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Item 8. Financial Statements and Supplementary Data

2023-06-27 compared with 2022-06-28 · 344 added, 293 removed, 996 unchanged (39% of the section changed)

30 unchanged sentences

Critical Audit Matter

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

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

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

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Depreciation and amortization 4,162 1,860

Write-down of inventory 768 6,405

Impairment of property and equipment 37 187

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

Inventory write-down 7,324 768

Impairment of long-lived assets 516 37

Loss on sale of property and equipment 8 5

251,730 168,322

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

Non-operating Income (Expense):

Operating (Loss) Income ( 4,407 ) 8,755

Non-operating (Expense) Income:

Interest expense, net ( 7,935 ) ( 4,948 )

Gain on forgiveness of PPP — 8,331

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

Income from equity method investments 1,460 37

Other ( 471 ) 1,221

( 6,946 ) 4,641

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

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

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

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

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

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

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

(Loss) Income before income taxes ( 11,353 ) 13,396

Income Tax Expense 432 1,169

Net (Loss) Income ( 11,785 ) 12,227

Net Income Attributable to Non-controlling Interests ( 510 ) ( 1,299 )

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

Stockholders $ ( 12,295 ) $ 10,928

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

Basic $ 3.79 $ ( 2.53 )

Diluted $ 3.78 $ ( 2.53 )

Income from discontinued operations per share (Note 23)

Basic $ — $ —

Diluted $ — $ —

Income (Loss) per share (Note 23)

(Loss) Income per share (Note 23)

Basic $ ( 4.32 ) $ 3.79

8 unchanged sentences

(In thousands) 2023 2022

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

Other Comprehensive Loss:

Foreign currency translation loss ( 549 ) ( 409 )

Net (Loss) Income $ ( 11,785 ) $ 12,227

Other Comprehensive Income:

Foreign currency translation income (loss) 4 ( 549 )

Unrealized gain on interest rate swaps, net of tax of $ 332 and $ 294

Reclassification of interest rate swaps into earnings 77 41

Total Other Comprehensive Loss 421 ( 165 )

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

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

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

Total Other Comprehensive Income 1,079 421

Total Comprehensive (Loss) Income ( 10,706 ) 12,648

Comprehensive Income Attributable to Non-controlling Interests ( 510 ) ( 1,299 )

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

Stockholders $ ( 11,216 ) $ 11,349

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Accounts receivable, net of allowance for doubtful accounts of $ 1,160 and $ 1,368

27,218 19,684

Income tax receivable 536 3,230

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Property and equipment, net of accumulated depreciation of $ 6,624 and $ 5,405

21,439 21,212

Intangible assets, net of accumulated amortization of $ 4,191 and $ 2,947

12,103 13,260

Right-of-use assets 11,666 7,354

26 unchanged sentences

Retained earnings 13,686 26,729

Accumulated other comprehensive loss ( 263 ) ( 684 )

Accumulated other comprehensive income (loss) 816 ( 263 )

Total Air T, Inc.

9 unchanged sentences

CASH FLOWS FROM OPERATING ACTIVITIES:

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

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

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

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

Net (loss) income $ ( 11,785 ) $ 12,227

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

Depreciation and amortization 4,162 1,860

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

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

Write-down of inventory 768 6,405

Income from equity method of investments ( 1,460 ) ( 37 )

Inventory write-down 7,324 768

Impairment of long-lived assets 516 37

Other 769 876

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Total adjustments 17,383 ( 40,484 )

Net cash used in operating activities - continuing operations ( 33,084 ) ( 1,823 )

Net cash provided by operating activities - discontinued operations — 4

Net cash used in operating activities ( 33,084 ) ( 1,819 )

Net cash provided by (used in) operating activities 16,909 ( 33,084 )

CASH FLOWS FROM INVESTING ACTIVITIES:

Purchases of marketable securities — ( 659 )

Sale of marketable securities — 815

Proceeds from sale of assets on lease and held for lease — 8,183

Acquisition of businesses, net of cash acquired ( 2,498 ) ( 12,804 )

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Other 572 364

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

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

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

Net cash used in investing activities ( 6,168 ) ( 33,388 )

CASH FLOWS FROM FINANCING ACTIVITIES:

3 unchanged sentences

Payments on term loan ( 27,850 ) ( 3,813 )

Proceeds from PPP loan — 8,215

Proceeds received from issuance of TruPs — 11,278

Other ( 1,528 ) 2,745

Net cash provided by financing activities - continuing operations 59,254 71

Net cash (used in) provided by financing activities ( 12,380 ) 59,254

Effect of foreign currency exchange rates on cash and cash equivalents 361 ( 341 )

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

NET DECREASE IN CASH AND CASH EQUIVALENTS AND RESTRICTED CASH ( 1,278 ) ( 7,559 )

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

1 unchanged sentence

SUPPLEMENTAL DISCLOSURE OF NON-CASH ACTIVITIES:

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

Equipment leased or held for lease transferred to inventory 12,700 12

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

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

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

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

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

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

1 unchanged sentence

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

Put option issued to co-investor in CAM (Note 24) — — — — — ( 1,000 ) — — ( 1,000 )

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

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

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

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

Net loss* — — — — — ( 12,295 ) — ( 26 ) ( 12,321 )

Repurchase of common stock — — 52 ( 1,081 ) — — — — ( 1,081 )

Exercise of stock options 4 1 — 20 — — — 21

Stock compensation expense — — — — 315 — — — 315

2 unchanged sentences

Unrealized gain on interest rate swaps, net of tax — — — — — — 998 — 998

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

Reversal of Put option issued to co-investor in CAM (Note 24) — — — — — 1,000 — — 1,000

Reclassification of interest rate swaps into earnings — — — — — — 77 — 77

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

Discontinued Operations

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

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

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

SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES

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Actual results could differ from those estimates.

