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Item 1. Financial Statements

2022-02-14 compared with 2021-11-12 · 160 added, 132 removed, 488 unchanged (37% of the section changed)

3 unchanged sentences

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

September 30, Six Months Ended

September 30,

December 31, Nine Months Ended

2021 2020 2021 2020

11 unchanged sentences

Depreciation and amortization 442 886 1,146 2,644

Loss (Gain) on sale of property and equipment — ( 3 ) 3 ( 4 )

Loss on sale of property and equipment — 5 3 1

45,408 54,751 124,916 131,275

2 unchanged sentences

Interest expense ( 1,236 ) ( 1,172 ) ( 3,341 ) ( 3,413 )

Gain (Loss) from equity method investments 14 ( 498 ) 97 ( 1,056 )

Income (Loss) from equity method investments 99 510 197 ( 546 )

Gain on forgiveness of Paycheck Protection Program (“PPP”) loan — — 8,331 —

Other-than-temporary impairment loss on investments ( 348 ) — ( 348 ) —

Other ( 11 ) 1,039 1,329 2,125

( 1,496 ) 377 6,168 ( 1,834 )

Income (Loss) from continuing operations before income taxes 8,041 ( 4,904 ) 8,362 ( 6,161 )

Income Taxes Expense (Benefit) 38 ( 1,547 ) 33 ( 1,847 )

Net Income (Loss) from continuing operations 8,003 ( 3,357 ) 8,329 ( 4,314 )

(Loss) Income from continuing operations before income taxes ( 1,471 ) 1,445 6,892 ( 4,715 )

Income Taxes Benefit ( 282 ) ( 318 ) ( 249 ) ( 2,165 )

Net (Loss) Income from continuing operations ( 1,189 ) 1,763 7,141 ( 2,550 )

Gain on sale of discontinued operations, net of tax — — — 4

Net Income (Loss) 8,003 ( 3,353 ) 8,329 ( 4,310 )

Net (Loss) Income ( 1,189 ) 1,763 7,141 ( 2,546 )

Net (Income) Loss Attributable to Non-controlling Interests $ ( 73 ) $ 335 $ ( 559 ) $ 884

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

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

Stockholders $ ( 1,262 ) $ 2,098 $ 6,582 $ ( 1,662 )

Income (Loss) from continuing operations per share (Note 5)

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

Basic $ ( 0.44 ) $ 0.73 $ 2.28 $ ( 0.58 )

3 unchanged sentences

Diluted $ — $ — $ — $ —

Income (Loss) per share (Note 5)

(Loss) Income per share (Note 6)

Basic $ ( 0.44 ) $ 0.73 $ 2.28 $ ( 0.58 )

7 unchanged sentences

Three Months Ended

September 30, Six Months Ended

September 30,

December 31, Nine Months Ended

(In Thousands) 2021 2020 2021 2020

Net Income (Loss) $ 8,003 $ ( 3,353 ) $ 8,329 $ ( 4,310 )

Net (Loss) Income $ ( 1,189 ) $ 1,763 $ 7,141 $ ( 2,546 )

Foreign currency translation gain (loss) 19 ( 22 ) 73 ( 157 )

Unrealized gain on interest rate swaps 46 55 57 29

Unrealized (loss) gain on interest rate swaps ( 20 ) 71 37 100

Reclassification of interest rate swaps into earnings 22 ( 1 ) 19 ( 17 )

Total Other Comprehensive Income (Loss) 21 48 129 ( 74 )

Total Comprehensive Income (Loss) 8,150 ( 3,382 ) 8,437 ( 4,432 )

Total Comprehensive (Loss) Income ( 1,168 ) 1,811 7,270 ( 2,620 )

Comprehensive (Income) Loss Attributable to Non-controlling Interests ( 73 ) 335 ( 559 ) 884

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

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

Stockholders $ ( 1,241 ) $ 2,146 $ 6,711 $ ( 1,736 )

2 unchanged sentences

CONDENSED CONSOLIDATED BALANCE SHEETS

(In thousands, except share amounts) September 30, 2021 March 31, 2021

(In thousands, except share amounts) December 31, 2021 March 31, 2021

Current Assets:

47 unchanged sentences

CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS

(In Thousands) Six Months Ended

September 30,

(In Thousands) Nine Months Ended

CASH FLOWS FROM OPERATING ACTIVITIES:

17 unchanged sentences

Purchases of marketable securities — ( 659 )

Sale of marketable securities 6 2,445

Proceeds from sale of assets on lease — 1,900

Investment in unconsolidated entities ( 4,461 ) —

Acquisition of assets ( 13,408 ) —

Capital expenditures related to property & equipment ( 1,205 ) ( 3,415 )

12 unchanged sentences

Effect of foreign currency exchange rates on cash and cash equivalents 69 ( 164 )

NET DECREASE IN CASH AND CASH EQUIVALENTS AND RESTRICTED CASH ( 9,653 ) ( 2,702 )

NET (DECREASE) INCREASE IN CASH AND CASH EQUIVALENTS AND RESTRICTED CASH ( 10,088 ) 33,254

CASH AND CASH EQUIVALENTS AND RESTRICTED CASH AT BEGINNING OF PERIOD 15,927 15,571

19 unchanged sentences

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

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

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

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

(In Thousands) Common Stock Treasury Stock Additional

17 unchanged sentences

Balance, September 30, 2021 3,023 $ 756 $ 141 $ ( 2,617 ) $ 236 $ 24,059 $ ( 576 ) $ 1,130 22,988

Net loss* — — — — — ( 1,262 ) — ( 17 ) ( 1,279 )

Stock compensation expense — — — — 79 — — — 79

Foreign currency translation gain — — — — — — 19 — 19

Adjustment to fair value of redeemable non-controlling interest — — — — — ( 514 ) — — ( 514 )

Unrealized loss on interest rate swaps, net of tax — — — — — — ( 20 ) — ( 20 )

Reclassification of interest rate swaps into earnings — — — — — — 22 — 22

Balance, December 31, 2021 3,023 $ 756 $ 141 $ ( 2,617 ) $ 315 $ 22,283 $ ( 555 ) $ 1,113 21,295

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

8 unchanged sentences

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, 2021.

The results of operations for the period ended September 30, 2021 are not necessarily indicative of the operating results for the full year.

The results of operations for the period ended December 31, 2021 are not necessarily indicative of the operating results for the full year.

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 six months ended September 30, 2021 and 2020.

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

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

10 unchanged sentences

Each of our businesses implemented measures to attempt to limit the impact of COVID-19 but we still experienced a substantial number of disruptions, and we experienced and continue to experience a reduction in demand for commercial aircraft, jet engines and parts compared to historical periods.

Many of our businesses may continue to generate reduced operating cash flow and may continue to operate at a loss from time to time during the remainder of fiscal 2022.

Many of our businesses may continue to generate reduced operating cash flow and may continue to operate at a loss from time to time during the remainder of fiscal 2022 and beyond.

We expect that the impact of COVID-19 will continue to some extent.

19 unchanged sentences

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

On December 2, 2021, the Company, through its wholly-owned subsidiary Wolfe Lake HQ, LLC, completed the purchase of the real estate located at 5000 36th Street West, St.

Louis Park, Minnesota pursuant to the real estate purchase agreement with WLPC East, LLC, a Minnesota limited liability company dated October 11, 2021.

The real estate purchased consists of a 2-story office building, asphalt-paved driveways and parking areas, and landscaping.

The building was constructed in 2004 with an estimated 54,742 total square feet of space.

The real estate purchased is where the Air T's executive office is currently located.

With this purchase, the Company assumed 11 leases from existing tenants occupying the building.

The total amount recorded for the real estate was $ 13.4 million, which included the purchase price of $ 13.2 million and total direct capitalized acquisition costs of $ 0.2 million.

The consideration paid for the real estate consisted of approximately $ 3.3 million in cash and a new secured loan from Bridgewater Bank ("Bridgewater") with an aggregate principal amount of $ 9.9 million and a fixed interest rate of 3.65 % which matures on December 2, 2031.

See Note 11 .

In accordance with ASC 805, the purchase price consideration was allocated as follows (in thousands):

Building 8,439

Site Improvements 798

Tenant Improvements 269

Above market leases 3

Below market leases ( 139 )

Intangible origination costs 512

Absorption period costs 732

Revenue Recognition

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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.

Product Sales The Company generates revenue from sales of various distinct products such as parts, aircraft 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.

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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.

