What changed in this filing

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Item 8. Financial Statements and Supplementary Data

2022-06-28 compared with 2021-06-25 · 510 added, 414 removed, 779 unchanged (54% of the section changed)

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Report of Independent Registered Public Accounting Firm

Consolidated Statements of Income for the Years Ended March 31, 2021 and 2020

Consolidated Statements of Comprehensive Income for the Years Ended March 31, 2021 and 2020

Consolidated Statements of Income (Loss) for the Years Ended March 31, 2022 and 2021

Consolidated Statements of Comprehensive Income ( Loss) for the Years Ended March 31, 2022 and 2021

Consolidated Balance Sheets as of March 31, 2022 and 2021

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We have audited the accompanying consolidated balance sheets of Air T, Inc.

and subsidiaries (the "Company") as of March 31, 2021 and 2020, the related consolidated statements of income, comprehensive income, equity, and cash flows, for each of the two years in the period ended March 31, 2021, and the related notes (collectively referred to as the "financial statements").

and subsidiaries (the "Company") as of March 31, 2022 and 2021, the related consolidated statements of income (loss), comprehensive income (loss), equity, and cash flows, for each of the two years in the period ended March 31, 2022, and the related notes (collectively referred to as the "financial statements").

In our opinion, the financial statements present fairly, in all material respects, the financial position of the Company as of March 31, 2022 and 2021, and the results of its operations and its cash flows for each of the two years in the period ended March 31, 2022, in conformity with accounting principles generally accepted in the United States of America.

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We believe that our audits provide a reasonable basis for our opinion.

Critical Audit Matters

The critical audit matters communicated below are matters arising from the current-period audit of the financial statements that were communicated or required to be communicated to the audit committee and that (1) relate to accounts or disclosures that are material to the financial statements and (2) involved our especially challenging, subjective, or complex judgments.

The communication of critical audit matters does not alter in any way our opinion on the financial statements, taken as a whole, and we are not, by communicating the critical audit matters below, providing separate opinions on the critical audit matters or on the accounts or disclosures to which they relate.

Critical Audit Matter

The critical audit matter communicated below is a matter arising from the current-period audit of the financial statements that was communicated or required to be communicated to the audit committee and that (1) relates to accounts or disclosures that are material to the financial statements and (2) involved our especially challenging, subjective, or complex judgments.

The communication of critical audit matters does not alter in any way our opinion on the financial statements, taken as a whole, and we are not, by communicating the critical audit matter below, providing a separate opinion on the critical audit matter or on the accounts or disclosures to which it relates.

Redeemable non-controlling interest – valuation of Contrail Aviation Support, LLC — Refer to Notes 1 and 4 to the financial statements

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• We evaluated whether the business and valuation assumptions used were consistent with evidence obtained in other areas of the audit.

Inventories, net – valuation of inventories– Refer to Notes 1 and 6 to the financial statements

Critical Audit Matter Description

Inventories are carried at the lower of cost or net realizable value.

In its periodic evaluation of the carrying value of these inventories, the Company is required to make estimates regarding the net realizable value, which includes the consideration of sales patterns and expected future demand.

Changes in these assumptions could have a significant impact on the valuation of certain inventory held by the Company’s Commercial Jet Engines and Parts operating segment.

We identified the valuation of certain inventory held by the Company’s Commercial Jet Engines and Parts operating segment as a critical audit matter.

Given the magnitude of the inventories at certain business units, coupled with the significant judgments necessary to project sales patterns and expected future demand, as well as changes in economic and market conditions brought on by COVID-19, auditing such estimates required a high degree of auditor judgment and an increased extent of effort, including the need to involve our fair value specialists, when performing audit procedures and evaluating the results of those procedures.

How the Critical Audit Matter Was Addressed in the Audit

Our audit procedures related to the sales patterns and expected future demand, used by management to determine the valuation of inventories, included the following, among others:

• We evaluated the reasonableness of the sales patterns and expected future demand, and related inputs used by management, by comparing the information to:

◦ Historical results of those business units.

◦ Forecasted sales based on recent quote and sales information for similar parts within the Company’s inventory.

◦ Market data and forecasts with regard to the recovery of the airline industry from the impacts of COVID-19.

• We involved our fair value specialists to assist in the evaluation of:

◦ The methodology used by, and the qualifications of, the Company’s third-party specialist.

◦ The key assumptions underlying the valuation of a representative sample of inventories including recent quotes, number of vendors, number of components, and component condition.

• We held discussions with various members of management to understand the status of any plans to monetize certain inventories at less than carrying value to meet cash flow demands and evaluated whether the determination of net realizable value for those inventories reflects the status of management’s plans.

/s/ Deloitte & Touche LLP

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AND SUBSIDIARIES

CONSOLIDATED STATEMENTS OF INCOME

CONSOLIDATED STATEMENTS OF INCOME (LOSS)

Year Ended March 31,

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Impairment of property and equipment 37 187

Gain on sale of property and equipment ( 10 ) ( 37 )

Loss (gain) on sale of property and equipment 5 ( 10 )

168,322 184,296

Operating (Loss) Income from continuing operations ( 9,175 ) 7,291

Operating Income (Loss) from continuing operations 8,755 ( 9,175 )

Non-operating Income (Expense):

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

Interest expense, net ( 4,948 ) ( 4,624 )

Gain on settlement of bankruptcy — 4,527

Loss from equity method investments ( 723 ) ( 910 )

Gain on forgiveness of PPP 8,331 —

Income (loss) from equity method investments 37 ( 723 )

Other 1,221 2,741

4,641 ( 2,606 )

(Loss) Income from continuing operations before income taxes ( 11,781 ) 2,624

Income Tax Benefit ( 3,387 ) ( 544 )

Net (Loss) Income from continuing operations ( 8,394 ) 3,168

Loss from discontinued operations, net of tax — ( 114 )

Income (Loss) from continuing operations before income taxes 13,396 ( 11,781 )

Income Tax Expense (Benefit) 1,169 ( 3,387 )

Net Income (Loss) from continuing operations 12,227 ( 8,394 )

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

Net (Loss) Income ( 8,390 ) 11,233

Net Loss (Income) Attributable to Non-controlling Interests 1,113 ( 3,577 )

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

Net Income (Loss) 12,227 ( 8,390 )

Net (Income) Loss Attributable to Non-controlling Interests ( 1,299 ) 1,113

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

Stockholders $ 10,928 $ ( 7,277 )

Loss from continuing operations per share (Note 22)

Income (loss) from continuing operations per share (Note 23)

Basic $ 3.79 $ ( 2.53 )

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Diluted $ — $ —

(Loss) Income per share (Note 22)

Income (Loss) per share (Note 23)

Basic $ 3.79 $ ( 2.53 )

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AND SUBSIDIARIES

CONSOLIDATED STATEMENTS OF COMPREHENSIVE INCOME

CONSOLIDATED STATEMENTS OF COMPREHENSIVE INCOME (LOSS)

Year Ended March 31,

(In thousands) 2022 2021

Net (Loss) Income $ ( 8,390 ) $ 11,233

Other Comprehensive Income:

Foreign currency translation (loss) gain ( 409 ) 212

Unrealized gain/(loss) on interest rate swaps, net of tax of $ 78 and $ 157

Net Income (Loss) $ 12,227 $ ( 8,390 )

Other Comprehensive Loss:

Foreign currency translation loss ( 549 ) ( 409 )

Unrealized gain on interest rate swaps, net of tax of $ 294 and $ 78

Reclassification of interest rate swaps into earnings 41 ( 18 )

Total Other Comprehensive Loss 421 ( 165 )

Total Comprehensive (Loss) Income ( 8,555 ) 10,916

Comprehensive Loss (Income) Attributable to Non-controlling Interests 1,113 ( 3,592 )

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

Total Comprehensive Income (Loss) 12,648 ( 8,555 )

Comprehensive (Income) Loss Attributable to Non-controlling Interests ( 1,299 ) 1,113

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

Stockholders $ 11,349 $ ( 7,442 )

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CONSOLIDATED BALANCE SHEETS

(In thousands) March 31, 2021 March 31, 2020

(In thousands, except per share data) March 31, 2022 March 31, 2021

Current Assets:

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Restricted investments 1,691 1,507

Accounts receivable, less allowance for doubtful accounts of $ 1,177 and $ 680

Accounts receivable, net of allowance for doubtful accounts of $ 1,368 and $ 1,177

Income tax receivable 3,230 4,389

Inventories, net 75,167 71,971

Employee retention credit receivable 9,138 —

Other current assets 10,106 4,068

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Property and equipment, net of accumulated depreciation of $ 5,405 and $ 4,510

Intangible assets, net of accumulated amortization of $ 2,947 and $ 2,467

Right-of-use assets 7,354 7,757

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Long-term debt 129,326 81,857

Long-term lease liability 7,075 7,473

Deferred income tax liabilities, net 2,812 595

Long-term lease liability 6,734 7,075

Other non-current liabilities 1,342 1,732

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4,000,000 shares authorized, 3,022,745 shares issued, 2,866,418 and 2,881,853 shares outstanding

Treasury stock, 140,892 shares at $ 18.58

Treasury stock, 156,327 at $ 19.20 and 140,892 shares at $ 18.58

( 3,002 ) ( 2,617 )

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CASH FLOWS FROM OPERATING ACTIVITIES:

Net (loss) income $ ( 8,390 ) $ 11,233

Loss from discontinued operations, net of income tax — 114

Net income (loss) $ 12,227 $ ( 8,390 )

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

Net (loss) income from continuing operations ( 8,394 ) 3,168

Net income (loss) from continuing operations 12,227 ( 8,394 )

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

Depreciation and amortization 1,860 3,107

Impairment of investment — 2,305

Profit from sale of assets on lease and held for lease — ( 1,473 )

Gain on settlement of bankruptcy — ( 4,509 )

Gain on forgiveness of PPP loan ( 8,331 ) —

Write-down of inventory 768 6,405

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Accrued expenses ( 485 ) ( 341 )

Employee retention credit receivable ( 9,138 ) —

Other ( 1,655 ) ( 5,570 )

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Investment in unconsolidated entities ( 6,797 ) —

Acquisition of assets ( 13,408 ) —

Capital expenditures related to property & equipment ( 1,530 ) ( 3,899 )

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Other 364 ( 919 )

Net cash provided by (used in) investing activities - continuing operations 2,516 ( 11,568 )

Net cash provided by investing activities - discontinued operations — 20,173

Net cash provided by investing activities 2,516 8,605

Net cash (used) provided by investing activities - continuing operations ( 33,388 ) 2,516

Net cash (used) provided by investing activities - discontinued operations — —

Net cash (used) provided by investing activities ( 33,388 ) 2,516

CASH FLOWS FROM FINANCING ACTIVITIES:

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Proceeds from PPP loan — 8,215

Proceeds received from issuance of Trust Preferred Securities ("TruPs") 1,341 8,522

Proceeds received from issuance of TruPs 11,278 1,341

Other 2,745 ( 2,319 )