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

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

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

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

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

Future economic developments such as inflation and increased interest rates as well as further business issues such as supply chain issues 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 and economic and business issues but we still experienced disruptions, and we experienced 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 flows and could operate at a loss from time to time beyond fiscal 2023.

We expect that issues caused by the pandemic and other economic and business issue will continue to some extent.

The fluidity of this situation precludes any prediction as to the ultimate adverse impact these issues on economic and market conditions and our businesses in particular, and, as a result, presents material uncertainty and risk with respect to us and our results of operations.

The Company believes the estimates and assumptions underlying the Company’s consolidated financial statements are reasonable and supportable based on the information available as of March 31, 2023, however;

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Goodwill, at original cost $ 10,939 $ 10,502

Less accumulated impairment ( 376 ) ( 376 )

Accumulated impairment ( 376 ) ( 376 )

Goodwill, net of impairment $ 10,563 $ 10,126

As of March 31, 2023, $ 4.2 million of the goodwill balance is attributable to the acquisition of Contrail and included within the Commercial Jet Engines and Parts segment.

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

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

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

$ 6.3 million of the goodwill balance is attributable to the acquisition of Shanwick in February 2022, and included within the Corporate and Other segment.

$ 0.1 million of the goodwill balance is attributable to the acquisition of WASI in January 2023, and included within the Overnight Air Cargo segment.

We performed our annual impairment assessment for goodwill of our reporting units at March 31, 2023.

In the fiscal year 2023, COVID-19 continued to have some impact on the macroeconomic conditions and the outlook of the airline industry.

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

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

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

The forecasts and assumptions are based on our annual and long-term business plans.

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

Based on the results of our annual quantitative assessment conducted as of March 31, 2022, the fair value of our Contrail reporting unit exceeded its carrying value, and management concluded that no impairment charge was warranted.

The market approach requires management to make significant assumptions related to market multiples of revenue and earnings derived from comparable publicly-traded companies with similar operating characteristics as our reporting units.

Based on the results of our annual quantitative assessment conducted as of March 31, 2023, the fair value of our reporting units exceeded their carrying values, and management concluded that no impairment charge was warranted.

Intangible Assets – Amortizable intangible assets consist of acquired patents, tradenames, customer relationships, and other finite-lived identifiable intangibles.

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Thus, warrants for mandatorily redeemable shares are liabilities under ASC 480.

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

The Warrants are recorded at fair value.

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

The liability is classified as Level 2 in the hierarchy.

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

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

In total, 5.3 million Warrants were exercised and the remaining 3.1 million Warrants expired on August 30, 2021.

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

27 unchanged sentences

The forecasts and assumptions are based on our annual and long-term business plans.

forecasts and assumptions are based on our annual and long-term business plans.

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

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These pass-through costs totaled $ 29.2 million and $ 23.0 million for the years ended March 31, 2023 and 2022, respectively.

Liquidity – The Company’s Credit Agreement with MBT (the Air T debt in Note 14 ) includes several covenants that are measured once a year at March 31, including, but not limited to, a financial covenant requiring a debt service coverage ratio of 1.25 .

The AirCo 1 Credit Agreement (the AirCo 1 debt in Note 14 ) contains an affirmative covenant relating to collateral valuation.

As of March 31, 2022, the Company and AirCo 1 were in compliance with all financial covenants.

The Contrail Credit Agreement (the Contrail debt in Note 14 ) contains affirmative and negative covenants, including covenants that restrict the ability of Contrail and its subsidiaries to, among other things, incur or guarantee indebtedness, incur liens, dispose of assets, engage in mergers and consolidations, make acquisitions or other investments, make changes in the nature of its business, and engage in transactions with affiliates.

The Contrail Credit Agreement also contains quarterly financial covenants applicable to Contrail and its subsidiaries, including a minimum debt service coverage ratio of 1.25 to 1.0 and a minimum TNW of $ 8 million.

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

The Company believes it is probable that the cash on hand (including that obtained from other current financings), net cash provided by operations from its remaining operating segments, together with its current revolving lines of credit, as amended or replaced, will be sufficient to meet its obligations as they become due in the ordinary course of business for at least 12 months following the date these financial statements are issued.

Recently Issued Accounting Pronouncements

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

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

The amendments in this Update 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.

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

Lessors—Certain Leases with Variable Lease Payments .

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

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

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

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

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

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

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

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

Recently Adopted Accounting Pronouncements

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

Disclosures by Business Entities about Government Assistance.

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

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

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

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

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

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

Early application of the amendments is permitted.

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

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

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

In December 2022, the FASB issued ASU 2022-06- Reference Rate Reform (Topic 848):

Deferral of the Sunset Date of Topic 848.

The amendments in this Update defer the implementation deadline of Topic 848 from December 31, 2022, to December 31, 2024.

The Company is currently in the process of converting our LIBOR-based contracts, hedging relationships, and other transactions to other reference rates.

We anticipate to be completed by September 30, 2023.

Worldwide Aviation Services, Inc.

On January 31, 2023, the Company acquired Worldwide Aircraft Services, Inc.

("WASI"), a Kansas corporation that services the aircraft industry across the United States and internationally through the operation of a repair station which is located in Springfield, Missouri at the Branson National Airport.

The acquisition was was funded with cash and the loans described in Note 14 of this report.

WASI is included within the Overnight air cargo segment.

