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Item 1. Financial Statements

2022-08-12 compared with 2022-02-14 · 287 added, 248 removed, 400 unchanged (57% of the section changed)

2 unchanged sentences

CONDENSED CONSOLIDATED STATEMENTS OF INCOME (LOSS)

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

December 31, Nine Months Ended

2021 2020 2021 2020

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

Operating Revenues:

10 unchanged sentences

Depreciation and amortization 861 380

Loss on sale of property and equipment — 5 3 1

(Gain) Loss on sale of property and equipment ( 2 ) 3

50,028 36,972

Operating Income (Loss) from continuing operations 25 1,068 724 ( 2,881 )

Non-operating Income (Expense):

Operating Income (Loss) 834 ( 4 )

Non-operating (Expense) Income:

Interest expense ( 1,822 ) ( 939 )

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

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

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

Income from equity method investments 532 83

Other ( 154 ) 1,182

( 1,444 ) 326

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

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

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

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

(Loss) Income before income taxes ( 610 ) 322

Income Taxes Expense (Benefit) 192 ( 5 )

Net (Loss) Income ( 802 ) 327

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

Net Income Attributable to Non-controlling Interests ( 631 ) ( 38 )

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

Stockholders $ ( 1,433 ) $ 289

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

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

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

Income from discontinued operations per share (Note 6)

Basic $ — $ — $ — $ —

Diluted $ — $ — $ — $ —

(Loss) Income per share (Note 6)

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Three Months Ended

December 31, Nine Months Ended

(In Thousands) 2022 2021

Net (Loss) Income $ ( 802 ) $ 327

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

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

Foreign currency translation loss ( 529 ) ( 49 )

Unrealized gain on interest rate swaps 475 11

Reclassification of interest rate swaps into earnings 17 ( 1 )

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

Total Other Comprehensive Loss ( 37 ) ( 39 )

Total Comprehensive (Loss) Income ( 839 ) 288

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

Comprehensive Income Attributable to Non-controlling Interests ( 631 ) ( 38 )

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

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CONDENSED CONSOLIDATED BALANCE SHEETS

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

(In thousands, except share amounts) June 30, 2022 March 31, 2022

Current Assets:

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Accounts receivable, net of allowance for doubtful accounts of $ 1,327 and $ 1,368

16,006 19,684

Income tax receivable 3,148 3,230

Inventories, net 86,132 75,167

Employee retention credit receivable 7,689 9,138

Other current assets 12,092 10,106

1 unchanged sentence

Assets on lease or held for lease, net of accumulated depreciation of $ 1,031 and $ 780

11,141 14,509

Property and equipment, net of accumulated depreciation of $ 5,675 and $ 5,405

21,262 21,212

Intangible assets, net of accumulated amortization of $ 3,237 and $ 2,947

11,789 13,260

Right-of-use ("ROU") assets 6,987 7,354

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CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS

(In Thousands) Nine Months Ended

(In Thousands) Three Months Ended

CASH FLOWS FROM OPERATING ACTIVITIES:

Net Income (Loss) 7,141 ( 2,546 )

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

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

Adjustments to reconcile Net Income (Loss) to net cash provided by operating activities:

Net (Loss) Income $ ( 802 ) $ 327

Adjustments to reconcile Net (Loss) Income to net cash provided by operating activities:

Depreciation and amortization 861 380

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

Other ( 260 ) ( 492 )

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Other ( 544 ) 941

Net cash used in operating activities - continued operations ( 19,690 ) ( 6,661 )

Net cash provided by operating activities - discontinued operations — 4

Net cash used in operating activities ( 2,531 ) ( 8,821 )

CASH FLOWS FROM INVESTING ACTIVITIES:

Purchases of marketable securities — ( 659 )

Sale of marketable securities 6 2,445

Proceeds from sale of assets on lease — 1,900

Investment in unconsolidated entities ( 880 ) ( 1,085 )

Acquisition of assets ( 13,408 ) —

Capital expenditures related to property & equipment ( 351 ) ( 136 )