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Effect of foreign currency exchange rates on cash and cash equivalents ( 341 ) ( 412 )

NET INCREASE IN CASH AND CASH EQUIVALENTS AND RESTRICTED CASH 356 3,031

NET (DECREASE) INCREASE IN CASH AND CASH EQUIVALENTS AND RESTRICTED CASH ( 7,559 ) 356

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

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Non-cash capital expenditures related to property & equipment 13 31

Equipment leased or held for lease to customers transferred to Inventory 19,623 4,932

Equipment leased or held for lease transferred to Inventory 12 19,623

Equipment in Inventory transferred to Assets on Lease 13,100 —

Issuance of Debt - Trust Preferred Securities — 4,000

Issuance of warrant liability — 840

SUPPLEMENTAL DISCLOSURE OF CASH FLOW INFORMATION:

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(In thousands) Common Stock Treasury Stock

Share Amount Share Amount Additional

Shares Amount Share Amount Additional

Capital Retained

Earnings Accumulated

Comprehensive

Income (Loss)

Non-controlling

Income (Loss) Non-controlling

Interests* Total

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

Net income* 7,656 1,991 9,647

Stock Split 1,010 252 ( 252 ) —

Repurchase of common stock ( 10 ) ( 2 ) 141 ( 2,617 ) ( 198 ) ( 2,817 )

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

Issuance of Warrants ( 840 ) ( 840 )

Adoption of ASC 842 - Leasing ( 41 ) ( 41 )

Foreign currency translation gain 197 15 212

Net loss* — — — — — ( 7,277 ) — ( 16 ) ( 7,293 )

Foreign currency translation loss — $ — — — — — ( 409 ) — ( 409 )

Adjustment to fair value of redeemable non-controlling interest — — — — ( 2,636 ) ( 221 ) — — ( 2,857 )

Unrealized loss of interest rate swaps, net of tax ( 529 ) ( 529 )

Unrealized gain of interest rate swaps, net of tax — — — — — — 262 — 262

Balance, March 31, 2021 3,023 $ 756 141 $ ( 2,617 ) $ — $ 16,270 $ ( 684 ) $ 989 $ 14,714

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Share Amount Share Amount Additional

Capital Retained

Earnings Accumulated

Comprehensive

Income (Loss)

Non-controlling

Income (Loss) Non-controlling

Interests* Total

Balance, March 31, 2021 3,023 $ 756 141 $ ( 2,617 ) $ — $ 16,270 $ ( 684 ) $ 989 $ 14,714

Net loss* ( 7,277 ) ( 16 ) ( 7,293 )

Net income* — — — — — 10,928 — 115 11,043

Repurchase of common stock — — 15 ( 385 ) — — — — ( 385 )

Stock compensation expense — — — — 393 — — — 393

Foreign currency translation loss — — — — — — ( 549 ) — ( 549 )

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Unrealized gain on interest rate swaps, net of tax — — — — — — 929 — 929

Put option issued to co-investor in CAM — — — — — ( 1,000 ) — — ( 1,000 )

Reclassification of interest rate swaps into earnings — — — — — — 41 — 41

Balance, March 31, 2022 3,023 $ 756 156 $ ( 3,002 ) $ 393 $ 26,729 $ ( 263 ) $ 1,104 $ 25,717

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

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

See notes to consolidated financial statements.

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

We evaluate the performance of our business segments based on operating income and Adjusted EBITDA.

We evaluate the performance of our business segments based on operating income (loss) and Adjusted EBITDA.

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 consolidated statements of operations for the fiscal years ended March 31, 2021 and 2020.

Refer to Footnote 2 - "Discontinued Operations" for additional information.

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

On September 30, 2019, the Company completed the sale of GAS.

The results of operations of GAS are reported as discontinued operations in the condensed consolidated statements of operations for the year ended March 31, 2021.

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

SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES

Principles of Consolidation – The consolidated financial statements include the accounts of the Company and its wholly-owned subsidiaries as well as its non-wholly owned subsidiaries, Contrail Aviation and Delphax.

All intercompany transactions and balances have been eliminated in consolidation.

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COVID-19 and its impact on the current financial, economic and capital markets environment, and future developments in these and other areas present uncertainty and risk with respect to our financial condition and results of operations.

Each of our businesses implemented measures to attempt to limit the impact of COVID-19 but we still experienced a 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.

We currently expect that many of our businesses may continue to generate reduced operating cash flow and may operate at a loss during at least the first half of fiscal 2022 and potentially even longer.

We expect that these impacts will continue to some extent if the outbreak persists.

Each of our businesses implemented measures to attempt to limit the impact of COVID-19 but we still experienced a number of disruptions, and we experienced and continue to experience to a lesser degree 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 beyond fiscal 2022.

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

The fluidity of this situation precludes any prediction as to the ultimate adverse impact of COVID-19 on economic and market conditions, and, as a result, present material uncertainty and risk with respect to us and our results of operations.

The Company believes the estimates and assumptions underlying the Company’s consolidated financial statements are reasonable and supportable based on the information available as of March 31, 2022, however;

uncertainty over the ultimate impact COVID-19 will have on the global economy generally, and the Company’s business in particular, makes any estimates and assumptions as of March 31, 2021 inherently less certain than they would be absent the current and potential impacts of COVID-19.

uncertainty over the ultimate direct and indirect impact COVID-19 will have on the global economy generally, and the Company’s business in particular, makes any estimates and assumptions as of March 31, 2022 inherently less certain than they would be absent the current and potential impacts of COVID-19.

Segments - The Company has four reportable operating segments:

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

We evaluate the performance of our business segments based on operating income.

We evaluate the performance of our business segments based on operating income (loss) and Adjusted EBITDA.

Variable Interest Entities – In accordance with the applicable accounting guidance for the consolidation of variable interest entities, the Company analyzes its variable interests to determine if an entity in which we have a variable interest is a variable interest entity.

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Thus, the Company would adjust its consolidated financial statements as needed, including recognizing in its current-period earnings the full effect of changes in depreciation, amortization, or other income effects, by line item, if any, as a result of the change to the provisional amounts calculated as if the accounting had been completed at the acquisition date.

Income statement activity of an acquired business is reflected within the Company’s consolidated statements of income commencing with the date of acquisition.

Income statement activity of an acquired business is reflected within the Company’s consolidated statements of income (loss) commencing with the date of acquisition.

Amounts for pre-acquisition periods are excluded.

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The Company accounts for such acquisition-related costs as expenses in the period in which the costs are incurred and the services are received.

Changes in estimate of the fair value of earn-out obligations subsequent to the acquisition date are not accounted for as part of the acquisition, rather, they are recognized directly in earnings.

Changes in estimates of the fair value of earn-out obligations subsequent to the acquisition date are not accounted for as part of the acquisition, rather, they are recognized directly in earnings.

Cash and Cash Equivalents – Cash equivalents consist of liquid investments with maturities of three months or less when purchased.

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In these evaluations, the Company is required to make estimates regarding the net realizable value, which includes the consideration of sales patterns and expected future demand.

Any slow moving, obsolete or damaged inventory and inventory with costs exceeding net realizable value are evaluated for

Any slow moving, obsolete or damaged inventory and inventory with costs exceeding net realizable value are evaluated for write-downs.

These estimates could vary significantly from actual amounts based upon future economic conditions, customer inventory levels, or competitive factors that were not foreseen or did not exist when the estimated write-downs were made.

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Investments under the Equity Method – The Company utilizes the equity method to account for investments when the Company possesses the ability to exercise significant influence, but not control, over the operating and financial policies of the investee.

The ability to exercise significant influence is presumed when an investor possesses more than 20% of the voting interests of the investee.

This presumption may be overcome based on specific facts and circumstances that demonstrate that the ability to exercise significant influence is restricted.

The Company applies the equity method to investments in common stock and to other investments when such other investments possess substantially identical subordinated interests to common stock.

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Goodwill, net of impairment $ 10,126 $ 4,227

As of March 31, 2021, the entire $ 4.2 million goodwill balance is attributable to the acquisition of Contrail Aviation and included within the Commercial Jet Engines and Parts segment.

As of March 31, 2022, $ 4.2 million of the goodwill balance is attributable to the acquisition of Contrail and included within the Commercial Jet Engines and Parts segment.

$ 5.9 million of the goodwill balance is attributable to the acquisition of GdW in February 2022, and included within the Corporate and Other segment.

We performed our annual impairment assessment for goodwill of the Contrail reporting unit at March 31, 2022.

In the fiscal year 2021, COVID-19 greatly impacted the macroeconomic conditions and the outlook of the airline industry.

In the fiscal year 2022, COVID-19 continued to greatly impact the macroeconomic conditions and the outlook of the airline industry.

Due to this, the Company performed a quantitative analysis using a combination of the income approach, utilizing a discounted cash flow analysis, and the market approach, utilizing the guideline public company method.

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The estimated amortizable lives of the intangible assets are as follows:

Purchased software 3

Internally developed software 10 - 15

In-place lease and other intangibles Over lease term

Trade names 5

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Non-compete 5

Customer relationship 10

Customer relationships 10 - 15

Property and Equipment and Assets on Lease or Held for Lease – Property and equipment is stated initially at cost, or fair value if purchased as part of a business combination.

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Accounting for Debt - Trust Preferred Securities and Warrant Liability – On June 10, 2019, the Company issued an aggregate of 1.6 million TruPs in the amount of $ 4.0 million in a non-cash transaction.

These TruPs are mandatorily redeemable preferred security obligations of the Company.

In accordance with ASC 480, the Company presented mandatorily redeemable preferred securities that do not contain a conversion option as a liability on the balance sheet.

In connection with the issuance of the TruPs, the Company also issued an aggregate of 8.4 million warrants (representing warrants to purchase $ 21.0 million in stated value of TruPs).

In connection with the issuance of these TruPs, the Company also issued an aggregate of 8.4 million warrants (representing warrants to purchase $ 21.0 million in stated value of TruPs).

A warrant for mandatorily redeemable shares conditionally obligates the issuer to ultimately transfer assets—the obligation is conditioned only on the warrant's being exercised because the shares will be redeemed.

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Accordingly, the Warrants are recorded within "Other non-current liabilities" on our consolidated balance sheets.

As of March 31, 2021, the Warrants are recorded at fair value.

The Warrants are recorded at fair value.

Fair value measurement was based on quoted price for a similar asset or liability as observed on the NASDAQ Global Market.

The liability is classified as Level 2 in the hierarchy.

As of March 31, 2022, 5.3 million Warrants were 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.

These TruPs are mandatorily redeemable preferred security obligations of the Company.

In accordance with ASC 480, the Company presented mandatorily redeemable preferred securities that do not contain a conversion option as a liability on the balance sheet.

Further, as the redemption date and the redemption amount are both fixed, in accordance with ASC 825, we measured these TruPs at the present value of the amount to be paid at settlement, discounted by using the implicit rate at inception.

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

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An uncertain income tax position is not recognized if it has a less than a 50% likelihood of being sustained.

