What changed in this filing

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Item 1. Financial Statements

2023-11-14 compared with 2023-08-11 · 177 added, 139 removed, 571 unchanged (36% of the section changed)

3 unchanged sentences

(in thousands, except per share data) Three Months Ended

September 30, Six Months Ended

September 30,

2023 2022 2023 2022

Operating Revenues:

10 unchanged sentences

Depreciation and amortization 700 1,026 1,389 1,888

Inventory write-down 3 1,003 5 1,020

Asset impairment — 485 — 516

78,205 60,509 148,975 110,538

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( 1,882 ) ( 2,087 ) ( 2,359 ) ( 3,529 )

Income (Loss) before income taxes 184 ( 610 )

Income Tax Expense 211 192

Loss before income taxes ( 1,121 ) ( 1,908 ) ( 937 ) ( 2,517 )

Income Taxes Expense (Benefit) 487 ( 572 ) 698 ( 380 )

Net Loss ( 1,608 ) ( 1,336 ) ( 1,635 ) ( 2,137 )

Net Income Attributable to Non-controlling Interests ( 504 ) ( 631 )

Net (Income) Loss Attributable to Non-controlling Interests ( 1 ) 104 ( 505 ) ( 528 )

Net Loss Attributable to Air T, Inc.

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Three Months Ended

September 30, Six Months Ended

September 30,

(In Thousands) 2023 2022 2023 2022

3 unchanged sentences

Reclassification of interest rate swaps into earnings ( 188 ) 17 ( 380 ) 34

Total Other Comprehensive Loss ( 233 ) ( 37 )

Total Other Comprehensive (Loss) Income ( 342 ) 368 ( 575 ) 331

Total Comprehensive Loss ( 1,950 ) ( 968 ) ( 2,210 ) ( 1,806 )

Comprehensive Income Attributable to Non-controlling Interests ( 504 ) ( 631 )

Comprehensive (Income) Loss Attributable to Non-controlling Interests ( 1 ) 104 ( 505 ) ( 528 )

Comprehensive Loss Attributable to Air T, Inc.

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CONDENSED CONSOLIDATED BALANCE SHEETS

(In thousands, except per share data) June 30, 2023 March 31, 2023

(In thousands, except share amounts) September 30, 2023 March 31, 2023

Current Assets:

Cash and cash equivalents $ 4,999 $ 5,806

Marketable securities 365 —

Restricted cash 924 1,284

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Total Current Assets 98,271 116,557

Assets on lease or held for lease, net of accumulated depreciation of $ 38 and $ 223

Property and equipment, net of accumulated depreciation of $ 7,150 and $ 6,624

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CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS

(In Thousands) Three Months Ended

(In Thousands) Six Months Ended

September 30,

CASH FLOWS FROM OPERATING ACTIVITIES:

Net Loss $ ( 1,635 ) $ ( 2,137 )

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

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

Depreciation and amortization 1,389 1,888

Inventory write-down 5 1,020

Asset impairment — 516

Income from equity method of investments ( 1,439 ) ( 798 )

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Other 1,708 202

Net cash used in investing activities ( 21 ) ( 1,060 )

Net cash provided by (used in) investing activities 156 ( 1,776 )

CASH FLOWS FROM FINANCING ACTIVITIES:

21 unchanged sentences

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

Adjustment to fair value of redeemable non-controlling interests — — — — — 926 — — 926

Adjustment to fair value of redeemable non-controlling interest — — — — — 926 — — 926

Unrealized gain on interest rate swaps, net of tax — — — — — — 475 — 475

1 unchanged sentence

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

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

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

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

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

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

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

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

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

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

(In Thousands) Common Stock Treasury Stock Additional

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Balance, June 30, 2023 3,027 $ 757 209 $ ( 4,098 ) $ 807 $ 13,289 $ 583 $ 1,069 $ 12,407

