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Item 1. Financial Statements

2021-02-12 compared with 2017-10-13 · 671 added, 459 removed, 83 unchanged (93% of the section changed)

1 unchanged sentence

AND SUBSIDIARIES

CONDENSED CONSOLIDATED STATEMENTS OF INCOME (UNAUDITED) (AS RESTATED)

Three Months Ended December 31,

Nine Months Ended December 31,

2015 (As Restated)

CONDENSED CONSOLIDATED STATEMENTS OF INCOME (LOSS)

(in thousands, except (loss) income per share number) Three Months Ended

December 31, Nine Months Ended

2020 2019 2020 2019

Operating Revenues:

1 unchanged sentence

Ground equipment sales 20,769 15,949 48,656 40,939

Ground support services

Printing equipment and maintenance

Commercial jet engines and parts 18,078 38,536 28,886 72,665

Corporate and other 650 109 1,063 806

55,819 73,300 128,394 171,181

Operating Expenses:

Flight-air cargo

Maintenance-air cargo

Overnight air cargo 14,505 16,806 43,906 51,031

Ground equipment sales 14,966 12,960 36,923 33,049

Ground support services

Printing equipment and maintenance

Research and development

Commercial jet engines and parts 16,086 29,308 22,861 48,644

General and administrative 8,303 9,550 24,276 28,670

Depreciation and amortization 886 975 2,644 4,610

Gain on sale of property and equipment

Operating Income

Write-down on inventory — — 535 —

Asset impairment — 4 129 18

Loss (Gain) on sale of property and equipment 5 ( 23 ) 1 ( 26 )

54,751 69,580 131,275 165,996

Operating Income (Loss) from continuing operations 1,068 3,720 ( 2,881 ) 5,185

Non-operating Income (Expense):

Realized gain

Investment income

Interest expense and other

Income Before Income Taxes

Net Loss Attributable to Non-controlling Interests

Net Income Attributable to Air T, Inc.

Earnings Per Share:

Other-than-temporary impairment loss on investments — ( 1,095 ) — ( 2,305 )

Interest expense ( 1,172 ) ( 1,227 ) ( 3,413 ) ( 4,298 )

Gain on settlement of bankruptcy — — — 4,527

Gain (Loss) from equity method investments 510 ( 282 ) ( 546 ) ( 636 )

Other 1,039 81 2,125 ( 75 )

377 ( 2,523 ) ( 1,834 ) ( 2,787 )

Income (Loss) from continuing operations before income taxes 1,445 1,197 ( 4,715 ) 2,398

Income Taxes (Benefit) Expense ( 318 ) 616 ( 2,165 ) ( 52 )

Net Income (Loss) from continuing operations 1,763 581 ( 2,550 ) 2,450

Loss from discontinued operations, net of tax — — — ( 70 )

(Loss) Gain on sale of discontinued operations, net of tax — ( 222 ) 4 8,137

Net Income (Loss) 1,763 359 ( 2,546 ) 10,517

Net Loss (Income) Attributable to Non-controlling Interests $ 335 $ ( 789 ) $ 884 $ ( 3,449 )

Net Income (Loss) Attributable to Air T, Inc.

Stockholders $ 2,098 $ ( 430 ) $ ( 1,662 ) $ 7,068

Income (Loss) from continuing operations per share (Note 6)

Basic $ 0.73 $ ( 0.07 ) $ ( 0.58 ) $ ( 0.36 )

Diluted $ 0.73 $ ( 0.07 ) $ ( 0.58 ) $ ( 0.36 )

(Loss) Income from discontinued operations per share (Note 6)

Basic $ — $ ( 0.07 ) $ — $ 2.93

Diluted $ — $ ( 0.07 ) $ — $ 2.93

Income (Loss) per share (Note 6)

Basic $ 0.73 $ ( 0.14 ) $ ( 0.58 ) $ 2.57

Diluted $ 0.73 $ ( 0.14 ) $ ( 0.58 ) $ 2.57

Weighted Average Shares Outstanding:

Basic 2,882 2,973 2,882 2,752

Diluted 2,887 2,973 2,882 2,756

See notes to condensed consolidated financial statements.

AND SUBSIDIARIES

CONDENSED CONSOLIDATED STATEMENTS OF COMPREHENSIVE INCOME (UNAUDITED) (AS RESTATED)

Three Months Ended December 31,

Nine Months Ended December 31,

2015 (As Restated)

Other comprehensive income (loss):

Foreign currency translation

Unrealized gains on investment securities available for sale

Tax effect of unrealized gains on investment securities available for sale

Total unrealized gains on investment securities available for sale, net of tax

Reclassification of (gains) losses on investment securities available for sale included in net income

Tax effect of reclassification of (gains) losses on investment securities available for sale included in net income

Reclassification adjustment for realized gains, net of tax

Total other comprehensive income

Total comprehensive income

Comprehensive loss attributable to the non-controlling interests

Comprehensive income attributable to Air T, Inc.

CONDENSED CONSOLIDATED STATEMENTS OF COMPREHENSIVE INCOME (LOSS)

Three Months Ended

December 31, Nine Months Ended

(In Thousands) 2020 2019 2020 2019

Net Income (Loss) $ 1,763 $ 359 $ ( 2,546 ) $ 10,517

Foreign currency translation loss ( 22 ) ( 53 ) ( 157 ) ( 29 )

Unrealized gain (loss) on interest rate swaps, net of tax 71 94 100 ( 170 )

Reclassification of interest rate swaps into earnings ( 1 ) — ( 17 ) —

Total Other Comprehensive Income (Loss) 48 41 ( 74 ) ( 199 )

Total Comprehensive Income (Loss) 1,811 400 ( 2,620 ) 10,318

Comprehensive Loss (Income) Attributable to Non-controlling Interests 335 ( 789 ) 884 ( 3,464 )

Comprehensive Income (Loss) Attributable to Air T, Inc.

Stockholders $ 2,146 $ ( 389 ) $ ( 1,736 ) $ 6,854

See notes to condensed consolidated financial statements.

AND SUBSIDIARIES

CONDENSED CONSOLIDATED BALANCE SHEETS (AS RESTATED)

December 31, 2015

March 31, 2015 *

(As Restated)

CONDENSED CONSOLIDATED BALANCE SHEETS

(In thousands, except share amounts) December 31, 2020 March 31, 2020

Current Assets:

Cash and cash equivalents (Delphax $276,000)**

Cash and cash equivalents $ 43,352 $ 5,952

Marketable securities 2,234 1,677

Accounts receivable, less allowance for doubtful accounts of $183,000 and $222,000 (Delphax $1,838,000)**

Notes and other receivables-current

Restricted cash 5,473 9,619

Restricted investments 736 1,085

Accounts receivable, net of allowance for doubtful accounts of $ 1,093 and $ 680

19,448 13,077

Income tax receivable 3,451 1,174

Inventories (Delphax $4,869,000)**

Deferred income taxes

Prepaid expenses and other (Delphax $612,000)**

Inventories, net 67,671 60,623

Other current assets 5,344 5,279

Total Current Assets 147,709 98,486

Investments in Available-For-Sale Securities

Property and Equipment, net (Delphax $391,000)**

Cash Surrender Value of Life Insurance Policies

Other Assets (Delphax $29,000)**

LIABILITIES AND EQUITY

Assets on lease or held for lease, net of accumulated depreciation of $ 1,295 and $ 6,526

10,225 27,945

Property and equipment, net of accumulated depreciation of $ 4,785 and $ 4,319

Right-of-use assets 7,895 8,116

Equity method investments 4,443 5,208

Goodwill 4,227 4,227

Other assets 3,151 2,173

Total Assets $ 185,238 $ 151,427

LIABILITIES AND STOCKHOLDERS' EQUITY

Current Liabilities:

Accounts payable (Delphax $1,197,000)**

Income tax payable (Delphax $170,000)**

Accrued expenses (Delphax $1,982,000)**

Short-term debt (Delphax $208,000)**

Accounts payable $ 7,950 10,864

Accrued expenses and other (Note 4) 11,968 13,024

Current portion of long-term debt 42,388 42,684

Short-term lease liability 1,357 1,174

Total Current Liabilities 63,663 67,746

Long-term Debt (Delphax $11,000)**

Deferred Income Taxes

Other Non-current Liabilities (Delphax $49,000)**

Long-term debt 85,019 43,136

Deferred income tax liabilities, net 609 579

Long-term lease liability 7,176 7,473

Other non-current liabilities 1,289 1,402

Total Liabilities 157,756 120,336

Redeemable non-controlling interest 5,554 6,080

Commitments and contingencies (Note 15)

Stockholders' Equity:

1 unchanged sentence

Common stock, $ .25 par value;

4,000,000 shares authorized, 2,372,527 shares issued and outstanding

4,000,000 shares authorized, 3,022,745 shares issued, 2,881,853 shares outstanding

Treasury stock, 140,892 shares at $ 18.58

( 2,617 ) ( 2,617 )

Additional paid-in capital 1,287 2,636

4 unchanged sentences

Non-controlling Interests 991 1,005

Total Equity 21,928 25,011

Total Liabilities and Equity $ 185,238 $ 151,427

* Derived from audited consolidated financial statements

** Amounts related to Delphax as of December 31, 2015

See notes to condensed consolidated financial statements.

AND SUBSIDIARIES

CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS (UNAUDITED)

Nine Months Ended December 31,

CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS

(In Thousands) Nine Months Ended

CASH FLOWS FROM OPERATING ACTIVITIES:

Adjustments to reconcile net income to net cash provided by operating activities:

Loss (Gain) on sale of marketable securities

Gain on sale of property and equipment

Change in accounts receivable and inventory reserves

Net (Loss) Income $ ( 2,546 ) $ 10,517

Loss from discontinued operations, net of income tax — 70

Gain on sale of discontinued operations, net of income tax ( 4 ) ( 8,137 )

Net (loss) income from continuing operations ( 2,550 ) 2,450

Adjustments to reconcile net (loss) income to net cash provided by operating activities:

Depreciation and amortization 2,644 4,640

Change in cash surrender value of life insurance

Warranty reserve

Compensation expense related to stock options

Impairment of investment — 2,305

Profit from sale of assets on lease ( 26 ) ( 3,846 )

Gain on settlement of bankruptcy — ( 4,527 )

Other 694 726

Change in operating assets and liabilities:

Accounts receivable ( 6,784 ) ( 4,708 )

Notes receivable and other non-trade receivables

Prepaid expenses and other

Inventories 6,118 ( 7,866 )

Accounts payable ( 2,913 ) 1,753

Accrued expenses ( 1,056 ) 1,106

Income tax payable

Non-current liabilities

Total adjustments

Net cash provided by operating activities

Other ( 2,788 ) ( 2,925 )

Net cash used in operating activities - continuing operations ( 6,661 ) ( 10,892 )

Net cash provided by operating activities - discontinued operations 4 1,201

Net cash used in operating activities ( 6,657 ) ( 9,691 )

CASH FLOWS FROM INVESTING ACTIVITIES:

Purchase of marketable securities

Proceeds from sale of investment securities available for sale

Cash inflow from acquisition of Delphax interests

Capital expenditures

Proceeds from sale of property and equipment

Purchases of marketable securities ( 659 ) ( 1,103 )

Sale of marketable securities 2,445 631

Proceeds from sale of assets on lease 1,900 16,956

Acquisition of businesses, net of cash acquired — ( 500 )

Investment in unconsolidated entities — ( 2,811 )

Capital expenditures related to property & equipment ( 3,415 ) ( 1,017 )

Capital expenditures related to assets on lease or held for lease ( 124 ) ( 39,885 )

Other ( 455 ) 157

Net cash used in investing activities - continuing operations ( 308 ) ( 27,572 )

Net cash provided by investing activities - discontinued operations — 20,174

Net cash used in investing activities ( 308 ) ( 7,398 )

CASH FLOWS FROM FINANCING ACTIVITIES:

Proceeds from line of credit

Payment on line of credit

Payment on Delphax senior credit facility

Proceeds from lease funding

Proceeds from exercise of stock options

Repurchase of stock options

Net cash used in financing activities

Proceeds from lines of credit 47,886 133,068

Payments on lines of credit ( 54,738 ) ( 100,884 )

Proceeds from term loan 59,277 27,449

Payments on term loan ( 18,176 ) ( 36,187 )

Proceeds from Payroll Protection Program loan ("PPP loan") 8,215 —

Proceeds received from issuance of Trust Preferred Securities ("TruPs") 1 6,041

Other ( 2,082 ) ( 3,323 )

Net cash provided by financing activities - continuing operations 40,383 26,164

Effect of foreign currency exchange rates on cash and cash equivalents ( 164 ) ( 10 )

NET (DECREASE) INCREASE IN CASH AND CASH EQUIVALENTS

CASH AND CASH EQUIVALENTS AT BEGINNING OF PERIOD

CASH AND CASH EQUIVALENTS AT END OF PERIOD

SUPPLEMENTAL SCHEDULE OF NON-CASH INVESTING ACTIVITIES:

Finished goods inventory transferred to equipment leased to customers

SUPPLEMENTAL DISCLOSURE OF CASH FLOW INFORMATION:

Cash paid during the period for:

NET INCREASE IN CASH AND CASH EQUIVALENTS AND RESTRICTED CASH 33,254 9,065

CASH AND CASH EQUIVALENTS AND RESTRICTED CASH AT BEGINNING OF PERIOD 15,571 12,540

CASH AND CASH EQUIVALENTS AND RESTRICTED CASH AT END OF PERIOD $ 48,825 $ 21,605

See notes to condensed consolidated financial statements.