Accounting for Redeemable Non-Controlling Interest – In 2016, in connection with the Company's acquisition of Contrail Aviation, Contrail Aviation entered into an Operating Agreement (the “Operating Agreement”) with the Seller providing for the governance of and the terms of membership interests in Contrail Aviation.

The Operating Agreement includes put and call options (“Put/Call Option”) with regard to the 21% non-controlling interest retained by the Seller.

The Seller is the founder of Contrail Aviation and its current Chief Executive Officer.

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.

Accounting for Redeemable Non-Controlling Interest – In 2016, in connection with the Company's acquisition of Contrail, Contrail entered into an Operating Agreement (the “Operating Agreement”) with the Seller providing for the governance of and the terms of membership interests in Contrail.

The Operating Agreement includes put and call options (“Contrail Put/Call Option”) with regard to the 21% non-controlling interest retained by the Seller.

The Seller is the founder of Contrail and its current Chief Executive Officer.

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

Per the agreement, the price is to be agreed upon by the parties or, failing such agreement, to be determined pursuant to third-party appraisals in a process specified in the agreement.

In February 2022, in connection with the Company's acquisition of GdW, a consolidated subsidiary of Shanwick, the Company entered into a shareholder agreement with the 30 % non-controlling interest owners of Shanwick, providing for the governance of and the terms of membership interests in Shanwick.

The shareholder agreement includes put and call options (“Shanwick Put/Call Option”) with regard to the 30 % non-controlling interest.

The non-controlling interest holders are the executive management of the underlying business.

The Shanwick Put/Call Option grants the Company an option to purchase the 30 % interest at the call option price ("Call Option") that equals to the average EBIT over the 3 Financial Years prior to the exercise of the Call Option multiplied by 8.

In addition, the Shanwick Put/Call Option also grants the non-controlling interest owners an option ("Put Option") to require Air T to purchase from them their respective ownership interests at the Put Option price, that is equal to the average EBIT over the 3 Financial Years prior to the exercise of the Put Option multiplied by 7.5.

The Call Option and the Put Option may be exercised at any time from the fifth anniversary of the shareholder agreement and then only at the end of each fiscal year of Air T.

Applicable accounting guidance requires an equity instrument that is redeemable for cash or other assets to be classified outside of permanent equity if it is redeemable (a) at a fixed or determinable price on a fixed or determinable date, (b) at the option of the holder, or (c) upon the occurrence of an event that is not solely within the control of the issuer.

As a result of this feature, the Company recorded the non-controlling interest as redeemable and classified it in temporary equity within its Consolidated Balance Sheets initially at its acquisition-date fair value.

The non-controlling interest is adjusted each reporting period for income (or loss) attributable to the non-controlling interest as well as any applicable distributions made.

A measurement period adjustment, if any, is then made to adjust the non-controlling interest to the higher of the redemption value (fair value) or carrying value each reporting period.

These fair value adjustments are recognized through retained earnings and are not reflected in the Company's Consolidated Statements of Income.

When calculating earnings per share attributable to the Company, the Company adjusts net income attributable to the Company for the measurement period adjustment to the extent the redemption value exceeds the fair value of the non-controlling interest on a cumulative basis.

The fair value of the non-controlling interest is determined using a combination of the income approach, utilizing a discounted cash flow analysis, and the market approach, utilizing the guideline public company method.

As a result of this feature, the Company recorded the non-controlling interests as redeemable and classified them in temporary equity within its Consolidated Balance Sheets initially at their acquisition-date estimated redemption value or fair value.

Per the Operating Agreement, the Contrail's non-controlling interest is redeemable at fair value, which is determined using a combination of the income approach, utilizing a discounted cash flow analysis, and the market approach, utilizing the guideline public company method.

Contrail's discounted cash flow analysis requires significant management judgment with respect to forecasts of revenue, operating margins, capital expenditures, and the selection and use of an appropriate discount rate.

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Contrail’s market approach requires management to make significant assumptions related to market multiples of earnings derived from comparable publicly-traded companies with similar operating characteristics as Contrail.

As of March 31, 2021, the fair value of the redeemable non-controlling interest is $ 6.6 million.

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

The increase was driven by $ 2.9 million related to the net change in fair value during the fiscal year ended March 31, 2021, which is reflected on our consolidated statements of equity, partially offset by net loss attributable to and distributions made to the non-controlling interest.

The fair value increase is primarily attributable to the value associated with Contrail's potential investment in an aircraft asset management joint venture, which subsequently closed on May 5, 2021.

See Note 24 .

The Contrail's non-controlling interest is adjusted each reporting period for income (or loss) attributable to the non-controlling interest as well as any applicable distributions made.

A measurement period adjustment, if any, is then made to adjust the non-controlling interest to the higher of the redemption value (fair value) or carrying value each reporting period.

These fair value adjustments are recognized through retained earnings and are not reflected in the Company's Consolidated Statements of Income (Loss).

As of March 31, 2022, the fair value of the Contrail's redeemable non-controlling interest is $ 7.2 million.

See Note 24 , Commitments and Contingencies.

The Shanwick's non-controlling interest is redeemable at established multiples of EBIT and, as such, is considered redeemable at other than fair value.

It is recorded on our consolidated balance sheets at estimated redemption value within redeemable non-controlling interests, and changes in its estimated redemption value are recorded on our consolidated statements of operations within non-controlling interests.

As of March 31, 2022, the estimated redemption value of Shanwick's redeemable non-controlling interest is $ 3.6 million.

See Note 24 , Commitments and Contingencies.

Revenue Recognition – Substantially all of the Company’s revenue is derived from contracts with an initial expected duration of one year or less.

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The Company, under the terms of its overnight air cargo dry-lease service contracts, passes through to its air cargo customer certain cost components of its operations without markup.

The cost of fuel, landing fees, outside maintenance, parts and certain other direct operating costs are included in operating expenses and billed to the customer, at cost, and included in overnight air cargo revenue on the accompanying statements of income.

These pass-through costs totaled $ 23.0 million and $ 19.9 million for the years ended March 31, 2022 and 2021, respectively.

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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 TNW of $ 8 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 were:

(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.

Due primarily to the impact of COVID-19 on its business, as of March 31, 2021, Contrail was not in compliance with maintaining the minimum TNW of $ 15 million.

As of the issuance date of this report, pursuant to the existing terms of the Contrail Credit Agreement, the Company and the non-controlling interest owner of Contrail made total capital contributions to Contrail in the amount of $ 1.4 million, which had the effect of curing this financial covenant non-compliance.

Contrail and ONB are also in discussions to reduce the minimum TNW to $ 8 million, in exchange for certain amendments to its credit agreement, including renewing its revolving line of credit at a lower amount than the current agreement.

However, there is no assurance that Contrail will be successful in reducing the minimum TNW financial covenant.

The obligations of Contrail under the Contrail Credit Agreement are guaranteed by the Company, up to a maximum of $ 1.6 million, plus costs of collection.

The Company is not liable for any other assets or liabilities of Contrail and there are no cross-default provisions with respect to Contrail’s debt in any of the Company’s debt agreements with other lenders.

In the possible absence of Contrail’s operation as a going concern, the Company believes it, along with the rest of its businesses, will continue to operate as a going concern, given the maximum guarantee of Contrail’s obligations of $ 1.6 million.

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 proceeds were used to pay down the Contrail Revolver.

The loan proceeds are also 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 indebtedness incurred is subject to the terms and provisions of the Master Loan Agreement.

The principal terms of the Contrail Main Street Loan are detailed in Note 13 .

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 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 MBT.

The principal terms of the Term Loan - PSB are detailed in Note 13 .

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 Payroll Protection Program ("PPP loan"), as authorized by the CARES Act, of $ 8.2 million to help pay for payroll costs, mortgage interest, rent and utility costs.

The Company has applied 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 and other current financings), net cash provided by operations from its remaining operating segments, together with its current revolving lines of credit, as amended or replaced, 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.

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 March 31, 2021, the standard did not have a material impact on the Company's 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 March 31, 2021, the amendment did not have a material impact on the Company's 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 March 31, 2021, the amendment did not have a material impact on the Company's 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 consolidated financial statements and disclosures.

As of March 31, 2022, Contrail was in compliance with all financial covenants.

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

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 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 provide optional expedients and exceptions for applying 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.

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

DISCONTINUED OPERATIONS

On September 30, 2019, the Company completed the sale of 100 % of the equity ownership in the Company’s wholly-owned subsidiary, 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 $ 10.5 million with a tax impact of $ 2.3 million for a net of tax gain of $ 8.2 million.

Summarized results of operations of GAS for the year ended March 31, 2021 and 2020 through the date of disposition are as follows (in thousands):

Year ended March 31,

March 31, 2021 March 31, 2020

Net sales $ — $ 16,637

Operating Income (Expense) 4 ( 17,319 )

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

Income tax benefit — ( 568 )

Income/(Loss) from discontinued operations, net of tax $ 4 $ ( 114 )

The following table presents capital expenditures, depreciation and amortization and other significant operating non-cash items of our discontinued operations for fiscal 2021 and 2020 (in thousands):

Capital expenditures — 82

Depreciation and amortization — 165

Goodwill and asset impairments — 405

In July 2021, the FASB updated the Leases (Topic 842):

Lessors—Certain Leases with Variable Lease Payments .

The amendments in this Update address stakeholders’ concerns by amending the lease classification requirements for lessors to align them with practice under Topic 840.

Lessors should classify and account for a lease with variable lease payments that do not depend on a reference index or a rate as an operating lease if both of the following criteria are met:

The lease would have been classified as a sales-type lease or a direct financing lease in accordance with the classification criteria in paragraphs 842-10-25-2 through 25-3.

The lessor would have otherwise recognized a day-one loss.

When a lease is classified as operating, the lessor does not recognize a net investment in the lease, does not derecognize the underlying asset, and, therefore, does not recognize a selling profit or loss.

The leased asset continues to be subject to the measurement and impairment requirements under other applicable GAAP.

The amendments in this Update are effective for fiscal years beginning after December 15, 2021, for all entities, and interim periods within those fiscal years for public business entities.

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

Recently Adopted Accounting Pronouncements

In October 2021, the FASB updated the 2021-08—Business Combinations (Topic 805):

Accounting for Contract Assets and Contract Liabilities from Contracts with Customers .

The amendments in this Update require that an entity (acquirer) recognize and measure contract assets and contract liabilities acquired in a business combination in accordance with Topic 606.

At the acquisition date, an acquirer should account for the related revenue contracts in accordance with Topic 606 as if it had originated the contracts.

To achieve this, an acquirer may assess how the acquiree applied Topic 606 to determine what to record for the acquired revenue contracts.

Generally, this should result in an acquirer recognizing and measuring the acquired

contract assets and contract liabilities consistent with how they were recognized and measured in the acquiree’s financial statements (if the acquiree prepared financial statements in accordance with GAAP).

However, there may be circumstances in which the acquirer is unable to assess or rely on how the acquiree applied Topic 606, such as if the acquiree does not follow GAAP, if there were errors identified in the acquiree’s accounting, or if there were changes identified to conform with the acquirer’s accounting policies.

