What changed in this filing

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Item 1. Financial Statements

2022-11-10 compared with 2022-08-12 · 181 added, 114 removed, 573 unchanged (34% of the section changed)

3 unchanged sentences

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

September 30, Six Months Ended

September 30,

2022 2021 2022 2021

Operating Revenues:

10 unchanged sentences

Depreciation and amortization 1,026 323 1,888 703

Inventory write-down 1,003 — 1,020 —

Asset impairment 485 — 516 —

(Gain) Loss on sale of property and equipment ( 1 ) — ( 2 ) 3

60,509 42,534 110,538 79,507

Operating Income (Loss) 834 ( 4 )

Operating Income 179 704 1,012 699

Non-operating (Expense) Income:

1 unchanged sentence

Income from equity method investments 266 14 798 97

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

Other ( 357 ) 159 ( 509 ) 1,340

1 unchanged sentence

(Loss) Income before income taxes ( 1,908 ) 8,041 ( 2,517 ) 8,362

Income Taxes Expense (Benefit) 192 ( 5 )

Income Taxes (Benefit) Expense ( 572 ) 38 ( 380 ) 33

Net (Loss) Income ( 1,336 ) 8,003 ( 2,137 ) 8,329

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

Net Loss (Income) Attributable to Non-controlling Interests $ 104 $ ( 448 ) $ ( 528 ) $ ( 486 )

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

10 unchanged sentences

Three Months Ended

September 30, Six Months Ended

September 30,

(In Thousands) 2022 2021 2022 2021

Net (Loss) Income $ ( 1,336 ) $ 8,003 $ ( 2,137 ) $ 8,329

Foreign currency translation loss ( 529 ) ( 49 )

Foreign currency translation (loss) income ( 606 ) 103 ( 1,135 ) 54

Unrealized gain on interest rate swaps 957 46 1,432 57

Reclassification of interest rate swaps into earnings 17 ( 2 ) 34 ( 3 )

Total Other Comprehensive Loss ( 37 ) ( 39 )

Total Other Comprehensive Income 368 147 331 108

Total Comprehensive (Loss) Income ( 968 ) 8,150 ( 1,806 ) 8,437

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

Comprehensive Loss (Income) Attributable to Non-controlling Interests 104 ( 448 ) ( 528 ) ( 486 )

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

3 unchanged sentences

CONDENSED CONSOLIDATED BALANCE SHEETS

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

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

Current Assets:

39 unchanged sentences

Common stock, $ .25 par value;

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

Treasury stock, 156,327 shares at $ 19.20

4,000,000 shares authorized, 3,026,495 and 3,022,745 shares issued, 2,850,748 and 2,866,418 shares outstanding

Treasury stock, 175,747 shares at $ 19.07 and 156,327 shares at $ 19.20

( 3,353 ) ( 3,002 )

1 unchanged sentence

Retained earnings 24,802 26,729

Accumulated other comprehensive loss ( 300 ) ( 263 )

Accumulated other comprehensive income (loss) 68 ( 263 )

Total Air T, Inc.

6 unchanged sentences

CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS

(In Thousands) Three Months Ended

(In Thousands) Six Months Ended

September 30,

CASH FLOWS FROM OPERATING ACTIVITIES:

2 unchanged sentences

Depreciation and amortization 1,888 703

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

Inventory write-down 1,020 —

Asset impairment 516 —

Other ( 190 ) ( 1,169 )

21 unchanged sentences

Effect of foreign currency exchange rates on cash and cash equivalents 62 51

NET (DECREASE) INCREASE IN CASH AND CASH EQUIVALENTS AND RESTRICTED CASH 1,155 ( 4,500 )

NET INCREASE (DECREASE) IN CASH AND CASH EQUIVALENTS AND RESTRICTED CASH 1,097 ( 9,653 )

CASH AND CASH EQUIVALENTS AND RESTRICTED CASH AT BEGINNING OF PERIOD 8,368 15,927

15 unchanged sentences

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

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 interests — — — — — 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

(In Thousands) Common Stock Treasury Stock Additional

11 unchanged sentences

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

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

Net loss* — — — — — ( 1,232 ) — ( 4 ) ( 1,236 )

Repurchase of common stock — — 19 ( 351 ) — — — — ( 351 )

Exercise of stock options 3 1 — — 20 — — — 21

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

Foreign currency translation loss — — — — — — ( 606 ) — ( 606 )

Adjustment to fair value of redeemable non-controlling interest — — — — — ( 188 ) — — ( 188 )

Unrealized gain on interest rate swaps, net of tax — — — — — — 957 — 957

Reclassification of interest rate swaps into earnings — — — — — — 17 — 17

Balance, September 30, 2022 3,026 $ 757 175 $ ( 3,353 ) $ 571 $ 24,802 $ 68 $ 1,094 $ 23,939

* Excludes amount attributable to redeemable non-controlling interests in Contrail Aviation Support, LLC ("Contrail") and Shanwick B.V.