AIR T, INC AND SUBSIDIARIES

CONDENSED CONSOLIDATED STATEMENTS OF EQUITY (UNAUDITED) (AS RESTATED)

Stockholders' Equity

Comprehensive

Non-controlling

Income (Loss)

CONDENSED CONSOLIDATED STATEMENTS OF EQUITY

(In Thousands) Common Stock Treasury Stock Additional

Capital Retained

Earnings Accumulated Other Comprehensive Income (Loss) Non-controlling

Interests Total

Shares Amount Shares Amount

Balance, March 31, 2019 2,022 $ 506 — $ — $ 2,866 $ 21,191 $ ( 205 ) $ ( 1,000 ) $ 23,358

Unrealized gain from marketable securities, net of tax

Exercise of stock options

Compensation expense related to stock options

Repurchase of stock options

Net income* — — — — — 1,782 — 2,034 3,816

Repurchase of Common Stock ( 17 ) ( 4 ) — — — ( 122 ) — — ( 126 )

Stock Split 1,010 252 — — ( 252 ) — — — —

Issuance of Debt - Trust Preferred Securities — — — — — ( 4,000 ) — — ( 4,000 )

Issuance of Warrants — — — — — ( 840 ) — — ( 840 )

Adoption of ASC - Leasing — — — — — ( 41 ) — — ( 41 )

Unrealized loss on interest rate swaps, net of tax — — — — — — ( 176 ) — ( 176 )

Foreign currency translation (loss) gain — — — — — — ( 30 ) 12 ( 18 )

Adjustment to fair value of redeemable non-controlling interests — — — — ( 985 ) — — — ( 985 )

Balance, June 30, 2019 3,015 $ 754 $ — $ — $ 1,629 $ 17,970 $ ( 411 ) $ 1,046 $ 20,988

Net income (loss)* — — — — — 5,715 — ( 17 ) 5,698

Repurchase of Common Stock 8 2 — — — ( 75 ) — — ( 73 )

Foreign currency translation gain — — — — — — 38 3 41

Adjustment to fair value of redeemable non-controlling interest — — — — 781 — — — 781

Unrealized loss on interest rate swaps, net of tax — — — — — — ( 88 ) — ( 88 )

Balance, September 30, 2019 3,023 $ 756 $ — $ — $ 2,410 $ 23,610 $ ( 461 ) $ 1,032 $ 27,347

Net loss* — — — — — ( 430 ) — ( 19 ) ( 449 )

Repurchase of Common Stock — — 110 ( 2,157 ) — — — — ( 2,157 )

Foreign currency translation loss — — — — — — ( 53 ) — ( 53 )

Adjustment to fair value of redeemable non-controlling interest — — — — ( 1,381 ) — — — ( 1,381 )

Unrealized gain on interest rate swaps, net of tax — — — — — — 94 — 94

Balance, December 31, 2019 3,023 $ 756 $ 110 $ ( 2,157 ) $ 1,029 $ 23,180 $ ( 420 ) $ 1,013 $ 23,401

Stockholders' Equity

Comprehensive

Non-controlling

Income (Loss)

Balance, March 31, 2015

Initial consolidation of Delphax

(In Thousands) Common Stock Treasury Stock Additional

Capital Retained

Earnings Accumulated Other Comprehensive Income (Loss) Non-controlling

Interests Total

Shares Amount Shares Amount

Balance, Balance, March 31, 2020 3,023 $ 756 $ 141 $ ( 2,617 ) $ 2,636 $ 23,768 $ ( 537 ) $ 1,005 $ 25,011

Net loss* — — — — — ( 841 ) — ( 5 ) ( 846 )

Unrealized loss on interest rate swaps, net of tax — — — — — — ( 26 ) — ( 26 )

Foreign currency translation (loss) — — — — — — ( 67 ) — ( 67 )

Adjustment to fair value of redeemable non-controlling interest — — — — 429 — — — 429

Balance, June 30, 2020 3,023 756 141 ( 2,617 ) 3,065 22,927 ( 630 ) 1,000 24,501

Net loss* — — — — — ( 2,920 ) — ( 8 ) ( 2,928 )

Foreign currency translation (loss) — — — — — — ( 68 ) — ( 68 )

Adjustment to fair value of redeemable non-controlling interest — — — — ( 890 ) — — — ( 890 )

Unrealized gain on interest rate swaps, net of tax — — — — — — 55 — 55

Balance, September 30, 2020 3,023 756 141 ( 2,617 ) 2,175 20,007 ( 643 ) 992 20,670

Net income (loss)* — — — — — 2,098 — ( 1 ) 2,097

Unrealized gain from marketable securities, net of tax

Foreign currency translation

Funding on residual sharing agreements

Balance, December 31, 2015 (As Restated)

Foreign currency translation (loss) — — — — — — ( 22 ) — ( 22 )

Adjustment to fair value of redeemable non-controlling interest — — — — ( 888 ) — — — ( 888 )

Unrealized gain on interest rate swaps, net of tax — — — — — — 71 — 71

Balance, December 31, 2020 3,023 $ 756 $ 141 $ ( 2,617 ) $ 1,287 $ 22,105 $ ( 594 ) $ 991 $ 21,928

* Excludes amount attributable to redeemable non-controlling interest in Contrail.

See notes to condensed consolidated financial statements.

AND SUBSIDIARIES

NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (UNAUDITED) (AS RESTATED)

Restatement of Previously Issued Consolidated Financial Statements

Pursuant to a Securities Purchase Agreement dated as of October 2, 2015 (the “Securities Purchase Agreement”) among the Company, Delphax Technologies Inc.

(“Delphax”) and its subsidiary, Delphax Technologies Canada Limited (“Delphax Canada”), on November 24, 2015 (the “Closing Date”), the Company purchased (i) at face value a $2,500,000 principal amount Five-Year Senior Subordinated Promissory Note (the “Senior Subordinated Note”) issued by Delphax Canada for a combination of cash and the outstanding principal of $500,000 and accrued and unpaid interest under a 90-Day Senior Subordinated Note purchased at face value by the Company from Delphax Canada on October 2, 2015 pursuant to the Securities Purchase Agreement and (ii) for $1,050,000 in cash a total of 43,000 shares of Delphax ’s Series B Preferred Stock (the “Series B Preferred Stock”) and a Stock Purchase Warrant (the “Warrant”) to acquire an additional 95,600 shares of Series B Preferred Stock at a price of $33.4728 per share (subject to adjustment for specified dilutive events).

Each share of Series B Preferred Stock is convertible into 100 shares of common stock of Delphax, subject to anti-dilution adjustments, and has no liquidation preference over shares of common stock of Delphax.

No dividends are required to be paid with respect to the shares of Series B Preferred Stock, except that ratable dividends (on an as-converted basis) are to be paid in the event that dividends are paid on the common stock of Delphax.

Based on the number of shares of Delphax common stock outstanding at the Closing Date, the number of shares of common stock underlying the Series B Preferred Stock purchased by the Company represented approximately 38% of the shares of Delphax common stock that would be outstanding assuming conversion of Series B Preferred Stock held by the Company.

Holders of the Series B Preferred Stock, voting as a separate class, were initially entitled to elect (and exercise rights of removal and replacement with respect to) three-sevenths of the board of directors of Delphax, and after June 1, 2016 the holders of the Series B Preferred Stock, voting as a separate class, were entitled to elect (and to exercise rights of removal and replacement with respect to) four-sevenths of the members of the board of directors of Delphax.

The Warrant expires on November 24, 2021 and provides that in the event that dividends are paid on the common stock of Delphax, the holder of the Warrant is entitled to participate in such dividends on a ratable basis as if the Warrant had been fully exercised and the shares of Series B Preferred Stock acquired upon such exercise had been converted into shares of Delphax common stock.

The condensed consolidated financial statements included in the Company ’s Quarterly Report on Form 10-Q for the period ended December 31, 2015, originally filed with the Securities and Exchange Commission (the “SEC”) on February 5, 2016 (“Original Filing”), reflect the consolidation of Delphax with the Company and its subsidiaries from the November 24, 2015 Closing Date.

Such condensed consolidated financial statements also reflect an attribution of 62% of Delphax’s loss for periods commencing as of the Closing Date to non-controlling interests in the determination of consolidated net income attributable to Air T, Inc.

stockholders.

Such attribution was based on the Company’s ownership of the Series B Preferred Stock, which represented approximately 38% of the shares of Delphax common stock that would be outstanding assuming conversion of Series B Preferred Stock held by the Company.

We have concluded that it was not appropriate to base attribution solely on our ownership of the Series B Preferred Stock and that our attribution methodology should be based on consideration of all of Air T’s investments in Delphax and Delphax Canada.

As disclosed above, the Warrant provides that in the event that dividends are paid on the common stock of Delphax, the holder of the Warrant is entitled to participate in such dividends on a ratable basis as if the Warrant had been fully exercised and the shares of Series B Preferred Stock acquired upon such exercise had been converted into shares of Delphax common stock.

This provision would have entitled Air T, Inc.

to approximately 67% of any Delphax dividends paid, with the remaining 33% paid to the non-controlling interests.

We concluded that this was a substantive distribution right which should be considered in the attribution of Delphax net income or loss to non-controlling interests.

We furthermore concluded that our investment in the debt of Delphax should be considered in attribution.

Specifically, Delphax ’s net losses are attributed first to our Series B Preferred Stock and Warrant investments and to the non-controlling interest (67% /33%) until such amounts are reduced to zero.

Additional losses are then fully attributed to our debt investments until they too are reduced to zero.

This sequencing reflects the relative priority of debt to equity.

Any further losses are then attributed to Air T and the non-controlling interests based on the initial 67% / 33% share.

Delphax net income is attributed using a backwards-tracing approach with respect to previous losses.

The effect of interest expense arising under the Senior Subordinated Note and of other intercompany transactions are reflected in the attribution of Delphax net income or losses to non-controlling interests because Delphax is a variable interest entity.

As a result of the application of the above-described attribution methodology, for the three and nine months ended December 31, 2015, the attribution of Delphax losses to non-controlling interests should have been 33%.

In addition, we are also correcting an otherwise immaterial error associated with our elimination of intercompany interest charged by Air T, Inc.

to Delphax Canada under the Senior Subordinated Note.

This Form 10-Q/A is being filed to restate our unaudited condensed consolidated financial statements at December 31, 2015 and for the three and nine months ended December 31, 2015 to so correct the treatment of Air T’s interests in Delphax with respect to the attribution of Delphax losses and the elimination of intercompany interest and to correct and expand related disclosures.

The combined impacts of all the adjustments to the applicable line items in our unaudited condensed consolidated financial statements for the periods covered by this Form 10Q/A are provided in the tables below.

Financial Statement Presentation

In addition to the restatement of our unaudited condensed consolidated financial statements, we have also restated the following Notes for the effects of the errors above or, as indicated, amended Notes to include additional relevant disclosures.

Acquisition of Interests in Delphax (As Amended)

Net Earnings Per Share (As Restated)

Variable Interest Entities (As Restated)

The following tables present the effect of the correction of the error on selected line items of our previously reported unaudited condensed consolidated financial statements at December 31, 2015 and for the three and nine months ended December 31, 2015:

As Previously Reported

Consolidated Balance Sheet Information (at December 31, 2015):

Retained earnings

Accumulated other comprehensive loss

Total Air T, Inc.

stockholders' equity

Non-controlling interests

Total liabilities and equity

Consolidated Statement of Income (Loss) (For the three months ended December 31, 2015):

Net loss attributable to non-controlling interests

Net income attributable to Air T, Inc.

Earnings per share - basic

Earnings per share - diluted

Consolidated Statement of Comprehensive Income (For the three months ended December 31, 2015):

Comprehensive loss attributable to non-controlling interests

Comprehensive income attributable to Air T, Inc.

Consolidated Statement of Income (Loss) (For the nine months ended December 31, 2015):

Net loss attributable to non-controlling interests

Net income attributable to Air T, Inc.

