Months of Fiscal 2027 Compared to First Six Months of Fiscal 2026
Operating Revenue
Reportable segment revenue for the six-month period ended September 30, 2026 increased by $129.2 million (95%) compared to the same period in the prior fiscal year.
Following is a table detailing revenue by segment during the six months ended September 30, 2026 compared to the same period in the prior fiscal year (dollars in thousands):
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| Six Months Ended September 30, | Change | ||||||||||||||||||||||
| 2026 | 2025 | ||||||||||||||||||||||
| Regional Airline | $ | 112,671 | $ | — | $ | 112,671 | Acquired December 18, 2025 | ||||||||||||||||
| MAC | 51,990 | 49,045 | 2,945 | 6 | % | ||||||||||||||||||
| CSA | 6,543 | 7,015 | (472) | (7) | % | ||||||||||||||||||
| WASI | 6,373 | 5,848 | 525 | 9 | % | ||||||||||||||||||
| Royal | 826 | 619 | 207 | 33 | % | ||||||||||||||||||
| Overnight Air Cargo | 65,732 | 62,527 | 3,205 | 5 | % | ||||||||||||||||||
| Contrail | 19,635 | 16,963 | 2,672 | 16 | % | ||||||||||||||||||
| AirCo | 1,607 | 971 | 636 | 65 | % | ||||||||||||||||||
| Worthington | 17,883 | 18,531 | (648) | (3) | % | ||||||||||||||||||
| Jet Yard | 5,546 | 5,323 | 223 | 4 | % | ||||||||||||||||||
| Air'Zona | 1,019 | 861 | 158 | 18 | % | ||||||||||||||||||
| LGSS | 3,665 | 1,242 | 2,423 | 195 | % | ||||||||||||||||||
| Commercial Aircraft, Engines and Parts | 49,355 | 43,891 | 5,464 | 12 | % | ||||||||||||||||||
| Ground Support Equipment | 22,539 | 24,707 | (2,168) | (9) | % | ||||||||||||||||||
| Digital Solutions | 5,229 | 4,305 | 924 | 21 | % | ||||||||||||||||||
| Aviation Leasing and Asset Management | 9,120 | — | 9,120 | New June 10, 2026 | |||||||||||||||||||
| Reportable segments total | 264,646 | 135,430 | 129,216 | 95 | % | ||||||||||||||||||
| Corporate and Other | 2,483 | 2,743 | (260) | (9) | % | ||||||||||||||||||
| Intersegment eliminations | (4,730) | (3,153) | (1,577) | 50 | % | ||||||||||||||||||
| Consolidated Air T, Inc. | $ | 262,399 | $ | 135,020 | $ | 127,379 | 94 | % | |||||||||||||||
Regional airline revenues for the six months ended September 30, 2026 were $112.7 million, representing a full six months of Rex operations, which was acquired on December 18, 2025. There is no prior-year comparable. Revenue consisted of passenger revenue, ancillary fees, freight and charter, and government subsidy income.
Revenues from the overnight air cargo segment for the six months ended September 30, 2026 increased by $3.2 million (5%) compared to the six months ended September 30, 2025. The increase was principally attributable to higher pricing on flight administrative fees and billable labor at MAC when compared to the prior year comparable period.
The commercial aircraft, engines and parts segment contributed $49.4 million of revenues in the six months ended September 30, 2026 compared to $43.9 million in the comparable prior year six months period. The increase of $5.5 million was largely attributable to increased component sales at Contrail, primarily driven by an increase in sales to a single customer. LGSS and AirCo also contributed to the revenue growth due to strategic investments in aircraft inventory that were not in place during the prior year comparable period, while Worthington's revenue declined year over year, consistent with the year over year decline experienced in the first quarter of 2027 as compared to the first quarter of 2026.
The ground support equipment segment's revenues for the six-month period ended September 30, 2026 were $22.5 million compared to $24.7 million in the same period in the prior fiscal year, a decrease of $2.2 million (9%). The decrease was primarily due to the timing of an annual U.S. military order, which occurred in the first six months of fiscal 2026. The current fiscal year U.S. military order is currently anticipated to occur in the third quarter of fiscal 2027. Partially offsetting the impact of this U.S. military order was revenue from a higher number of deicing trucks sold in the current period, as a result of timing on fulfilling annual orders for a large customer.