In those circumstances, the acquirer should consider the terms of the acquired contracts, such as timing of payment, identify each performance obligation in the contracts, and allocate the total transaction price to each identified performance obligation on a relative standalone selling price basis as of contract inception (that is, the date the acquiree entered into the contracts) or contract modification to determine what should be recorded at the acquisition date.

The amendments in this Update also provide certain practical expedients for acquirers when recognizing and measuring acquired contract assets and contract liabilities from revenue contracts in a business combination.

For public business entities, the amendments in this Update are effective for fiscal years beginning after December 15, 2022, including interim periods within those fiscal years.

For all other entities, the amendments are effective for fiscal years beginning after December 15, 2023, including interim periods within those fiscal years.

The amendments in this Update should be applied prospectively to business combinations occurring on or after the effective date of the amendments.

Early adoption of the amendments is permitted, including adoption in an interim period.

An entity that early adopts in an interim period should apply the amendments (1) retrospectively to all business combinations for which the acquisition date occurs on or after the beginning of the fiscal year that includes the interim period of early application and (2) prospectively to all business combinations that occur on or after the date of initial application.

The Company early adopted the amendments as of April 1, 2021.

As a result, we recognized and measured contract assets and contract liabilities acquired from the acquisition of GdW in accordance with Topic 606 as if we had originated the contracts.

In November 2021, the FASB issued an update on the 2021-10—Government Assistance (Topic 832):

Disclosures by Business Entities about Government Assistance.

The amendments in this Update apply to business entities that account for a transaction with a government by applying a grant or contribution accounting model by analogy to other accounting guidance (for example, a grant model within IAS 20, Accounting for Government Grants and Disclosure of Government Assistance, or Subtopic 958-605, Not-For-Profit Entities—Revenue Recognition).

The amendments in this Update require the following annual disclosures about transactions with a government that are accounted for by applying a grant or contribution accounting model by analogy:

Information about the nature of the transactions and the related accounting policy used to account for the transactions

The line items on the balance sheet and income statement that are affected by the transactions, and the amounts applicable to each financial statement line item

Significant terms and conditions of the transactions, including commitments and contingencies.

The amendments in this Update are effective for all entities within their scope for financial statements issued for annual periods beginning after December 15, 2021.

Early application of the amendments is permitted.

An entity should apply the amendments in this Update either (1) prospectively to all transactions within the scope of the amendments that are reflected in financial statements at the date of initial application and new transactions that are entered into after the date of initial application or (2) retrospectively to those transactions.

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

The Company early adopted the amendments as of April 1, 2021 and made all the required disclosures pertaining to our ERC application in Note 11 .

Wolfe Lake HQ, LLC

On December 2, 2021, the Company, through its wholly-owned subsidiary Wolfe Lake HQ, LLC, completed the purchase of the real estate located in 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 1 4 .

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

Building 8,439

Site Improvements 798

Tenant Improvements 269

In-place lease and other intangibles 1,108

GdW Beheer B.V.

On February 10, 2022, the Company acquired GdW, a Dutch holding company in the business of providing global aviation data and information.

The acquisition was completed through a wholly-owned subsidiary of the Company, Air T Acquisition 22.1, LLC ("Air T Acquisition 22.1", “Subsidiary”), a Minnesota limited liability company, through its Dutch subsidiary, Shanwick, and was funded with cash, investment by executive management of the underlying business, and the loans described in Note 14 .

As part of the transaction, the executive management of the underlying business purchased 30 % of Shanwick.

Air T Acquisition 22.1 and its consolidated subsidiaries are included within the Corporate and other segment.

Total consideration is summarized in the table below (in thousands):

February 10, 2022

Consideration paid $ 15,256

Cash acquired ( 2,452 )

Net assets acquired ( 6,855 )

Goodwill $ 5,949

The transaction was accounted for as a business combination in accordance with ASC Topic 805 "Business Combinations." Assets acquired and liabilities assumed were recorded in the accompanying consolidated balance sheet at their fair values as of February 10, 2022, with the excess of total consideration over fair value of net assets acquired recorded as goodwill.

The following table outlines the consideration transferred and purchase price allocation at the respective fair values as of February 10, 2022 (in thousands):

February 10, 2022

Accounts Receivable $ 715

Other current assets 67

Property, plant and equipment, net 40

Intangible - Proprietary Database 2,936

Intangible - Customer Relationships 7,354

Total assets 11,112

Accounts payable 15

Accrued expenses and deferred revenue 1,670

Deferred income tax liabilities, net 2,572

Total liabilities 4,257

Net assets acquired $ 6,855

As of March 31, 2022, the purchase price allocation is considered preliminary.

The Company’s initial accounting for this acquisition is incomplete as of the date of this report.

Therefore, as permitted by applicable accounting guidance, the foregoing amounts are provisional.

All relevant facts and circumstances are still being considered by management prior to finalization of the purchase price allocation.

The following table sets forth the revenue and expenses of GdW, prior to intercompany eliminations, that are included in the Company’s condensed consolidated statement of income for the fiscal year ended March 31, 2022 (in thousands):

Income Statement

Post-Acquisition

Revenue $ 887

Cost of Sales 145

Operating Expenses 701

Operating Income 41

Non-operating income 19

Net income $ 60

Pro forma financial information is not presented as the results are not material to the Company’s consolidated financial statements.

MAJOR CUSTOMER

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Approximately 15 % and 35 % of the Company’s consolidated accounts receivable at March 31, 2022 and 2021, respectively, were due from FedEx Corporation.

VARIABLE INTEREST ENTITIES

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 - 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 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 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, 2021 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 $ 8.0 thousand and $ 0.5 million, as of March 31, 2021 and $ 11.0 thousand and $ 0.5 million, as of March 31, 2020.

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

For the fiscal years ended March 31, 2021 and 2020, Delphax did not recognize any revenue, respectively.

For the fiscal year ended March 31, 2021, Delphax recorded net loss and operating loss of $ 48.0 thousand.

For the fiscal year ended March 31, 2020, Delphax recorded net income of $ 6.1 million, broken out between an operating loss of $ 0.2 million and non-operating income of $ 6.3 million, the majority of which was the result of the gain on dissolution of entities of $ 4.5 million.

FAIR VALUE OF FINANCIAL INSTRUMENTS

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Fair Value Measurements at March 31,

Marketable securities (Level 1) $ 2,914 $ 3,240

Marketable securities (including restricted investments) (Level 1) $ 2,550 $ 2,914

Interest rate swaps (Level 2) 889 593

Debt - Trust Preferred Securities (Level 2) $ 14,289 12,877

Warrants Liability (Level 2) — 414

Redeemable non-controlling interest (Level 3) $ 6,598 $ 6,080

Contrail's redeemable non-controlling interest (Level 3) $ 7,178 $ 6,598

The fair values of our interest rate swaps are based on the market standard methodology of netting the discounted expected future variable cash receipts and the discounted future fixed cash payments.

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Since these inputs are observable in active markets over the terms that the instruments are held, the derivatives are classified as Level 2 in the hierarchy.

The fair value of the Debt - Trust Preferred Securities was based on quoted prices as observed on the NASDAQ Global Market.

The fair value of the Warrants was derived from quoted prices for a similar asset or liability as observed on the NASDAQ Global Market.

Both of these items are classified as Level 2 in the hierarchy.

The fair value of the redeemable non-controlling interest is based on a combination of market approach and income approach and is classified as Level 3 in the hierarchy.

The fair value of Contrail's redeemable non-controlling interest is based on a combination of market approach and income approach and is classified as Level 3 in the hierarchy.

See Note 24 .

The fair value measurements which use significant observable inputs (Level 3), changed due to the following (in thousands):

Redeemable Non-

Contrail's Redeemable Non-

Beginning Balance as of April 1, 2021 $ 6,598

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Distribution to non-controlling member —

Net loss attributable to non-controlling interests ( 1,095 )

Fair value adjustment 2,857

Net income attributable to non-controlling interests 826

Fair value adjustment - Contrail (Note 24) ( 531 )

Ending Balance as of March 31, 2022 $ 7,178

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Year Ended March 31,

Overnight air cargo $ 28 $ —

Ground equipment manufacturing:

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Reserves ( 3,122 ) ( 2,102 )

Total, net of reserves $ 71,971 $ 60,623

Total inventories, net of reserves $ 75,167 $ 71,971

A write-down of $ 0.8 million was recorded on the inventory of the commercial jet engines and parts segment during the fiscal year ended March 31, 2022.

Of the total write-down, $ 0.5 million was driven by a management decision to monetize two engines by sale to a third party, in which the net carrying values exceeded the estimated proceeds during the quarter ended September 30, 2020.

The remaining write-down was attributable to our evaluation of the carrying value of inventory as of March 31, 2021, where we compared its cost to its net realizable value and considered factors such as physical condition, sales patterns and expected future demand to estimate the amount necessary to write down any slow moving, obsolete or damaged inventory.

The write-down was attributable to our evaluation of the carrying value of inventory as of March 31, 2022, where we compared its cost to its net realizable value and considered factors such as physical condition, sales patterns and expected future demand to estimate the amount necessary to write down any slow moving, obsolete or damaged inventory.

LESSOR ARRANGEMENTS

Assets on lease

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Future minimum rental payments to be received do not include contingent rentals that may be received under certain leases because amounts are based on usage.

Contingent rent earned totaled approximately $ 4.9 thousand and $ 3.7 million for the fiscal years ended March 31, 2021 and 2020, respectively.

Contingent rent earned totaled approximately $ 0.1 million and $ 4.9 thousand for the fiscal years ended March 31, 2022 and 2021, respectively.

As of March 31, 2022, future minimum rental payments to be received under non-cancelable leases are as follows (in thousands):

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Total $ 4,452

As of March 31, 2021, Contrail has one engine on lease that is due a return-to-condition compensation ("engine compensation") upon the lease termination in December 2022.

As of March 31, 2022, Contrail has one engine on lease that includes a return-to-condition compensation ("engine compensation") provision upon the lease termination in December 2022.

The engine compensation is determined as the sum of $ 3.6 million, plus a variable component calculated based on various escalation factors, including usage of flight hours and consumption of material, labor and utility.

The Company estimated the engine compensation as of March 31, 2021 to be $ 4.1 million, which was recorded within "Other Assets" on our consolidated balance sheets.

The Company estimated the engine compensation as of March 31, 2022 to be $ 4.4 million, which was recorded within "Other current assets" on our consolidated balance sheets.

$ 3.6 million of the engine compensation is fixed, and thus is included within the $ 4.4 million of future rental payments to be received during the fiscal year ended March 31, 2023.

Office leases

The Company, through its wholly owned subsidiary, Wolfe Lake, leases offices to third parties with lease terms between 5 and 29 years under operating lease agreements.

For the offices currently on lease, there are no options for the lessees to purchase the spaces at the end of the leases.

The Company depreciates the assets on a straight-line basis over the assets' useful life.