Earnings per share - basic

Earnings per share - diluted

Consolidated Statement of Comprehensive Income (For the nine months ended December 31, 2015):

Comprehensive loss attributable to non-controlling interests

Comprehensive income attributable to Air T, Inc.

NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (UNAUDITED)

Financial Statement Presentation

The condensed consolidated financial statements of Air T, Inc.

(the “Company”) have been prepared, without audit, pursuant to the rules and regulations of the Securities and Exchange Commission.

(“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.

It is suggested that these condensed consolidated financial statements 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, 2015.

The results of operations for the periods ended December 31 are not necessarily indicative of the operating results for the full year.

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, 2020.

The results of operations for the period ended December 31, 2020 are not necessarily indicative of the operating results for the full year.

Certain reclassifications have been made to the prior period amounts to conform to the current presentation.

New Accounting Pronouncement s

In May 2014, a comprehensive new revenue recognition standard was issued that will supersede nearly all existing revenue recognition guidance.

The new guidance introduces a five-step model in which an entity should recognize revenue to depict the transfer of promised goods or services to customers in an amount that reflects the consideration to which the entity expects to be entitled in exchange for those goods or services.

This guidance also requires disclosures sufficient to enable users to understand the nature, amount, timing, and uncertainty of revenue and cash flows arising from contracts with customers, including qualitative and quantitative disclosures about contracts with customers, significant judgments and changes in judgments, and assets recognized from the costs to obtain or fulfill a contract.

This guidance is effective for annual reporting periods beginning after December 15, 2017, including interim periods within that reporting period.

Management is currently evaluating the new guidance, including possible transition alternatives, to determine the impact it will have on the Company ’s consolidated financial statements.

In February 2015, a standard was issued that amends the guidance that reporting entities apply when evaluating whether certain legal entities should be consolidated.

The Company will be required to adopt the standard as of the first quarter of its fiscal year ending March 31, 2017.

The Company is currently evaluating the impact of adoption on its consolidated financial statements.

In April 2015, a standard was issued that amends existing guidance to require the presentation of debt issuance costs in the balance sheet as a deduction from the carrying amount of the related debt liability instead of a deferred charge.

It is effective for annual reporting periods beginning after December 15, 2015, but early adoption is permitted.

The Company is evaluating the impact of adoption of the standard on its consolidated financial statements.

In July 2015, a standard was issued that amends existing guidance to simplify the measurement of inventory by requiring certain inventory to be measured at the lower of cost or net realizable value.

It is effective for fiscal years beginning after December 15, 2016 and for interim periods therein.

The Company is evaluating the impact of the adoption of the standard on its consolidated financial statements.

In September 2015, a standard was issued that simplifies the accounting for measurement period adjustments associated with a business combination by eliminating the requirement to restate prior period financial statements for measurement period adjustments when measurements were incomplete as of the end of the reporting period that includes the business combination.

The new guidance requires that the cumulative impact of a measurement period adjustment (including the impact on prior periods) be recognized in the reporting period in which the adjustment is identified.

It is effective for interim and annual periods beginning after December 15, 2015, with early adoption permitted.

The Company is currently evaluating whether it will adopt this new standard during the fiscal year ended March 31, 2016, or wait until required adoption in the following fiscal year.

In January 2016, the Financial Accounting Standard Board (FASB) published Accounting Standards Update (ASU) 2016-01 Financial Instruments Overall:

Recognition and Measurement of Financial Assets and Financial Liabilities that amends the guidance on the classification and measurement of financial instruments.

ASU 2016-01 becomes effective for public business entities in fiscal years beginning after December 15, 2017, including interim periods therein.

All other entities are provided a one-year deferral.

ASU 2016-01 removes equity securities from the scope of Accounting Standards Codification (ASC) Topic 320 and creates ASC Topic 321, Investments –

Equity Securities.

Under the new Topic, all equity securities with readily determinable fair values are measured at fair value on the statement of financial position, with changes in fair value recorded through earnings.

The update eliminates the option to record changes in the fair value of equity securities through other comprehensive income.

The Company is evaluating the impact of the adoption of the standard on its consolidated financial statements.

Acquisition of Interests in Delphax (As Amended )

Pursuant to a Securities Purchase Agreement dated as of October 2, 2015 (the “Securities Purchase Agreement”) among the Company, Delphax Technologies Inc.

(“Delphax”) and its subsidiary, Delphax Technologies Canada Limited (“Delphax Canada”), on November 24, 2015 (the “Closing Date”), the Company purchased (i) at face value a $2,500,000 principal amount Five-Year Senior Subordinated Promissory Note (the “Senior Subordinated Note”) issued by Delphax Canada for a combination of cash and the surrender of outstanding principal of $500,000 and accrued and unpaid interest under, and cancellation of, a 90-Day Senior Subordinated Note purchased at face value by the Company from Delphax Canada on October 2, 2015 pursuant to the Securities Purchase Agreement and (ii) for $1,050,000 in cash a total of 43,000 shares of Delphax ’s Series B Preferred Stock (the “Series B Preferred Stock”) and a Stock Purchase Warrant (the “Warrant”) to acquire an additional 95,600 shares of Series B Preferred Stock at a price of $33.4728 per share (subject to adjustment for specified dilutive events).

Principal under the Senior Subordinated Note is due on October 24, 2020 and bears interest at an annual rate of 8.5%.

Interest is to be paid in kind until, in the absence of specified events, November 24, 2017.

Thereafter, interest is to be paid in cash.

Interest in kind is to be paid monthly, while interest payable in cash is to be paid quarterly.

The Senior Subordinated Note is guaranteed by Delphax and is secured by security interests granted by Delphax and Delphax Canada in their respective inventories, equipment, accounts receivable, cash, deposit accounts, contract rights and other specified property, as well as a pledge by Delphax of the outstanding capital stock of its subsidiaries, including Delphax Canada.

Pursuant to the terms of a subordination agreement (the “Subordination Agreement”) entered into on October 2, 2015 by Delphax, Delphax Canada, the Company and the senior lender (the “Senior Lender”) that provides a revolving credit facility under an agreement with Delphax and Delphax Canada (the “Senior Credit Agreement”), the Company ’s rights with respect to payment under and enforcement of the Senior Subordinated Note, and enforcement of its security interests are subordinated to the rights of the Senior Lender under the Senior Credit Agreement.

Based on the number of shares of Delphax common stock outstanding and reserved for issuance under Delphax ’s employee stock option plans at the Closing Date, the number of shares of common stock underlying the Series B Preferred Stock purchased by the Company represent approximately 38% of the shares of Delphax common stock that would be outstanding assuming conversion of Series B Preferred Stock held by the Company and approximately 31% of the outstanding shares of common stock assuming conversion of the Series B Preferred Stock and the issuance of all the shares of Delphax common stock reserved for issuance under Delphax’s employee stock option plans.

Pursuant to the terms of the Series B Preferred Stock, for so long as amounts are owed to the Company under the Senior Subordinated Note or the Company continues to hold a specified number of the Series B Preferred Stock and interests in the Warrant sufficient to permit it to acquire up to 50% of the number of shares of Series B Preferred Stock initially purchasable under the Warrant (or holds shares of Series B Preferred Stock acquired in connection with the exercise of the Warrant equal to 50% of the number of shares of Series B Preferred Stock initially purchasable under the Warrant), then

holders of the Series B Preferred Stock, voting as a separate class, would be entitled to elect (and exercise rights of removal and replacement with respect to) three-sevenths of the board of directors of Delphax, and after June 1, 2016 the holders of the Series B Preferred Stock, voting as a separate class, would be entitled to elect (and to exercise rights of removal and replacement with respect to) four-sevenths of the members of the board of directors of Delphax;

without the written consent or waiver of the Company, Delphax may not enter into specified corporate transactions.

Pursuant to the provision described above, beginning on November 24, 2015, three designees of the Company were elected to the board of directors of Delphax, which had a total of seven members following their election.

The Warrant expires on November 24, 2021.

In the event that Delphax were to declare a cash dividend on its common stock, the Warrant provides that the holder of the Warrant would participate in the dividend as if the Warrant had been exercised in full and the shares of Series B Preferred Stock acquired upon exercise had been fully converted into Delphax common stock.

The Warrant provides that, prior to any exercise of the Warrant, the holder of the Warrant must first make a good faith written tender offer to existing holders of Delphax common stock to purchase an aggregate amount of common stock equal to the number of shares of common stock issuable upon conversion of the Series B Preferred Stock that would be purchased upon such exercise of the Warrant.

The Warrant requires that the per share purchase price to be offered in such tender offer would be equal to the then-current exercise price of the Warrant divided by the then-current conversion rate of the Series B Preferred Stock.

To the extent that shares of common stock are purchased by the holder in the tender offer, the amount of shares of Series B Preferred Stock purchasable under the Warrant held by such holder is to be ratably reduced.

The Warrant is to provide that it may be exercised for cash, by surrender of principal and interest under the Senior Subordinated Note equal to 0.95 times the aggregate exercise price or by surrender of a portion of the Warrant having a value equal to the aggregate exercise price based on the difference between the Warrant exercise price per share and an average market value, measured over a 20-trading day period, of Delphax common stock that would be acquired upon conversion of one share of Series B Preferred Stock.

As a result of the above transactions, the Company determined that it had obtained control over Delphax and it included Delphax in its consolidated financial statements beginning on November 24, 2015.

The following table summarizes the preliminary fair values of consolidated Delphax assets and liabilities as of the Closing Date:

November 24, 2015

Cash and cash equivalents

Accounts receivable, net

Other current assets

Property and equipment

Accounts payable

Discontinued Operations

On September 30, 2019, the Company completed the sale of Global Aviation Services, LLC ("GAS").

The results of operations of GAS are reported as discontinued operations in the condensed consolidated statements of operations for the three and nine months ended December 31, 2020 and 2019.

Refer to Footnote 3 - "Discontinued Operations" for additional information.

Unless otherwise indicated, the disclosures accompanying the condensed consolidated financial statements reflect the Company's continuing operations.

Contrail Aviation Support, LLC ("Contrail") is a subsidiary of the Company in the Commercial Jet Engines and Parts segment.

The Contrail Credit Agreement contains affirmative and negative covenants, including covenants that restrict the ability of Contrail and its subsidiaries to, among other things, incur or guarantee indebtedness, incur liens, dispose of assets, engage in mergers and consolidations, make acquisitions or other investments, make changes in the nature of its business, and engage in transactions with affiliates.

The Contrail Credit Agreement also contains quarterly financial covenants applicable to Contrail and its subsidiaries, including a minimum debt service coverage ratio of 1.25 to 1.0 and a minimum tangible net worth of $ 15 million.

On September 25, 2020, Contrail entered into a Third Amendment to Supplement #2 to Master Loan Agreement dated June 24, 2019 with Old National Bank ("ONB").

The material changes within the Third Amendment are:

(a) to extend the date for compliance with the provision where Contrail is required to pay down the total outstanding principal balance of its revolver to zero for at least thirty consecutive days to September 5, 2021;

and (b) to extend the date for compliance with the required quarterly debt service coverage ratio covenant such that Contrail shall commence compliance with the covenant commencing on March 31, 2022 and on the last day of each fiscal quarter thereafter.

On November 24, 2020, Contrail and ONB entered into Supplement #8 to Master Loan Agreement and related documentation for a loan in the aggregate amount of $ 43.6 million (the “Contrail Main Street Loan”) for which ONB served as lender pursuant to the Main Street Priority Loan Facility as established by the U.S.

Federal Reserve (the "Fed").

The Contrail Main Street Loan was approved by the Fed and completed by December 8, 2020.

The loan proceeds are to be used as working capital to support the operations of Contrail in the ordinary course of business, which includes the acquisition from time to time of aircraft and engines.

The proceeds will also be used to pay down the Contrail Revolver.

The indebtedness incurred is subject to the terms and provisions of the Master Loan Agreement.

The principal terms of the Contrail Main Street Loan ("Term Note G") are:

(a) interest on the loan accrues at a floating rate of LIBOR plus 3.00 % and interest is payable commencing November 24, 2021;

(b) 15 % principal payments plus 15 % of the amount of capitalized interest are due on November 24, 2023 and 2024, with the remainder due on the loan maturity date – November 24, 2025;

and, (d) a 2 % origination fee was paid on funding of the loan.

The loan contains affirmative covenants as to cash flow coverage and tangible net worth.

The terms of the loan provide for customary events of default, including, among others, those relating to a failure to make payment, breaches of representations and covenants, and the occurrence of certain events.

The loan is secured by a security interest in the assets of Contrail.

AirCo 1, LLC ("AirCo 1") is a wholly-owned subsidiary of AirCo, LLC, which is a wholly-owned subsidiary of Stratus Aero Partners LLC, which is a wholly-owned subsidiary of the Company in the Commercial Jet Engines and Parts segment.