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

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

11 unchanged sentences

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

Three Months Ended September 30, Six Months Ended September 30,

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

2021 2020 2021 2020

23 unchanged sentences

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, 2021 and September 30, 2021 and the amount of contract liabilities as of April 1, 2021 that were recognized as revenue during the six-month period ended September 30, 2021 (in thousands):

The following table presents outstanding contract liabilities as of April 1, 2021 and December 31, 2021 and the amount of contract liabilities as of April 1, 2021 that were recognized as revenue during the nine-month period ended December 31, 2021 (in thousands):

Outstanding contract liabilities Outstanding contract liabilities as of April 1, 2021

Recognized as Revenue

As of September 30, 2021 $ 1,978

As of December 31, 2021 $ 1,585

As of April 1, 2021 $ 1,358

For the six months ended September 30, 2021 $ 638

Accrued Expenses

(in thousands) September 30, 2021 March 31, 2021

For the nine months ended December 31, 2021 $ 1,180

Accrued Expenses and Other

(in thousands) December 31, 2021 March 31, 2021

Salaries, wages and related items $ 4,356 $ 5,427

3 unchanged sentences

Total $ 8,959 $ 12,787

During the three-month period ended September 30, 2021, the Company recorded $ 38.0 thousand in income tax expense at an effective tax rate ("ETR") of 0.5 %.

During the three-month period ended December 31, 2021, the Company recorded $ 0.3 million in income tax benefit at an effective tax rate ("ETR") of 19.2 %.

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 September 30, 2021 were the change in valuation allowance related to the Company's subsidiaries in the corporate and other segment, Delphax Solutions, Inc.

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, 2021 were the change in valuation allowance related to the Company's subsidiaries in the corporate and other segment, Delphax Solutions, Inc.

and Delphax Technologies, Inc.

(collectively known as "Delphax"), the estimated benefit for the exclusion of income for the Company's captive insurance company subsidiary ("SAIC") under Section 831(b), the exclusion from the tax provision of the minority owned portion of the pretax income of Contrail, and the exclusion from taxable income of the PPP loan forgiveness income, as directed by the CARES Act enacted in 2020, and any accrued interest forgiven as a part of that Act.

During the three-month period ended September 30, 2020, the Company recorded $ 1.5 million in income tax benefit at an ETR of 31.5 %.

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 September 30, 2020 were 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 six-month period ended September 30, 2021, the Company recorded $ 33.0 thousand in income tax expense at an effective rate of 0.4 %.

(collectively known as "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 the Company's 79 %-owned subsidiary ("Contrail").

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

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 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, 2021, the Company recorded $ 0.2 million in income tax benefit at an effective rate of ( 3.6 )%.

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 six-month period ended September 30, 2021 were the change in valuation allowance related to Delphax, the estimated benefit for the exclusion of income for SAIC under Section 831(b), the exclusion from the tax provision of the minority owned portion of the pretax income of Contrail, the exclusion from taxable income of the PPP loan forgiveness income, as directed by the CARES Act enacted in 2020, and any accrued interest forgiven as a part of that Act.

During the six-month period ended September 30, 2020, the Company recorded $ 1.8 million in income tax benefit which resulted in an effective tax rate of 30.0 %.

The primary factors contributing to the difference between the federal statutory rate and the Company's effective tax rate for the six-month period ended September 30, 2020 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), and the exclusion from the tax provision of the minority owned portion of the pretax income of Contrail.

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, 2021 were the change in valuation allowance related to Delphax, the estimated benefit for the exclusion of income for SAIC under Section 831(b), the exclusion from the tax provision of the minority owned portion of the pretax income of Contrail, the exclusion from taxable income of the PPP loan forgiveness income, as directed by the CARES Act enacted in 2020, and any accrued interest forgiven as a part of that Act.

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

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, 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.