Depreciation expense relating to office leases was $ 0.1 million for the fiscal year ended March 31, 2022.

We recognized rental and other revenues related to operating lease payments of $ 0.4 million, of which variable lease payments were $ 0.2 million during the year ended March 31, 2022.

Future minimum rental payments to be received do not include variable lease payments that may be received under certain leases because amounts are based on usage.

The following table sets forth the undiscounted cash flows for future minimum base rents to be received from customers for office leases in effect at March 31, 2022:

Year ended March 31,

Thereafter 3,729

Total $ 7,584

PROPERTY AND EQUIPMENT

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Building 13,850 2,636

Less accumulated depreciation ( 4,510 ) ( 4,319 )

26,617 13,029

accumulated depreciation ( 5,405 ) ( 4,510 )

Property and equipment, net $ 21,212 $ 8,519

Intangibles consisted of the following (in thousands):

Year Ended March 31,

Purchased software $ 447 $ 407

Internally developed software 4,112 828

In-place lease and other intangibles 1,108 —

Customer relationships 7,694 451

Patents 1,112 1,112

Other 1,391 1,024

accumulated amortization ( 2,947 ) ( 2,467 )

In-process software 343 245

Intangible assets, total $ 13,260 $ 1,600

The components of purchased intangible assets for Wolfe Lake were as follows (in thousands):

March 31, 2022

Average Remaining Amortization Period Gross Carrying Amount Accumulated Amortization Net Amount

In-place lease and other intangibles 9 years, 3 months $ 1,108 $ 63 $ 1,045

The components of purchased intangible assets for GdW were as follows (in thousands):

March 31, 2022

Average Remaining Amortization Period Gross Carrying Amount Accumulated Amortization Net Amount

Internally developed software 9 years, 10 months $ 2,892 $ 49 $ 2,843

Customer relationship 14 years, 10 months 7,243 82 7,161

13 years, 5 months $ 10,135 $ 131 $ 10,004

Based on the intangible assets recorded at March 31, 2022 and assuming no subsequent additions to or impairment of the underlying assets, the remaining estimated annual amortization expense is expected to be as follows:

(In thousands) Amortization

Thereafter 7,283

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 consolidated statement of income as interest expense in the same period in which the underlying hedged transaction affects earnings.

On August 31, 2021, Air T and MBT refinanced Term Note A and fixed its interest rate at 3.42 %.

As a result of this refinancing, the Company determined that the interest rate swap on Term Note A was no longer an effective hedge.

The Company will amortize the fair value of the interest-rate swap contract included in accumulated other comprehensive income (loss) associated with Term Note A at the time of de-designation into earnings over the remainder of its term.

In addition, any changes in the fair value of Term Note A's swap after August 31, 2021 are recognized directly into earnings.

The remaining swap contract associated with Term Note D is designated as an effective cash flow hedging instrument in accordance with ASC 815.

On January 7, 2022, Contrail completed an interest rate swap transaction with Old National Bank ("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 ("Contrail - Term Note G").

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

As of February 24, 2022, this swap contract has been designated as a cash flow hedging instrument and qualified as an effective hedge in accordance with ASC 815.

During the period between January 7, 2022 and February 24, 2022, the Company recorded a loss of approximately $ 0.1 million in the consolidated statement of income (loss) due to the changes in the fair value of the instrument prior to the designation and qualification of this instrument as an effective hedge.

After it was deemed an effective hedge, the Company recorded changes in the fair value of the instrument in the consolidated statement of comprehensive income (loss).

For the swaps related to Air T Term Note D and Contrail - Term Note G, the effective portion of changes in the fair value on these instruments is recorded in other comprehensive income (loss) and is reclassified into the consolidated statement of income (loss) as interest expense in the same period in which the underlying hedged transactions affect earnings.

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

As of March 31, 2021 and March 31, 2020, the fair value of the interest-rate swap contracts was a liability of $ 0.6 million and $ 0.9 million, respectively, which is included within Other Non-Current Liabilities in the consolidated balance sheets.

During the twelve months ended March 31, 2021 and 2020, the Company recorded a loss of approximately $ 0.3 million and a gain of $ 0.5 million, net of tax, respectively, in the consolidated statement of comprehensive income (loss) for changes in the fair value of the instruments.

As of March 31, 2022 and March 31, 2021, the fair value of the interest-rate swap contracts was an asset of $ 0.9 million and a liability of $ 0.6 million, respectively, which is included within other assets and other non-current liabilities, respectively in the consolidated balance sheets.

During the twelve months ended March 31, 2022 and 2021, the Company recorded a gain of approximately $ 0.9 million and $ 0.3 million, net of tax, respectively, in the 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.

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

During the fiscal year ended March 31, 2021, 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.

During the fiscal year ended March 31, 2020, related to these derivative instruments, the Company had a gross gain aggregating to $ 1.7 thousand and a gross loss aggregating to $ 0.3 million.

During the fiscal year ended March 31, 2022, the Company did not record any gain or loss related to these derivative instruments.

During the fiscal year ended March 31, 2021, 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.

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

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

During the fiscal year ended March 31, 2022, the Company had a gross unrealized gain aggregating to $ 2.8 million and a gross unrealized loss aggregating to $ 2.4 million.

During the fiscal year ended March 31, 2020, the Company had a gross unrealized gain aggregating to $ 8.4 thousand and a gross unrealized loss aggregating to $ 0.5 million.

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

During the fiscal year ended March 31, 2021, the Company had a gross unrealized gain aggregating to $ 1.2 million and a gross unrealized loss aggregating to $ 1.2 million.

These unrealized gains and losses are included in Other income (loss) on the 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 March 31, 2021 and 2020, the Company had outstanding borrowings of $ 0 and $ 0.4 million under its margin account, respectively, which is reflected in accrued expenses and other on the consolidated balance sheets.

As of March 31, 2021 and 2020, the Company had cash margin balances related to exchange-traded equity securities and securities sold short of $ 0.9 million and $ 1.3 million, respectively, which is reflected in other current assets on the consolidated balance sheets.

The interest rate on margin account borrowings was 9.4 % as of March 31, 2021.

As of March 31, 2022 and 2021, the Company had no outstanding borrowings under its margin account.

As of March 31, 2022 and 2021, the Company had cash margin balances related to exchange-traded equity securities and securities sold short of $ 0 and $ 0.9 million, respectively, which is reflected in other current assets on the consolidated balance sheets.

EQUITY METHOD INVESTMENTS

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

For the fiscal years ended March 31, 2021 and 2020, the Company recorded approximately $ 1.2 million and $ 1.5 million as its share of Insignia’s net loss for the twelve months ended December 31, 2020 and 2019, respectively, along with a basis difference adjustment of approximately $ 96.1 thousand.

In addition to the current year's loss attribution, the previous impairments taken in prior fiscal years have accelerated the Company's net investment basis in Insignia to be zero as of March 31, 2021.

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

As of March 31, 2022, the number of Insignia's shares owned by the Company was adjusted to 0.5 million, representing approximately 27 % 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 for the fiscal year ended March 31, 2022.

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.

The Company evaluated these restatements and determined that they would not result in any additional impact on the Company's condensed consolidated financial statements.

The Company's 18.98 % investment in CCI is accounted for under the equity method of accounting.

Due to the differing fiscal year-ends, the Company has elected a three-month lag to record the CCI investment at cost, with a basis difference of $ 0.3 million.

For the fiscal year ended March 31, 2021, the Company recorded a gain of $ 0.4 million as its share of CCI's net income for the twelve months ended December 31, 2020, along with a basis difference adjustment of $ 49.9 thousand.

For the fiscal year ended March 31, 2022, the Company recorded a loss of $ 0.8 million as its share of CCI's net loss for the twelve months ended December 31, 2021, along with a basis difference adjustment of $ 50.0 thousand.

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 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.

The Company's net investment basis in CCI is $ 2.6 million as of March 31, 2022.

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Twelve Months Ended

December 31, 2020 Twelve Months Ended December 31, 2019

December 31, 2021 Twelve Months Ended

December 31, 2020

Revenue $ 115,051 $ 91,245

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stockholders $ ( 815 ) $ ( 760 )

EMPLOYEE RETENTION CREDIT

The ERC, as originally enacted on March 27, 2020 by the CARES Act, is a refundable tax credit against certain employment taxes equal to 50% of the qualified wages an eligible employer pays to employees after March 12, 2020, and before January 1, 2021.

The Taxpayer Certainty and Disaster Tax Relief Act (the “Relief Act”), enacted on December 27, 2020, amended, and extended the ERC.

The Relief Act extended and enhanced the ERC for qualified wages paid after December 31, 2020 through June 30, 2021.

Under the Relief Act, eligible employers may claim a refundable tax credit against certain employment taxes equal to 70% of the qualified wages an eligible employer pays to employees after December 31, 2020 through June 30, 2021.

Under the American Rescue Plan Act of 2021 ("ARPA"), which was signed into law on March 11, 2021, the ERC was further extended through December 31, 2021.

The purpose of the ERC is to encourage employers to keep employees on the payroll, even if they are not working during the covered period because of the COVID-19 outbreak.

The Company qualified for federal government assistance through the ERC provisions for the period between January 1, 2021 and September 30, 2021.

We recognize government grants for which there is a reasonable assurance of compliance with grant conditions and receipt of credits.

As of March 31, 2022, the Company's expected one-time refunds totaling $ 9.1 million, are included on the Consolidated Balance Sheets as an Employee Retention Credit receivable, as well as on the Consolidated Statements of Income (Loss) as an offset to the related employee expenses within general and administrative expenses.

We expect to receive the employee retention credit payment in fiscal 2023.

Upon receipt, we expect to allocate these funds towards a combination of further investment in our team members, growth investments, capital expenditures, and deferred maintenance capital spending.

ACCRUED EXPENSES

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Total $ 13,391 $ 12,787

LEASE ARRANGEMENTS

LESSEE ARRANGEMENTS

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

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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 has applied 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 March 31, 2021, 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:

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.

Federal Reserve.

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

The proceeds were 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.

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 3-month 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.

As of March 31, 2022, 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.

As mentioned in Note 2 , on February 10, 2022, the Company acquired GdW, a Dutch holding company in the business of providing global aviation data and information.

The acquisition was completed through a wholly-owned subsidiary of the Company, Air T Acquisition 22.1, a Minnesota limited liability company, through its Dutch subsidiary, Shanwick, and was funded with cash, investment by executive management of the underlying business, and loans as described below.

As part of the transaction, Shanwick obtained a EUR 4.0 million loan package from ING Bank ("ING") to further fund this transaction.

The ING loan package includes a EUR 3.0 million term loan (translated into $ 3.3 million Term Loan A - ING below) which carries an interest rate of 3.5 % and a maturity date of February 1, 2027, and a EUR 1.0 million term loan (translated into $ 1.1 million Term Loan B - ING below) which carries an interest rate of 4 % and a maturity date of May 1, 2027.

The ING loan is non-recourse to the Company and Subsidiary and is secured by the shares of GdW.