On December 11, 2020, AirCo 1 and Park State Bank (“PSB”), entered into a loan in the aggregate amount of $ 6.2 million (the “AirCo 1 Main Street Loan”) for which PSB served as lender pursuant to the Main Street Priority Loan Facility as established by the Fed.

The AirCo 1 Main Street Loan was approved by the Fed and completed by December 22, 2020.

The loan proceeds were used to pay off the AirCo 1 revolving line of credit with Minnesota Bank & Trust ("MBT").

The principal terms of the AirCo 1 Main Street Loan ("Term Loan - PSB") are:

(a) interest on the loan accrues at a floating rate of LIBOR plus 3.00 % and interest is payable commencing December 11, 2021;

(b) 15 % principal payments (including any capitalized interest accrued thereon) are due on December 11, 2023, and 2024, with the remainder due on the loan maturity date – December 11, 2025;

and, (d) a 2 % origination fee was paid on funding of the loan.

The loan contains an affirmative covenant relating to collateral valuation.

The loan is secured by a security interest in the assets of AirCo 1 and a pledge of AirCo’s membership interest in AirCo 1.

The revolving line of credit at Air T with MBT has a due date or expires within the next twelve months.

We are currently seeking to refinance this obligation prior to August 31, 2021;

however, there is no assurance that we will be able to execute this refinancing or, if we are able to refinance this obligation, that the terms of such refinancing would be as favorable as the terms of our existing credit facility.

In April 2020, the Company obtained loans under the PPP, as authorized by the Coronavirus Aid, Relief, and Economic Security Act (the "CARES Act"), of $ 8.2 million to help pay for payroll costs, mortgage interest, rent and utility costs.

The Company will apply to MBT for forgiveness of the PPP Loan, however, forgiveness is not fully assured.

The Company believes it is probable that the cash on hand (including that obtained from the PPP), net cash provided by operations from its remaining operating segments, together with its current revolving lines of credit, as amended or replaced and other recent financings, will be sufficient 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.

COVID-19 Pandemic

The Company is closely monitoring the impact of the COVID-19 pandemic on all aspects of its business.

Even though the Company undertook measures to attempt to limit the effect of the pandemic and its impact on the Company, the Company continued to experience a decrease in revenues during the third fiscal quarter and the month of January.

The extent to which the COVID-19 pandemic continues to impact the Company’s operations will depend on future developments, which are highly uncertain and cannot be predicted with confidence, including the scope, severity and duration of the pandemic, the actions taken to contain the pandemic or mitigate its impact, including the effectiveness and rollout of vaccines and the direct and indirect economic effects of the pandemic and containment measures, among others.

Financial Instruments Designated for Trading

Except for short sales of equity securities, the Company accounts for all other financial instruments (including derivative instruments) designated for trading in accordance with ASC 815.

All changes in the fair value of the financial instruments designed for trading are recognized in earnings as they occur.

Further, all gains and losses on derivative instruments designated for trading are presented net on the condensed consolidated Statements of Income (Loss).

The fair value of derivative instruments designated for trading in a gain position are recorded in Other Current Assets and the fair value of derivative instruments designed for trading in a loss position are recorded in Accrued Expenses and Other on the condensed consolidated Balance Sheets.

The Company accounts for short sales of equity securities in accordance with ASC 942 and ASC 860.

The obligations incurred in short sales are reported in Accrued Expenses and Other on the condensed consolidated Balance Sheets.

They are subsequently measured at fair value through the income statement at each reporting date with gains and losses on securities.

Interest on the short positions are accrued periodically and reported as interest expense.

The market value of the Company’s equity securities and cash held by the broker are used as collateral against any outstanding margin account borrowings for purposes of short selling equities.

This collateral is recorded in Other Current Assets on the condensed consolidated Balance Sheets.

The Company reports all cash receipts and payments resulting from the purchases and sales of securities, loans, and other assets that are acquired specifically for resale as operating cash flows.

Recently Adopted Accounting Pronouncements

In June 2016, the FASB issued ASU 2016-13, Financial Instruments—Credit Losses (Topic 326):

Measurement of Credit Losses on Financial Instruments.

This standard significantly changes how entities measure credit losses for most financial assets and certain other instruments that are not measured at fair value through net income, including trade receivables.

The standard requires an entity to

estimate its lifetime “expected credit loss” for such assets at inception, and record an allowance that, when deducted from the amortized cost basis of the financial asset, presents the net amount expected to be collected on the financial asset.

The Company adopted this standard on April 1, 2020.

As of December 31, 2020, the standard did not have a material impact on the Company's condensed consolidated financial statements and disclosures.

In January 2017, the FASB issued ASU 2017-04, Intangibles – Goodwill and Other (Topic 350):

Simplifying the Test for Goodwill Impairment.

This ASU simplifies how an entity is required to test goodwill for impairment by eliminating Step Two from the goodwill impairment test.

Step Two measures a goodwill impairment loss by comparing the implied fair value of a reporting unit’s goodwill with the carrying amount of that goodwill.

Under this standard, an entity will recognize an impairment charge for the amount by which the carrying value of a reporting unit exceeds its fair value.

The Company adopted this amendment on April 1, 2020.

As of December 31, 2020, the amendment did not have a material impact on the Company's condensed consolidated financial statements and disclosures.

In October 2018, the FASB updated the Consolidation (Topic 810):

Targeted Improvements to Related Party Guidance for Variable Interest Entities of the Accounting Standards Codification.

The amendments in this update affect reporting entities that are required to determine whether they should consolidate a legal entity under the guidance within the Variable Interest Entities Subsections of Subtopic 810-10, Consolidation—Overall.

Indirect interests held through related parties in common control arrangements should be considered on a proportional basis for determining whether fees paid to decision makers and service providers are variable interests.

The Company adopted this amendment on April 1, 2020.

As of December 31, 2020, the amendment did not have a material impact on the Company's condensed consolidated financial statements and disclosures.

In December 2019, the FASB updated the Income Taxes (Topic 740):

Simplifying the Accounting for Income Taxes of the Accounting Standards Codification.

For public business entities, the amendments in this Update are effective for fiscal years beginning after December 15, 2020, and interim periods within those fiscal years.

The amendments in this Update simplify the accounting for income taxes by removing the exception to the incremental approach for intraperiod tax allocation when there is a loss from continuing operations and income or a gain from other items (for example, discontinued operations or other comprehensive income), among other changes.

The Company early adopted this amendment as of April 1, 2020.

The amendment resulted in an immaterial impact to its condensed consolidated financial statements and disclosures.

Recently Issued Accounting Pronouncements

In January 2020, the FASB updated the Investments—Equity Securities (Topic 321), Investments—Equity Method and Joint Ventures (Topic 323), and Derivatives and Hedging (Topic 815)—Clarifying the Interactions between Topic 321, Topic 323, and Topic 815.

For public business entities, the amendments in this Update are effective for fiscal years beginning after December 15, 2020, and interim periods within those fiscal years.

The amendments clarify that an entity should consider observable transactions that require it to either apply or discontinue the equity method of accounting for the purposes of applying the measurement alternative in accordance with Topic 321 immediately before applying or upon discontinuing the equity method.

The Company is currently evaluating the impact of this amendment on its condensed consolidated financial statements and disclosures.

In March 2020, the FASB issued ASU 2020-04- Reference Rate Reform (Topic 848):

Facilitation of the Effects of Reference Rate Reform on Financial Reporting.

The amendments in this Update provide optional expedients and exceptions for applying generally accepted accounting principles (GAAP) to contracts, hedging relationships, and other transactions affected by reference rate reform if certain criteria are met.

The amendments in this Update apply only to contracts, hedging relationships, and other transactions that reference LIBOR or another reference rate expected to be discontinued because of reference rate reform.

The expedients and exceptions provided by the amendments do not apply to contract modifications made and hedging relationships entered into or evaluated after December 31, 2022, except for hedging relationships existing as of December 31, 2022, that an entity has elected certain optional expedients for and that are retained through the end of the hedging relationship.

Further, in accordance with the amendments in this Update, an entity may make a one-time election to sell, transfer, or both sell and transfer debt securities classified as held to maturity that reference a rate affected by reference rate reform and that are classified as held to maturity before January 1, 2020.

The amendments are effective for all entities from the beginning of an interim period that includes the issuance date of this ASU.

An entity may elect to apply the amendments prospectively through December 31, 2022.

The Company is currently evaluating the impact of this amendment on our contracts, hedging relationships, and other transactions affected by reference rate reform.

Revenue Recognition

Substantially all of the Company’s 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:

Type of Revenue Nature, Timing of Satisfaction of Performance Obligations, and Significant Payment Terms

Product Sales The Company generates revenue from sales of various distinct products such as parts, aircraft equipment, printing equipment, jet engines, airframes, and scrap metal to its customers.

A performance obligation is created when the Company accepts an order from a customer to provide a specified product.

Each product ordered by a customer represents a performance obligation.

The Company recognizes revenue when obligations under the terms of the contract are satisfied;

generally, this occurs at a point-in-time upon shipment or when control is transferred to the customer.

Transaction prices are based on contracted terms, which are at fixed amounts based on standalone selling prices.

While the majority of the Company's contracts do not have variable consideration, for the limited number of contracts that do, the Company records revenue based on the standalone selling price less an estimate of variable consideration (such as rebates, discounts or prompt payment discounts).

The Company estimates these amounts based on the expected incentive amount to be provided to customers and reduces revenue accordingly.

Performance obligations are short-term in nature and customers are typically billed upon transfer of control.

The Company records all shipping and handling fees billed to customers as revenue.

The terms and conditions of the customer purchase orders or contracts are dictated by either the Company’s standard terms and conditions or by a master service agreement or by the contract.

Support Services The Company provides a variety of support services such as aircraft maintenance, printer maintenance, and short-term repair services to its customers.

Additionally, the Company operates certain aircraft routes on behalf of FedEx.

A performance obligation is created when the Company agrees to provide a particular service to a customer.

For each service, the Company recognizes revenues over time as the customer simultaneously receives the benefits provided by the Company's performance.

This revenue recognition can vary from when the Company has a right to invoice to the output or input method depending on the structure of the contract and management’s analysis.

For repair-type services, the Company records revenue over-time based on an input method of costs incurred to total estimated costs.

The Company believes this is appropriate as the Company is performing labor hours and installing parts to enhance an asset that the customer controls.

The vast majority of repair-services are short term in nature and are typically billed upon completion of the service.

Some of the Company’s contracts contain a promise to stand ready as the Company is obligated to perform certain maintenance or administrative services.

For most of these contracts, the Company applies the 'as invoiced' practical expedient as the Company has a right to consideration from the customer in an amount that corresponds directly with the value of the entity's performance completed to date.

A small number of contracts are accounted for as a series and recognized equal to the amount of consideration the Company is entitled to less an estimate of variable consideration (typically rebates).

These services are typically ongoing and are generally billed on a monthly basis.

In addition to the above type of revenues, the Company also has Leasing Revenue, which is in scope under Topic 842 (Leases) and out of scope under Topic 606 and Other Revenues (Freight, Management Fees, etc.) which are immaterial for disclosure under Topic 606.

The following table summarizes disaggregated revenues by type (in thousands):

Three Months Ended December 31, Nine Months Ended December 31,

2020 2019 2020 2019

Product Sales

Air Cargo $ 4,970 $ 6,014 $ 15,013 $ 18,108

Ground equipment sales 20,365 15,640 47,935 40,132

Commercial jet engines and parts 16,471 35,463 23,450 59,851

Corporate and other 73 3 106 72

Support Services

Air Cargo 11,342 12,644 34,751 38,572

Ground equipment sales 109 161 193 370

Commercial jet engines and parts 1,191 797 3,771 3,804

Corporate and other 47 116 72 383

Leasing Revenue

Air Cargo — — — —

Ground equipment sales 39 58 110 111

Commercial jet engines and parts 373 2,245 1,537 8,901

Corporate and other 36 36 178 117

Air Cargo 10 48 25 91

Ground equipment sales 256 90 418 326

Commercial jet engines and parts 43 31 128 109

Corporate and other 494 ( 46 ) 707 234

Total $ 55,819 $ 73,300 $ 128,394 $ 171,181

See Note 12 for the Company's disaggregated revenues by geographic region and 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

Contract liabilities relate to deferred income and advanced customer deposits with respect to product sales.

The following table presents outstanding contract liabilities as of April 1, 2020 and December 31, 2020 and the amount of contract liabilities that were recognized as revenue during the nine-month period ended December 31, 2020 (in thousands):

Outstanding contract liabilities Outstanding contract liabilities as of April 1, 2020

Recognized as Revenue

As of December 31, 2020 $ 1,661

As of April 1, 2020 1,853

For the nine months ended December 31, 2020 785

Discontinued Operations

On September 30, 2019, the Company completed the sale of 100 % of the equity ownership in the Company’s wholly-owned subsidiary, Global Aviation Services, LLC ("GAS") to PrimeFlight Aviation Services, Inc., a Delaware corporation.