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Payments on term loan ( 836 ) ( 1,042 )

Proceeds from PPP loan — 8,215

Proceeds received from issuance of Trust Preferred Securities ("TruPs") — 4,291

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

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

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

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

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

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

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

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

Net income* — — — — — 289 — 153 442

Foreign currency translation loss — — — — — — ( 49 ) — ( 49 )

Adjustment to fair value of redeemable non-controlling interests — — — — — ( 238 ) — — ( 238 )

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

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

Unrealized gain on interest rate swaps, net of tax — — — — — — 11 — 11

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

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

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

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

Balance, June 30, 2021 3,023 $ 756 141 $ ( 2,617 ) $ — $ 16,321 $ ( 723 ) $ 1,142 $ 14,879

(In Thousands) Common Stock Treasury Stock Additional

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

Net income* — — — — — 289 — 153 442

Net loss* — — — — — ( 1,433 ) — ( 6 ) ( 1,439 )

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

Foreign currency translation loss — — — — — — ( 529 ) — ( 529 )

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Balance, June 30, 2022 3,023 $ 756 156 $ ( 3,002 ) $ 472 $ 26,222 $ ( 300 ) $ 1,098 $ 25,246

Net income (loss)* — — — — — 7,555 — ( 12 ) 7,543

Stock compensation expense — — — — 236 — — — 236

Foreign currency translation gain — — — — — — 103 — 103

Adjustment to fair value of redeemable non-controlling interest — — — — — 183 — — 183

Unrealized gain on interest rate swaps, net of tax — — — — — — 46 — 46

Reclassification of interest rate swaps into earnings — — — — — — ( 2 ) — ( 2 )

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

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

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

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

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

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

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

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

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

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

See notes to condensed consolidated financial statements.

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These condensed consolidated financial statements should be read in conjunction with the consolidated financial statements and notes thereto included in the Company's Annual Report on Form 10-K for the year ended March 31, 2022.

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

Discontinued Operations

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

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

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

Formation of new entities

On May 5, 2021, the Company formed 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 Company and Mill Road Capital (“MRC”) have agreed to become common members in CAM.

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”).

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

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

The results of operations for the period ended June 30, 2022 are not necessarily indicative of the operating results for the full year.

COVID-19 Pandemic

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 substantial number of disruptions, and we experienced and continue to experience a reduction in demand for commercial aircraft, jet engines and parts compared to historical periods.

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

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 during fiscal 2023.

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 our businesses in particular, and, as a result, present material uncertainty and risk with respect to us and our results of operations.

Recently Issued Accounting Pronouncements

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

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

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

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

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

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

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

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

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 condensed consolidated financial statements are reasonable and supportable based on the information available as of June 30, 2022;

however, 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 June 30, 2022 inherently less certain than they would be absent the current and potential impacts of COVID-19.

Recently Adopted Accounting Pronouncements

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

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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.

The Company adopted this amendment on April 1, 2022.

As of the date of the adoption, the amendment did not have a material impact on the Company's consolidated financial statements and disclosures.

Recently Issued Accounting Pronouncements

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

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

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

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 at 5000 36th Street West, St.

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

Louis Park, Minnesota pursuant to a real estate purchase agreement with WLPC East, LLC, a Minnesota limited liability company (an unaffiliated third-party) 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.

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

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

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Tenant Improvements 269

Above market leases 3

Below market leases ( 139 )

Intangible origination costs 512

Absorption period costs 732

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"), 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 12 .

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.

Subsequent to the acquisition date, the Company made certain measurement period adjustments to the preliminary purchase price allocation, which resulted in an increase to goodwill of $ 0.3 million.

The increase is attributable to a measurement period adjustment of $ 0.3 million related to certain intangible assets acquired and related deferred tax liabilities assumed due to clarification of information utilized to determine fair value during the measurement period.

As of June 30, 2022, the measurement period is completed and all adjustments are reflected in the tables below.