Net loss* — — — — — ( 1,609 ) — ( 19 ) ( 1,628 )

Repurchase of common stock — — — — — — — — —

Exercise of stock options 3 1 — — 25 — — — 26

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

Foreign currency translation loss — — — — — — ( 170 ) — ( 170 )

Adjustment to fair value of redeemable non-controlling interest — — — — — 412 — — 412

Unrealized gain on interest rate swaps, net of tax — — — — — — 16 — 16

Reclassification of interest rate swaps into earnings — — — — — — ( 188 ) — ( 188 )

Balance, September 30, 2023 3,030 $ 758 209 $ ( 4,098 ) $ 911 $ 12,092 $ 241 $ 1,050 $ 10,954

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

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These condensed consolidated financial statements should be read in conjunction with the consolidated financial statements and notes thereto included in the Company's Annual Report on Form 10-K for the year ended March 31, 2023.

The results of operations for the period ended June 30, 2023 are not necessarily indicative of the operating results for the full year.

The results of operations for the period ended September 30, 2023 are not necessarily indicative of the operating results for the full year.

The accompanying financial statements have been prepared in accordance with generally accepted accounting principles applicable to a going concern, which contemplates the realization of assets and the satisfaction of liabilities in the normal course of business.

Recently Issued Accounting Pronouncements

The Company’s financial statements have been prepared assuming that it will continue as a going concern, which contemplates continuity of operations, realization of assets, and liquidation of liabilities in the normal course of business.

The revolving line of credit at Air T with MBT ("Revolver - MBT") with $ 16.4 million outstanding as of September 30, 2023 matures on August 31, 2024.

The Company does not have sufficient cash on hand or available liquidity to repay the outstanding debt which is due within one year after the date that the financial statements are issued.

This condition raises substantial doubt about the Company’s ability to continue as a going concern.

In response to this condition, management has plans to alleviate the substantial doubt.

We are currently seeking to refinance the Revolver - MBT prior to its maturity date;

however, there is no assurance that we will be able to execute this refinancing or, if we are able to refinance this obligation, that the terms of such refinancing would be as favorable as the terms of our existing credit facility.

Other plans include raising additional funds via sales of our trust preferred securities ("TruPs") through the Company's at-the-market offering that commenced on October 18, 2023 or through a private placement offering including possible incremental sales to existing shareholders, implementing cost reduction measures, reevaluating future investments in selected startups, and considering liquidation or sale of select investments in addition to the reduction of capital expenditures.

As a result of these plans, management believes it is probable that the cash on hand and current financings, net cash provided by operations from operating segments will be sufficient to meet obligations as they become due in the ordinary course of business for at least 12 months following the date these financial statements are issued.

Management has concluded that the plans are probable of being achieved to alleviate substantial doubt about the Company’s ability to continue as a going concern.

Recently Adopted Accounting Pronouncements

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

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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 its LIBOR-based contracts, hedging relationships, and other transactions to other reference rates and anticipates that this process will be complete by September 30, 2023.

The Company has completed the process of converting its material LIBOR-based contracts, hedging relationships, and other transactions to other reference rates as of September 30, 2023.

Worldwide Aviation Services, Inc.

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

GdW Beheer B.V.

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

The acquisition was completed through a wholly-owned subsidiary of the Company, Air T Acquisition 22.1, LLC ("Air T Acquisition 22.1"), a Minnesota limited liability company, through its Dutch subsidiary, Shanwick, and was funded with cash, investment by executive management of the underlying business, and the loans described in Note 12 .

As part of the transaction, the executive management of the underlying business purchased 30.0 % of Shanwick.

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

GdW was administratively dissolved on June 24, 2022 with Shanwick as the surviving entity.