The digital solutions segment contributed $5.2 million of revenues in the six months ended September 30, 2026 compared to $4.3 million in the prior year six month period, an increase of $0.9 million (21%). The increase was primarily due to continued growth in data analytics and airspace management engagements in this segment.
The aviation leasing and asset management segment contributed revenues of $9.1 million during the six months ended September 30, 2026. There is no prior year revenue to report. Revenue consisted of origination, due diligence, disposition, and asset management fees.
Operating (Loss) Income
45
Following is a table detailing operating (loss) income by segment during the six months ended September 30, 2026 compared to the same six months in the prior fiscal year (dollars in thousands):
| Six Months Ended September 30, | Change | ||||||||||||||||||||||
| 2026 | 2025 | ||||||||||||||||||||||
| Regional Airline | $ | (17,709) | $ | — | $ | (17,709) | Acquired December 18, 2025 | ||||||||||||||||
| MAC | 2,912 | 1,828 | 1,084 | 59 | % | ||||||||||||||||||
| CSA | 403 | 373 | 30 | 8 | % | ||||||||||||||||||
| WASI | 1,126 | 944 | 182 | 19 | % | ||||||||||||||||||
| Royal | (78) | (64) | (14) | (22) | % | ||||||||||||||||||
| Overnight Air Cargo | 4,363 | 3,081 | 1,282 | 42 | % | ||||||||||||||||||
| Contrail | 1,175 | 9,108 | (7,933) | (87) | % | ||||||||||||||||||
| AirCo | (898) | (1,313) | 415 | 32 | % | ||||||||||||||||||
| Worthington | (870) | (270) | (600) | (222) | % | ||||||||||||||||||
| Jet Yard | 707 | 282 | 425 | 151 | % | ||||||||||||||||||
| Air'Zona | 44 | 52 | (8) | (15) | % | ||||||||||||||||||
| LGSS | 291 | (225) | 516 | 229 | % | ||||||||||||||||||
| Commercial Aircraft, Engines and Parts | 449 | 7,634 | (7,185) | (94) | % | ||||||||||||||||||
| Ground Support Equipment | 2,412 | 2,957 | (545) | (18) | % | ||||||||||||||||||
| Digital Solutions | 36 | (527) | 563 | (107) | % | ||||||||||||||||||
| Aviation Leasing and Asset Management | (8,157) | — | (8,157) | New June 10, 2026 | |||||||||||||||||||
| Reportable segments total | (18,606) | 13,145 | (31,751) | (242) | % | ||||||||||||||||||
| Corporate and Other | (6,369) | (7,077) | 708 | 10 | % | ||||||||||||||||||
| Intersegment eliminations | 349 | 286 | 63 | 22 | % | ||||||||||||||||||
| Consolidated Air T, Inc. | $ | (24,626) | $ | 6,354 | $ | (30,980) | (488) | % | |||||||||||||||
Consolidated operating loss for the six months ended September 30, 2026 was $24.6 million compared to operating income of $6.4 million for the comparable six months of the prior year.
The regional airline segment incurred an operating loss of $17.7 million for the six months ended September 30, 2026. There was no prior-year comparable as Rex was acquired on December 18, 2025. Depreciation and amortization attributable to Rex was $18.2 million, and general and administrative expenses were $17.4 million for the six months ended September 30, 2026. Fuel expense continued to be the primary driver of the loss, with the increase driven principally by higher per-liter fuel prices rather than increased consumption. Rex does not hedge its fuel price or related Australian dollar/U.S. dollar exposure and purchases fuel at prevailing market prices, mitigating higher costs through fare adjustments, capacity management, and fuel levy arrangements with certain state governments. Higher unscheduled engine removals, together with lower engine throughput from third-party maintenance, repair and overhaul providers, also contributed to the loss by reducing the number of aircraft available for service below planned levels.
The overnight air cargo segment generated operating income of $4.4 million for the six months ended September 30, 2026 compared to $3.1 million in the prior year six-month period. The increase was mainly driven by higher revenue, as outlined in the revenue discussion above, partially offset by lower margins on maintenance revenue resulting from increased operating costs and staffing increases.