The acquisition date's fair value of the consideration is summarized in the table below (in thousands):

January 31, 2023

Cash consideration $ 1,628

Seller's Note $ 1,370

Total consideration $ 2,998

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 January 31, 2023, with the excess of total consideration above 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 January 31, 2023 (in thousands):

January 31, 2023

Accounts receivable $ 1,037

Inventory 517

Other current assets 97

Property, plant and equipment, net 403

Intangible -Trade Name 342

Intangible - Non-competition Agreement 19

Intangible - Customer Relationships 683

Other assets 20

Total assets $ 3,118

Accounts payable 61

Accrued expenses and deferred revenue 635

Total liabilities $ 696

Net assets acquired $ 2,422

Consideration paid 2,998

Cash acquired ( 500 )

Net assets acquired ( 2,422 )

Goodwill $ 76

As of March 31, 2023, the purchase price allocation is final.

The following table sets forth the revenue and expenses of WASI that are included in the Company’s condensed consolidated statement of income for the fiscal year ended March 31, 2023 (in thousands):

Income Statement

Post-Acquisition

Revenue $ 929

Cost of Sales 676

Operating Expenses 425

Operating Loss ( 172 )

Non-operating expense ( 22 )

Net loss $ ( 194 )

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

Wolfe Lake HQ, LLC

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

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

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

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

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 14 .

As part of the transaction, the executive management of the underlying business purchased 30.0 % 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 was completed and all adjustments are reflected in the tables below.

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

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Net assets acquired $ 6,520

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

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

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

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

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

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Interest rate swaps (Level 2) 2,420 889

Warrants Liability (Level 2) — 414

Contrail's redeemable non-controlling interest (Level 3) $ 7,972 $ 7,178

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

Contrail's Redeemable Non-

Contrail's Redeemable Non-Controlling

Beginning Balance as of April 1, 2022 $ 7,178

1 unchanged sentence

Distribution to non-controlling member —

Net income attributable to non-controlling interests 826

Net loss attributable to non-controlling interests ( 954 )

Fair value adjustment - Contrail (Note 24) 1,748

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Overnight air cargo:

Finished goods 546 28

Ground equipment manufacturing:

6 unchanged sentences

Commercial jet engines and parts:

60,439 60,516

Whole engines available for sale or tear-down 10,141 15,403

Parts 50,813 45,036

Total inventories 74,738 78,289

1 unchanged sentence

Total inventories, net of reserves $ 71,125 $ 75,167

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

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

A write-down of $ 7.3 million was recorded on the inventory of the commercial jet engines and parts segment during the fiscal year ended March 31, 2023, of which, $ 5.4 million was due to a management decision to monetize three engines by sale to a third party, in which the net carrying values exceeded the estimated proceeds.

The remainder of the write-down was attributable to our evaluation of the carrying value of inventory as of March 31, 2023, where we compared its cost to its net realizable value and considered factors such as physical condition, sales patterns and expected future demand to estimate the amount necessary to write down any slow moving, obsolete or damaged inventory.

LESSOR ARRANGEMENTS

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

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

Contingent rent earned totaled approximately $ 0 and $ 0.1 million for the fiscal years ended March 31, 2023 and 2022, respectively.

As of March 31, 2023, future minimum rental payments to be received under non-cancelable leases are as follows (in thousands):

Year ended March 31,

Total $ 4,452

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

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

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

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

As of March 31, 2023, Contrail has received its return-to-condition compensation ("engine compensation") in the amount of $ 4.6 million on a previously leased engine that terminated in December 2022.

Office leases

2 unchanged sentences

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

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

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

Depreciation expense relating to office leases was $ 0.3 million and $ 0.1 million for the fiscal years ended March 31, 2023 and 2022, respectively.

We recognized rental and other revenues related to operating lease payments of $ 1.4 million and $ 0.4 million, respectively, of which variable lease payments were $ 0.6 million and $ 0.2 million during the fiscal years ended March 31, 2023 and 2022, respectively.

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

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

The following table sets forth the undiscounted cash flows for future minimum base rents to be received from customers for office leases in effect as of March 31, 2023:

Year ended March 31,

18 unchanged sentences

Other 1,782 1,391

16,254 15,864

Accumulated amortization ( 4,191 ) ( 2,947 )

12,063 12,917

In-process software 40 343

Intangible assets, total $ 12,103 $ 13,260

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

March 31, 2022

Average Remaining Amortization Period Gross Carrying Amount Accumulated Amortization Net Amount

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

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

In the fiscal year ended March 31, 2023, 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.

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

March 31, 2023

Average Remaining Amortization Period Gross Carrying Amount Accumulated Amortization Net Amount

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

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

Customer relationships 8 years, 10 months $ 683 $ 13 670

Other 14 years, 4 months 361 4 357

10 years, 9 months $ 1,044 $ 17 $ 1,027

2 unchanged sentences

Thereafter 6,580

INVESTMENTS IN SECURITIES AND DERIVATIVE INSTRUMENTS

I NVESTMENTS IN SECURITIES AND DERIVATIVE INSTRUMENTS

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

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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.

On March 30, 2023, Contrail made a prepayment of $ 6.7 million on Contrail - Term Note G.

As a result of this prepayment, the Company determined that the interest rate swap on Contrail - Term Note G was no longer an effective hedge.

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

In addition, any changes in the fair value of Contrail - Term Note G's swap after March 30, 2023 are recognized directly into earnings.

For the swaps related to Air T Term Note D and Contrail - Term Note G (prior to March 30, 2023), the effective portion of changes in the fair value on these instruments is recorded in other comprehensive income (loss) and is reclassified into the consolidated statement of income (loss) as interest expense in the same period in which the underlying hedged transactions affect earnings.

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

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

During the twelve months ended March 31, 2022 and 2021, the Company recorded a gain of approximately $ 0.9 million and $ 0.3 million, net of tax, respectively, in the consolidated statement of comprehensive income (loss) for changes in the fair value of the instruments.