Net Earnings (Loss) Per Share

3 unchanged sentences

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

Three Months Ended September 30, Six Months Ended September 30,

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

2021 2020 2021 2020

Net income (loss) from continuing operations $ 8,003 $ ( 3,357 ) $ 8,329 $ ( 4,314 )

Net (loss) income from continuing operations $ ( 1,189 ) $ 1,763 $ 7,141 $ ( 2,550 )

Net (income) loss from continuing operations attributable to non-controlling interests ( 73 ) 335 ( 559 ) 884

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

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

Stockholders ( 1,262 ) 2,098 6,582 ( 1,666 )

Income (Loss) from continuing operations per share:

(Loss) Income from continuing operations per share:

Basic $ ( 0.44 ) $ 0.73 $ 2.28 $ ( 0.58 )

Diluted $ ( 0.44 ) $ 0.73 $ 2.28 $ ( 0.58 )

Antidilutive shares excluded from computation of income (loss) per share from continuing operations — 5 — 5

Antidilutive shares excluded from computation of loss per share from continuing operations 11 — — 5

Gain on sale of discontinued operations, net of tax — — — 4

4 unchanged sentences

Diluted $ — $ — $ — $ —

Income (Loss) per share:

(Loss) Income per share:

Basic $ ( 0.44 ) $ 0.73 $ 2.28 $ ( 0.58 )

Diluted $ ( 0.44 ) $ 0.73 $ 2.28 $ ( 0.58 )

Antidilutive shares excluded from computation of income (loss) per share — 5 — 5

Antidilutive shares excluded from computation of loss per share 11 — — 5

Weighted Average Shares Outstanding:

12 unchanged sentences

This interest rate swap is considered a Level 2 fair value measurement.

As of September 30, 2021 and March 31, 2021, the fair value of this interest-rate swap contract was a liability of $ 0.5 million and $ 0.6 million, respectively, which is included within other non-current liabilities in the condensed consolidated balance sheets.

During the three and six months ended September 30, 2021, the Company recorded a gain of approximately $ 46.0 thousand and $ 57.0 thousand, net of tax, respectively, in the condensed consolidated statement of comprehensive income (loss) for changes in the fair value of this instrument.

As of December 31, 2021 and March 31, 2021, the fair value of this interest-rate swap contract was a liability of $ 0.4 million and $ 0.6 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, 2021, the Company recorded a loss of approximately $ 20.0 thousand and a gain of $ 37.0 thousand, net of tax, respectively, in the condensed consolidated statement of comprehensive income (loss) for changes in the fair value of this instrument.

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

1 unchanged sentence

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

During the three and six months ended September 30, 2021, the Company did not record any gain or loss related to these derivative instruments.

During the three months ended September 30, 2020, the Company had a gross gain aggregating to $ 0.4 million and $ 0.1 million gross loss related to these derivative instruments.

During the six months ended September 30, 2020, the Company had a gross gain aggregating to $ 0.7 million and $ 0.1 million gross loss related to these derivative instruments.

During the three and nine months ended December 31, 2021, the Company did not record any gain or loss related to these derivative instruments.

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

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

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 September 30, 2021, the Company had a gross unrealized gain aggregating $ 0.4 million and a gross unrealized loss aggregating $ 0.1 million.

During the six months ended September 30, 2021, the Company had a gross unrealized gain aggregating $ 0.8 million and a gross unrealized loss aggregating $ 0.2 million.

During the three months ended September 30, 2020, the Company had a gross unrealized gain aggregating $ 0.1 million and a gross unrealized loss aggregating $ 0.3 million.

During the six months ended September 30, 2020, the Company had a gross unrealized gain aggregating $ 0.7 million and a gross unrealized loss aggregating $ 0.7 million.

The fair market value of marketable equity securities is determined based on quoted market prices in active markets and are therefore, considered Level 1 fair value measurements.

During the three months ended December 31, 2021, the Company had a gross unrealized gain aggregating to $ 1.7 million and a gross unrealized loss aggregating to $ 1.9 million.

During the nine months ended December 31, 2021, the Company had a gross unrealized gain aggregating to $ 2.5 million and a gross unrealized loss aggregating to $ 2.1 million.

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 (loss).

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 September 30, 2021 and 2020, the Company had outstanding borrowings of $ 0 and $ 0.6 million under its margin account, respectively, which is reflected in accrued expenses and other on the condensed consolidated balance sheets.

As of September 30, 2021 and 2020, the Company had cash margin balances related to exchange-traded equity securities and securities sold short of $ 0 and $ 0.7 million, respectively, which is reflected in other current assets on the condensed consolidated balance sheets.

As of December 31, 2021 and 2020, the Company had outstanding borrowings of $ 0 and $ 0.7 million under its margin account, respectively, which is reflected in accrued expenses and other on the condensed consolidated balance sheets.

As of December 31, 2021 and 2020, the Company had cash margin balances related to exchange-traded equity securities and securities sold short of $ 0 and $ 1.3 million, respectively, which is reflected in other current assets on the condensed consolidated balance sheets.