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):

February 10, 2022

Consideration paid $ 15,256

Cash acquired ( 2,452 )

Net assets acquired ( 6,520 )

Goodwill $ 6,284

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

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

February 10, 2022

Accounts Receivable $ 715

Other current assets 67

Property, plant and equipment, net 40

Intangible - Proprietary Database 2,576

Intangible - Customer Relationships 7,267

Total assets 10,665

Accounts payable 15

Accrued expenses and deferred revenue 1,670

Deferred income tax liabilities, net 2,460

Total liabilities 4,145

Net assets acquired $ 6,520

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

Income Statement

Post-Acquisition

Revenue $ 887

Cost of Sales 145

Operating Expenses 701

Operating Income 41

Non-operating income 19

Net income $ 60

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

Revenue Recognition

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

Three Months Ended June 30,

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

2023 2022 2023 2022

Product Sales

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Leasing Revenue

Air Cargo — —

Ground equipment sales 10 29 34 73

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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, 2023 and June 30, 2023 and the amount of contract liabilities as of April 1, 2023 that were recognized as revenue during the three-month period ended June 30, 2023 (in thousands):

The following table presents outstanding contract liabilities as of April 1, 2023 and September 30, 2023 and the amount of contract liabilities as of April 1, 2023 that were recognized as revenue during the six-month period ended September 30, 2023 (in thousands):

Outstanding contract liabilities Outstanding contract liabilities as of April 1, 2023

Recognized as Revenue

As of June 30, 2023 $ 6,315

As of September 30, 2023 $ 3,629

As of April 1, 2023 $ 5,000

For the three months ended June 30, 2023 $ 2,078

For the six months ended September 30, 2023 $ 4,368

Accrued Expenses and Other

(in thousands) June 30, 2023 March 31, 2023

(in thousands) September 30, 2023 March 31, 2023

Salaries, wages and related items $ 5,605 $ 4,748

3 unchanged sentences

Total $ 12,303 $ 13,133

During the three-month period ended June 30, 2023, the Company recorded $ 0.2 million in income tax expense at an effective tax rate ("ETR") of 114.7 %.

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

During the three-month period ended September 30, 2023, the Company recorded $ 0.5 million in income tax expense at an effective rate ("ETR") of ( 43.4 )%.

The Company has computed the provision for income taxes based on the estimated annual effective tax rate excluding loss jurisdictions with no tax benefit and the application of discrete items, if any, for interim reporting.

consolidated group, Delphax Solutions, Inc.

and Delphax Technologies, Inc.

(collectively known as "Delphax") and Landing Gear Support Services PTE LTD (known as "LGSS"), the estimated benefit for the exclusion of income for the Company's captive insurance company subsidiary ("SAIC") under Section 831(b), and the exclusion from the tax provision of the minority owned portion of the pretax income of Contrail, and the foreign rate differentials for Air T's operations located in the Netherlands, Puerto Rico, and Singapore.

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

The primary factors contributing to the difference between the federal statutory rate of 21.0% and the Company's effective tax rate for the three-month period ended June 30, 2022 were the change in valuation allowance related to the Company's subsidiaries in the corporate and other segment, Delphax, other capital losses, the estimated benefit for the exclusion of income for the SAIC under Section 831(b), and the exclusion from the tax provision of the minority owned portion of the pretax income of Contrail.

(collectively known as “Delphax”) and Landing Gear Support Services PTE LTD (known as “LGSS”), and the foreign rate differentials for Air T’s operations located in the Netherlands and Puerto Rico.

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

The primary factors contributing to the difference between the federal statutory rate of 21.0% and the Company's effective tax rate for the three-month period ended September 30, 2022 were the change in valuation allowance related to the Company's subsidiaries in the corporate and other segment, Delphax, other capital losses, the estimated benefit for the exclusion of income for SAIC under Section 831(b), and the exclusion from the tax provision of the minority owned portion of the pretax income of Contrail.

During the six-month period ended September 30, 2023, the Company recorded $ 0.7 million in income tax expense at an ETR of ( 74.5 )%.