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

February 10, 2022

Consideration paid $ 15,256

Cash acquired ( 2,452 )

Net assets acquired ( 6,520 )

Goodwill $ 6,284

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 2,576

Intangible - Customer Relationships 7,267

Total assets 10,665

Accounts payable 15

Accrued expenses and deferred revenue 1,670

Deferred income tax liabilities, net 2,460

Total liabilities 4,145

Net assets acquired $ 6,520

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.

Revenue Recognition

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

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

2021 2020 2021 2020

Three Months Ended June 30,

Product Sales

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

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

The following table presents outstanding contract liabilities as of April 1, 2022 and June 30, 2022 and the amount of contract liabilities as of April 1, 2022 that were recognized as revenue during the three-month period ended June 30, 2022 (in thousands):

Outstanding contract liabilities Outstanding contract liabilities as of April 1, 2022

Recognized as Revenue

As of December 31, 2021 $ 1,585

As of June 30, 2022 $ 4,851

As of April 1, 2022 $ 4,727

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

For the three months ended June 30, 2022 $ 3,161

Accrued Expenses and Other

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

(in thousands) June 30, 2022 March 31, 2022

Salaries, wages and related items $ 6,593 $ 4,232

3 unchanged sentences

Total $ 14,222 $ 13,391

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

During the three-month period ended June 30, 2022, the Company recorded $ 0.2 million in income tax expense at an effective tax rate ("ETR") of ( 31.5 )%.

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

The primary factors contributing to the difference between the federal statutory rate of 21.0% and the Company's effective tax rate for the three-month period ended December 31, 2021 were the change in valuation allowance related to the Company's subsidiaries in the corporate and other segment, Delphax Solutions, Inc.

and Delphax Technologies, Inc.

(collectively known as "Delphax"), the estimated benefit for the exclusion of income for the Company's captive insurance company subsidiary ("SAIC") under Section 831(b) and the exclusion from the tax provision of the minority owned portion of the pretax income of the Company's 79 %-owned subsidiary ("Contrail").

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

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

During the nine-month period ended December 31, 2021, the Company recorded $ 0.2 million in income tax benefit at an effective rate of ( 3.6 )%.

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

The primary factors contributing to the difference between the federal statutory rate of 21.0% and the Company's effective tax rate for the nine-month period ended December 31, 2021 were the change in valuation allowance related to Delphax, the estimated benefit for the exclusion of income for SAIC under Section 831(b), the exclusion from the tax provision of the minority owned portion of the pretax income of Contrail, the exclusion from taxable income of the PPP loan forgiveness income, as directed by the CARES Act enacted in 2020, and any accrued interest forgiven as a part of that Act.

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

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

(collectively known as "Delphax"), other capital losses, the estimated benefit for the exclusion of income for the Company's captive insurance company subsidiary ("SAIC") under Section 831(b), and the exclusion from the tax provision of the minority owned portion of the pretax income of Contrail Aviation Support, LLC.

During the three-month period ended June 30, 2021, the Company recorded $ 5.0 thousand in income tax benefit at an ETR of ( 1.6 )%.

The primary factors contributing to the difference between the federal statutory rate of 21.0% and the Company's effective tax rate for the three-month period ended June 30, 2021 were the tax rate differential for carryback tax losses at a rate higher than the statutory tax rate, the change in valuation allowance related to Delphax, the estimated benefit for the exclusion of income for SAIC under Section 831(b) and the exclusion from the tax provision of the minority owned portion of the pretax income of Contrail.

Net Earnings (Loss) Per Share

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

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

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

2021 2020 2021 2020

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

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

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

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

(Loss) Income from continuing operations per share:

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

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

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

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

Income from discontinued operation attributable to Air T, Inc.