Equity Method Investments

2 unchanged sentences

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

As of September 30, 2021, the number of Insignia's shares owned by the Company was 0.5 million, representing approximately 28 % of the outstanding shares.

As of December 31, 2021, the number of Insignia's shares owned by the Company was 0.5 million, representing approximately 28 % of the outstanding shares.

During the fiscal year ended March 31, 2021, due to loss attributions and impairments taken in prior fiscal years, the Company's net investment basis in Insignia was reduced to $ 0 .

As such, the Company did no t record any additional share of Insignia's net loss as of September 30, 2021.

As such, the Company did no t record any additional share of Insignia's net loss as of December 31, 2021.

On August 23, 2021, Insignia restated its 10-K for the fiscal year ended December 31, 2020 and its 10-Q for the quarter ended March 31, 2021.

3 unchanged sentences

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 loss of $ 0.3 million and $ 0.5 million as its share of CCI's net loss for the three and six months ended September 30, 2021, along with a basis difference adjustment of $ 13.0 thousand and $ 25.0 thousand, respectively.

The Company's net investment basis in CCI is $ 3.2 million as of September 30, 2021.

Summarized unaudited financial information for the Company's equity method investees for the three and six months ended June 30, 2021 and 2020 is as follows (in thousands):

Three Months Ended Six Months Ended

June 30, 2021 June 30, 2020 June 30, 2021 June 30, 2020

The Company recorded a loss of $ 0.1 million and $ 0.6 million as its share of CCI's net loss for the three and nine months ended December 31, 2021, along with a basis difference adjustment of $ 13.0 thousand and $ 38.0 thousand, respectively.

Additionally, due to the adverse financial results as reported in CCI's financial statements for the quarters ended June 30, 2021 and September 30, 2021, in addition to consideration of industry reports and other qualitative factors, the Company determined that it has suffered from an other-than-temporary impairment in its investment in CCI.

As such, the Company recorded an impairment charge of $ 0.3 million during the quarter ended December 31, 2021.

After the impairment, the Company's net investment basis in CCI is $ 2.8 million as of December 31, 2021.

Summarized unaudited financial information for the Company's equity method investees for the three and nine months ended September 30, 2021 and 2020 is as follows (in thousands):

Three Months Ended Nine Months Ended

September 30, 2021 September 30, 2020 September 30, 2021 September 30, 2020

Revenue $ 29,408 $ 27,327 $ 87,396 $ 61,402

5 unchanged sentences

Inventories consisted of the following (in thousands):

September 30,

2021 March 31,

Overnight air cargo $ 30 $ —

Ground equipment manufacturing:

19 unchanged sentences

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

The components of lease cost for the three and six months ended September 30, 2021 and 2020 are as follows (in thousands):

Three Months Ended September 30, Six Months Ended September 30,

The components of lease cost for the three and nine months ended December 31, 2021 and 2020 are as follows (in thousands):

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

2021 2020 2021 2020

3 unchanged sentences

Total lease cost $ 998 $ 838 $ 2,813 $ 2,382

Amounts reported in the consolidated balance sheets for leases where we are the lessee as of September 30, 2021 and March 31, 2021 were as follows (in thousands):

September 30, 2021 March 31, 2021

Amounts reported in the consolidated balance sheets for leases where we are the lessee as of December 31, 2021 and March 31, 2021 were as follows (in thousands):

December 31, 2021 March 31, 2021

Operating leases

5 unchanged sentences

Operating leases 4.33 % 4.37 %

Maturities of lease liabilities under non-cancellable leases where we are the lessee as of September 30, 2021 are as follows (in thousands):

Maturities of lease liabilities under non-cancellable leases where we are the lessee as of December 31, 2021 are as follows (in thousands):

Operating Leases

2022 (excluding the six months ended September 30, 2021) $ 895

2022 (excluding the nine months ended December 31, 2021) $ 440

Thereafter 5,300

4 unchanged sentences

Financing Arrangements

On August 31, 2021, Air T entered into a Third Amended and Restated Credit Agreement with Minnesota Bank & Trust ("MBT").

The terms of the Amended and Restated Credit Agreement were revised to extend the Air T revolver's termination date to August 31, 2023.