The primary factors contributing to the difference between the federal statutory rate of 21.0% and the Company's effective tax rate for the six-month period ended September 30, 2023, were the valuation allowance related to the Company’s U.S.

consolidated group, Delphax and LGSS, and the foreign rate differentials for Air T’s operations located in the Netherlands and Puerto Rico.

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

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

The primary factors contributing to the difference between the federal statutory rate of 21% and the Company's effective tax rate for the six-month period ended September 30, 2022 were the change in valuation allowance related to Delphax, other capital losses, the estimated benefit for the exclusion of income for SAIC under Section 831(b), and the exclusion from the tax provision of the minority owned portion of the pretax income of Contrail.

Net Earnings (Loss) Per Share

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

During the three months ended September 30, 2023, 3,750 options were exercised under the Air T's 2012 Stock Option Plan at $ 7.04 per share, which was disclosed within our condensed consolidated statement of equity.

Thus, as of September 30, 2023, all stock options under the Air T's 2012 Stock Option Plan have either been exercised or expired.

Further, no options under the Air T's 2020 Omnibus Stock and Incentive Plan were exercisable as of September 30, 2023.

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

Three Months Ended June 30,

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

2023 2022 2023 2022

Net loss $ ( 1,608 ) $ ( 1,336 ) $ ( 1,635 ) $ ( 2,137 )

Net income attributable to non-controlling interests ( 504 ) ( 631 )

Net (income) loss attributable to non-controlling interests ( 1 ) 104 ( 505 ) ( 528 )

Net loss attributable to Air T, Inc.

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Intangible Assets and Goodwill

Intangible assets as of June 30, 2023 and March 31, 2023 consisted of the following (in thousands):

June 30, 2023

Intangible assets as of September 30, 2023 and March 31, 2023 consisted of the following (in thousands):

September 30, 2023

Gross Carrying Amount Accumulated Amortization Net Book Value

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Intangible assets, total $ 16,294 $ ( 4,191 ) $ 12,103

Based on the intangible assets recorded at June 30, 2023 and assuming no subsequent additions to, or impairment of the underlying assets, the remaining estimated annual amortization expense is expected to be as follows:

Based on the intangible assets recorded at September 30, 2023 and assuming no subsequent additions to, or impairment of the underlying assets, the remaining estimated annual amortization expense is expected to be as follows:

(In thousands)

Year ending March 31, Amortization

2024 (excluding the three months ended June 30, 2023) $ 920

2024 (excluding the six months ended September 30, 2023) $ 609

Thereafter 5,504

The carrying amount of goodwill as of June 30, 2023 and March 31, 2023 was $ 10.6 million.

There was no impairment of goodwill during the three months ended June 30, 2023.

The carrying amount of goodwill as of September 30, 2023 and March 31, 2023 was $ 10.5 million and $ 10.6 million, respectively.

There was no impairment on goodwill during the six months ended September 30, 2023.

Investments in Securities and Derivative Instruments

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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 swap related to Air T Term Note D, the effective portion of changes in the fair value on this instrument 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.

During the three months ended June 30, 2023 and 2022, the Company recorded a gain of approximately $ 24.0 thousand and $ 0.5 million, net of tax, respectively, with prior year's gain inclusive of Contrail - Term Note G due to its effective hedge designation at the time.

For the swaps related to Air T Term Note D, the effective portion of changes in the fair value on this instrument 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 transaction affects earnings.

During the three and six months ended September 30, 2023, the Company recorded a gain of approximately $ 16.0 thousand and $ 40.0 thousand, net of tax, respectively.

During the three and six months ended September 30, 2022, the Company recorded a gain of approximately $ 1.0 million and $ 1.4 million, net of tax, respectively, with prior year's gain inclusive of Contrail - Term Note G due to its effective hedge designation at the time.

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

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

As of June 30, 2023 and March 31, 2023, the fair value of these interest-rate swap contracts was an asset of $ 2.8 million and $ 2.4 million, respectively, which is included within other assets in the condensed consolidated balance sheets.