The commercial aircraft, engines, and parts segment generated operating income of $0.4 million in the six months ended September 30, 2026 compared to operating income of $7.6 million in the prior year six-month period. The decrease was primarily attributable to a $7.0 million gain on sale of aircraft in the prior year period, which did not recur in the current period.
The ground support equipment segment's operating income for the six months ended September 30, 2026 was $2.4 million compared to operating income of $3.0 million in the prior year comparable period. The decline in operating income was primarily driven by the lower revenue discussed above, as well as lower gross margins driven by unfavorable movements in materials pricing.
The digital solutions segment generated nominal operating income in six months ended September 30, 2026, compared to an operating loss of $0.5 million in the prior year comparable period. The improvement was primarily driven by two factors: revenue growth at high incremental margins and lower labor costs as AI-driven tools improved efficiency.
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Aviation leasing and asset management generated operating loss of $8.2 million in the six months ended September 30, 2026, representing operations after the Arena acquisition on June 10, 2026 and year-to-date activity related to Crestone Air Partners. The operating loss reflects ongoing direct and indirect operating costs during the initial post-acquisition period, an unfavorable earnout remeasurement of $3.3 million, $2.5 million of depreciation and amortization, $11.5 million of general and administrative expenses and $3.5 million of acquisition and post-acquisition integration costs.
Adjusted EBITDA
The table below provides Adjusted EBITDA, as described and reconciled on a consolidated basis to operating (loss) income as described in Non-GAAP Financial Measures below, for the six months ended September 30, 2026 and 2025 (in thousands):
| Six Months Ended September 30, | Change | ||||||||||||||||
| 2026 | 2025 | ||||||||||||||||
| Regional Airline | $ | 970 | $ | — | $ | 970 | |||||||||||
| MAC | 3,098 | 1,992 | 1,106 | ||||||||||||||
| CSA | 434 | 398 | 36 | ||||||||||||||
| WASI | 1,216 | 1,060 | 156 | ||||||||||||||
| Royal | (43) | (37) | (6) | ||||||||||||||
| Overnight Air Cargo | 4,705 | 3,413 | 1,292 | ||||||||||||||
| Contrail | 1,299 | 8,536 | (7,237) | ||||||||||||||
| AirCo | (886) | (1,230) | 344 | ||||||||||||||
| Worthington | (707) | (158) | (549) | ||||||||||||||
| Jet Yard | 916 | 481 | 435 | ||||||||||||||
| Air'Zona | 71 | 78 | (7) | ||||||||||||||
| LGSS | 295 | (163) | 458 | ||||||||||||||
| Commercial Aircraft, Engines and Parts | 988 | 7,544 | (6,556) | ||||||||||||||
| Ground Support Equipment | 2,498 | 3,027 | (529) | ||||||||||||||
| Digital Solutions | 515 | (108) | 623 | ||||||||||||||
| Aviation Leasing and Asset Management | 1,019 | — | 1,019 | ||||||||||||||
| Reportable segments total | 10,695 | 13,876 | (3,181) | ||||||||||||||
| Corporate and Other | (5,867) | (4,816) | (1,051) | ||||||||||||||
| Intersegment eliminations | 349 | 286 | 63 | ||||||||||||||
| Consolidated Air T, Inc. | $ | 5,177 | $ | 9,346 | $ | (4,169) | |||||||||||
Adjusted EBITDA for the regional airline segment was $1.0 million for the six months ended September 30, 2026, with no prior-year comparable. Rex's depreciation and amortization add-back of $18.2 million for the six month period is the largest reconciling item between its operating loss and its Adjusted EBITDA. In addition, Rex also incurred $0.7 million of post-acquisition integration costs during the year-to-date period, which was added back to its Adjusted EBITDA from its operating loss.
Adjusted EBITDA for the overnight air cargo businesses increased by $1.3 million to $4.7 million from the six months ended September 30, 2025 to the six months ended September 30, 2026. The increase is consistent with the operating income improvement discussed above, as there were no significant adjustments between operating income and Adjusted EBITDA.
Adjusted EBITDA for the commercial aircraft, engines and parts businesses decreased by $6.6 million to income of $1.0 million from the six months ended September 30, 2025 to the six months ended September 30, 2026. The decrease is driven by the same factors discussed under operating income above.