The Company secured the funds necessary to fund its portion of the GdW acquisition consideration on February 8, 2022 through (i) a new secured loan from Bridgewater Bank ("Bridgewater"), a Minnesota banking corporation and (ii) cash.

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 the Subsidiary, a pledge of $ 5.0 million 8.0 % TruPs, and a personal guaranty of the Company’s Chairman, President and Chief Executive Officer Nicholas Swenson.

The following table provides certain information about the current financing arrangements of the Company's and its subsidiaries as of March 31, 2022 and 2021:

March 31, 2021 March 31, 2020 Maturity Date Interest Rate Unused commitments

(In Thousands) March 31, 2022 March 31, 2021 Maturity Date Interest Rate Unused commitments

Revolver - MBT $ 10,969 $ — 8/31/2023 Greater of 2.50 % or Prime - 1.00 %

Supplemental Revolver - MBT — 9,550 6/30/20 Greater of 1-month LIBOR + 1.25 % or 3 %

Term Note A - MBT 6,750 7,750 1/1/28 1-month LIBOR + 2 %

Term Note A - MBT 8,542 6,750 8/31/2031 3.42 %

Term Note B - MBT 3,014 3,375 8/31/2031 3.42 %

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Total 51,813 38,807

Revolver - MBT — 8,335 8/31/21 2 Greater of 6.5 % or Prime + 2 %

Term Loan - PSB 6,200 — 12/11/25 3-month LIBOR + 3 %

Term Loan - Park State Bank ("PSB") 6,393 6,200 12/11/2025 3-month LIBOR + 3.00 %

Total 6,393 6,200

Jet Yard Debt

Term Loan - MBT 1,943 — 8/31/2031 4.14 %

Total 1,943 —

Contrail Debt

Revolver - ONB 3,843 — 9/5/2023 1-month LIBOR + 3.45 %

Term Loan A - ONB — 6,285 1/26/21 1-month LIBOR + 3.75 %

Term Loan E - ONB — 6,320 12/1/22 1-month LIBOR + 3.75 %

Term Loan F - ONB — 8,358 5/1/25 1-month LIBOR + 3.75 %

Term Loan G - ONB 44,918 43,598 11/24/2025 1-month LIBOR + 3.00 %

Term Loan H - ONB 8,698 — 8/18/2023 Wall Street Journal (WSJ) Prime Rate + 0.75 %

Total 57,459 43,598

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Canadian Emergency Business Account Loan 32 32 12/31/2025 5.00 %

Wolfe Lake Debt

Term Loan - Bridgewater 9,837 — 12/2/2031 3.65 %

Total 9,837 —

Air T Acquisition 22.1

Term Loan - Bridgewater 5,000 — 2/8/2027 4.00 %

Term Loan A - ING 3,341 — 2/1/2027 3.50 %

Term Loan B - ING 1,114 — 5/1/2027 4.00 %

Total 9,455 —

Total Debt 136,932 88,637

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Total Debt, net $ 135,808 $ 87,496

Fiscal 2021's weighted average interest rate on short term borrowings outstanding was 0.0 % due to the fact that all short-term borrowings outstanding as of March 31, 2021 have zero balances.

The weighted average interest rate on short term borrowings outstanding as of March 31, 2020 was 3.7 %.

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

Fiscal 2022's weighted average interest rate on short term borrowings outstanding was 3.90 % .

The weighted average interest rate on short term borrowings outstanding as of March 31, 2021 was 0.00 %, due to the fact that all short-term borrowings outstanding as of March 31, 2021 have zero balances.

The Air T revolving credit facility and the Contrail revolving credit facility contain affirmative and negative covenants, including covenants that restrict the ability of the Company 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.

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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 did not apply for loan forgiveness, 10 months after the end of Air T’s loan forgiveness covered period, which is December 24, 2022.

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 December 31, 2020.

At March 31, 2022, our contractual financing obligations, including payments due by period, are as follows (in thousands):

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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 March 31, 2021, approximately 4.1 million Warrants have been exercised.

As a result, the amount outstanding on the Company's Debt - Trust Preferred Securities is $ 14.3 million as of March 31, 2021.

At March 31, 2021, the Company had Warrants outstanding and exercisable to purchase approximately 4.3 million shares of its TruPs at an exercise price of $ 2.40 per one-tenth of a share.

The Warrants will expire on August 30, 2021 or earlier upon redemption or liquidation.

As of March 31, 2022, approximately 5.3 million Warrants were exercised.

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

During fiscal 2022, the Company received $ 8.5 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 $ 25.6 million as of March 31, 2022.

RELATED PARTY MATTERS

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The Company paid aggregate rental payments of approximately $ 0.2 million to Cohen Kuhn Properties, LLC pursuant to such lease during the period from April 1, 2021 through March 31, 2022.

The lease for this facility originally was to expire on June 30, 2021, however;

in April 2021, the Company executed the option to renew the lease for an additional period of 5 years on the same terms.

This lease expires on July 17, 2026.

The lease agreement provides that the Company shall be responsible for maintenance of the leased facilities and for utilities, taxes and insurance.

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Swenson and the Company ("the related party group") to direct the activities of CCI that most significantly impact CCI’s economic performance.

As mentioned in Note 14 , Air T Acquisition 22.1's term loan with Bridgewater is secured by a first lien on all of the assets of the Subsidiary, a pledge of $ 5.0 million 8.0 % TruPs, and a personal guaranty of the Company’s Chairman, President and Chief Executive Officer Nicholas Swenson.

In November 2021, Air T engaged Thomas Funds Americas, LLC ("TFA") to perform certain investment consultation services for the Company.

Manit Rye, an employee of Air T, is the managing member of TFA.

As of March 31, 2022, the Company has paid approximately $ 0.2 million to TFA to compensate for services rendered.

EMPLOYEE AND NON-EMPLOYEE STOCK OPTIONS

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

maintains two stock option plans for the benefit of certain eligible employees and directors.

The first Air T stock option plan is the 2012 Stock Option Plan.

The second Air T stock option plan is the 2020 Omnibus Stock and Incentive Plan.

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

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The Company uses the Black-Scholes option pricing model to value stock options granted under the Air T, Inc.

plan and the Delphax plans.

plans and the Delphax plans.

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 determination of compensation expense.

Air T's 2012 Stock Option Plan

No options were granted under Air T, Inc.’s 2012 Stock Option Plan during the fiscal years ended March 31, 2022 and 2021.

No stock-based compensation expense with respect to this plan was recognized for the year ended March 31, 2022 and 2021, respectively.

At March 31, 2021, there was no unrecognized compensation expense related to the Air T Inc.

stock options.

There was no activity during the fiscal years ended March 31, 2021 and 2020 under the Delphax option plans.

Option activity during the fiscal years ended March 31, 2020 (retrospectively adjusted to account for the stock split on June 10, 2019) and 2021 is summarized below:

At March 31, 2022, there was no unrecognized compensation expense related to the Air T's 2012 stock options.

Option activity during the fiscal years ended March 31, 2021 and 2022 is summarized below:

Shares Weighted

Exercise Price

Per Share Weighted

Life (Years) Aggregate

Outstanding at March 31, 2020 11,250 $ 6.61 3.07 $ 66,388

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Exercisable at March 31, 2022 11,250 $ 6.61 1.07 $ 182,000

Air T's 2020 Omnibus Stock and Incentive Plan

On December 29, 2020, the Company’s Board of Directors unanimously approved the 2020 Omnibus Stock and Incentive Plan (the "Plan"), which was subsequently approved by the Company's stockholders at the August 18, 2021 Annual Meeting of Stockholders.

The total number of shares authorized under the Plan is 420,000 .

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

Through March 31, 2022, 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 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.

The Company uses the Black-Scholes option pricing model to value stock options granted under the Air T's 2020 Omnibus Stock and Incentive Plan.

We determined that the fair value of the Plan is $ 1.3 million.

The key assumptions used in the Plan's Black-Scholes option pricing model are as follows:

Risk-free interest rate 0.94 %

Expected dividend yield —

Expected term 10 years

Expected volatility 44.29 %

We do not anticipate significant forfeitures and elected to account for forfeitures as they occur.

As of March 31, 2022, total compensation cost recognized under the Plan was $ 0.4 million.

The unrecognized compensation cost related to nonvested awards is $ 0.9 million, which is expected to be recognized over a weighted average period of 9.25 years.

REVENUE RECOGNITION

Performance Obligations

Substantially all of the Company’s non-lease revenue is derived from contracts with an initial expected duration of one year or less.

As a result, the Company has applied the practical expedient to exclude consideration of significant financing components from the determination of transaction price, to expense costs incurred to obtain a contract, and to not disclose the value of unsatisfied performance obligations.

The following is a description of the Company’s performance obligations as of March 31, 2022:

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

March 31, 2021 March 31, 2020

Year Ended March 31, 2022 Year Ended March 31, 2021

Product Sales

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All employees of the Company are immediately eligible to participate in the Plans.

The Company’s contribution to the Plans for the years ended March 31, 2021 and 2020 was approximately $ 0.5 million and $ 0.6 million, respectively, and was recorded in the consolidated statements of income.

The Company’s contribution to the Plans for the years ended March 31, 2022 and 2021 was approximately $ 0.6 million and $ 0.5 million, respectively, and was recorded in the consolidated statements of income (loss).

The Company, in each of the past three years, has paid a discretionary profit sharing bonus in which all employees have participated.

Profit sharing expense in fiscal 2021 and 2020 was approximately $ 1.5 million and $ 3.5 million, respectively, and was recorded in general and administrative expenses in the consolidated statements of income.

Profit sharing expense in fiscal 2022 and 2021 was approximately $ 2.0 million and $ 1.5 million, respectively, and was recorded in general and administrative expenses in the consolidated statements of income (loss).

Income tax expense (benefit) attributable to (loss) income from continuing operations consists of (in thousands):

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Federal $ 1,358 $ ( 3,330 )

State 130 ( 8 )

Foreign 134 39

Total current 1,536 ( 3,161 )

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Total $ 1,169 $ ( 3,387 )

Income tax expense attributable to (loss) income from continuing operations differed from the amounts computed by applying the U.S.

Federal income tax rate of 21 % to pretax (loss) income from continuing operations as follows (in thousands):

Income tax expense attributable to income (loss) from continuing operations differed from the amounts computed by applying the U.S.

Federal income tax rate of 21 % to pretax income (loss) from continuing operations as follows (in thousands):

Year Ended March 31,

Expected Federal income tax (benefit)/ expense U.S.