The agreement included a purchase price of $ 21 million as well as an earn-out provision of $ 4 million if certain performance metrics were achieved by March 31, 2020.

Those metrics were not achieved per the final settlement statement received during the second quarter ended September 30, 2020.

The Company received approximately $ 20.5 million of total proceeds at closing after the initial net working capital adjustment.

The Company recognized a pre-tax gain on the sale of GAS of approximately $ 10.8 million with a tax impact of $ 2.4 million for a net of tax gain of $ 8.4 million in the second quarter of 2019.

Summarized results of operations of GAS for the three and nine months ended December 31, 2020 and 2019 through the date of disposition are as follows (in thousands):

Three Months Ended December 31, Nine Months Ended December 31,

2020 2019 2020 2019

Net sales $ — $ — $ — $ 16,637

Operating Income (Expense) — — 4 ( 17,319 )

Gain/(Loss) from discontinued operations before income taxes — — 4 ( 682 )

Income tax benefit — — — ( 612 )

Gain/(Loss) from discontinued operations, net of tax $ — $ — $ 4 $ ( 70 )

Accrued Expenses

Income tax payable

Other long-term liabilities

Total liabilities

The Company determined that it was reasonable to use the price which it paid for its equity interest as the basis for estimating the total fair value of Delphax ’s equity as of November 24, 2015 acquisition date.

The effect of the Company’s equity and debt investments of $1,050,000 and $2,500,000, respectively, are not reflected in the above table.

As such, the amounts presented reflect the fair values of Delphax’s assets and liabilities immediately prior to the Company’s investments.

The net assets amount presented above is the estimated acquisition date fair value of the non-controlling interests in Delphax.

Delphax ’s debt immediately prior to the acquisition included approximately $508,000 due under the 90-Day Senior Subordinated Note.

The goodwill is not tax deductible for income tax purposes.

The Company ’s accounting for its acquisition of interests in Delphax is currently incomplete.

Therefore, as permitted by ASC 805, the above amounts are provisional.

The Company anticipates finalizing its accounting for this business combination in the fourth quarter of the current fiscal year.

Direct costs relating to the above transactions of $110,000 were expensed as incurred during the three and nine-month periods ended December 31, 2015, and are included in general and administrative expenses in the condensed consolidated statements of income and comprehensive income.

Income Tax es

Income taxes have been provided using the asset and liability method.

Deferred tax assets and liabilities are recognized for the future tax consequences attributable to differences between the consolidated financial statement carrying amounts of existing assets and liabilities and their respective tax bases.

Deferred tax assets and liabilities are measured using enacted tax laws and rates expected to apply to taxable income in the years in which those temporary differences are expected to be recovered or settled.

The effect of a change in tax rates on deferred tax assets and liabilities is recognized in income in the period that includes the enactment date.

The income tax provision for the nine-month period ended December 31, 2015 differs from the federal statutory rate partially due to the effect of state income taxes, the federal domestic production activities deduction, and the Company ’s share of Delphax’s consolidated net loss.

The effective tax rate for the nine-month period ended December 31, 2015 also reflects the estimated benefit for the exclusion of income for the Company’s captive insurance company subsidiary afforded under Section 831(b).

During the nine-month periods ended December 31, 2015 and 2014, the Company recorded income tax expense of $2,867,000 and $1,495,000, respectively.

For the three-month period ended December 31, 2015, the tax expense was $1,499,000 compared to $691,000 of tax expense recorded for the prior comparable quarter.

As described in Note 2, effective on November 24, 2015, Air T, Inc.

purchased interests in Delphax.

With an equity investment level by the Company of approximately 38%, Delphax is required to continue filing a separate United States corporate tax return.

Furthermore, Delphax has three foreign subsidiaries located in Canada, France, and the United Kingdom which file tax returns in those jurisdictions.

With few exceptions, Delphax is no longer subject to examinations by income tax authorities for tax years before 2011.

Delphax maintains a September 30 fiscal year.

As of September 30, 2015, Delphax and its subsidiaries had estimated foreign and domestic tax loss carryforwards of $13.9 million and $8.0 million, respectively.

As of that date, they had estimated foreign research and development credit carryforwards of $3.9 million, which are available to offset future income tax.

The credits and net operating losses expire in varying amounts beginning in the year 2023.

Domestic alternative minimum tax credits of approximately $325,000 are available to offset future income tax with no expiration date.

Should there be an ownership change for purposes of Section 382 or any equivalent foreign tax rules, the utilization of the previously mentioned carryforwards may be significantly limited.

The provisions of ASC 740 require an assessment of both positive and negative evidence when determining whether it is more-likely-than-not that deferred tax assets will be recovered.

In accounting for the Delphax acquisition on November 24, 2015, the Company established a full valuation allowance against Delphax ’s net deferred tax assets of approximately $11,661,000.

The corresponding valuation allowance at December 31, 2015 was approximately $12,003,000.

The cumulative losses incurred by Delphax in recent years was the primary basis for the Company’s determination that a full valuation allowance should be established.

Net Earnings Per Share (As R estated)

Basic earnings per share have been calculated by dividing net earnings attributable to Air T, Inc.

(in thousands) December 31, 2020 March 31, 2020

Salaries, wages and related items $ 4,723 $ 3,616

Profit sharing and bonus 2,111 3,349

Other 5,134 6,059

Total $ 11,968 $ 13,024

During the three-month period ended December 31, 2020, the Company recorded $ 0.3 million in income tax benefit at an effective tax rate ("ETR") of ( 22.0 )%.

The Company records income taxes using an estimated annual effective tax rate for interim reporting.

The primary factors contributing to the difference between the federal statutory rate of 21.0% and the Company's effective tax rate for the three-month period ended December 31, 2020 were the tax rate differential for carryback tax losses at a rate higher than the statutory tax rate, the change in valuation allowance related to Delphax, the estimated benefit for the exclusion of income for the Company's captive insurance company subsidiary ("SAIC") under Section 831(b), and the exclusion from the tax provision of the minority owned portion of the pretax income of Contrail.

During the three-month period ended December 31, 2019, the Company recorded $ 0.6 million in income tax benefit at an ETR of 51.5 %.

The primary factors contributing to the difference between the federal statutory rate of 21.0% and the Company's effective tax rate for the three-month period ended December 31, 2019 were the change in valuation allowance related to Delphax, the estimated benefit for the exclusion of income for SAIC under Section 831(b), the estimated deduction for foreign derived intangible income, and the exclusion from the tax provision of the minority owned portion of the pretax income of Contrail.

During the nine-month period ended December 31, 2020, the Company recorded $ 2.2 million in income tax benefit at an ETR of 45.9 %.

The Company records income taxes using an estimated annual effective tax rate for interim reporting.

The primary factors contributing to the difference between the federal statutory rate of 21.0% and the Company's effective tax rate for the nine-month period ended December 31, 2020 were the tax rate differential for carryback tax losses at a rate higher than the statutory tax rate, the change in valuation allowance related to Delphax, the estimated benefit for the exclusion of income for SAIC under Section 831(b) and the exclusion from the tax provision of the minority owned portion of the pretax income of Contrail.

During the nine-month period ended December 31, 2019, the Company recorded $ 0.1 million in income tax benefit which resulted in an effective tax rate of ( 2.2 )%.

The primary factors contributing to the difference between the federal statutory rate and the Company's effective tax rate for the nine-month period ended December 31, 2019 were related to the change in valuation allowance related to Delphax, the estimated benefit for the exclusion of income for SAIC under Section 831(b), the estimated deduction for foreign derived intangible income, and the exclusion from the tax provision of the minority owned portion of the pretax income of Contrail.

Net Earnings Per Share

Basic earnings per share has been calculated by dividing net income (loss) attributable to Air T, Inc.

stockholders by the weighted average number of common shares outstanding during each period.

For purposes of calculating diluted earnings per share, shares issuable under employee and director stock options were considered potential common shares and were included in the weighted average common shares, unless they were anti-dilutive.

The computation of basic and diluted earnings per common share is as follows:

Three Months Ended December 31,

Nine Months Ended December 31,

(As Restated)*

Net earnings attributable to Air T, Inc.

Stockholders, as previously stated

Net earnings attributable to Air T, Inc.

Stockholders, as restated

Earnings Per Share:

Basic, as previously stated

Basic, as restated

Diluted, as previously stated

Diluted, as restated

For purposes of calculating diluted earnings 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.

The computation of basic and diluted earnings per common share is as follows (in thousands, except for per share figures):

Three Months Ended December 31, Nine Months Ended December 31,

2020 2019 2020 2019

Net income (loss) from continuing operations $ 1,763 $ 581 $ ( 2,550 ) $ 2,450

Net loss (income) from continuing operations attributable to non-controlling interests 335 ( 789 ) 884 ( 3,449 )

Net income (loss) from continuing operations attributable to Air T, Inc.

Stockholders 2,098 ( 208 ) ( 1,666 ) ( 999 )

Income (Loss) from continuing operations per share:

Basic $ 0.73 $ ( 0.07 ) $ ( 0.58 ) $ ( 0.36 )

Diluted $ 0.73 $ ( 0.07 ) $ ( 0.58 ) $ ( 0.36 )

Antidilutive shares excluded from computation of loss per share from continuing operations — 4 5 4

Loss from discontinued operations, net of tax — — — ( 70 )

(Loss) Gain on sale of discontinued operations, net of tax — ( 222 ) 4 8,137

(Loss) Income from discontinued operations attributable to Air T, Inc.

stockholders — ( 222 ) 4 8,067

(Loss) Income from discontinued operations per share:

Basic $ — $ ( 0.07 ) $ — $ 2.93

Diluted $ — $ ( 0.07 ) $ — $ 2.93

Antidilutive shares excluded from computation of loss per share from discontinued operations — 4 — —

Income (Loss) per share:

Basic $ 0.73 $ ( 0.14 ) $ ( 0.58 ) $ 2.57

Diluted $ 0.73 $ ( 0.14 ) $ ( 0.58 ) $ 2.57

Antidilutive shares excluded from computation of loss per share — 4 5 —

Weighted Average Shares Outstanding:

* Earnings per common share have been restated for the three and nine-month periods ended December 31, 2015.

For the three and nine-month periods ended December 31, 2015 and 2014, there were no stock options outstanding that were anti-dilutive.

Investment Securities Available For Sale

The marketable securities held by the Company as of December 31, 2015 and March 31, 2015 are classified as available for sale securities.

Available-for-sale securities at December 31, 2015 consisted of investments in publicly traded companies with a fair market value of $8,666,000, an aggregate cost basis of $8,706,000, gross unrealized gains aggregating $477,000 and gross unrealized losses aggregating $517,000.

Marketable securities at March 31, 2015 consisted of investments with a fair value of $5,279,000, an aggregate cost basis of $5,490,000, gross unrealized gains aggregating $0 and gross unrealized losses aggregating $211,000.

Securities in a loss position at December 31, 2015 had a fair market value of $6,255,000 and have been in a continuous loss position in the amount of $517,000 for less than twelve months.

Securities in a loss position at March 31, 2015 had a fair value of $4,168,000 and had been in a continuous loss position in the amount of $176,000 for less than twelve months and securities in a loss position in the amount of $35,000 for greater than twelve months had a fair value of $1,111,000.

The Company realized gains of $859 and $78 from the sale of securities during the three-month period ended December 31, 2015 and December 31, 2014 respectively.

For the nine-month period ended December 31, 2015, the Company realized a loss of $7,696 and no loss for the prior comparable period for the sale of marketable securities.

A gain of $859 and $8,487 was also realized for the nine-month periods ended December 31, 2015 and December 31, 2014 respectively.

The marketable securities held by the Company as of December 31, 2015 and March 31, 2015 are classified as available for sale securities.

The Company does not intend to liquidate marketable securities holdings in Insignia Systems, Inc.

(“Insignia”) within twelve months;

as a result, the fair value of marketable securities in Insignia were reclassified from current to non-current assets during the quarter ended June 30, 2015 and are reported as investments in available-for-sale securities at December 31, 2015.

Investments in Insignia at December 31, 2015 had an aggregate cost basis of $5,106,000 and sustained gross unrealized losses aggregating $362,000.

All securities are priced using publicly quoted market prices and are considered Level 1 fair value measurements.

Inventories consisted of the following:

December 31, 2015

Basic 2,882 2,973 2,882 2,752

Diluted 2,887 2,973 2,882 2,756

On June 10, 2019, the Company effected a three-for-two stock split of its common stock in the form of a 50 % stock dividend to stockholders of record as of June 4, 2019.