See notes to condensed consolidated financial statements.

7 unchanged sentences

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

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

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

Impacts from Geopolitical, Macroeconomic, and COVID-19 Challenges

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.

3 unchanged sentences

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.

however, uncertainty over the ultimate direct and indirect impact COVID-19 will have on the global economy generally, and the Company’s businesses in particular, makes any estimates and assumptions as of September 30, 2022 inherently less certain than they would be absent the current and potential impacts of COVID-19.

The war in Eastern Europe and related sanctions imposed on Russia and related actors have resulted in interest rate acceleration and inflation, including, but not limited to, a significant increase in the price of commodities.

We expect that these factors will continue to negatively impact our businesses at least in the short-term.

The ultimate impact on our overall financial condition and operating results will depend on the currently unknowable duration and severity of these activities.

We continue to evaluate the long-term impact that these may have on our business model, however there can be no assurance that the measures we have taken or will take will completely offset the negative impact.

Recently Adopted Accounting Pronouncements

24 unchanged sentences

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 Minnesota executive office is currently located.

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

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

14 unchanged sentences

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.

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

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

58 unchanged sentences

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

Three Months Ended June 30,

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

2022 2021 2022 2021

Product Sales

22 unchanged sentences

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

The following table presents outstanding contract liabilities as of April 1, 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):

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

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

Recognized as Revenue

As of June 30, 2022 $ 4,851

As of September 30, 2022 $ 4,676

As of April 1, 2022 $ 4,727

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

For the six months ended September 30, 2022 $ 3,636

Accrued Expenses and Other

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

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

Salaries, wages and related items $ 4,505 $ 4,232

3 unchanged sentences

Total $ 13,626 $ 13,391

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 )%.

During the three-month period ended September 30, 2022, the Company recorded global income tax benefit of $ 0.6 million at an effective tax rate of 30.0 %.

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

The primary factors contributing to the difference between the federal statutory rate of 21.0% and the Company's effective tax rate for the three-month period ended September 30, 2022 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"), 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.

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

The primary factors contributing to the difference between the federal statutory rate of 21.0% and the Company's effective tax rate for the three-month period ended September 30, 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, and the exclusion of taxable income of the PPP loan forgiveness income, as directed by the CARES Act enacted in 2020, and any accrued interest forgiven as a part of that Act.

During the six-month period ended September 30, 2022, the Company recorded global income tax benefit of $ 0.4 million at an effective tax rate of 15.1 %.

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% and the Company's effective tax rate for the six-month period ended September 30, 2022 were the change in valuation allowance related to Delphax, other capital losses, the estimated benefit for the exclusion of income for SAIC under Section 831(b), and the exclusion from the tax provision of the minority owned portion of the pretax income of Contrail.

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

The primary factors contributing to the difference between the federal statutory rate of 21.0% and the Company's effective tax rate for the six-month period ended September 30, 2021 were the change in valuation allowance related to Delphax, the estimated benefit for the exclusion of income for SAIC under Section 831(b), the exclusion from the tax provision of the minority owned portion of the pretax income of Contrail, the exclusion from taxable income of the PPP loan forgiveness income, as directed by the CARES Act enacted in 2020, and any accrued interest forgiven as a part of that Act.

Net Earnings (Loss) Per Share

2 unchanged sentences

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

During the three months ended September 30, 2022, 3,750 options were exercised under the Air T's 2012 Stock Option Plan at $ 5.75 per share, which was disclosed within our condensed consolidated statement of equity.

7,500 unexpired options remain outstanding under this plan.

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

Three Months Ended June 30,

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

2022 2021 2022 2021

Net (loss) income $ ( 1,336 ) $ 8,003 $ ( 2,137 ) $ 8,329

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

Net loss (income) attributable to non-controlling interests 104 ( 448 ) ( 528 ) ( 486 )

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

8 unchanged sentences

Intangible Assets and Goodwill

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

June 30, 2022

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

September 30, 2022

Gross Carrying Amount Accumulated Amortization Net Book Value

19 unchanged sentences

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:

During the quarter ended September 30, 2022, the Company impaired $ 0.3 million of previously capitalized costs related to a software project that was deemed no longer probable to be completed and placed in service.

Based on the intangible assets recorded at September 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

2023 (excluding the six months ended September 30, 2022) $ 567

Thereafter 5,537

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 .

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

There was no impairment on goodwill during the quarter ended September 30, 2022.

Investments in Securities and Derivative Instruments

15 unchanged sentences

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.