Expected Federal income tax expense (benefit) U.S.

statutory rate $ 2,813 21.0 % $ ( 2,472 ) 21.0 %

State income taxes, net of federal benefit 177 1.3 % ( 271 ) 2.3 %

Nontaxable cancellation of debt income — 0.0 % ( 1,331 ) - 50.7 %

Permanent Items ( 165 ) - 1.2 % —

Micro-captive insurance benefit ( 233 ) - 1.8 % ( 217 ) 1.8 %

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Income attributable to minority interest - Contrail ( 174 ) - 1.3 % 247 - 2.1 %

Write-off Delphax tax attributes — 0.0 % 9,353 356.4 %

Acquired Net Operating Loss ("NOL") carrybacks;

CARES Act — 0.0 % ( 363 ) - 13.8 %

Write-off Delphax Tech SAS 2,225 16.6 % — 0.0 %

PPP Loan Forgiveness ( 1,650 ) - 12.3 % — 0.0 %

NOL Carryback - Rate Differential — 0.0 % ( 1,468 ) 12.5 %

Other differences, net 427 3.2 % 173 - 1.4 %

Income tax benefit $ ( 3,387 ) 28.8 % $ ( 544 ) - 20.7 %

Income tax expense (benefit) $ 1,169 8.7 % $ ( 3,387 ) 28.8 %

The Company did not record any liabilities for uncertain tax positions for the fiscal years ended March 31, 2022 and March 31, 2021.

During the fiscal period ended March 31, 2020, the Company sold GAS.

The tax benefit related to this entity allocated to discontinued operations for March 31, 2020 was $ 0.6 million.

In addition, a gain on the sale of discontinued operations was recognized, resulting in a net of tax gain of $ 8.2 million.

The Company has state gross operating losses of $ 3.9 million at March 31, 2022.

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During the year ended March 31, 2021, each entity, respectively, accounted for $ 0.3 million and $( 0.1 ) million of the fiscal year 2021's valuation allowance effect.

The valuation allowance release in March 31, 2020 relates to attribute reduction for cancellation of debt income and dissolution of the Canadian and UK subsidiaries (See Note 4 ).

Impairment on investments and changes in unrealized losses related to available-for-sale securities and foreign tax credits accounted for the remaining valuation allowance effect for each year.

In March of 2020, the CARES Act was enacted and made significant changes to federal tax laws, including certain changes that were retroactive to the March 31, 2020 tax year.

Changes in tax laws are accounted for in the period of enactment and the retroactive effects are recognized in these financial statements.

Of the changes impactful to the Company, the CARES act permits favorable treatment of deductible interest expense as well as the ability to carryback tax losses incurred in the March 31, 2021 fiscal year up to 5 years and recoup previously paid federal income taxes;

under which the Company was subject to a higher federal tax rate.

The benefit of the recoupment of these taxes are included in these consolidated financial statements and the Company expects to receive a refund of $ 3.4 million.

Impairment on investments and changes in unrealized losses related to available-for-sale securities and foreign tax credits accounted for the valuation allowance effect for each year.

Deferred tax assets and liabilities were comprised of the following (in thousands):

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Investment in foreign subsidiaries — 1,331

Inventory reserve 682 489

Accrued vacation 327 339

Foreign tax credit 263 535

Accounts and notes receivable 235 221

Interest rate swaps 138 149

Investment in partnerships 671 821

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Capital gain deferment ( 1,696 ) ( 1,782 )

GdW intangible assets ( 2,572 ) —

Other deferred tax liabilities ( 36 ) ( 35 )

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Delphax entities

As described in Note 4 , effective on November 24, 2015, Air T, Inc.

Effective on November 24, 2015, Air T, Inc.

purchased interests in Dephax.

With an equity investment level by the Company of approximately 67 %, Delphax is required to continue filing a separate United States corporate tax return.

Furthermore, Delphax has foreign subsidiaries located in France, and historically had foreign subsidiaries located in Canada and the United Kingdom;

Furthermore, Delphax historically had foreign subsidiaries located in France, Canada and the United Kingdom;

all of which file(d) tax returns in those jurisdictions.

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The returns for the fiscal years ended September 30, 2021 and March 31, 2022 have not yet been filed.

Included in the deferred tax balances above and related to the Delphax entities are estimated foreign and U.S.

federal loss carryforwards of $ 6.1 million and $ 8.5 million, respectively.

Included in the deferred tax balances above and related to the Delphax entities are estimated foreign, U.S.

federal and U.S.

state loss carryforwards of $ 4.3 million, $ 8.4 million and $2.2 million, respectively.

The net operating losses expire in varying amounts beginning in the tax year 2027.

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(in thousands, except per share data)

Quarter Second

Quarter Third

Quarter Fourth

Operating Revenues $ 36,968 $ 43,238 $ 45,433 $ 51,438

Operating Income (Loss), net of tax 327 8,003 ( 1,189 ) 5,086

Income attributable to non-controlling interests ( 38 ) ( 448 ) ( 73 ) ( 740 )

Income (Loss) attributable to Air T, Inc.

Stockholders 289 7,555 ( 1,262 ) 4,346

Basic Income (Loss) per share $ 0.10 $ 2.62 $ ( 0.44 ) $ 1.51

Diluted Income (Loss) per share $ 0.10 $ 2.60 $ ( 0.44 ) $ 1.51

Antidilutive shares excluded from computation of income (loss) per share — — 11 —

Operating Revenues 36,970 35,604 55,819 46,728

(Loss) Income from continuing operations, net of tax ( 956 ) ( 3,357 ) 1,763 ( 5,844 )

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Diluted Income (Loss) per share from discontinued operations $ — $ — $ — $ —

Diluted Loss per share $ ( 0.29 ) $ ( 1.01 ) $ 0.73 $ ( 1.96 )

Antidilutive shares Excluded from Computation of income (loss) per share from continuing operations (in shares) 5 5 — 8

Antidilutive shares Excluded from Computation of income (loss) per share from discontinued operations (in shares) — — — —

Antidilutive shares Excluded from Computation of income (loss) per share (in shares) 5 5 — 8

Operating Revenues $ 47,188 $ 50,693 $ 73,300 $ 65,604

Income (Loss) from continuing operations, net of tax 3,991 ( 2,122 ) 581 718

Net (Income) Loss attributable to non-controlling interests ( 2,373 ) ( 287 ) ( 789 ) ( 128 )

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

Stockholders 1,618 ( 2,409 ) ( 208 ) 590

Income (Loss) from discontinued operations, net of tax 165 8,124 ( 222 ) ( 2 )

Basic Income (loss) per share from continuing operations 0.72 ( 0.80 ) ( 0.07 ) 0.20

Basic Income (Loss) per share from discontinued operations 0.07 2.69 ( 0.07 ) —

Basic Income (Loss) per share 0.79 1.89 ( 0.14 ) 0.20

Diluted Income (Loss) per share from continuing operations 0.72 ( 0.80 ) ( 0.07 ) 0.20

Diluted Income (loss) per share from discontinued operations 0.07 2.68 ( 0.07 ) —

Diluted Income (Loss) per share $ 0.79 $ 1.88 $ ( 0.14 ) $ 0.20

Antidilutive shares Excluded from Computation of income (loss) per share from continuing operations (in shares) — 5 6 —

Antidilutive shares Excluded from Computation of income (loss) per share from discontinued operations (in shares) — — 6 7

Antidilutive shares Excluded from Computation of income (loss) per share (in shares) — — 6 —

Diluted (Loss) Income per share $ ( 0.29 ) $ ( 1.01 ) $ 0.73 $ ( 1.96 )

Antidilutive shares excluded from computation of income (loss) per share from continuing operations 5 5 — 8

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

Antidilutive shares excluded from computation of income (loss) per share 5 5 — 8

GEOGRAPHICAL INFORMATION

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 March 31, 2022 and March 31, 2021 (in thousands):

2021 March 31,

March 31, 2022 March 31, 2021

United States $ 34,067 $ 8,632

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Country March 31, 2022 March 31, 2021

Netherlands — 4,778

Estonia — 7,408

Macau $ 1,351 $ 1,896

Mexico — 1,845

Other 303 122

$ 2,018 $ 14,131

Total tangible long-lived assets, net $ 1,654 $ 2,018

Total revenue, located in the United States, and outside the United States is summarized in the following table as of March 31, 2022 and March 31, 2021 (in thousands):

2021 March 31,

March 31, 2022 March 31, 2021

United States $ 142,898 $ 147,010

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

Due to insignificance, the Company combined the previous printing and equipment segment into corporate and other.

We have presented prior periods based on the current presentation.

Segment data is summarized as follows (in thousands):

Year Ended March 31,

(In Thousands) Year Ended March 31,

Operating Revenues:

Overnight Air Cargo:

Domestic $ 65,441 $ 66,251

International 8,968 —

Total Overnight Air Cargo 74,409 66,251

Ground Equipment Sales:

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Total $ 1,860 $ 3,107

The table below provides a reconciliation of operating income (loss) to Adjusted EBITDA by reportable segment for the fiscal year ended March 31, 2022 and 2021 (in thousands):

Fiscal year 2022

Overnight Air Cargo Ground Equipment Sales Commercial Jet Engines and Parts Corporate and Other Total

Operating income (loss) from continuing operations $ 2,794 $ 3,220 $ 3,619 $ ( 878 ) $ 8,755

Depreciation and amortization (excluding leased engines depreciation) 58 234 694 603 1,589

Asset impairment, restructuring or impairment charges — — 885 ( 80 ) 805

Loss on sale of property and equipment 2 1 2 — 5

Security issuance expenses — — — 252 252

Adjusted EBITDA $ 2,854 $ 3,455 $ 5,200 $ ( 103 ) $ 11,406

Fiscal year 2021

Overnight Air Cargo Ground Equipment Sales Commercial Jet Engines and Parts Corporate and Other Total

Operating income (loss) from continuing operations $ 2,178 $ 8,948 $ ( 10,882 ) $ ( 9,419 ) $ ( 9,175 )

Depreciation and amortization (excluding leased engines depreciation) 66 184 562 419 1,231

Asset impairment, restructuring or impairment charges — — 6,405 187 6,592

Loss (gain) on sale of property and equipment 4 — ( 18 ) 4 ( 10 )

Security issuance expenses — — — 32 32

Adjusted EBITDA $ 2,248 $ 9,132 $ ( 3,933 ) $ ( 8,777 ) $ ( 1,330 )

EARNINGS PER COMMON SHARE

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

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.

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Year Ended March 31,

Net (loss) income from continuing operations $ ( 8,394 ) $ 3,168

Net loss (income) from continuing operations attributable to non-controlling interests 1,113 ( 3,577 )

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

Net income (loss) from continuing operations $ 12,227 $ ( 8,394 )

Net (income) loss from continuing operations attributable to non-controlling interests ( 1,299 ) 1,113

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

Stockholders 10,928 ( 7,281 )

Loss from continuing operations per share:

Income (loss) from continuing operations per share:

Basic $ 3.79 $ ( 2.53 )

Diluted $ 3.78 $ ( 2.53 )

Antidilutive shares Excluded from Computation of loss per share from continuing operations 6 7

Loss from discontinued operations, net of tax — ( 114 )

Antidilutive shares excluded from computation of income (loss) per share from continuing operations — 6

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

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Antidilutive shares excluded from computation of income per share from discontinued operations — —

(Loss) Income per share:

Income (loss) per share:

Basic $ 3.79 $ ( 2.53 )

Diluted $ 3.78 $ ( 2.53 )

Antidilutive shares Excluded from Computation of (loss) income per share 6 —

Antidilutive shares excluded from computation of income (loss) per share — 6

Weighted Average Shares Outstanding:

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COMMITMENTS AND CONTINGENCIES

Impact of COVID-19 — As further discussed in Note 1 , the full extent and duration of the impact of COVID-19 on the U.S.

and world economies generally, and the Company’s business in particular, is uncertain.