As of March 31, 2023 and March 31, 2022, the fair value of the interest-rate swap contracts was an asset of $ 2.4 million and $ 0.9 million, respectively, which is included within other assets in the consolidated balance sheets.

During the years ended March 31, 2023 and 2022, the Company recorded a gain of approximately $ 1.0 million and $ 0.9 million, net of tax, respectively, in the consolidated statement of comprehensive income (loss) for changes in the fair value of the instruments.

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

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

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

During the fiscal year ended March 31, 2021, the Company had a gross gain aggregating to $ 0.8 million and a gross loss aggregating to $ 23.7 thousand related to these derivative instruments.

During the fiscal year ended March 31, 2023, the Company recorded no gain and $ 0.3 million loss related to these derivative instruments.

During the fiscal year ended March 31, 2022, the Company did no t record any gain or loss related to these derivative instruments.

The following table presents these derivative instruments at fair value in the condensed consolidated balance sheets as of March 31, 2023 and March 31, 2022 (in thousands):

(In thousands) March 31, 2023 March 31, 2022

Exchange-traded options & futures

Other current assets $ 179 $ —

Total assets 179 —

Exchange-traded options & futures

Accrued Expenses and other 2 —

Total liabilities $ 2 $ —

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

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

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

As of March 31, 2023 and 2022, the Company had $ 0.1 million and $ 0 of outstanding borrowings under its margin account, respectively.

As of March 31, 2023 and 2022, the Company had cash margin balances related to exchange-traded equity securities and securities sold short of $ 0.2 million and $ 0 , respectively, which is reflected in other current assets on the consolidated balance sheets.

The interest rate on margin account borrowings was 6.33 % as of March 31, 2023.

EQUITY METHOD INVESTMENTS

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

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

As of March 31, 2023, 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 for the fiscal year ended March 31, 2022.

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

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

During the three months ended September 30, 2022, Insignia recorded net income of $ 11.8 million, which was primarily driven by a gain on litigation settlement of $ 12.0 million.

During the fiscal year ended March 31, 2023, the Company's share of Insignia's net income for twelve months ended December 31, 2022 was $ 3.1 million.

The Company applied $ 1.4 million to offset the cumulative value of unrecorded share of losses, resulting in net income recognition of $ 1.7 million.

As of March 31, 2023, the Company's net investment basis in Insignia is $ 1.7 million.

The Company's 20.1 % investment in CCI is accounted for under the equity method of accounting.

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

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

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

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

For the fiscal year ended March 31, 2023, the Company recorded income of $ 0.8 million as its share of CCI's net income for the twelve months ended December 31, 2022, along with a basis difference adjustment of $ 50.0 thousand.

The Company's net investment basis in CCI is $ 3.1 million as of March 31, 2023.

During the quarter ended December 31, 2022, the Company also paid off the $ 2.0 million promissory note payable to CCI.

See Note 14 .

Summarized audited financial information for the Company's equity method investees for the twelve months ended December 31, 2022 and December 31, 2021 are as follows (in thousands):

4 unchanged sentences

Gross Profit 20,668 5,642

Operating loss ( 9,627 ) ( 10,551 )

Net loss ( 7,473 ) ( 1,960 )

Net loss attributable to Air T, Inc.

Operating income (loss) 16,631 ( 9,627 )

Net income (loss) 14,256 ( 7,473 )

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

stockholders $ 2,473 $ ( 815 )

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

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

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

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

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

As of March 31, 2022, we recognized the one-time refunds totaling $ 9.1 million which was included on the Consolidated Balance Sheets as an Employee Retention Credit receivable, as well as on the Consolidated Statements of Income (Loss) as an offset to the related employee expenses within general and administrative expenses in the fiscal year ended March 31, 2022.

During the fiscal year ended March 31, 2023, the Company received $ 8.2 million of the total refunds, leaving $ 0.9 million in the Employee Retention Credit receivable.

ACCRUED EXPENSES

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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 twelve months ended March 31, 2022 and 2021 are as follows (in thousands):

The components of lease cost for the fiscal years ended March 31, 2023 and 2022 are as follows (in thousands):

Twelve Months Ended March 31, 2023 Twelve Months Ended March 31, 2022

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Total lease cost $ 3,433 $ 3,427

Amounts reported in the consolidated balance sheets for leases where we are the lessee as of the years ended March 31, 2022 and 2021 were as follows (in thousands):

Amounts reported in the consolidated balance sheets for leases where we are the lessee as of the fiscal years ended March 31, 2023 and 2022 were as follows (in thousands):

March 31, 2023 March 31, 2022

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Operating leases 4.95 % 4.33 %

Maturities of lease liabilities under non-cancellable leases where we are the lessee as of the year ended March 31, 2022 are as follows (in thousands):

Maturities of lease liabilities under non-cancellable leases where we are the lessee as of the fiscal year ended March 31, 2023 are as follows (in thousands):

Operating Leases

6 unchanged sentences

Borrowings of the Company and its subsidiaries are summarized below at March 31, 2023 and March 31, 2022, respectively.

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

As of March 31, 2022, the Company's PPP Loan was fully forgiven by the SBA.

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

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

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

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

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

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

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

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

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

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

The loan is secured by a first lien on all of the assets of the Subsidiary, a pledge of $ 5.0 million 8.0 % TruPs, and a personal guaranty of the Company’s Chairman, President and Chief Executive Officer Nicholas Swenson.

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

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

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

The borrowing base calculation methodology remains unchanged.

The interest rate on borrowings under the facility that are less than $ 17.0 million remains at the greater of 2.50 % or Prime minus 1.00 %.

The interest rate applicable to borrowings under the facility that exceed $ 17.0 million is the greater of 2.50 % or Prime plus 0.50 %.