Adjusted EBITDA for ground support equipment decreased by $0.5 million to $2.5 million from the six months ended September 30, 2025 to the six months ended September 30, 2026. The decrease is consistent with the operating income decline discussed above, as there were no significant adjustments between operating income and Adjusted EBITDA.
Adjusted EBITDA for the digital solutions businesses increased by $0.6 million to $0.5 million from the six months ended September 30, 2025 to the six months ended September 30, 2026. The increase from revenue growth and lower labor costs more than offset any residual cost pressure in this group of businesses.
Adjusted EBITDA for the aviation leasing and asset management segment was $1.0 million for the six months ended September 30, 2026, with no prior-year comparable. As with the operating loss discussion above, the unfavorable earnout remeasurement of $3.3 million, depreciation and amortization add-back of $2.5 million, and acquisition and post-acquisition integration costs of $3.5 million
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for the six months ended September 30, 2026 are the largest reconciling items between its operating loss and its Adjusted EBITDA income.
Non-Operating Income (Expense)
Following is a table detailing non-operating income (expense) during the six months ended September 30, 2026 compared to the same six months in the prior fiscal year (in thousands):
| Six Months Ended September 30, | Change | ||||||||||||||||
| 2026 | 2025 | ||||||||||||||||
| Interest expense | $ | (11,519) | $ | (4,565) | $ | (6,954) | |||||||||||
| Income from equity method investments | 2,012 | 4,160 | (2,148) | ||||||||||||||
| Gain on bargain purchase | 872 | — | 872 | ||||||||||||||
| Other | 2,023 | 478 | 1,545 | ||||||||||||||
| $ | (6,612) | $ | 73 | $ | (6,685) | ||||||||||||
The Company had a net non-operating loss of $6.6 million for the six months ended September 30, 2026 compared to net non-operating income of $0.1 million in the prior year six-month period. The change was primarily driven by an increase in interest expense of $7.0 million.
Provision for Income Taxes
During the six-month period ended September 30, 2026, the Company recorded $4.0 million in income tax expense at an ETR of (12.8)%. The Company has computed the provision for income taxes based on the estimated annual effective tax rate applied to the year-to-date income or loss 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, 2026 were the valuation allowance related to the Company’s U.S. consolidated group, DTI, DSI, and Rex and its subsidiaries, and the foreign rate differentials for Air T’s operations located in Australia, Ireland, the Netherlands, and Puerto Rico, partially offset by the benefit from the FDII deduction and foreign tax credits. Income tax expense for the period, despite a pre-tax loss, is primarily attributable to the U.S. consolidated group being in an estimated taxable income position for the year, principally due to the recognition of a previously deferred gain and limitations on the deductibility of interest expense, notwithstanding the full valuation allowance on the Company’s U.S. consolidated group.
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 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 acquisition-related costs, and the benefit from the FDII deduction.
Critical Accounting Policies and Estimates
The Company’s significant accounting policies are fully described in Note 1 to these 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, 2026. 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 September 30, 2026.
Seasonality
The ground support equipment 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. Apart from the regional airline segment, 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
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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 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 September 30, 2026.
Liquidity and Capital Resources
As of September 30, 2026, the Company held approximately $27.2 million in cash and cash equivalents and restricted cash. The Company has an aggregate of approximately $26.0 million in available funds under its lines of credit as of September 30, 2026.
As of September 30, 2026, the Company’s working capital amounted to $64.2 million, a decrease of $0.2 million compared to March 31, 2026.
As discussed further in Note 12 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 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”). 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 agreed 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, of which the Issuer has received all contractually required advances through September 30, 2026 (in thousands):
| September 30, 2025 | $ | 10,000 | |||
| January 30, 2026 | 10,000 | ||||
May 30, 20261 | 10,000 | ||||
| September 30, 2026 | 10,000 | ||||
| January 30, 2027 | 10,000 | ||||
| May 30, 2027 | 10,000 | ||||
1 The Investors advanced $15.0 million for the scheduled $10.0 million issuance on May 30, 2026. For the remaining scheduled issuances, the Company has the flexibility to choose which advance amount will be reduced by $5.0 million. As of the date the condensed consolidated financial statements are issued, the Company has not made that determination.