The maximum amount available under the revolving facility remains at $ 17 million and interest will be due on the outstanding balance at the rate of 2.5 % or the prime rate plus 1 %, whichever is greater.

Air T and MBT also revised Term Note A to extend the maturity date to August 30, 2031 and to increase the principal amount to $ 9 million.

The revised note utilizes a fixed 3.42 % interest rate.

Air T and MBT also revised Term Note B to extend the maturity date to August 30, 2031.

The principal balance was set at the then current balance amount of $ 3.2 million.

The interest rate on Term Note B is fixed at 3.42 %.

A prepayment penalty provision was added to Term Note A and Term Note B that provides for a 3 % premium payment if prepayment occurs in year 1, 1 % in years 2-3 and 0 % thereafter.

20 % of the loan amount can be prepaid without penalty each year and no penalty payment is due for prepayments made to cure a covenant violation.

Term Note E was restated to set the principal amount of the note at the then current balance due amount ($ 3.7 million), which amount reflects principal payments through August 31, 2021.

The parties also agreed to add the Company’s indirect subsidiary, Jet Yard, LLC ("Jet Yard") as a co-Borrower.

Jet Yard entered into a promissory note with MBT in the principal amount of $ 2 million.

The Jet Yard Note matures on August 30, 2031 and has a fixed interest rate of 4.14 %.

Jet Yard intends to use the proceeds of the note for leasehold improvements at Jet Yard’s facility in Marana, AZ.

On September 2, 2021, Contrail Aviation Support, LLC (“Contrail”), a 79 %-owned subsidiary of Air T, Inc.

entered into a Fourth Amendment to Supplement #2 to Master Loan Agreement (the “Amendment”) and Third Amended and Restated Promissory Note Revolving Note with Old National Bank ("ONB").

The principal revisions to Contrail’s existing credit facility with ONB as contained in the Amendment and the Restated Promissory Note Revolving Note are summarized below:

The termination date of the facility was extended to September 5, 2023;

The Revolving Note principal amount was revised from $ 40 million to $ 25 million;

The net worth covenant was amended and the definition of “net worth” was revised.

The net worth covenant now requires that the borrower maintain a net worth of at least:

(i) $ 8 million at all times prior to March 31, 2023;

(ii) $ 10 million at all times during the period beginning March 31, 2023 and ending on March 30, 2024;

and (iii) $ 12 million at all times on or after March 31, 2024.

On April 13, 2020, the Company entered into a loan with MBT with a principal amount of $ 8.2 million pursuant to the Payroll Protection Program ("PPP Loan"), backed by the Small Business Administration ("SBA"), under the CARES Act.

As of September 30, 2021, the Company's PPP Loan was fully forgiven by the SBA.

As mentioned in Note 2 , on December 2, 2021, the Company, through its wholly-owned subsidiary Wolfe Lake HQ, LLC, completed the purchase of the real estate located at 5000 36th Street West, St.

Louis Park, Minnesota pursuant to the real estate purchase agreement with WLPC East, LLC, a Minnesota limited liability company dated October 11, 2021.

The purchase price was $ 13.2 million, which was paid for with approximately $ 3.3 million in cash and a new secured loan from Bridgewater with an aggregate principal amount of $ 9.9 million and a fixed interest rate of 3.65 % which matures on December 2, 2031 ("Wolfe Lake Debt").

The promissory note provides for monthly payments of principal and interest commencing January 1, 2022 and continuing to the maturity date in the amount of $ 50.9 thousand.

On April 13, 2020, the Company entered into a loan with Minnesota Bank & Trust ("MBT") with a principal amount of $ 8.2 million pursuant to the Payroll Protection Program ("PPP Loan"), backed by the Small Business Administration ("SBA"), under the CARES Act.

As of December 31, 2021, the Company's PPP Loan was fully forgiven by the SBA.

As such, the Company accounted for its then outstanding principal and accrued interest as a gain on extinguishment in accordance with ASC 470.