As of September 30, 2023 and March 31, 2023, the fair value of these interest-rate swap contracts was an asset of $ 2.7 million and $ 2.4 million, respectively, which is included within other assets in the condensed consolidated balance sheets.

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

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

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

During the three months ended September 30, 2023, the Company had a gross unrealized gain aggregating to $ 0.4 million and a gross unrealized loss aggregating to $ 1.1 million.

During the six months ended September 30, 2023, the Company had a gross unrealized gain aggregating to $ 0.9 million and a gross unrealized loss aggregating to $ 1.8 million.

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

During the six months ended September 30, 2022, the Company had a gross unrealized gain aggregating to $ 0.1 million and a gross unrealized loss aggregating to $ 0.3 million.

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

Equity Method Investments

The Company’s investment in Insignia Systems, Inc.

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

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

As of June 30, 2023, the Company owned 0.5 million Insignia shares, representing approximately 27.1 % of Insignia's outstanding shares.

During the three months ended June 30, 2023, the Company's share of Insignia's net income for three months ended March 31, 2023 was $ 0.4 million.

As of June 30, 2023, the Company's net investment basis in Insignia is $ 2.1 million.

The Company’s investment in Lendway, Inc.

LDWY ("Lendway"), formerly Insignia Systems, Inc.

("Insignia"), is accounted for under the equity method of accounting.

On August 2, 2023, Insignia reincorporated in the state of Delaware as Lendway, Inc.

Subsequent to reincorporation, Lendway sold its legacy business on August 4, 2023 to pivot the business towards non-bank lending.

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

As of September 30, 2023, the Company owned 0.5 million Lendway shares, representing approximately 27.1 % of Lendway's outstanding shares.

During the three and six months ended September 30, 2023, the Company's share of Lendway's net loss and income for the three and six months ended June 30, 2023 was $ 10.0 thousand and $ 0.4 million, respectively.

The Company's net investment basis in Lendway is $ 2.1 million as of September 30, 2023.

The Company's 20.1 % investment in Cadillac Casting, Inc.

1 unchanged sentence

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

The Company recorded income of $ 0.7 million as its share of CCI's net income for the three months ended June 30, 2023 , along with a basis difference adjustment of $ 12.0 thousand.

The Company's net investment basis in CCI is $ 3.5 million as of June 30, 2023.

Summarized unaudited financial information for the Company's equity method investees for the three months ended March 31, 2023 and 2022 is as follows (in thousands):

Three Months Ended

March 31, 2023 March 31, 2022

The Company recorded income of $ 0.7 million and $ 1.4 million as its share of CCI's net income for the three and six months ended September 30, 2023, along with a basis difference adjustment of $ 12.0 thousand and $ 25.0 thousand, respectively.

The Company's net investment basis in CCI is $ 4.0 million as of September 30, 2023.

Summarized unaudited financial information for the Company's equity method investees for the three and six months ended June 30, 2023 and 2022 is as follows (in thousands):

Three Months Ended Six Months Ended

June 30, 2023 June 30, 2022 June 30, 2023 June 30, 2022

Revenue $ 47,905 $ 38,388 $ 99,062 $ 73,989

5 unchanged sentences

Inventories consisted of the following (in thousands):

September 30,

2023 March 31,

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

The majority of our leases have a term of 2 to 5 years;

The majority of our leases have a lease term of 2 to 5 years;

however, we have certain leases with longer terms of up to 30 years.