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.

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

The Overline Note and commitment matures 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) plus the full receipt of the Company’s carryback tax refund for the year (estimated at approximately $ 2.6 million).

As of March 31, 2023, the Overline Note was paid in full and terminated.

On September 30, 2022, the Company executed a promissory note payable to CCI ("Promissory Note - CCI") for $ 2.0 million that bears interest at 10.00 % per annum and matured on December 30, 2022.

As of December 31, 2022, this note has been repaid without penalty.

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.

Contrail executed a Collateral Assignment of two Aircraft engines in connection with the Amendment.

On January 31, 2022 the Company funded the WASI acquisition through (i) a promissory note to Worldwide Aviation, LLC, (ii) cash, and (iii) an additional secured loan from MBT.

The promissory note to Worldwide Aviation, LLC in the amount of $ 1.5 million bears a fixed interest rate of 6.00 % and is payable via periodic payments up to the January 1, 2026 maturity date.

In connection with the acquisition, the Company and Jet Yard entered Amendment No.

2 to the Third Amended and Restated Credit Agreement (“Amendment No.

2”) with MBT.

Amendment No.

2 amends the Third Amended and Restated Credit Agreement dated as of August 31, 2021 as amended by that certain Amendment No.

1 to the Third Amended and Restated Credit Agreement dated June 9, 2022.

Amendment No.

2 provides for a new term loan (“Term Loan F”) in the amount of $ 1.0 million to help finance a portion of the consideration paid by the Company for WASI.

Pursuant to the amendment, the Company executed Term Note F in favor of MBT in the original principal amount of $ 1.0 million.

The note bears interest at a rate equal to the greater of six percent ( 6.00 %) or the prime rate plus one percent ( 1.00 %).

The note obligates the Company to make monthly payments of principal plus accrued interest commencing March 1, 2023.

The note may be prepaid, in whole or part, at any time without penalty and final payment of all amounts due under the note is due January 31, 2028.

On March 22, 2023, Contrail entered into the First Amendment to Second Amendment to Master Loan Agreement and Third Amendment to Master Loan Agreement ("the Amendment") with ONB.

The Amendment amends the Master Loan Agreement dated June 24, 2019 with principal revisions to:

(i) Section 3 of the Second Amendment was revised so that exclusion of certain gains and losses from the definition of “net income” applies through September 30, 2023, not March 31, 2023;

(ii) Section 5 of the Second Amendment relating to prepayment of Term Loan G was amended to eliminate the requirement that all asset sales during the period beginning with October 1, 2022 and ending on March 31, 2023 be applied as prepayments on Term Loan G;

instead, the Amendment provision now reflects the agreement that voluntary payments totaling $ 20.0 million would be made by the borrower on Term Loan G no later than September 30, 2023;

and, (iii) a revolving note resting period covenant was added to the Amendment whereby the outstanding principal balance on the revolving note would be paid to zero (0) for at least thirty (30) consecutive days during each annual period ending on the anniversary date of the revolving note, provided the borrower has not achieved a debt service coverage ratio of 1.10 :1.

As mentioned in Note 9 , during the quarter ended March 31, 2023, Contrail made a prepayment of $ 6.7 million on Term Loan G without penalty.

The following table provides certain information about the current financing arrangements of the Company's and its subsidiaries as of March 31, 2023 and 2022:

1 unchanged sentence

Revolver - MBT $ 8,742 $ 10,969 8/31/2023 2 Greater of 2.50 % or Prime - 1.00 %

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

Term Note A - MBT 7,762 8,542 8/31/2031 3.42 %

2 unchanged sentences

Term Note E - MBT 800 2,316 6/25/2025 Greater of LIBOR + 1.50 % or 2.50 %

Term Note F - MBT 983 — 1/31/2028 Greater of 6.00 % or Prime + 1.00 %

Promissory Note - CCI — — 12/30/2022 10.00 %

Debt - Trust Preferred Securities 25,598 25,567 6/7/2049 8.00 %

PPP Loan — 8,215 12/24/2022 1 1.00 %

Total 47,963 51,813

19 unchanged sentences

Total 8,198 9,455

Promissory Note - Seller's Note 1,279 — 1/1/2026 6.00 %

Total 1,279 —

Total Debt 125,914 136,932

1 unchanged sentence

Total Debt, net $ 125,085 $ 135,808

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

Fiscal 2023's weighted average interest rate on short term borrowings outstanding was 7.77 % .

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

The weighted average interest rate on short term borrowings outstanding as of March 31, 2022 was 3.90 %.

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

4 unchanged sentences

Fiscal year ended Amount

2024 $ 38,736

Thereafter 39,712

10 unchanged sentences

Total $ 7,935 $ 4,948

Other - 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 the securities 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).

2 On June 23, 2023, the Company and MBT entered into amendments to the MBT revolving credit agreement and related promissory note.

The amendments extended the maturity date of the credit facility to August 31, 2024, among other changes.

See Note 26 .

• The Company issued and distributed to existing common shareholders, via a non-cash transaction from equity, an aggregate of 1.6 million trust preferred capital security shares (aggregate $ 4.0 million stated value) and an aggregate of 8.4 million 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 currently is $ 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 March 31, 2022, approximately 5.3 million Warrants were exercised.

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

During fiscal 2022, the Company received $ 8.5 million in gross proceeds from the sale of TruPs through a S-3 Registration Statement filed by the Company.

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

The amount outstanding on the Company's Debt - Trust Preferred Securities is $ 25.6 million as of March 31, 2022.

3 Earlier of 3/31/23 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 March 31, 2023, the Overline Note was paid in full and terminated.