As of September 30, 2022 and March 31, 2022, the fair value of these interest-rate swap contracts was an asset of $ 3.0 million and $ 0.9 million, respectively, which is included within other assets in the condensed consolidated balance sheets.

During the three and six months ended September 30, 2022, the Company recorded a gain of approximately $ 1.0 million and $ 1.4 million, net of tax, respectively.

During the three and six months ended September 30, 2021, the Company recorded a gain of approximately $ 46.0 thousand and $ 57.0 thousand, net of tax, respectively.

These gains are included in the condensed consolidated statement of comprehensive income (loss) for changes in the fair value of these instruments.

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

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

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

During the three and six months ended September 30, 2022, related to these derivative instruments, the Company had a gross gain aggregating to $ 46.0 thousand and no gross loss.

During the three and six months ended September 30, 2021, the Company did no t record any gain or loss related to derivative instruments.

The following table presents these derivative instruments at fair value in the condensed consolidated balance sheets as of September 30, 2022 and March 31, 2022 (in thousands):

(In thousands) September 30, 2022 March 31, 2022

Exchange-traded options & futures

Other current assets $ 401 $ —

Total assets 401 —

Exchange-traded options & futures

Accrued Expenses and other 119 —

Total liabilities $ 119 $ —

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

1 unchanged sentence

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 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.

During the three months ended September 30, 2022, the Company had a gross unrealized gain aggregating to $ 43.0 thousand and a gross unrealized loss aggregating to $ 0.2 million.

During the six months ended September 30, 2022, the Company had a gross unrealized gain aggregating to $ 86.0 thousand and a gross unrealized loss aggregating to $ 0.3 million.

During the three months ended September 30, 2021, the Company had a gross unrealized gain aggregating to $ 0.4 million and a gross unrealized loss aggregating to $ 0.1 million.

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

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

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

As of 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.

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

Equity Method Investments

2 unchanged sentences

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

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.

As of September 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 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.

As such, the Company did not record as of September 30, 2022 any additional share of Insignia's net loss for the three months ended June 30, 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.

3 unchanged sentences

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

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

The Company recorded income of $ 0.4 million and $ 0.7 million as its share of CCI's net income for the three and six months ended September 30, 2022, along with a basis difference adjustment of $ 12.0 thousand and $ 25.0 thousand, respectively.

The Company's net investment basis in CCI is $ 3.4 million as of September 30, 2022.

The Company also executed a $ 2.0 million promissory note payable to CCI on September 30, 2022.

See Note 12 .

Summarized unaudited financial information for the Company's equity method investees for the three and six months ended June 30, 2022 and 2021 is as follows (in thousands):

Three Months Ended Six Months Ended

June 30, 2022 June 30, 2021 June 30, 2022 June 30, 2021

Revenue $ 38,388 $ 27,715 $ 73,989 $ 57,988

5 unchanged sentences

Inventories consisted of the following (in thousands):

September 30,

2022 March 31,

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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 months ended June 30, 2022 and 2021 are as follows (in thousands):

Three Months Ended June 30,

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

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

2022 2021 2022 2021

Operating lease cost $ 498 $ 420 $ 989 $ 867

2 unchanged sentences

Total lease cost $ 826 $ 939 $ 1,638 $ 1,815

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

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

September 30, 2022 March 31, 2022

Operating leases

2 unchanged sentences

Weighted-average remaining lease term

Operating leases 13 years, 7 months 13 years, 5 months

Operating leases 13 years, 8 months

Weighted-average discount rate

Operating leases 4.36 %

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

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

Operating Leases

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

2023 (excluding the six months ended September 30, 2022) $ 886

Thereafter 5,028

4 unchanged sentences

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 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.

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.

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

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

1 unchanged sentence

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.

As of September 30, 2022, the unused commitment on the Overline Note was $ 4.1 million and there was no unused commitment on the MBT Revolver.

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

7 unchanged sentences

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.

As of September 30, 2022, the Company has received $ 1.4 million of the ERC and none of the carryback tax refunds.

It is not possible to estimate when, or if, the remainder of 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,

On September 30, 2022, the Company executed a promissory note payable to CCI ("Promissory Note - CCI") for $ 2.0 million that bears interest at 10 % per annum and matures on December 30, 2022.

The note may be prepaid at any time without penalty.

The note is subordinate and junior to any and all indebtedness of the Company to MBT.

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

(In Thousands) September 30,

2022 March 31,

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

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

Revolver - MBT $ 17,000 $ 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 %

Overline Note - MBT 879 — 3/31/2023 1

Greater of 2.50 % or Prime + 0.50 %

Term Note A - MBT 8,157 8,542 8/31/2031 3.42 %

1 unchanged sentence

Term Note D - MBT 1,371 1,405 1/1/2028 1-month LIBOR + 2.00 %

Promissory Note - CCI 2,000 — 12/30/2022 10.00 %

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

24 unchanged sentences

Total Debt, net $ 152,683 $ 135,808

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):

1 Earlier of 8/31/23 or the date on which Air T has received the 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.

As of September 30, 2022, the Company has received $ 1.4 million of the ERC and none of the federal income tax refunds.