As of March 31, 2021, no contingencies have been recorded on the Company’s consolidated balance sheet as a result of COVID-19, however, the global pandemic could have long-term impacts on the Company’s financial condition, results of operations, and cash flows and the pandemic could once again worsen in the future.

Refer to Note 1 for further discussion of COVID-19.

Contrail entered into an Operating Agreement in connection with the acquisition of Contrail providing for the governance of and the terms of membership interests in Contrail and including put and call options with the Seller of Contrail.

The Company has presented this redeemable non-controlling interest in Contrail between the liabilities and equity sections of the accompanying 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 Contrail RNCI is a Level 3 fair value measurement that is valued at $ 7.2 million as of March 31, 2022.

The change in the redemption value compared to March 31, 2021 is an increase of $ 0.6 million.

The increase was driven by $ 0.3 million of contributions

made from the non-controlling interest and $ 0.8 million of net income attributable to the non-controlling interest, offset by $ 0.5 million of the net change in fair value.

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

If either side were to exercise the option, the Company anticipates that the price would approximate the fair value of the Contrail RNCI, as determined on the transaction date.

The Company currently expects that it would fund any required payment from cash provided by operations.

On May 5, 2021, the Company formed an aircraft asset management business called CAM, and an aircraft capital joint venture called CJVII.

The new venture focuses on acquiring commercial aircraft and jet engines for leasing, trading and disassembly.

CJVII targets investments in current generation narrow-body aircraft and engines, building on Contrail’s origination and asset management expertise.

CAM serves two separate and distinct functions:

1) to direct the sourcing, acquisition and management of aircraft assets owned by CJVII, and 2) to directly invest into CJVII alongside other institutional investment partners.

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 March 31, 2022, CAM's remaining capital commitments are approximately $ 2.0 million from the Company and $ 22.0 million from MRC.

In connection with the formation of CAM, MRC has a fixed price put option of $ 1 million to sell its common equity in CAM to Air T at each of the first 3 anniversary dates.

At the later of (a) 5 years after execution of the agreement and (b) distributions to MRC per the waterfall equal to their capital contributions, Air T has a call option and MRC has a put option on the MRC common interests in CAM.

If either party exercises the option, the exercise price will be fair market value if Air T pays in cash at closing or 112.5 % of fair market value if Air T opts to pay in three equal annual installments after exercise.

As of March 31, 2022, Air T recorded MRC's $ 1.0 million put option within "Other non-current liabilities" on our consolidated balance sheets.

We also reflected it within on our consolidated statements of equity as "Put option issued to co-investor in CAM".

The shareholder agreement includes the Shanwick Put/Call Option with regard to the 30 % non-controlling interest.

The non-controlling interest holders are the executive management of the underlying business.

The Shanwick Put/Call Option grants the Company an option to purchase the 30 % interest at the call option price that equals to the average EBIT over the 3 Financial Years prior to the exercise of the Call Option multiplied by 8.

In addition, the Shanwick Put/Call Option also grants the non-controlling interest owners an option to require Air T to purchase from them their respective ownership interests at the Put Option price, that is equal to the average EBIT over the 3 Financial Years prior to the exercise of the Put Option multiplied by 7.5.

The Call Option and the Put Option may be exercised at any time from the fifth anniversary of the shareholder agreement and then only at the end of each fiscal year of Air T.

The Company has presented this redeemable non-controlling interest in Shanwick 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 estimated redemption value at the end of each reporting period.

As the Shanwick RNCI will be redeemed at established multiples of EBIT, it is considered redeemable at other than fair value.

Changes in its estimated redemption value are recorded on our consolidated statements of operations within non-controlling interests.

The Shanwick RNCI's estimated redemption value is at $ 3.6 million as of March 31, 2022, which was comprised of the following (in thousands):

Shanwick's Redeemable Non-

Beginning Balance as of April 1, 2021 $ —

Contribution from non-controlling members 3,226

Distribution to non-controlling members —

Net income attributable to non-controlling interests 10

Redemption value adjustments 348

Ending Balance as of March 31, 2022 $ 3,584

SHARES REPURCHASE

On May 14, 2014, the Company announced that its Board of Directors had authorized a program to repurchase up to 750,000 (retrospectively adjusted to 1,125,000 after the stock split on June 10, 2019) shares of the Company’s common stock from time to time on the open market or in privately negotiated transactions, in compliance with SEC Rule 10b-18, over an indefinite

During the year ended March 31, 2022, the Company repurchased 15,435 shares at an aggregate cost of $ 0.4 million, in which all were recorded as treasury shares.

The Company has a total of 156,327 treasury shares as of March 31, 2022.

SUBSEQUENT EVENTS

Aircraft capital joint venture

On May 6, 2021, the Company announced the May 5, 2021 formation of a new aircraft asset management business called Contrail Asset Management, LLC (“CAM”), and a new aircraft capital joint venture called Contrail JV II LLC (“CJVII”).

The new joint venture was formed as a scalable asset management platform to complement the Company’s existing operating businesses.

The new venture will focus on acquiring commercial aircraft and jet engines for leasing, trading and disassembly.

CJVII will target investments in current generation narrow-body aircraft and engines, building on Contrail Aviation’s origination and asset management expertise.

CJVII will initially be capitalized with up to $ 408 million of equity from Air T and three institutional investor partners, consisting of $ 108 million in initial commitments and $ 300 million in upsize capacity, contingent on underwriting and transaction appeal.

The three investor partners bring significant aviation experience to the joint venture.

The Company and Mill Road Capital (“MRC”) have agreed to became common members in CAM, the aircraft asset management business.

CAM will serve two separate and distinct functions:

1) to direct the sourcing, acquisition and management of aircraft assets owned by CJVII (“Asset Management Function”), and 2) to directly invest into CJVII alongside other institutional investment partners (“Investment Function”).

The Company and its affiliates will perform the services required for the Asset Management Function in exchange for 90 % of the economic interest derived therefrom.

For the Asset Management Function, CAM will receive origination fees, management fees, consignment fees (where applicable) and a carried interest.

For its Investment Function, CAM has an initial commitment to CJVII of approximately $ 53 million, which is comprised of an $ 8 million initial commitment from the Company and an approximately $ 45 million initial commitment from MRC.

Any investment returns will be shared pro-rata between the Company and MRC.

The CAM LLC Agreement provides that the limited liability company and each series will continue for a period of seven (7) years from the closing date, provided that the term of the company and each series may be extended for two (2) consecutive one-year periods after the initial term.

At the Market Offering

On May 14, 2021, the Company and Air T Funding (the “Trust”) entered into an At the Market Offering Agreement (the “ATM Agreement”) with Ascendiant Capital Markets, LLC (the “sales agent” or “Ascendiant”), pursuant to which the Trust may sell and issue its Alpha Income Preferred Securities having an aggregate offering price of up to $ 8 million (the “Capital Securities”) from time to time through Ascendiant, as the Trust’s sales agent (the “ATM Offering”).

The Trust has no obligation to sell any of the Capital Securities, and may at any time suspend offers under the ATM Agreement or terminate the ATM Agreement.

Sales of the Capital Securities, if any, under the ATM Agreement may be made in transactions that are deemed to be “at-the-market” equity offerings as defined in Rule 415 under the Securities Act of 1933, as amended, including sales made by means of ordinary brokers’ transactions, including on the NASDAQ Stock Market.

Subject to the terms and conditions of the ATM Agreement, the sales agent will use its reasonable efforts to sell the Capital Securities from time to time based upon the Trust’s instructions (including any price, time, or size limits or other parameters or conditions the Trust may impose).

The Trust or the Company will pay the sales agent a commission of up to 3.0 % of the gross sales price of any Capital Securities sold under the ATM Agreement.

The Trust has also provided the sales agent with customary indemnification rights.

The Capital Securities will be offered and sold pursuant to the Company’s and the Trust’s shelf registration statement on Form S-3 (File Nos.

333-254110-01 and 333-254110).

On May 14, 2021, the Company and the Trust filed a prospectus supplement relating to the ATM Offering with the Securities and Exchange Commission.

Under the terms of the ATM Agreement, the Trust may also sell Capital Securities to Ascendiant as principal for its own account at a price agreed upon at the time of the sale, subject to the Trust entering into a separate terms agreement with Ascendiant for any such sale.

Sale of CF34-3B engines

On May 3, 2022, wholly-owned subsidiary AirCo1 completed an agreement to sell two CF34-3B engine leases to an outside party.

Previous to the sale, the engines were leased by AirCo1 to an unrelated third party and the leases were included in the transaction.

Total proceeds for the transaction were $ 3.9 million.

Amendment No.1 to Third Amended And Restated Credit Agreement with MBT and Overline Note

On June 9, 2022, the Company, Jet Yard and MBT entered into Amendment No.

1 to Third Amended and Restated Credit Agreement (“Amendment”) and a related Overline Note (“Overline Note”) in the original principal amount of $ 5.0 million.

The Amendment and Note memorialize an increase to the amount that may be drawn by the Company on the MBT revolving credit agreement from $ 17.0 million to $ 22.0 million.

The total amount of borrowings under the facility as revised is now the Company’s calculated borrowing base or $ 22.0 million.

The borrowing base calculation methodology remains unchanged.

The interest rate on borrowings under the facility that are less than $ 17 million remains at the greater of 2.50 % or Prime minus 1 %.

The interest rate applicable to borrowings under the facility that exceed $ 17.0 million is the greater of 2.50 % or Prime plus 0.5 %.

The commitment fee on unused borrowings below $ 17.0 million remains at 0.11 %.

The commitment fee on unused borrowings above $ 17.0 million is 0.20 %.

The Amendment also includes an additional covenant to the credit agreement, namely the requirement that the Company provide inventory appraisals for AirCo, AirCo Services and Worthington to MBT twice a year.

The Overline loan and commitment mature on the earlier of March 31, 2023 or the date on which the Company receives all funds from the Company’s ERC application (estimated at approximately $ 9.1 million) filed on or about January 24, 2022 plus the full receipt of the Company’s carryback tax refund for the year (estimated at approximately $ 2.6 million) filed on or about August 19, 2021.

Both were applied for under different components of the CARES Act.

It is not possible to estimate when, or if, these funds may be received.

Each of the Company subsidiaries that has guaranteed the MBT revolving facility executed a guaranty acknowledgment in which they agreed to guaranty the Overline Loan and acknowledged, among other things, that the Overline Loan would not impair the lenders rights under the previously executed guaranty or security agreement.

Changes in and Disagreements with Accountants on Accounting and Financial Disclosure.

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-K

Item 8. Financial Statements and Supplementary Data