Three Months Ended June 30,

Net (loss) income $ ( 802 ) $ 327

Net (income) attributable to non-controlling interests ( 631 ) ( 38 )

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

Stockholders ( 1,433 ) 289

Income from discontinued operations per share:

Basic $ — $ — $ — $ —

Diluted $ — $ — $ — $ —

(Loss) Income per share:

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Diluted $ ( 0.50 ) $ 0.10

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

Antidilutive shares excluded from computation of (loss) income per share 7 —

Weighted Average Shares Outstanding:

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Diluted 2,866 2,890

Intangible Assets and Goodwill

Intangible assets as of June 30, 2022 and March 31, 2022 consisted of the following (in thousands):

June 30, 2022

Gross Carrying Amount Accumulated Amortization Net Book Value

Purchased software $ 447 $ ( 394 ) $ 53

Internally developed software 3,562 ( 210 ) 3,352

In-place lease and other intangibles 1,094 ( 110 ) 984

Customer relationships 7,057 ( 452 ) 6,605

Patents 1,112 ( 1,102 ) 10

Other 1,405 ( 969 ) 436

14,677 ( 3,237 ) 11,440

In-process software 349 — 349

Intangible assets, total $ 15,026 $ ( 3,237 ) $ 11,789

March 31, 2022

Gross Carrying Amount Accumulated Amortization Net Book Value

Purchased software $ 447 $ ( 386 ) $ 61

Internally developed software 4,112 ( 139 ) 3,973

In-place lease and other intangibles 1,108 ( 63 ) 1,045

Customer relationships 7,694 ( 339 ) 7,355

Patents 1,112 ( 1,101 ) 11

Other 1,391 ( 919 ) 472

15,864 ( 2,947 ) 12,917

In-process software 343 — 343

Intangible assets, total $ 16,207 $ ( 2,947 ) $ 13,260

Based on the intangible assets recorded at June 30, 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)

Year ending March 31, Amortization

2023 (excluding the three months ended June 30, 2022) $ 917

Thereafter 5,801

The carrying amount of goodwill as of June 30, 2022 and March 31, 2022 was $ 10.3 million and $ 10.1 million, respectively.

The change is primarily attributable to adjustments made to the purchase price allocation related to the Company's acquisition of GdW Beheer B.V.

mentioned in Note 2 .

Investments in Securities and Derivative Instruments

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The swaps mature in January 2028.

As mentioned in Note 1 1 , on August 31, 2021, Air T and MBT refinanced Term Note A and fixed its interest rate at 3.42 %.

On August 31, 2021, Air T and Minnesota Bank & Trust ("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 associated with Term Note A at the time of de-designation into earnings over the remainder of its term.

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.

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

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

As of December 31, 2021 and March 31, 2021, the fair value of this interest-rate swap contract was a liability of $ 0.4 million and $ 0.6 million, respectively, which is included within other non-current liabilities in the condensed consolidated balance sheets.

During the three and nine months ended December 31, 2021, the Company recorded a loss of approximately $ 20.0 thousand and a gain of $ 37.0 thousand, net of tax, respectively, in the condensed consolidated statement of comprehensive income (loss) for changes in the fair value of this instrument.

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

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

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

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

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

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

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 June 30, 2022 and March 31, 2022, the fair value of these interest-rate swap contracts was an asset of $ 1.6 million and $ 0.9 million, respectively, which is included within other assets in the condensed consolidated balance sheets.

During the three months ended June 30, 2022 and 2021, the Company recorded a gain of approximately $ 0.5 million and a gain of $ 11.0 thousand, net of tax, respectively, in the condensed consolidated statement of comprehensive income (loss) for changes in the fair value of these instruments.

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

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

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

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

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

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

During the three months ended June 30, 2022, the Company had a gross unrealized gain aggregating to $ 43.0 thousand and a gross unrealized loss aggregating to $ 44.0 thousand.

During the three months ended June 30, 2021, the Company had a gross unrealized gain aggregating to $ 0.4 million and a gross unrealized loss aggregating to $ 49.0 thousand.

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

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

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

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

As of June 30, 2022 and 2021, the Company had no outstanding borrowings under its margin account.

As of June 30, 2022 and 2021, the Company had cash margin balances related to exchange-traded equity securities and securities sold short of $ 0 and $ 22.0 thousand, respectively, which is reflected in other current assets on the condensed consolidated balance sheets.