4 On May 26, 2023, AirCo 1 executed an Amendment to Main Street Priority Loan Agreement with PSB.

The Amendment replaces the three-month LIBOR benchmark applicable to the loan with a three-month SOFR based rate, which is defined as the three-month SOFR rate plus 3.26 %.

See Note 26 .

5 Effective May 26, 2023, Contrail amended the Promissory Note Revolving Note with ONB to replace the LIBOR based interest rate with a one-month SOFR based rate.

The applicable interest rate is now the one-month SOFR-based rate, as defined in the loan agreement, plus 3.56 %.

See Note 26 .

6 Effective May 26, 2023, Contrail amended the Promissory Note Term Note G with ONB to replace the one-month LIBOR based interest rate with a one-month SOFR-based rate.

The principal amount of the loan was $ 38.2 million on the effective date of the amended documents and the applicable interest rate is now the one-month SOFR based rate, as defined in the loan agreement, plus 3.11 %.

See Note 26 .

RELATED PARTY MATTERS

Contrail Aviation Support, LLC leases its corporate and operating facilities at Verona, Wisconsin from Cohen Kuhn Properties, LLC, a limited liability company whose membership interests are owned by Mr.

Contrail leases its corporate and operating facilities at Verona, Wisconsin from Cohen Kuhn Properties, LLC, a limited liability company whose membership interests are owned by Mr.

Joseph Kuhn, Contrail's Chief Executive Officer and Mrs.

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

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

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

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

15 unchanged sentences

At March 31, 2023, there was no unrecognized compensation expense related to the Air T's 2012 stock options.

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

In Fiscal 2023, 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 as of March 31, 2023.

Option activity during the fiscal years ended March 31, 2022 and 2023 is summarized below (in thousands, except for shares):

Shares Weighted

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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 the first vesting date on June 30, 2022, 32,600 shares did not meet the stock price condition and therefore, could not be exercised.

As of March 31, 2023, the remaining number of options that grantees are able to exercise is 293,400 .

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

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

We determined that the fair value of the Plan at inception was $ 1.3 million.

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

4 unchanged sentences

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

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

During fiscal years ended March 31, 2023 and 2022, total compensation cost recognized under the Plan was $ 0.3 million and $ 0.4 million, respectively.

The unrecognized compensation cost related to nonvested awards is $ 0.6 million, which is expected to be recognized over a weighted average period of 8.25 years.

29 unchanged sentences

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

In the current fiscal year, the Company also generated revenue from the sale of assets on lease or held for lease.

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

23 unchanged sentences

Contract Balances and Costs

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

Contract liabilities relate to deferred revenue, our unconditional right to receive consideration in advance of performance with respect to subscription revenue and advanced customer deposits with respect to product sales.

The following table presents outstanding contract liabilities as of April 1, 2022 and March 31, 2023 and the amount of contract liabilities that were recognized as revenue during the year ended March 31, 2023 (in thousands):

10 unchanged sentences

Profit sharing expense in fiscal 2023 and 2022 was approximately $ 2.4 million and $ 2.0 million, respectively, and was recorded in general and administrative expenses in the consolidated statements of income (loss).

I NCOME TAXES

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

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State ( 442 ) 140

Foreign ( 196 ) —

Total deferred ( 609 ) ( 367 )

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

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

Other differences, net 281 - 2.5 % 427 3.2 %

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The Company did not record any liabilities for uncertain tax positions for the fiscal years ended March 31, 2023 and March 31, 2022.

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

The Company (exclusive of Delphax which has a full valuation allowance) has federal gross operating losses of $ 1.7 million and state gross operating losses of $ 9.4 million at March 31, 2023.

These net operating losses will begin to expire in tax year 2031.

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During the year ended March 31, 2022, each entity, respectively, accounted for $ 0.2 million and $( 2.2 ) million of the fiscal year 2022's valuation allowance effect.

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

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

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Unrealized losses on investments 1,740 1,669

Investment in foreign subsidiaries — 1,331

Inventory reserve 851 682

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Capital gain deferment ( 1,799 ) ( 1,696 )

GdW intangible assets ( 2,572 ) —

Foreign intangible assets ( 2,159 ) ( 2,572 )

Other deferred tax liabilities ( 110 ) ( 36 )

Total deferred tax liabilities ( 8,878 ) ( 7,794 )

Net deferred tax asset $ 1,962 $ 6,431

Net deferred tax assets $ 5,590 $ 1,962

Less valuation allowance ( 8,007 ) ( 4,774 )

Net deferred tax liability $ ( 2,812 ) $ ( 595 )

Net deferred tax liabilities $ ( 2,417 ) $ ( 2,812 )

Delphax entities

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

purchased interests in Dephax.

purchased interests in Delphax.

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

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The returns for the fiscal years ended September 30, 2022 and March 31, 2023 have not yet been filed.

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

The gross deferred tax balances related to the Delphax entities includes estimated foreign, U.S.

federal and U.S.

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As a result of its permanent reinvestment assertion, the Company has not recorded deferred taxes related to DSI under the indefinite exception.

Valuation Allowance

Management assesses the available positive and negative evidence to estimate whether sufficient future taxable income will be generated to permit use of the existing deferred tax assets.

A significant piece of objective negative evidence evaluated was the cumulative loss incurred over the three-year period ended March 31, 2023.

Such objective evidence limits the ability to consider other subjective evidence, such as our projections for future growth.

On the basis of this evaluation, as of March 31, 2023, a valuation allowance of $ 8.0 million (inclusive of the Delphax entities’ valuation allowances that were discussed above) has been recorded to recognize only the portion of the deferred tax asset that is more likely than not to be realized.

The amount of the deferred tax asset considered realizable, however, could be adjusted if estimates of future taxable income during the carryforward period are reduced or increased or if objective negative evidence in the form of cumulative losses is no longer present and additional weight is given to subjective evidence such as our projections for growth.