6 unchanged sentences

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

The components of lease cost for the three months ended June 30, 2023 and 2022 are as follows (in thousands):

Three Months Ended June 30,

The components of lease cost for the three and six months ended September 30, 2023 and 2022 are as follows (in thousands):

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

2023 2022 2023 2022

Operating lease cost $ 742 $ 498 $ 1,424 $ 989

2 unchanged sentences

Total lease cost $ 1,218 $ 826 $ 2,171 $ 1,638

Amounts reported in the consolidated balance sheets for leases where we are the lessee as of June 30, 2023 and March 31, 2023 were as follows (in thousands):

June 30, 2023 March 31, 2023

Amounts reported in the consolidated balance sheets for leases where we are the lessee as of September 30, 2023 and March 31, 2023 were as follows (in thousands):

September 30, 2023 March 31, 2023

Operating leases

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Operating leases 5.04 % 4.95 %

Maturities of lease liabilities under non-cancellable leases where we are the lessee as of June 30, 2023 are as follows (in thousands):

Maturities of lease liabilities under non-cancellable leases where we are the lessee as of September 30, 2023 are as follows (in thousands):

Operating Leases

2024 (excluding the three months ended June 30, 2023) $ 1,843

2024 (excluding the six months ended September 30, 2023) $ 1,254

Thereafter 8,227

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Financing Arrangements

Borrowings of the Company and its subsidiaries are summarized below at June 30, 2023 and March 31, 2023, respectively.

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 Old National Bank ("ONB").

Borrowings of the Company and its subsidiaries are summarized below at September 30, 2023 and March 31, 2023, respectively.

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.

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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.

The following table provides certain information about the current financing arrangements of the Company and its subsidiaries as of June 30, 2023:

(In Thousands) June 30,

On September 5, 2023, Contrail entered into the Sixth Amendment to Supplement #2 to Master Loan Agreement and the Fifth Amended and Restated Promissory Note with ONB.

The principal purpose of the amended documents was to extend the maturity date of the revolving $ 25.0 million facility to November 24, 2025 or such earlier date on which the revolving note becomes due and payable pursuant to the supplement or the master loan agreement.

The material terms of the revolving facility remain the same, including the payment terms and interest rate except that the change in control event of default provision was revised to provide as follows:

"(h) Change in control of operations.

If the CEO Joe Kuhn, or a CEO acceptable to ONB, in its reasonable discretion, has its employment with Contrail terminated for any reason, or ceases to oversee the day-to-day operations of Contrail."

The following table provides certain information about the current financing arrangements of the Company and its subsidiaries as of September 30, 2023:

(In Thousands) September 30,

2023 March 31,

2023 Maturity Date Interest Rate Unused commitments at June 30, 2023

2023 Maturity Date Interest Rate Unused commitments at September 30, 2023

Revolver - MBT $ 16,395 $ 8,742 8/31/2024 SOFR + range of 2.25 % - 3.25 %

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Total Debt, net $ 108,058 $ 125,085

At June 30, 2023, our contractual financing obligations, including payments due by period, are as follows (in thousands):

At September 30, 2023, our contractual financing obligations, including payments due by period, are as follows (in thousands):

Due by Amount

June 30, 2024 $ 22,721

June 30, 2025 24,499

June 30, 2026 26,160

June 30, 2027 6,476

June 30, 2028 2,877

September 30, 2024 $ 23,904

September 30, 2025 10,902

September 30, 2026 26,038

September 30, 2027 6,292

September 30, 2028 2,825

Thereafter 38,858

Unamortized Debt Issuance Costs ( 761 )

Shares Repurchased

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

During the three months ended June 30, 2023, the Company repurchased 620 shares at an aggregate cost of $ 15.0 thousand.

All of these repurchased shares were recorded as treasury shares as of June 30, 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), a 1% excise tax on share repurchases made after December 31, 2022, and created and extended certain tax-related energy incentives.

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 three months ended June 30, 2023 was not material.