Equity Method Investments

The Company’s investment in Insignia Systems, Inc.

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

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

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

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

As of June 30, 2022, the number of Insignia's shares owned by the Company was 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 as of December 31, 2021.

As such, the Company did no t record as of June 30, 2022 any additional share of Insignia's net income for the three months ended March 31, 2022 but applied it to its accumulated deferred net loss below zero basis.

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.

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

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

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

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

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

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

Three Months Ended Nine Months Ended

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

At December 31, 2021, the Company determined that it has suffered from an other-than-temporary impairment in its investment in CCI and recorded an impairment charge of $ 0.3 million.

The Company recorded income of $ 0.3 million as its share of CCI's net income for the three months ended June 30, 2022, along with a basis difference adjustment of $ 12.5 thousand.

The Company's net investment basis in CCI is $ 2.9 million as of June 30, 2022.

Summarized unaudited financial information for the Company's equity method investees for the three months ended March 31, 2022 and 2021 is as follows (in thousands):

Three Months Ended

March 31, 2022 March 31, 2021

Revenue $ 35,602 $ 30,273

Gross Profit 4,375 807

Operating loss ( 1,339 ) 891 ( 6,544 ) ( 3,496 )

Net loss ( 1,434 ) 2,242 ( 5,847 ) ( 2,075 )

Net loss attributable to Air T, Inc.

Operating income (loss) 1,981 ( 3,095 )

Net income (loss) 1,750 ( 2,145 )

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

stockholders $ 308 $ ( 295 )

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

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

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

2021 2020 2021 2020

The components of lease cost for the three months ended June 30, 2022 and 2021 are as follows (in thousands):

Three Months Ended June 30,

Operating lease cost $ 491 $ 447

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Total lease cost $ 812 $ 876

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

December 31, 2021 March 31, 2021

Amounts reported in the consolidated balance sheets for leases where we are the lessee as of June 30, 2022 and March 31, 2022 were as follows (in thousands):

June 30, 2022 March 31, 2022

Operating leases

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Operating leases 4.35 % 4.33 %

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

Maturities of lease liabilities under non-cancellable leases where we are the lessee as of June 30, 2022 are as follows (in thousands):

Operating Leases

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

2023 (excluding the three months ended June 30, 2022) $ 1,305

Thereafter 5,027

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Financing Arrangements

Borrowings of the Company and its subsidiaries are summarized below at June 30, 2022 and March 31, 2022, respectively.

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

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

Louis Park, Minnesota pursuant to a real estate purchase agreement with WLPC East, LLC, a Minnesota limited liability company (an unrelated third-party) dated October 11, 2021.

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

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

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

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

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

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

(In Thousands) December 31,

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 Air T Acquisition 22.1 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 Air T Acquisition 22.1, 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.

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.

As of June 30, 2022, the unused commitment of the MBT revolver and the Overline Note was $ 2.9 million and $ 5.0 million, respectively.

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 Employee Retention Credit ("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.

The following table provides certain information about the current financing arrangements of the Company's and its subsidiaries as of June 30, 2022:

(In Thousands) June 30,

2022 March 31,

2021 Maturity Date Interest Rate Unused commitments

Revolver - MBT $ 3,680 $ — August 31, 2023 Greater of 2.5 % or Prime - 1 %

Term Note A - MBT 8,734 6,750 August 31, 2031 3.42 %

Term Note B - MBT 3,081 3,375 August 31, 2031 3.42 %

Term Note D - MBT 1,422 1,472 January 1, 2028 1-month LIBOR + 2 %

Term Note E - MBT 2,856 4,706 June 25, 2025 Greater of LIBOR + 1.5 % or 2.5 %

Debt - Trust Preferred Securities 24,960 14,289 June 7, 2049 8.00 %

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

2022 Maturity Date Interest Rate Unused commitments at June 30, 2022

Revolver - MBT $ 14,068 $ 10,969 8/31/2023 Greater of 2.50 % or Prime - 1.00 %

Overline Note - MBT — — 3/31/2023 1 Greater of 2.50 % or Prime + 0.50 %

Term Note A - MBT 8,350 8,542 8/31/2031 3.42 %

Term Note B - MBT 2,946 3,014 8/31/2031 3.42 %

Term Note D - MBT 1,388 1,405 1/1/2028 1-month LIBOR + 2.00 %

Term Note E - MBT 1,997 2,316 6/25/2025 Greater of LIBOR + 1.50 % or 2.50 %

Debt - Trust Preferred Securities 25,586 25,567 6/7/2049 8.00 %

Total 54,335 51,813

Term Loan - PSB 6,393 6,200 December 11, 2025 3-month LIBOR + 3.00 %

Term Loan - Park State Bank 6,393 6,393 12/11/2025 3-month LIBOR + 3.00 %

Total 6,393 6,393

Jet Yard Debt

Term Loan - MBT 1,968 — August 31, 2031 4.14 %

Term Loan - MBT 1,919 1,943 8/31/2031 4.14 %

Total 1,919 1,943

Contrail Debt

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

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

Revolver - Old National Bank ("ONB") — 3,843 9/5/2023 1-month LIBOR + 3.45 %

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

Term Loan H - ONB 14,875 8,698 8/18/2023 Wall Street Journal (WSJ) Prime Rate + 0.75 %

Total 59,793 57,459

Delphax Solutions Debt

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

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

Wolfe Lake Debt

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

Term Loan - Bridgewater 9,776 9,837 12/2/2031 3.65 %

Total 9,776 9,837

Air T Acquisition 22.1

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

Term Loan A - ING 2,960 3,341 2/1/2027 3.50 %

Term Loan B - ING 1,039 1,114 5/1/2027 4.00 %

Total 8,999 9,455

Total Debt 141,246 136,932

1 unchanged sentence

Total Debt, net $ 140,181 $ 135,808

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

1 Earlier of 8/31/23 or the date on which Air T has received payment from the federal income tax refunds in the amount of approximately $ 2.6 million and Employee Retention Tax Credits in an amount not less than $ 9.1 million.

At June 30, 2022, our contractual financing obligations, including payments due by period, are as follows (in thousands):

Due by Amount

December 31, 2022 $ 2,963

December 31, 2023 12,688

December 31, 2024 9,058

December 31, 2025 40,817

December 31, 2026 1,672

June 30, 2023 $ 2,607

June 30, 2024 39,098

June 30, 2025 12,207

June 30, 2026 39,111

June 30, 2027 5,168

Thereafter 43,055

Unamortized Debt Issuance Costs ( 1,065 )

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

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

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

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

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

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

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

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

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

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

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

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

During the first quarter ended June 30, 2022 the Company did not sell any Trust Preferred (“TruP”) securities.

The amount outstanding on the Company's Debt - Trust Preferred Securities is $ 25.6 million as of June 30, 2022.

Geographical Information

Total tangible long-lived assets, net of accumulated depreciation, located in the United States, the Company's country of domicile, and held outside the United States are summarized in the following table as of December 31, 2021 and March 31, 2021 (in thousands):

December 31, 2021 March 31, 2021

June 30, 2022 March 31, 2022

United States $ 21,132 $ 34,067

1 unchanged sentence

Total tangible long-lived assets, net $ 32,403 $ 35,721

The Company's tangible long-lived assets, net of accumulated depreciation, held outside of the United States represent engines and aircraft on lease at December 31, 2021.

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

December 31, 2021 March 31, 2021

The Company's tangible long-lived assets, net of accumulated depreciation, held outside of the United States represent engines and aircraft on lease at June 30, 2022.