QUARTERLY FINANCIAL INFORMATION (UNAUDITED)

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Operating Revenues $ 50,862 $ 60,688 $ 61,396 $ 74,377

Operating (Loss) Income, net of tax ( 802 ) ( 1,336 ) 108 ( 9,755 )

(Income) Loss attributable to non-controlling interests ( 631 ) 104 ( 698 ) 715

Loss attributable to Air T, Inc.

Stockholders ( 1,433 ) ( 1,232 ) ( 590 ) ( 9,040 )

Basic Loss per share $ ( 0.50 ) $ ( 0.43 ) $ ( 0.21 ) $ ( 3.15 )

Diluted Loss per share $ ( 0.50 ) $ ( 0.43 ) $ ( 0.21 ) $ ( 3.15 )

Antidilutive shares excluded from computation of income (loss) per share 7 4 5 5

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

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

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

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

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

Loss attributable to non-controlling interests 115 433 335 230

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

Stockholders ( 841 ) ( 2,924 ) 2,098 ( 5,614 )

Income from discontinued operations, net of tax — 4 — —

Basic (Loss) Income per share from continuing operations $ ( 0.29 ) $ ( 1.01 ) $ 0.73 $ ( 1.96 )

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

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

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

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

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

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

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

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

GEOGRAPHICAL INFORMATION

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Macau $ — $ 1,351

Other 303 122

Total tangible long-lived assets, net $ 89 $ 1,654

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

We have presented prior periods based on the current presentation.

Segment data is summarized as follows (in thousands):

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Total 247,323 177,077

Operating Income (Loss):

Operating (Loss) Income:

Overnight Air Cargo 4,047 2,794

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Asset impairment, restructuring or impairment charges 342 — 7,319 7 179 7,840

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

Security issuance expenses — — — 252 252

Loss (Gain) on sale of property and equipment 1 9 ( 2 ) — 8

Securities expenses — — — 63 63

Adjusted EBITDA $ 4,505 $ 3,314 $ 7,105 $ ( 8,895 ) $ 6,029

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

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

Security issuance expenses — — — 32 32

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

Securities expenses — — — 252 252

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

7 Included in the asset impairment, restructuring or impairment charges for the fiscal year ended March 31, 2023 was a write-down of $ 7.3 million on the commercial jet engines and parts segment's inventory, of which, $ 5.4 million was due to a management decision to monetize three engines by sale to a third party, in which the net carrying values exceeded the estimated proceeds.

EARNINGS PER COMMON SHARE

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Year Ended March 31,

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

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

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

Stockholders 10,928 ( 7,281 )

Income (loss) from continuing operations per share:

Basic $ 3.79 $ ( 2.53 )

Diluted $ 3.78 $ ( 2.53 )

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

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

Gain from discontinued operations attributable to Air T, Inc.

Net (loss) income from operations $ ( 11,785 ) $ 12,227

Net income from operations attributable to non-controlling interests ( 510 ) ( 1,299 )

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

Stockholders ( 12,295 ) 10,928

Income from discontinued operations per share:

Basic $ — $ —

Diluted $ — $ —

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

Income (loss) per share:

(Loss) income from operations per share:

Basic $ ( 4.32 ) $ 3.79

Diluted $ ( 4.32 ) $ 3.78

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

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

Weighted Average Shares Outstanding:

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COMMITMENTS AND CONTINGENCIES

Contrail Put/Call Option

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

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The change in the redemption value compared to March 31, 2022 is an increase of $ 0.8 million.

The increase was driven by $ 0.3 million of contributions

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

The increase was driven by $ 1.8 million of the net change in fair value, offset by $ 1.0 million of net loss attributable to the non-controlling interest.

As of the date of this filing, neither the Seller nor Air T 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.

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

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

CAM serves two separate and distinct functions:

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

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

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

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

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

Contrail Asset Management, LLC and CJVII, LLC

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 CJVII, LLC (“CJVII”).

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

The joint venture, CJVII, was formed as a series LLC ("CJVII Series").

It consists of several individual series that target investments in current generation narrow-body aircraft and engines, building on Contrail’s origination and asset management expertise.

CAM was formed to serve two separate and distinct functions:

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

CAM has two classes of equity interests:

1) common interests and 2) investor interests.

Neither interest votes as the entity is operated by a Board of Directors.

The common interests of CAM relate to its Asset Management Function.

The investor interests of CAM relate to the Company’s and Mill Road Capital’s (“MRC”) investments through CAM into CJVII (the Investment Function) and ultimately into the individual CJVII Series.

With regard to CAM’s common interests, the Company

currently owns 90 % of the economic common interests in CAM, and MRC owns the remaining 10 %.

MRC invested $ 1.0 million directly into CAM in exchange for 10 % of the common interests.

For the Asset Management Function, CAM receives origination fees, management fees, consignment fees (where applicable) and a carried interest from the direct investors into each CJVII Series.

Such fee income and carried interest will be distributed to the Company and MRC in proportion to their respective common interests.

For its Investment Function, CAM’s initial commitment to CJVII was approximately $ 51.0 million.

The Company and MRC have commitments to CAM in the respective amounts of $ 7.0 million and $ 44.0 million.

These represent the investor interests of CAM, separate and distinct from the common interests.

Any investment returns on CAM’s investor interests are shared pro-rata between the Company and MRC for each individual investment at the CJVII Series.

As of March 31, 2023, Air T has fulfilled its Investment Function initial commitment to CAM.

Per its Operating Agreement, CAM is comprised of only two Series:

the Onshore and the Offshore Series.

Participation in each is determined solely based on whether a potential investment at the CJVII Series is a domestic (Onshore) or international (Offshore) investment.