As of September 30, 2026, the Issuer has collectively received a total of $75.0 million of advances from the Investors.
The Multiple Advance Note bears annual interest at a rate of 8.5% 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
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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.
As discussed further in Note 12 of Notes to Condensed Consolidated Financial Statements included under Part I, Item 1 of this Report on Form 10-Q, on June 2, 2026, Contrail entered into a subordinated promissory note with OCAS, Inc. ("OCAS"), the former minority owner of Contrail, in the amount of $3.5 million ("Term Loan - OCAS II") with an economic effective date of April 1, 2026. The note was made pursuant to Contrail's purchase and redemption of OCAS' 5% membership interest in Contrail. The note matures on April 1, 2029 and bears interest at an annual rate equal to the ten year Treasury bond yield plus 2.50% which is compounded monthly on the basis of a 365-day year for the actual number of days elapsed. The rate adjusts on each anniversary date of the note.
As discussed further in Note 12 of Notes to Condensed Consolidated Financial Statements included under Part I, Item 1 of this Report on Form 10-Q, on June 15, 2026, Air’Zona Aircraft Services, Inc., CSA Air, Inc., Global Ground Support, LLC, Jet Yard, LLC, Jet Yard Solutions, LLC, Mountain Air Cargo, Inc., Worldwide Aircraft Services, Inc., Royal Aircraft Services, LLC and Worthington Aviation, LLC, each a subsidiary or affiliate of the Company (collectively, the “Alerus Loan Parties”), entered into Amendment No. 6 to Credit Agreement with Alerus Financial, National Association (“Alerus”), as lender. In connection with Amendment No. 6, the Alerus Loan Parties executed an Overline Note with Alerus in the original principal amount of $2.8 million (the “Overline Note”). The Overline Note bears interest at a fluctuating annual rate equal to the greater of 5.00% or 1-month term SOFR plus 2.50% and matures on the earlier of October 15, 2026 or the termination of the overline commitment in accordance with the Alerus Credit Agreement.
As discussed further in Note 12 of Notes to Condensed Consolidated Financial Statements included under Part I, Item 1 of this Report on Form 10-Q, on September 1, 2026, the Alerus Loan Parties entered into Amendment No. 7 to Credit Agreement ("Amendment No. 7") with Alerus.
In connection with Amendment No. 7, the Alerus Loan Parties executed an Amended and Restated Revolving Credit Note in the original principal amount of $25.0 million (the “Revolving Note”), which amends and restates, without repayment or novation, the prior $20.0 million revolving note, and a Consolidated Term Note in the original principal amount of $11.5 million (the “Consolidated Term Note”), which consolidates, without repayment or novation, the outstanding balances of Term Loan A, Term Loan C and the overline loans. The Revolving Note matures on August 27, 2029. Under the Consolidated Term Note, principal is payable in monthly installments through August 15, 2031, with all remaining principal due on August 27, 2031.
Amendment No. 7 provides an accordion option under which the Alerus Loan Parties may request an additional revolving commitment of up to $3.5 million for one 120-day period during each fiscal year of the Company, subject to specified conditions, including pro forma compliance with the financial covenants. Outstanding accordion loans must be repaid at the end of the applicable accordion commitment period.
Borrowings under the Revolving Note and any accordion note bear interest at a fluctuating annual rate equal to the greater of 5.00% and 1-month term SOFR plus a leverage-based applicable margin. The Consolidated Term Note bears interest at 1-month term SOFR plus the same applicable margin. The applicable margin is initially 2.50% and ranges from 2.25% to 2.75% based on the Alerus Loan Parties' leverage ratio. Amendment No. 7 also establishes a 0.25% annual unused commitment fee on the unused revolving commitment and provides that the leverage ratio may not exceed 3.00 to 1.00.