All share and earnings per share information have been retroactively adjusted to reflect the stock split and the incremental par value of the newly-issued shares was recorded with the offset to additional paid-in capital.

With respect to our December 31, 2020 Quarterly Report on Form 10-Q, the effect of the stock split was recognized retroactively in the stockholders’ equity accounts in the condensed consolidated Balance Sheets, and in all share data in the condensed consolidated Financial Statements and Management’s Discussion and Analysis of Financial Condition and Results of Operations.

Investments in Securities and Derivative Instruments

As part of the Company’s interest rate risk management strategy, the Company, from time to time, uses derivative instruments to minimize significant unanticipated earnings fluctuations that may arise from rising variable interest rate costs associated with existing borrowings (Air T Term Note A and Term Note D).

To meet these objectives, the Company entered into interest rate swaps with notional amounts consistent with the outstanding debt to provide a fixed rate of 4.56 % and 5.09 %, respectively, on Term Notes A and D.

The swaps mature in January 2028.

As of August 1, 2018, these swap contracts are designated as effective cash flow hedging instruments in accordance with ASC 815.

The effective portion of changes in the fair value on these instruments is recorded in other comprehensive income and is reclassified into the condensed consolidated statement of income as interest expense in the same period in which the underlying hedged transaction affects earnings.

The interest rate swaps are considered Level 2 fair value measurements.

As of December 31, 2020 and March 31, 2020, the fair value of the interest-rate swap contracts was a liability of $ 0.8 million and $ 0.9 million, respectively, which is included within other non-current liabilities in the condensed consolidated balance sheets.

During the three and nine months ended December 31, 2020, the Company recorded a gain of approximately $ 71.0 thousand and $ 0.1 million, net of tax, in the condensed consolidated statement of comprehensive income (loss) for changes in the fair value of the instruments.

The Company may, from time to time, employ trading strategies designed to profit from market anomalies and opportunities it identifies.

Management uses derivative financial instruments to execute those strategies, which may include options, and futures contracts.

These derivative instruments are priced using publicly quoted market prices and are considered Level 1 fair value measurements.

During the three months ended December 31, 2020, related to these derivative instruments, the Company had a gross gain aggregating to $ 0.1 million and a gross loss aggregating to $ 1.6 thousand, respectively.

During the nine months ended December 31, 2020, related to these derivative instruments, the Company had a gross gain aggregating to $ 0.8 million and a gross loss aggregating to $ 23.7 thousand, respectively.

The following table presents these derivative instruments at fair value in the condensed consolidated balance sheets as of December 31, 2020 and March 31, 2020 (in thousands):

(In thousands) December 31, 2020 March 31, 2020

Exchange-traded options & futures

Other current assets $ 76 $ 6

Total assets 76 6

Exchange-traded options & futures

Accrued Expenses and other 7 36

Total liabilities $ 7 $ 36

The Company also invests in exchange-traded marketable securities and accounts for that activity in accordance with ASC 321, Investments- Equity Securities.

Marketable equity securities are carried at fair value, with changes in fair market value included in the determination of net income.

The fair market value of marketable equity securities is determined based on quoted market prices in active markets.

During the three months ended December 31, 2020, the Company had a gross unrealized gain aggregating to $ 0.8 million and a gross unrealized loss aggregating to $ 0.3 million.

During the nine months ended December 31, 2020, the Company had a gross unrealized gain aggregating to $ 1.6 million and a gross unrealized loss aggregating to $ 1.1 million.

These unrealized gains and losses are included in Other Income (Loss) on the condensed consolidated Statement of Income.

The market value of the Company’s equity securities and cash held by the broker are periodically used as collateral against any outstanding margin account borrowings.

As of December 31, 2020 and 2019, the Company had outstanding borrowings of $ 0.7 million and $ 0.4 million under its margin account, respectively, which is reflected in accrued expenses and other on the condensed consolidated balance sheets.

As of December 31, 2020 and 2019, the Company had cash margin balances related to exchange-traded equity securities and securities sold short of $ 1.3 million and $ 0.3 million, respectively, which is reflected in other current assets on the condensed consolidated balance sheets.

The interest rate on margin account borrowings was 9.5 % as of December 31, 2020.

Equity Method Investments

The Company’s investment in Insignia Systems, Inc.

(“Insignia”) is accounted for under the equity method of accounting.

The Company has elected a three-month lag upon adoption of the equity method.

On December 31, 2020, Insignia effected a seven-for-one reverse stock split of its outstanding common stock.

As such, as of December 31, 2020, the number of Insignia's shares owned by the Company was adjusted to 0.5 million, representing approximately 28 % of the outstanding shares.

The Company recorded approximately $ 0.2 million and $ 1.0 million as its share of Insignia’s net loss for the three and nine months ended September 30, 2020 along with a basis difference adjustment of approximately $ 24.0 thousand and $ 72.0 thousand, respectively.

The Company's net investment basis in Insignia is $ 0.2 million as of December 31, 2020.

On November 8, 2019, the Company made an investment of $ 2.8 million to purchase a 19.90 % ownership stake in Cadillac Casting, Inc.

("CCI"), subsequently reduced to a 18.98 % ownership stake as of September 30, 2020.

The Company accounts for this investment 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 at cost, with a basis difference of $ 0.3 million.

The Company recorded a gain of $ 0.6 million and $ 0.3 million as its share of CCI's net income for the three and nine months ended September 30, 2020, along with a basis difference adjustment of $ 12.0 thousand and $ 37.0 thousand, respectively.

The Company's net investment basis in CCI is $ 3.5 million as of December 31, 2020.

Summarized unaudited financial information for the Company's equity method investees for the three and nine months ended September 30, 2020 and 2019 is as follows (in thousands):

Three Months Ended Nine Months Ended

September 30, 2020 September 30, 2019 September 30, 2020 September 30, 2019

Revenue $ 27,327 $ 25,325 $ 61,402 $ 85,546

Gross Profit 3,231 1,071 5,196 4,688

Operating income (loss) 891 ( 2,374 ) ( 3,496 ) ( 5,746 )

Net income (loss) 2,242 ( 2,556 ) ( 2,075 ) ( 6,528 )

Net income (loss) attributable to Air T, Inc.

stockholders $ 355 $ ( 285 ) $ ( 705 ) $ ( 749 )

Inventories consisted of the following (in thousands):

2020 March 31,

Ground support service parts

Printing equipment and maintenance

Ground equipment manufacturing:

Raw materials $ 6,356 $ 4,192

1 unchanged sentence

Finished goods 1,809 1,725

Ground equipment manufacturing:

Corporate and Other:

Raw materials 558 464

Work in process

Finished goods 890 910

Commercial jet engines and parts 56,405 51,084

Total inventories $ 68,582 $ 61,106

Total inventories, net

Stock- Based Compensation

The Company maintains a stock option plan for the benefit of certain eligible employees and directors.

In addition, Delphax maintains a number of stock option plans.

Compensation expense is recognized for stock options based on their grant-date fair values over the requisite service period.

The Company and Delphax use the Black-Scholes option pricing model to value stock options.

The key assumptions for this valuation method include the expected term of the option, stock price volatility, risk-free interest rate and dividend yield.

Many of these assumptions are judgmental and highly sensitive in the determ ination of compensation expense.

No options were granted or exercised under the Company ’s stock option plan during the three and nine-month periods ended December 31, 2015.

During the three-month period ended December 31, 2014, options for 15,000 shares were exercised, options for 2,500 shares were repurchased by the Company and cancelled, and options for 6,000 shares expired.

For the nine-month period ended December 31, 2014, options for 15,000 shares were exercised, options for 32,000 shares were repurchased by the Company and cancelled, and options for 6,000 shares expired.

Stock-based compensation expense in the amount of $0 and $8,958 was recognized for the Company’s stock option plan in the nine-month periods ended December 31, 2015 and 2014, respectively.

At December 31, 2015, there was no unrecognized compensation expense related to the Company stock option plan.

As noted above, Delphax maintains a number of stock option plans.

These plans were in place at the time of the Company ’s acquisition of interests in Delphax.

Subsequent to this acquisition, Delphax granted 1.2 million non-qualified options to purchase shares of its common stock to certain of its employees at an exercise price of $0.33 per share.

For the period from the acquisition through December 31, 2015 there was approximately $31,000 of stock-based compensation expense recorded related to Delphax’s stock-based compensation arrangements.

As of December 31, 2015, Delphax had a total of approximately $373,000 in unrecognized compensation cost associated with its stock option plans.

Reserves ( 911 ) ( 483 )

Total inventories, net of reserves $ 67,671 $ 60,623

The Company has operating leases for the use of real estate, machinery, and office equipment.

The majority of our leases have a lease term of 2 to 5 years;

however, we have certain leases with longer terms of up to 30 years.

Many of our leases include options to extend the lease for an additional period.

The lease term for all of the Company’s leases includes the non-cancellable period of the lease, plus any additional periods covered by either a Company option to extend the lease that the Company is reasonably certain to exercise, or an option to extend the lease controlled by the lessor that is considered likely to be exercised.

Payments due under the lease contracts include fixed payments plus, for some of our leases, variable payments.

Variable payments are typically operating costs associated with the underlying asset and are recognized when the event, activity, or circumstance in the lease agreement on which those payments are assessed occurs.

Our leases do not contain residual value guarantees.

The Company has elected to combine lease and non-lease components as a single component and not to recognize leases on the balance sheet with an initial term of one year or less.

The interest rate implicit in lease contracts is typically not readily determinable, and as such the Company utilizes the incremental borrowing rate to calculate lease liabilities, which is the rate incurred to borrow on a collateralized basis over a similar term an amount equal to the lease payments in a similar economic environment.

The components of lease cost for the three and nine months ended December 31, 2020 and 2019 are as follows (in thousands):

Three Months Ended December 31, Nine Months Ended December 31,

2020 2019 2020 2019

Operating lease cost $ 547 $ 569 $ 1,599 $ 1,489

Short-term lease cost 50 63 251 318

Variable lease cost 241 97 532 304

Total lease cost $ 838 $ 729 $ 2,382 $ 2,111

Amounts reported in the consolidated balance sheets for leases where we are the lessee as of the quarter ended December 31, 2020 and March 31, 2020 were as follows (in thousands):

December 31, 2020 March 31, 2020

Operating leases

Operating lease right-of-use assets $ 7,895 $ 8,116

Operating lease liabilities 8,533 8,647

Weighted-average remaining lease term

Operating leases 13 years, 10 months 14 years, 4 months

Weighted-average discount rate

Operating leases 4.3 % 4.5 %

Maturities of lease liabilities under non-cancellable leases where we are the lessee as of the quarter ended December 31, 2020 are as follows (in thousands):

Operating Leases

2021 (excluding the nine months ended December 31, 2020) $ 444

Thereafter 5,852

Total undiscounted lease payments $ 11,778

Interest ( 2,719 )

Discount ( 526 )

Total lease liabilities $ 8,533

Financing Arrangements

On April 1, 2015, the Company replaced its existing $7.0 million credit line with a senior secured revolving credit facility of $20.0 million (the “Revolving Credit Facility”).

The Revolving Credit Facility includes a sublimit for issuances of letters of credit of up to $500,000.

Under the Revolving Credit Facility, each of the Company and its wholly-owned operating subsidiaries may make borrowings.

Initially, borrowings under the Revolving Credit Facility bear interest (payable monthly) at an annual rate of one-month LIBOR plus 1.50%, although the interest rates under the Revolving Credit Facility are subject to incremental increases based on a consolidated leverage ratio.

In addition, a commitment fee accrues with respect to the unused amount of the Revolving Credit Facility at an annual rate of 0.15%.

Amounts applied to repay borrowings under the Revolving Credit Facility may be reborrowed, subject to the terms of the facility.

The Revolving Credit Facility matures on April 1, 2017.

Borrowings under the Revolving Credit Facility, together with hedging obligations, if any, owing to the lender under the Revolving Credit Facility or any affiliate of such lender, are secured by a first-priority security interest in substantially all assets of the Company and the other borrowers (including, without limitation, accounts receivable, equipment, inventory and other goods, intellectual property, contract rights and other general intangibles, cash, deposit accounts, equity interests in subsidiaries and joint ventures, investment property, documents and instruments, and proceeds of the foregoing), but excluding interests in real property.

The agreement governing the Revolving Credit Facility contains affirmative and negative covenants, including covenants that restrict the ability of the Company and the other borrowers to, among other things, incur or guarantee indebtedness, incur liens, dispose of assets, engage in mergers and consolidations, make acquisitions or other investments, make changes in the nature of their business, enter into certain operating leases, and make certain capital expenditures.