As of March 31, 2023, for its Investment Function, the Company has contributed $ 6.9 million to CAM’s Offshore Series and $ 0.6 million to CAM’s Onshore Series.

The Company determined that CAM is a variable interest entity and that the Company is not the primary beneficiary.

This is primarily the result of the Company's conclusion that it does not control CAM’s Board of Directors, which has the power to direct the activities that most significantly impact the economic performance of CAM.

Accordingly, the Company does not consolidate CAM and has determined to account for this investment using equity method accounting.

As of March 31, 2023, the Company's net investment basis in CAM is $ 5.7 million.

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 Air T at each of the first three ( 3 ) anniversary dates.

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

If either party exercises the option, the exercise price will be fair market value if Air T pays in cash at closing or 112.5 % of fair market value if Air T opts to pay in three ( 3 ) equal annual installments after exercise.

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

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

The Company previously recognized $ 1.0 million within “ Other non-current liabilities ” with an offset to equity as of March 31, 2022.

We subsequently reviewed this accounting treatment and determined that there was no loss contingency that existed under ASC 450 as we did not expect the $ 1.0 million put option to be exercised in the money to MRC.

As such, as of March 31, 2023, the Company reversed the $ 1.0 million previously recorded.

This matter was not material to our consolidated financial statements for any quarterly or annual periods.

With respect to the secondary put and call option, as it is priced at fair value, the Company also determined that there is no potential loss or gain upon exercise that would need to be recognized.

Shanwick Put/Call Option

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.

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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 $ 3.6 million as of March 31, 2022, which was comprised of the following (in thousands):

Shanwick's Redeemable Non-

The Shanwick RNCI's estimated redemption value is $ 4.7 million as of March 31, 2023, which was comprised of the following (in thousands):

Shanwick's Redeemable

Non-Controlling

Beginning Balance as of April 1, 2022 $ 3,584

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SHARES REPURCHASE

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

During the year ended March 31, 2023, the Company repurchased 51,794 shares at an aggregate cost of $ 1.1 million, in which all were recorded as treasury shares.

The Company has a total of 208,121 treasury shares as of March 31, 2023.

On August 16, 2022, President Biden signed the Inflation Reduction Act ("IRA") into law.

The IRA enacted a 15% corporate minimum tax rate (subject to certain thresholds being met) that will be applicable to the Company beginning in its Fiscal 2024, a 1% excise tax on share repurchases made after December 31, 2022, and created and extended certain tax-related energy incentives.

The Company does not currently expect that the tax-related provisions of the IRA will have a material impact on its consolidated financial statements.

As a result of the IRA's enactment into law, the Company is now subject to a 1% excise tax on share repurchases, effective for share repurchases made after December 31, 2022.

This excise tax may be reduced for the value of certain share issuances.

The excise tax incurred in connection with the Company's stock repurchases during the fourth quarter of Fiscal 2023 was not material.

SUBSEQUENT EVENTS

Sale of CF34-3B engines

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

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

Total proceeds for the transaction were $ 3.9 million.

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

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

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

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

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

The borrowing base calculation methodology remains unchanged.

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

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

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

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

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

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

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

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

Amendment of ONB loans

Effective May 26, 2023, Contrail entered into the Fourth Amendment to Master Loan Agreement and the Amended and Restated Promissory Note Term Note G with ONB.

The purpose of the amended documents was to replace the one-month LIBOR based interest rate with a one-month SOFR-based rate.

All other material terms of the obligations remain the same.

Effective May 26, 2023, Contrail entered into the First Amendment to Supplement #8 to Master Loan Agreement, the Fifth Amendment to Supplement #2 to the Master Loan Agreement and the Fourth Amended and Restated Promissory Note Revolving Note with ONB.

The purpose of the amended documents was to replace the LIBOR based interest rate with a one-month SOFR based rate.

All other material terms of the obligation remain the same.

The maximum principal amount of the revolving note remains at $ 25.0 million and the applicable interest rate is now the one-month SOFR-based rate, as defined in the loan agreement, plus 3.56 %.

Amendment of PSB Loan Agreement

On May 26, 2023, AirCo 1 executed an Amendment to Main Street Priority Loan Facility Term Loan Agreement with PSB.

The Amendment replaces the three-month LIBOR benchmark applicable to the loan with a three-month SOFR based rate, which is defined as the three-month SOFR rate plus 3.26 %.

The principal amount of the loan was $ 6.4 million on the effective date of the amended agreement.

The interest rate is to be determined on the 11th day of each month on the amounts that remain outstanding, commencing June 11, 2023.

Amendment of MBT Revolving Credit Agreement

On June 23, 2023, the Company and MBT entered into amendments to the MBT revolving credit agreement and related promissory note.

The amendments extended the maturity date of the credit facility to August 31, 2024 and include the following changes:

A $ 2.0 million seasonal increase in the maximum amount available under the facility.

The maximum amount of the facility will now increase to $ 19.0 million between May 1 and November 30 of each year and will decrease to $ 17.0 million between December 1 and April 30 of each year;

The reference rate for the interest rate payable on the revolving facility will change from Prime to SOFR, plus a spread.

The exact spread over SOFR will change every September 30 and March 31 based on the Company calculated funded debt leverage ratio (defined as total debt divided by EBITDA).

Depending on the result of the calculation, the interest rate spread applicable to the facility will range between 2.25 % and 3.25 %;

The unused commitment fee on the revolving credit facility will increase from 0.11 % to 0.15 %;

The covenant restricting the Company’s use of funds for “Other Investments” was revised to limit the Company to $ 5.0 million of “Other Investments” per year.

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

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

What changed 10-K

Item 8. Financial Statements and Supplementary Data