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 flows for the six months ended September 30, 2026 and 2025 (in thousands):
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| Six Months Ended September 30, | |||||||||||
| 2026 | 2025 | ||||||||||
| Net cash used in operating activities | $ | (13,207) | $ | (6,504) | |||||||
| Net cash (used in) provided by investing activities | (51,238) | 13,936 | |||||||||
| Net cash provided by financing activities | 66,093 | 3,746 | |||||||||
| Effect of foreign currency exchange rates on cash and cash equivalents | 300 | (147) | |||||||||
| Net increase in cash and cash equivalents and restricted cash | $ | 1,948 | $ | 11,031 | |||||||
Net cash used in operating activities was $13.2 million for the six-month period ended September 30, 2026 compared to $6.5 million in the prior year six-month period, representing an increase in cash used of $6.7 million. The increase in cash used was primarily attributable to a $39.6 million change in net loss (income) in the current period compared to the prior period, as well as an unfavorable change in accounts receivable. Partially offsetting these changes were a $20.1 million favorable change in depreciation and amortization, primarily driven by the acquisition of Rex in December 2025, a $7.0 million prior year period gain on sale of aircraft, and a favorable change in cash flow from other current assets when compared to the prior year period.
Net cash used in investing activities for the six-month period ended September 30, 2026 was $51.2 million compared to net cash provided by investing activities of $13.9 million in the prior year period. The cash used in investing activities in the current six-month period was primarily driven by capital expenditures related to property and equipment of $29.3 million, acquisitions of businesses, net of cash acquired of $19.3 million, and investments in unconsolidated entities of $14.8 million. The net cash provided by investing activities in the prior six-month period was primarily driven by proceeds of $19.9 million from the sale of aircraft, partially offset by investments in unconsolidated entities of $6.8 million.
Net cash provided by financing activities for the six-month period ended September 30, 2026 was $66.1 million compared to $3.7 million in the prior year period. The cash provided by financing activities during the six-month period ended September 30, 2026 was primarily driven by $55.3 million of net proceeds on the Company's term loans and lines of credit.and a $10.0 million contribution from redeemable non-controlling interests. The cash provided by financing activities in the six-month period ended September 30, 2025 was primarily due to $7.2 million of net proceeds on the Company's term loans and lines of credit, partially offset by $3.1 million of distributions to non-controlling interests.
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 certain assets that are on lease, as the Company believes this expense matches with the corresponding revenue earned on these 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 GAAP measure.
The tables below provide a reconciliation of operating (loss) income to Adjusted EBITDA for the three and six months ended September 30, 2026 and 2025 (in thousands):
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| Three Months Ended September 30, | Six Months Ended September 30, | ||||||||||||||||||||||
| 2026 | 2025 | 2026 | 2025 | ||||||||||||||||||||
| Operating (loss) income | $ | (11,804) | $ | 5,508 | $ | (24,626) | $ | 6,354 | |||||||||||||||
Depreciation and amortization (excluding certain leased assets depreciation)1 | 12,311 | 730 | 22,196 | 1,432 | |||||||||||||||||||
| Asset impairment, restructuring or impairment charges | 63 | 198 | 93 | 239 | |||||||||||||||||||
| (Gain) loss on sale of property and equipment | (226) | 21 | (226) | 20 | |||||||||||||||||||
| Securities issuance expenses | 38 | 20 | 49 | 49 | |||||||||||||||||||
| Share-based compensation | 40 | 41 | 88 | 81 | |||||||||||||||||||
| Earnout remeasurement | 3,402 | (264) | 3,402 | (666) | |||||||||||||||||||
| Acquisition and deal-sourcing expenses | 2 | 1,628 | 2,956 | 1,837 | |||||||||||||||||||
| Post-acquisition integration costs | 545 | — | 1,245 | — | |||||||||||||||||||
| Adjusted EBITDA | $ | 4,371 | $ | 7,882 | $ | 5,177 | $ | 9,346 | |||||||||||||||
(1) There was no depreciation expense for leased assets to exclude for the three and six months ended September 30, 2026, respectively. For the three and six months ended September 30, 2025, leased assets depreciation expense excluded was $0.1 million and $0.7 million, respectively. | |||||||||||||||||||||||
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"), 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 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 12 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.
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
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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 September 30, 2026, there are $53.8 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, 2026. Our exposures to market risk have not changed materially since March 31, 2026.