The following table provides certain information about the current financing arrangements of the Company's and its subsidiaries as of September 30, 2021:

(In Thousands) September 30,

The following table provides certain information about the current financing arrangements of the Company's and its subsidiaries as of December 31, 2021:

(In Thousands) December 31,

2021 March 31,

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Contrail Debt

Revolver - ONB 118 — September 5, 2023 1-month LIBOR + 3.45 %

Revolver - Old National Bank ("ONB") 1,503 — September 5, 2023 1-month LIBOR + 3.45 %

Term Loan G - ONB 44,918 43,598 November 24, 2025 1-month LIBOR + 3.00 %

2 unchanged sentences

Canadian Emergency Business Account Loan 32 32 December 31, 2025 5.00 %

Wolfe Lake Debt

Term Loan - Bridgewater 9,900 — December 2, 2031 3.65 %

Total 9,900 —

Total Debt 109,447 88,637

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Total Debt, net $ 108,398 $ 87,496

1 The PPP loan was fully forgiven by the SBA in September 2021.

At September 30, 2021, our contractual financing obligations, including payments due by period, are as follows (in thousands):

At December 31, 2021, our contractual financing obligations, including payments due by period, are as follows (in thousands):

Due by Amount

September 30, 2022 $ 1,319

September 30, 2023 5,974

September 30, 2024 8,752

September 30, 2025 12,253

September 30, 2026 36,263

December 31, 2022 $ 2,963

December 31, 2023 12,688

December 31, 2024 9,058

December 31, 2025 40,817

December 31, 2026 1,672

Thereafter 42,249

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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 September 30, 2021, 5.3 million Warrants have been exercised.

As of December 31, 2021, 5.3 million Warrants have been exercised.

The remaining 3.1 million Warrants were not exercised and expired on August 30, 2021.

On May 14, 2021, the Company entered into an At the Market Offering Agreement (the “ATM Agreement”) with Ascendiant Capital Markets, LLC (the “sales agent” or “Ascendiant”), pursuant to which it may sell and issue its TruPs having an aggregate offering price of up to $ 8.0 million from time to time.

The Company has no obligation to sell any TruPs, and may at any time suspend offers under the ATM Agreement or terminate the ATM Agreement.

As of September 30, 2021, the Company has sold 0.2 million shares of TruPs under the ATM agreement for net proceeds of $ 5.0 million.

The amount outstanding on the Company's Debt - Trust Preferred Securities is $ 22.1 million as of September 30, 2021.

During the first three quarters of fiscal 2022, the Company received $ 7.9 million in gross proceeds from the sale of TruPs through a S-3 Registration Statement filed by the Company.

The TruPs were sold and issued under the S-3 “shelf” Registration Statement base prospectus filed with the Securities and Exchange Commission on March 10, 2021 and declared effective by the SEC on March 19, 2021, and under an At the Market Offering Agreement and a First Amendment to the At the Market Offering Agreement filed with the SEC on May 14, 2021 and November 19, 2021, respectively, and prospectus supplements filed with the SEC on May 14, 2021 and November 19, 2021, respectively.

The amount outstanding on the Company's Debt - Trust Preferred Securities is $ 25.0 million as of December 31, 2021.

1 The PPP loan was fully forgiven by the SBA in September 2021.

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 September 30, 2021 and March 31, 2021 (in thousands):

September 30, 2021 March 31, 2021

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, 2021 and March 31, 2021 (in thousands):

December 31, 2021 March 31, 2021

United States $ 25,683 $ 8,632

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Total tangible long-lived assets, net $ 27,224 $ 10,650

The Company's tangible long-lived assets, net of accumulated depreciation, held outside of the United States represent engines and aircraft on lease at September 30, 2021.

The net book value located within each individual country at September 30, 2021 and March 31, 2021 is listed below (in thousands):

September 30, 2021 March 31, 2021

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, 2021.

The net book value located within each individual country at December 31, 2021 and March 31, 2021 is listed below (in thousands):

December 31, 2021 March 31, 2021

Macau $ 1,430 $ 1,896

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Total tangible long-lived assets, net $ 1,541 $ 2,018

Total revenue, in and outside the United States, is summarized in the following table for the six months ended September 30, 2021 and September 30, 2020 (in thousands):

September 30, 2021 September 30, 2020

Total revenue, in and outside the United States, is summarized in the following table for the nine months ended December 31, 2021 and December 31, 2020 (in thousands):

December 31, 2021 December 31, 2020

United States $ 109,261 $ 113,563

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(In Thousands) Three Months Ended

September 30, Six Months Ended

September 30,

December 31, Nine Months Ended

2021 2020 2021 2020

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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 $ 7.3 million as of September 30, 2021.