The net book value located within each individual country at June 30, 2022 and March 31, 2022 is listed below (in thousands):

June 30, 2022 March 31, 2022

Macau $ 1,292 $ 1,351

Lithuania 9,688 —

Other 291 303

Total tangible long-lived assets, net $ 11,271 $ 1,654

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

December 31, 2021 December 31, 2020

Total revenue, in and outside the United States, is summarized in the following table for the three months ended June 30, 2022 and June 30, 2021 (in thousands):

June 30, 2022 June 30, 2021

United States $ 41,952 $ 31,769

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

We have presented prior periods based on the current presentation.

Segment data is summarized as follows (in thousands):

(In Thousands) Three Months Ended

December 31, Nine Months Ended

2021 2020 2021 2020

Operating Revenues by Segment:

34 unchanged sentences

Total $ 861 $ 380

The table below provides a reconciliation of operating income (loss) to Adjusted EBITDA by reportable segment for the three months ended June 30, 2022 and 2021 (in thousands):

Three Months Ended June 30, 2022

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

Operating income (loss) $ 1,077 $ 142 $ 3,074 $ ( 3,459 ) $ 834

Depreciation and amortization (excluding leased engines depreciation) 19 49 179 358 605

Gain on sale of property and equipment — — ( 2 ) — ( 2 )

Security issuance expenses — — — 15 15

Adjusted EBITDA $ 1,096 $ 191 $ 3,251 $ ( 3,086 ) $ 1,452

Three Months Ended June 30, 2021

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

Operating income (loss) $ 732 $ 1,423 $ ( 238 ) $ ( 1,921 ) $ ( 4 )

Depreciation and amortization (excluding leased engines depreciation) 13 32 164 70 279

Loss on sale of property and equipment 2 1 — — 3

Security issuance expenses — — — 5 5

Adjusted EBITDA $ 747 $ 1,456 $ ( 74 ) $ ( 1,846 ) $ 283

Commitments and Contingencies

Redeemable Non-controlling Interest

Redeemable Non-controlling Interests

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

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.

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

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

In addition, the Company has elected to recognize changes in the redemption 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 $ 7.9 million as of December 31, 2021.

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

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

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

The Contrail RNCI is a Level 3 fair value measurement that is valued at $ 6.5 million as of June 30, 2022.

The change in the redemption value compared to March 31, 2022 is a decrease of $ 0.7 million.

The decrease was driven by $ 1.0 million of net decrease in fair value, in addition to $ 0.3 million of net income attributable to the non-controlling interest during the three months ended June 30, 2022.

As of the date of this filing, neither the Seller nor the Company 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 a new aircraft asset management business called CAM, and a new aircraft capital joint venture called CJVII.

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’s origination and asset management expertise.

CAM will serve two separate and distinct functions:

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

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

As of June 30, 2022, CAM's remaining capital commitments are approximately $ 1.1 million from the Company and $ 19.7 million from MRC.

In connection with the formation of CAM, MRC has a fixed price put option of $ 1.0 million to sell its common equity in CAM to the Company 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, the Company 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 the Company pays in cash at closing or 112.5 % of fair market value if the Company opts to pay in three equal annual installments after exercise.

The Company recorded MRC's $ 1.0 million put option within "Other non-current liabilities" on our consolidated balance sheets.

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 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 the Company 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 ("Shanwick RNCI").

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 $ 3.9 million as of June 30, 2022, which was comprised of the following (in thousands):

Shanwick RNCI

Beginning Balance as of April 1, 2022 $ 3,583

Contribution from non-controlling members —

Distribution to non-controlling members —

Net income attributable to non-controlling interests ( 12 )

Redemption value adjustments 305

Ending Balance as of June 30, 2022 $ 3,876

2020 Omnibus Stock and Incentive Plan

2 unchanged sentences

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

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

As of June 30, 2022, options to purchase up to 293,400 shares are outstanding 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.

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

As of June 30, 2022, total compensation cost recognized under the Plan was $ 79.0 thousand.

Subsequent Events

Contrail's Interest Rate Swap

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

Federal Reserve.

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

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

Employee Retention Credit

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

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

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

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

GdW Beheer B.V.

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

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

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

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

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

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

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

What changed 10-Q

Item 1. Financial Statements