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 September 30, 2026. 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 September 30, 2026 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 September 30, 2026, 718,294 shares may be repurchased pursuant to this program.
| Dates of Shares Purchased | Total Number of Shares Purchased | Average Price Paid per Share | Total Number of Shares Purchased as Part of Public Announced Plans or Programs | Maximum Number of Shares that May Yet Be Purchased Under the Plans or Programs | ||||||||||||||||||||||
| July 1 - July 31, 2026 | 9,916 | $ | 27.31 | 9,916 | 731,337 | |||||||||||||||||||||
| August 1 - August 31, 2026 | 13,043 | 30.20 | 13,043 | 718,294 | ||||||||||||||||||||||
| September 1 - September 30, 2026 | — | — | — | 718,294 | ||||||||||||||||||||||
| 22,959 | ||||||||||||||||||||||||||
Item 5. Other information
(c) Insider Trading Arrangements
During the quarter ended September 30, 2026, 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 | Amendment No. 7 to Credit Agreement, dated to be effective as of September 1, 2026, by and among Air’Zona Aircraft Services, Inc., CSA Air, Inc., Global Ground Support, LLC, Jet Yard, LLC, Jet Yard Solutions, LLC, Mountain Air Cargo, Inc., Worldwide Aircraft Services, Inc., Royal Aircraft Services, LLC, Worthington Aviation, LLC, Air T, Inc., as loan party agent and guarantor, and Alerus Financial, National Association, as lender, incorporated by reference to Exhibit 10.1 to the Company’s Current Report on Form 8-K filed September 4, 2026 (Commission File No. 001-35476). | ||||
| 10.2 | Amended and Restated Revolving Credit Note, dated as of September 1, 2026, made by Air’Zona Aircraft Services, Inc., CSA Air, Inc., Global Ground Support, LLC, Jet Yard, LLC, Jet Yard Solutions, LLC, Mountain Air Cargo, Inc., Royal Aircraft Services, LLC, Worldwide Aircraft Services, Inc. and Worthington Aviation, LLC in favor of Alerus Financial, National Association, incorporated by reference to Exhibit 10.2 to the Company’s Current Report on Form 8-K filed September 4, 2026 (Commission File No. 001-35476). | ||||
| 10.3 | Consolidated Term Note, dated as of September 1, 2026, made by Air’Zona Aircraft Services, Inc., CSA Air, Inc., Global Ground Support, LLC, Jet Yard, LLC, Jet Yard Solutions, LLC, Mountain Air Cargo, Inc., Royal Aircraft Services, LLC, Worldwide Aircraft Services, Inc. and Worthington Aviation, LLC in favor of Alerus Financial, National Association, incorporated by reference to Exhibit 10.3 to the Company’s Current Report on Form 8-K filed September 4, 2026 (Commission File No. 001-35476). | ||||
| 10.4 | Acknowledgment and Agreement, dated September 1, 2026, by Air T, Inc., as guarantor, in favor of Alerus Financial, National Association, incorporated by reference to Exhibit 10.4 to the Company’s Current Report on Form 8-K filed September 4, 2026 (Commission File No. 001-35476). | ||||
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| 10.5 | Federal Assignment of Claims Agreement, dated September 1, 2026, by and between Global Ground Support, LLC and Alerus Financial, National Association, incorporated by reference to Exhibit 10.5 to the Company’s Current Report on Form 8-K filed September 4, 2026 (Commission File No. 001-35476). | ||||
| 22.1 | List of Issuers and Guarantors | ||||
| 31.1 | Section 302 Certification of Chief Executive Officer and President | ||||
| 31.2 | Section 302 Certification of Chief Financial Officer | ||||
| 32.1 | Section 1350 Certifications | ||||
| 101 | The following financial information from the Quarterly Report on Form 10-Q for the quarter ended September 30, 2026, formatted in XBRL (Extensible Business Reporting Language): (i) Condensed Consolidated Statements of Income (Loss), (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. | ||||
| 104 | The cover page from the Company’s Quarterly Report on Form 10-Q for the quarter ended September 30, 2026, formatted in Inline XBRL (included as Exhibit 101) | ||||
* 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: November 13, 2026 | ||||||||
| /s/ Tracy Kennedy | ||||||||
| Tracy Kennedy, Chief Financial Officer (Principal Financial Officer and Principal Accounting Officer) | ||||||||
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