The Credit Agreement also contains financial covenants, including a minimum consolidated tangible net worth of $22.0 million, a minimum consolidated fixed charge coverage ratio of 1.35 to 1.0, a minimum consolidated asset coverage ratio of 1.75 to 1.0, and a maximum consolidated leverage ratio of 3.5 to 1.0.

The agreement governing the Revolving Credit Facility contains events of default including, without limitation, nonpayment of principal, interest or other obligations, violation of covenants, misrepresentation, cross-default to other debt, bankruptcy and other insolvency events, judgments, certain ERISA events, certain changes of control of the Company, termination of, or modification to materially reduce the scope of the services required to be provided under, certain agreements with FedEx Corporation, and the occurrence of a material adverse effect upon the Company and the other borrowers as a whole.

As of December 31, 2015, pursuant to the Senior Credit Agreement, Delphax maintained a $7.0 million revolving senior credit facility, subject to a borrowing base of Delphax ’s North American accounts receivable and inventories.

The facility, which is secured by substantially all of Delphax’s North American assets, expires in November 2018, prohibits payment of cash dividends by Delphax, and is subject to certain financial covenants.

The facility provides for interest based upon the prime rate plus a margin (4.25% as of December 31, 2015).

As of December 31, 2015, Delphax had aggregate borrowings of approximately $181,000 outstanding under the facility.

As of December 31, 2015, an additional $2,828,000 was available under the facility.

Delphax also has a secured equipment loan with its senior lender.

This loan had an original principal amount of $134,000 and provides for monthly payments of $2,000, plus interest based on the prime rate plus a margin (4.50% as of December 31, 2015).

As of December 31, 2015, the remaining balance of this loan was $38,000.

The Company assumes various financial obligations and commitments in the normal course of its operations and financing activities.

Financial obligations are considered to represent known future cash payments that the Company is required to make under existing contractual arrangements such as debt and lease agreements.

Variable Interest Entities (As R estated)

A variable interest entity ("VIE") is an entity that either (i) has insufficient equity to permit the entity to finance its activities without additional subordinated financial support, or (ii) has equity investors who lack the characteristics of a controlling financial interest.

Under ASC 810, an entity that holds a variable interest in a VIE and meets certain requirements would be considered to be the primary beneficiary of the VIE and required to consolidate the VIE in its consolidated financial statements.

In order to be considered the primary beneficiary of a VIE, an entity must hold a variable interest in the VIE and have both:

the power to direct the activities that most significantly impact the economic performance of the VIE;

the right to receive benefits from, or the obligation to absorb losses of, the VIE that could be potentially significant to the VIE.

As described in Note 2, the Company acquired Delphax Series B Preferred Stock, loaned funds to Delphax, and acquired the Warrant.

In accordance with ASC 810, the Company evaluated whether Delphax was a VIE as of November 24, 2015.

Based principally on the fact that the Company granted Delphax subordinated financial support, the Company determined that Delphax was a VIE on that date.

Therefore, it was necessary for the Company to assess whether it held any “variable interests”, as defined in ASC 810, in Delphax.

The Company concluded that its investments in Delphax ’s equity and debt, and its investment in the Warrant, each constituted a variable interest.

Based on its determination that it held variable interests in a VIE, the Company was required to assess whether it was Delphax’s “primary beneficiary”, as defined in ASC 810.

After considering all relevant facts and circumstances, the Company concluded that it became the primary beneficiary of Delphax on November 24, 2015.

While various factors informed the Company ’s determination, the Company assigned considerable weight to both 1) the shortness of time until June 1, 2016 when the Company would become entitled to elect four-sevenths of the members of the board of directors of Delphax and 2) the anticipated financial significance of Delphax’s activities in the periods subsequent to June 1, 2016.

Since the Company became Delphax’s primary beneficiary on November 24, 2015, the Company consolidated Delphax in its consolidated financial statements beginning on that date.

Refer to Note 2 for the provisional fair value of the assets and liabilities of Delphax on the acquisition date.

The following table sets forth the carrying values of assets and liabilities of Delphax as of December 31, 2015:

Borrowings of the Company and its subsidiaries are summarized below at December 31, 2020 and March 31, 2020, respectively.

On April 13, 2020, the Company entered into a loan with MBT in a principal amount of $ 8.2 million pursuant to a PPP Loan under the Coronavirus Aid, Relief, and Economic Security Act (the “CARES Act”).

The PPP Loan is evidenced by a promissory note (“Note”).

The Note provides for customary events of default including, among other things, cross-defaults on any other loan with MBT.

The PPP Loan may be accelerated upon the occurrence of an event of default.

The PPP Loan is unsecured and guaranteed by the United States Small Business Administration ("SBA").

The Company will apply to MBT for forgiveness of the PPP Loan, with the amount which may be forgiven equal to the sum of payroll costs, covered rent and mortgage obligations, and covered utility payments incurred by the Company during the 24-week period beginning on April 13, 2020, calculated in accordance with the terms of the CARES Act.

The PPP Loan bears interest at a fixed annual rate of one percent ( 1 %).

Once the forgiveness determination is made, the Company will be required to make repayments plus interest on any unforgiven amount.

As of December 31, 2020, the Company has used the funds received from the PPP loan on eligible expenses as outlined in the CARES Act.

On September 25, 2020, Contrail entered into a Third Amendment to Supplement #2 to Master Loan Agreement dated June 24, 2019 with ONB.

The material changes within the Third Amendment are:

On November 24, 2020, Contrail and ONB entered into Supplement #8 to Master Loan Agreement and related documentation for a loan in the aggregate amount of $ 43.6 million for which ONB served as lender pursuant to the Main Street Priority Loan Facility as established by the U.S.

Federal Reserve.

The Contrail Main Street Loan was approved by the Fed and completed by December 8, 2020.

The loan proceeds are to be used as working capital to support the operations of Contrail in the ordinary course of business, which includes the acquisition from time to time of aircraft and engines.

The proceeds will also be used to pay down the Contrail Revolver.

The indebtedness incurred is subject to the terms and provisions of the Master Loan Agreement.

The principal terms of the Term Note G are:

(a) interest on the loan accrues at a floating rate of LIBOR plus 3.00 % and interest is payable commencing November 24, 2021;

(b) 15 % principal payments plus 15 % of the amount of capitalized interest are due on November 24, 2023 and 2024, with the remainder due on the loan maturity date – November 24, 2025;

and, (d) a 2 % origination fee was paid on funding of the loan.

The loan contains affirmative covenants as to cash flow coverage and tangible net worth.

The loan is secured by a security interest in the assets of Contrail.

On December 11, 2020, AirCo 1 and PSB entered into a loan in the aggregate amount of $ 6.2 million for which PSB served as lender pursuant to the Main Street Priority Loan Facility as established by the U.S.

Federal Reserve.

The AirCo 1 Main Street Loan was approved by the Fed and completed by December 22, 2020.

The loan proceeds were used to pay off the AirCo 1 revolving line of credit with MBT.

The principal terms of the Term Loan - PSB are:

(a) interest on the loan accrues at a floating rate of LIBOR plus 3.00 % and interest is payable commencing December 11, 2021;

(b) 15 % principal payments (including any capitalized interest accrued thereon) are due on December 11, 2023, and 2024, with the remainder due on the loan maturity date – December 11, 2025;

and, (d) a 2 % origination fee was paid on funding of the loan.

The loan contains an affirmative covenant relating to collateral valuation.

The loan is secured by a security interest in the assets of AirCo 1 and a pledge of AirCo’s membership interest in AirCo 1.

The following table provides certain information about the current financing arrangements of the Company's and its subsidiaries as of December 31, 2020:

(In Thousands) December 31,

2020 March 31,

2020 Maturity Date Interest Rate Unused commitments

Revolver - MBT $ 9,074 $ — August 31, 2021 Greater of 2.5 % or Prime - 1 %

Supplemental Revolver- MBT — 9,550 June 30, 2020 Greater of 1-month LIBOR + 1.25 % and 3 %

Term Note A - MBT 7,000 7,750 January 1, 2028 1-month LIBOR + 2 %

Term Note B - MBT 3,500 3,875 January 1, 2028 4.50 %

Term Note D - MBT 1,489 1,540 January 1, 2028 1-month LIBOR + 2 %

Term Note E - MBT 5,308 — June 25, 2025 Greater of LIBOR + 1.5 % or 2.5 %

Debt - Trust Preferred Securities 12,878 12,877 June 7, 2049 8.00 %

PPP Loan 8,215 — December 24, 2022 1 1.00 %

Total 47,464 35,592

Revolver - MBT — 8,335 August 31, 2021 2 Greater of 6.50 % or Prime + 2 %

Term Loan - PSB 6,200 — December 11, 2025 1-month LIBOR + 3 %

Total 6,200 8,335

Contrail Debt

Revolver - ONB 23,243 21,284 September 5, 2021 1-month LIBOR + 3.45 %

Term Loan A - ONB 3,508 6,285 January 26, 2021 1-month LIBOR + 3.75 %

Term Loan E - ONB 4,597 6,320 December 1, 2022 1-month LIBOR + 3.75 %

Term Loan F - ONB — 8,358 May 1, 2025 1-month LIBOR + 3.75 %

Term Loan G - ONB 43,598 — November 24, 2025 1-month LIBOR + 3 %

Total 74,946 42,247

Delphax Solutions Debt

Canadian Emergency Business Account Loan 31 — December 31, 2025 5.00 %

Total Debt 128,641 86,174

Unamortized Debt Issuance Costs ( 1,234 ) ( 354 )

Total Debt, net $ 127,407 $ 85,820

1 Pursuant to The Paycheck Protection Flexibility Act of 2020, P.L.

116-142, the SBA extended the deferral period for loan payments to either (1) the date that SBA remits the borrower’s loan forgiveness amount to MBT or (2) if Air T does not apply for loan forgiveness, 10 months after the end of Air T’s loan forgiveness covered period, calculated as 24-week period beginning on April 13, 2020.

SBA does not require a formal modification to the original promissory note agreement.

2 The AirCo 1 Revolver was paid off and closed as of 12/31/2020.

At December 31, 2020, our contractual financing obligations, including payments due by period, are as follows (in thousands):

Due by Amount

December 31, 2021 $ 42,388

Current assets:

Cash and cash equivalents

Accounts receivable, net

Other current assets

Total current assets

Property and equipment

Current liabilities:

Accounts payable

Income tax payable

Accrued expenses

Short-term debt

Total current liabilities

Long-term debt

Other long-term liabilities

Total liabilities

Long-term debt as reflected in the above table includes $2,500,000 due to the Company from Delphax Canada under the Senior Subordinated Note.

This debt was eliminated for purposes of the Company ’s accompanying December 31, 2015 condensed consolidated balance sheet.

The assets of Delphax and its subsidiaries can only be used to satisfy the obligations of Delphax and subsidiaries.

Furthermore, the creditors of Delphax and its subsidiaries do not have recourse to the assets of Air T, Inc.

or its subsidiaries.

Revenue and Expenses of Delphax .

Delphax’s revenues and expenses are included in the Company’s consolidated financial statements beginning November 24, 2015.

Revenues and expenses prior to the date of initial consolidation are excluded.

The following table sets forth the revenue and expenses of Delphax that are included in the Company’s consolidated statements of income for the three and nine months ended December 31, 2015.

Three and Nine Months

Ended December 31, 2015

Operating Revenues

Operating Expenses:

Cost of sales

General and administrative

Research and development

Depreciation and amortization

Operating Loss

Non-operating Income

Loss Before Income Taxes

We determined that the attribution of Delphax net income or loss should be based on consideration of all of Air T ’s investments in Delphax and Delphax Canada.

As disclosed in Note 2, the Warrant provides that in the event that dividends are paid on the common stock of Delphax, the holder of the Warrant is entitled to participate in such dividends on a ratable basis as if the Warrant had been fully exercised and the shares of Series B Preferred Stock acquired upon such exercise had been converted into shares of Delphax common stock.

This provision would have entitled Air T, Inc.

to approximately 67% of any Delphax dividends paid, with the remaining 33% paid to the non-controlling interests.

We concluded that this was a substantive distribution right which should be considered in the attribution of Delphax net income or loss to non-controlling interests.

We furthermore concluded that our investment in the debt of Delphax should be considered in attribution.

Additional losses are then fully attributed to our debt investments until they too are reduced to zero.

This sequencing reflects the relative priority of debt to equity.

Any further losses are then attributed to Air T and the non-controlling interests based on the initial 67% / 33% share.

Delphax net income is attributed using a backwards-tracing approach with respect to previous losses.

Geographical I nformation

Total tangible long-lived assets, net of accumulated depreciation, located in the United States, the Company's country of domicile, and similar tangible long-lived assets, net of accumulated depreciation, held outside the United States are summarized in the following table as of December 31, 2015 and March 31, 2015:

United States, the Company ’s country of domicile

Total tangible long-lived assets

Segment I nformation

The Company has five business segments.