The Contrail RNCI is a Level 3 fair value measurement that is valued at $ 7.9 million as of December 31, 2021.

The change in the redemption value compared to March 31, 2021 is an increase of $ 1.3 million.

The increase was driven by $ 0.3 million of contributions made from the non-controlling interest and $ 0.1 million of the net change in fair value, in addition to $ 0.3 million of net income attributable to the non-controlling interest during the six months ended September 30, 2021.

The increase was driven by $ 0.3 million of contributions made from the non-controlling interest and $ 0.6 million of the net change in fair value, in addition to $ 0.4 million of net income attributable to the non-controlling interest during the nine months ended December 31, 2021.

As of the date of this filing, neither the Seller nor Air T has indicated an intent to exercise the put and call options.

7 unchanged sentences

CAM has an initial commitment to CJVII of approximately $ 53.0 million, which is comprised of an $ 8.0 million initial commitment from the Company and an approximately $ 45.0 million initial commitment from MRC.

As of September 30, 2021, CAM's unfunded capital commitments are approximately $ 6.9 million from the Company and $ 43.9 million from MRC.

As of December 31, 2021, CAM's remaining capital commitments are approximately $ 4.2 million from the Company and $ 28.9 million from MRC.

2020 Omnibus Stock and Incentive Plan

2 unchanged sentences

Among other instruments, the Plan permits the Company to grant stock option awards.

Through September 30, 2021, options to purchase up to 326,000 shares have been granted under the Plan.

Through December 31, 2021, options to purchase up to 326,000 shares have been granted under the Plan.

Vesting of options is based on the grantee meeting specified service conditions.

Furthermore, the number vested options that a grantee is able to exercise, if any, is based on the Company’s stock price as of the vesting dates specified in the respective option grant agreements.

As of September 30, 2021, total compensation cost recognized under the Plan was $ 0.2 million.

Furthermore, the number of vested options that a grantee is able to exercise, if any, is based on the Company’s stock price as of the vesting dates specified in the respective option grant agreements.

As of December 31, 2021, total compensation cost recognized under the Plan was $ 0.3 million.

Subsequent Events

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

Contrail's Interest Rate Swap

On January 7, 2022, Contrail completed an interest rate swap transaction with ONB with respect to the $ 43.6 million loan made to Contrail in November 2020 pursuant to the Main Street Priority Loan Facility as established by the U.S.

Federal Reserve.

The purpose of the floating-to-fixed interest rate swap transaction was to effectively fix the loan interest rate at 4.68 %.

Notwithstanding the terms of the interest rate swap transaction, Contrail is ultimately obligated for all amounts due and payable under the financing.

Employee Retention Credit

On January 24, 2022, the Company filed an application with the Internal Revenue Service for an Employee Retention Credit in an amount approximating $ 9.1 million.

The Employee Retention Credit, originally included in the CARES Act in 2020 and subsequently modified by Congress, is a refundable tax credit against certain employment taxes equal to 50-70% of the qualified wages an eligible employer pays to its employees.

The Company’s application was made with respect to wages paid between the period January 1, 2001 and September 30, 2021.

There is no assurance that the Company will qualify for this credit or when, or in what amount, the application will be approved.

GdW Beheer B.V.

On February 8, 2022, Air T Acquisition 22.1, LLC, a wholly-owned subsidiary of the Company, entered into a new secured loan with Bridgewater Bank, a Minnesota banking corporation.

The loan is in the principal amount of $ 5.0 million and bears a fixed interest rate of 4.00 %.

The loan provides for monthly payments of accrued interest and annual principal payments of $ 0.5 million each for years 2023 through 2027, and matures on February 8, 2027 at which time the entire unpaid balance will be due and payable in full.

In addition, the loan agreement contains affirmative and negative covenants.

The loan is secured by a first lien on all of the assets of Air T Acquisition 22.1, LLC, a pledge of $ 5.0 million 8.0 % Cumulative Capital Security Certificates (also referred to as the TruPs) which were contributed to the Air T Acquisition 22.1, LLC by the Company upon its formation, and a personal guaranty of the Company’s Chairman, President and Chief Executive Officer, Nicholas Swenson.

The proceeds from the loan, as well as additional cash of $2.7 million were used to acquire a 70 % interest in GdW Beheer B.V., a Dutch holding company involved in the global aviation data and information business, on February 10, 2022.

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

Item 1. Financial Statements