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

Due by Amount

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

September 30, 2023 $ 44,704

September 30, 2024 10,130

September 30, 2025 12,183

September 30, 2026 39,085

September 30, 2027 5,982

Thereafter 41,587

Unamortized Debt Issuance Costs ( 988 )

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.

During the second quarter ended September 30, 2022 the Company did not sell any TruPs.

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

Shares Repurchased

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 period.

During the three months ended September 30, 2022, the Company repurchased 19,420 shares at an aggregate cost of $ 0.4 million.

All of these repurchased shares were recorded as treasury shares as of September 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 June 30, 2022 and March 31, 2022 (in thousands):

June 30, 2022 March 31, 2022

September 30, 2022 March 31, 2022

United States $ 21,319 $ 34,067

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Total tangible long-lived assets, net $ 35,912 $ 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 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

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

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

September 30, 2022 March 31, 2022

Lithuania 13,292 —

Other 291 303

Macau 1,232 1,351

Total tangible long-lived assets, net $ 14,593 $ 1,654

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

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

September 30, 2022 September 30, 2021

United States $ 91,323 $ 69,225

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(In Thousands) Three Months Ended

September 30, Six Months Ended

September 30,

2022 2021 2022 2021

Operating Revenues by Segment:

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Total $ 1,026 $ 322 $ 1,888 $ 703

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

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

Six Months Ended September 30, 2022

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

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Depreciation and amortization (excluding leased engines depreciation) 42 95 360 755 1,252

Asset impairment, restructuring or impairment charges 337 — 1,020 179 1,536

Gain on sale of property and equipment ( 1 ) — ( 2 ) 1 ( 2 )

Security issuance expenses — — — 15 15

Security expenses — — — 34 34

Adjusted EBITDA $ 2,300 $ 2,124 $ 4,248 $ ( 4,840 ) $ 3,832

Three Months Ended June 30, 2021

Six Months Ended September 30, 2021

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

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

Security issuance expenses — — — 5 5

Security expenses — — — 65 65

Adjusted EBITDA $ 1,617 $ 1,531 $ 2,024 $ ( 3,821 ) $ 1,351

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

The 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.

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

The change in the redemption value compared to March 31, 2022 is a decrease of $ 0.7 million, which was driven by the decrease in fair value of $ 0.7 million and distributions to non-controlling interest of $ 0.2 million, partially offset by net income attributable to non-controlling interest of $ 0.2 million.

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

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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.

On May 5, 2021, the Company formed an aircraft asset management business called Contrail Asset Management, LLC ("CAM"), and an aircraft capital joint venture called Contrail JV II LLC ("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.

The Company and Mill Road Capital (“MRC”) agreed to become common members in CAM.

CAM serves two separate and distinct functions:

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

As of September 30, 2022, CAM's remaining capital commitments are approximately $ 0.8 million from the Company and $ 17.3 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.

At the later of (a) five 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.

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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):

The Shanwick RNCI's estimated redemption value is $ 3.8 million as of September 30, 2022, which was comprised of the following (in thousands):

Shanwick RNCI

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Redemption value adjustments 232

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

Ending Balance as of September 30, 2022 $ 3,769

2020 Omnibus Stock and Incentive Plan

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

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

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

For the three and six months ended September 30, 2022, total compensation cost recognized under the Plan was $ 79.0 thousand and $ 0.2 million, respectively.

Subsequent Events

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

On November 8, 2022, Contrail entered into the Second Amendment to Master Loan Agreement (the “Amendment”) with ONB.

The Amendment amends the Master Loan Agreement dated as of June 24, 2019, as amended.

The principal revisions made in the Amendment are:

(i) the tangible net worth covenant was revised to require that Contrail maintain a tangible net worth of at least $ 12.0 million at all times prior to March 31, 2024 and $ 15.0 million at all times on or following March 31, 2024;

and, (ii) that all proceeds from certain asset sales during the period beginning on October 1, 2022 and ending on March 31, 2023 be applied as prepayments on Term Loan G.

The effectiveness of the Amendment is conditioned on Contrail executing a Collateral Assignment of two Aircraft Engine Lease Agreements.

The form of Collateral Assignment is attached as an exhibit to the Amendment.

The foregoing summary of the terms of the Amendment is qualified in its entirety by reference to the form of Second Amendment to Master Loan Agreement with Exhibit filed as Exhibit 10.2 herewith, which is incorporated herein by reference.

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