The overnight air cargo segment, comprised of the Company ’s Mountain Air Cargo, Inc.

(“MAC”) and CSA Air, Inc.

(“CSA”) subsidiaries, operates in the air express delivery services industry.

The ground equipment sales segment, comprised of the Company’s Global Ground Support, LLC (“GGS”) subsidiary, manufactures and provides mobile deicers and other specialized equipment products to passenger and cargo airlines, airports, the U.S.

military and industrial customers.

The ground support services segment, comprised of the Company’s Global Aviation Services, LLC (“GAS”) subsidiary, provides ground support equipment maintenance and facilities maintenance services to domestic airlines and aviation service providers.

The printing equipment and maintenance segment is comprised of Delphax and its subsidiaries, which was consolidated for financial accounting purposes beginning November 24, 2015.

Delphax designs, manufactures and sells advanced digital print production equipment, maintenance contracts, spare parts, supplies and consumable items for these systems.

The equipment is sold through Delphax and its subsidiaries located in Canada, the United Kingdom and France.

A significant portion of Delphax’s net sales is related to service and support provided after the sale.

Delphax has a significant presence in the check production marketplace in North America, Europe, Latin America, Asia and the Middle East.

The Company’s newly established leasing segment, comprised of the Company’s Air T Global Leasing, LLC subsidiary, provides funding for equipment leasing transactions, which may include transactions for the leasing of equipment manufactured by GGS and transactions initiated by third parties unrelated to equipment manufactured by the Company or any of its subsidiaries.

Air T Global Leasing, LLC commenced operations during the quarter ended December 31, 2015.

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

The Company evaluates the performance of its business segments based on operating income.

Segment data is summarized as follows:

Three Months Ended December 31,

Nine Months Ended December 31,

Operating Revenues:

December 31, 2022 9,383

December 31, 2023 9,037

December 31, 2024 9,037

December 31, 2025 41,764

Thereafter 17,032

Unamortized Debt Issuance Costs ( 1,234 )

On June 10, 2019, the Company completed a transaction with all holders of the Company’s Common Stock to receive a special, pro-rata distribution of three securities as enumerated below:

• A dividend of one additional share for every two shares already held (a 50 % stock dividend, or the equivalent of a 3-for-2 stock split).

See Footnote 6 for discussion.

• The Company issued and distributed to existing common stockholders an aggregate of 1.6 million trust preferred capital security ("TruPs") shares (aggregate $ 4.0 million stated value) and an aggregate of 8.4 million warrants ("Warrants") (representing warrants to purchase $ 21.0 million in stated value of TruPs).

On January 14, 2020, Air T effected a one-for-ten reverse split of its TruPs.

As a result of the reverse split, the stated value of the TruPs will be $ 25.00 per share.

Further, each Warrant conferred upon its holder the right to purchase one-tenth of a share of TruPs for $ 2.40 , representing a 4 % discount to the new stated value of $ 2.50 for one-tenth of a share.

As of December 31, 2020, 3.6 million Warrants have been exercised.

As a result, the amount outstanding on the Company's Debt - Trust Preferred Securities is $ 12.9 million as of December 31, 2020.

At December 31, 2020, the Company had Warrants outstanding and exercisable to purchase 4.8 million shares of its TruPs at an exercise price of $ 2.40 per one-tenth of a share.

On January 11, 2021, the Company announced the extension of the expiration date of the Warrants.

The Warrants, previously scheduled to expire on January 15, 2021, are extended and now will expire on August 30, 2021 or earlier upon redemption or liquidation.

Fair Value Measurement

as of December 31, 2020

Warrant liability (Level 2) $ 485

As of December 31, 2020, the Warrants are recorded within "Other non-current liabilities" on our condensed consolidated balance sheets.

Fair value measurement was based on market activity and trading volume as observed on the NASDAQ Global Market.

The liability is classified as Level 2 in the hierarchy (Level 2 is defined as quoted prices in markets that are not active or inputs which are observable, either directly or indirectly, for substantially the full term of the asset or liability).

Geographical information

Total tangible long-lived assets, net of accumulated depreciation, located in the United States, the Company's country of domicile, and held outside the United States are summarized in the following table as of December 31, 2020 and March 31, 2020 (in thousands):

December 31, 2020 March 31, 2020

United States $ 7,727 $ 19,086

Foreign 10,086 14,131

Total tangible long-lived assets, net $ 17,813 $ 33,217

The Company's tangible long-lived assets, net of accumulated depreciation, held outside of the United States represent engines and aircraft on lease at December 31, 2020.

The net book value located within each individual country at December 31, 2020 and March 31, 2020 is listed below (in thousands):

December 31, 2020 March 31, 2020

Spain $ 10,013 $ —

Netherlands — 4,778

Estonia — 7,408

Mexico — 1,845

Total tangible long-lived assets, net $ 10,086 $ 14,131

Total revenue from continuing operations, in and outside the United States is summarized in the following table for the nine months ended December 31, 2020 and December 31, 2019 (in thousands):

December 31, 2020 December 31, 2019

United States $ 113,563 $ 127,115

Foreign 14,831 44,066

Total revenue $ 128,394 $ 171,181

Segment Information

The Company has four business segments:

overnight air cargo, ground equipment sales, commercial jet engine and parts segment and corporate and other.

Segment data is summarized as follows (in thousands):

(In Thousands) Three Months Ended

December 31, Nine Months Ended

2020 2019 2020 2019

Operating Revenues by Segment:

Overnight Air Cargo $ 16,322 $ 18,706 $ 49,789 $ 56,771

Ground Equipment Sales:

Domestic 13,680 13,505 40,486 36,466

International 7,089 2,444 8,170 4,473

Total Ground Equipment Sales 20,769 15,949 48,656 40,939

Ground Support Services

Printing Equipment and Maintenance

Commercial Jet Engines and Parts:

Domestic 15,851 19,651 22,476 33,941

International 2,227 18,885 6,410 38,724

Total Printing Equipment and Maintenance

Total Commercial Jet Engines and Parts 18,078 38,536 28,886 72,665

Corporate and other:

Domestic 548 32 811 609

International 102 77 252 197

Total Corporate and other 650 109 1,063 806

Total $ 55,819 $ 73,300 $ 128,394 $ 171,181

Operating Income (Loss):

1 unchanged sentence

Ground Equipment Sales 4,229 1,644 7,369 4,212

Ground Support Services

Printing Equipment and Maintenance

Commercial Jet Engines and Parts ( 1,598 ) 3,440 ( 4,776 ) 6,411

Corporate and other ( 2,053 ) ( 2,002 ) ( 7,091 ) ( 6,347 )

Total $ 1,068 $ 3,720 $ ( 2,881 ) $ 5,185

Capital Expenditures:

1 unchanged sentence

Ground Equipment Sales 4 834 115 844

Ground Support Services

Printing Equipment and Maintenance

Commercial Jet Engines and Parts 1,656 16,595 3,166 34,251

Corporate and other 2 213 30 285

Total $ 1,747 $ 17,782 $ 3,539 $ 35,576

Depreciation and Amortization:

1 unchanged sentence

Ground Equipment Sales 38 75 152 177

Ground Support Services

Printing Equipment and Maintenance

Commercial Jet Engines and Parts 754 753 2,114 3,946

Corporate and other 77 129 326 432

Total $ 886 $ 975 $ 2,644 $ 4,610

Variable Interest Entities

Under ASC 810 - Consolidation, an entity that holds a variable interest in a VIE and meets certain requirements would be considered to be the primary beneficiary of the VIE and required to consolidate the VIE in its condensed consolidated financial statements.

In order to be considered the primary beneficiary of a VIE, an entity must hold a variable interest in the VIE and have both:

• the power to direct the activities that most significantly impact the economic performance of the VIE;

• the right to receive benefits from, or the obligation to absorb losses of, the VIE that could be potentially significant to the VIE.

The Company concluded that its investments in Delphax’s equity and debt, and its investment in the Delphax warrant, each constituted a variable interest.

In addition, the Company concluded that it became the primary beneficiary of Delphax on November 24, 2015.

The Company consolidated Delphax in its condensed consolidated financial statements beginning on that date.

Delphax is included within our Corporate and other segment.

Upon petition by the Company, on August 8, 2017 the Ontario Superior Court of Justice in Bankruptcy and Insolvency adjudged Delphax Canada to be bankrupt.

As a result, Delphax Canada ceased to have capacity to deal with its property, which then vested in the trustee in bankruptcy of Delphax Canada subject to the rights of secured creditors.

As of June 30, 2019, the bankruptcy proceedings were finalized in accordance with Canadian law and, therefore, Delphax Canada was legally discharged of its liabilities.

The conclusion of the bankruptcy proceedings also resulted in the dissolution of Delphax Canada.

In addition, on June 11, 2019, the Company also fully dissolved Delphax UK.

As such, the only Delphax entity that remains in existence as of March 31, 2020 is Delphax France.

The Company extinguished the assets and liabilities of Delphax Canada and Delphax UK during the quarter ended June 30, 2019 and recognized a gain on dissolution of entities of $ 4.5 million.

Delphax had total assets and liabilities with carrying values of $ 9.0 thousand and $ 0.5 million, as of December 31, 2020 and $ 11.0 thousand and $ 0.5 million, as of March 31, 2020.

Delphax’s components of net income (loss) are included in our condensed consolidated statements of income and comprehensive income herein.

For the three months ended December 31, 2020 and December 31, 2019, Delphax did not recognize any revenue, respectively.

For the three months ended December 31, 2020, Delphax recorded a net loss of $ 8.0 thousand, broken out between an operating loss of $ 2.0 thousand and non-operating loss of $ 6.0 thousand.

For the three months ended December 31, 2019, Delphax recorded net loss and operating loss of $ 57.0 thousand.

For the nine months ended December 31, 2020 and December 31, 2019, Delphax did not recognize any revenue, respectively.

For the nine months ended December 31, 2020, Delphax recorded net loss and operating loss of $ 40.0 thousand.

For the nine months ended December 31, 2019, Delphax recorded net income of $ 6.1 million, broken out between an operating loss of $ 0.2 million and non-operating income of $ 6.2 million, the majority of which was the result of the gain on dissolution of entities of $ 4.5 million.

Commitments and Contingencies

The Company is currently involved in certain product liability-related matters and employment and other matters, which involve pending or threatened legal proceedings.

Management believes that these threatened or pending legal proceedings, if adversely decided, would not have a material adverse effect on the Company's results of operations or financial position.

Contrail Aviation entered into an Operating Agreement (the “Operating Agreement”) in connection with the acquisition of Contrail Aviation in 1996 providing for the governance of and the terms of membership interests in Contrail Aviation and including put and call options with the Seller of Contrail (“Put/Call Option”).

The Put/Call Option permits the Seller to require Contrail Aviation to purchase all of the Seller’s equity membership interests in Contrail Aviation commencing on the fifth anniversary of the acquisition, which is on July 18, 2021.

The Company has presented this redeemable non-controlling interest in Contrail Aviation between the liabilities and equity sections of the accompanying condensed consolidated balance sheets.

In addition, the Company has elected to recognize changes in the redemption value immediately as they occur and adjust the carrying amount of the instrument to equal the redemption value at the end of each reporting period.

The fair value of the redeemable non-controlling interest is $ 5.6 million as of December 31, 2020.

The change in the redemption value compared to March 31, 2020 is a net decrease of $ 0.5 million.

The decrease was driven by $ 1.9 million of net loss attributable to and distributions made to the non-controlling interest as of December 31, 2020, partially offset by a $ 1.4 million increase related to the net change in fair value during the nine months ended December 31, 2020, which is reflected on our condensed consolidated statements of equity.

The offsetting increase is primarily attributable to the value associated with Contrail's potential investment in an aircraft asset management joint venture, as announced publicly in our 8-K dated December 23, 2020.

Subsequent Events

Management performs an evaluation of events that occur after the consolidated balance sheet date, but before the consolidated financial statements are issued, for potential recognition or disclosure of such events in the Company ’s consolidated financial statements.

Overnight Air C argo .

At December 31, 2015, MAC and C SA operated a total of 18 ATR aircraft and a total of 61 Cessna Caravan aircraft under agreements with FedEx Corporation.

In January 2016, FedEx advised MAC that effective at the end of February 2016 it would be transferring an ATR aircraft operated by MAC to another feeder operator to meet scheduling needs.

The administrative revenue related to an ATR aircraft is significantly greater than the administrative revenue related to the operation of a Cessna Caravan.

On January 11, 2021, the Company announced that the Warrants to purchase its TruPs have been extended through August 30, 2021.

The Warrants were scheduled to expire on January 15, 2021.

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

What changed 10-Q/A

Item 1. Financial Statements