Geographical Information

Total tangible long-lived assets, net of accumulated depreciation, located in the United States, the Company's country of domicile, and held outside the United States are summarized in the following table as of June 30, 2023 and March 31, 2023 (in thousands):

June 30, 2023 March 31, 2023

Total tangible long-lived assets, which include property and equipment as well as assets on lease, net of accumulated depreciation, located in the United States, the Company's country of domicile, and held outside the United States, are summarized in the following table as of September 30, 2023 and March 31, 2023 (in thousands):

September 30, 2023 March 31, 2023

United States $ 21,114 $ 21,433

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Total tangible long-lived assets, net $ 21,165 $ 21,522

The net book value located within each individual country at June 30, 2023 and March 31, 2023 is listed below (in thousands):

June 30, 2023 March 31, 2023

The net book value of tangible long-lived assets located within each individual foreign country at September 30, 2023 and March 31, 2023 is listed below (in thousands):

September 30, 2023 March 31, 2023

The Netherlands $ 43 $ 42

Total tangible long-lived assets, net $ 51 $ 89

Total revenue, in and outside the United States, is summarized in the following table for the three months ended June 30, 2023 and June 30, 2022 (in thousands):

June 30, 2023 June 30, 2022

Total revenue, in and outside the United States, is summarized in the following table for the six months ended September 30, 2023 and September 30, 2022 (in thousands):

September 30, 2023 September 30, 2022

United States $ 128,435 $ 91,323

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(In Thousands) Three Months Ended

September 30, Six Months Ended

September 30,

2023 2022 2023 2022

Operating Revenues by Segment:

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Total $ 700 $ 1,026 $ 1,389 $ 1,888

The table below provides a reconciliation of operating income (loss) to Adjusted EBITDA by reportable segment for the three months ended June 30, 2023 and 2022 (in thousands):

Three Months Ended June 30, 2023

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

Operating income (loss) $ 1,935 $ ( 85 ) $ 1,478 $ ( 2,670 ) $ 658

The table below provides a reconciliation of operating income (loss) to Adjusted EBITDA for the six months ended September 30, 2023 and 2022 (in thousands):

Six Months Ended September 30, 2023

Operating income $ 1,422

Depreciation and amortization (excluding leased engines depreciation) 1,389

Asset impairment, restructuring or impairment charges 5

Gain on sale of property and equipment

Securities expenses — — — 45 45

TruPs issuance expenses 93

Adjusted EBITDA $ 2,901

Three Months Ended June 30, 2022

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

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

Six Months Ended September 30, 2022

Operating income $ 1,012

Depreciation and amortization (excluding leased engines depreciation) 1,252

Asset impairment, restructuring or impairment charges 1,536

Gain on sale of property and equipment ( 2 )

Securities expenses — — — 15 15

TruPs issuance expenses 34

Adjusted EBITDA $ 3,832

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

The Contrail RNCI is a Level 3 fair value measurement that is valued at $ 8.0 million as of June 30, 2023.

The change in the redemption value compared to March 31, 2023 is an increase of $ 7.0 thousand, which was driven by the decrease in fair value of $ 0.1 million and net income attributable to non-controlling interest of $ 0.2 million, partially offset by distributions to non-controlling interest of $ 0.1 million.

The Contrail RNCI is a Level 3 fair value measurement that is valued at $ 7.7 million as of September 30, 2023.

The change in the redemption value compared to March 31, 2023 is a decrease of $ 0.3 million, which was driven by the decrease in fair value of $ 0.6 million and distributions to non-controlling interest of $ 0.2 million, partially offset by net income attributable to non-controlling interest of $ 0.5 million.

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

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

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

The new venture 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").

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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 June 30, 2023, for its Investment Function, the Company has contributed $ 1.0 million to CAM’s Offshore Series and $ 6.9 million to CAM’s Onshore Series.

As of September 30, 2023, for its Investment Function, the Company has contributed $ 1.0 million to CAM’s Onshore Series and $ 6.9 million to CAM’s Offshore Series.

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

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

As of June 30, 2023, the Company's net investment basis in CAM is $ 5.3 million.

As of September 30, 2023, the Company's net investment basis in CAM is $ 4.5 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 the Company at each of the first three ( 3 ) anniversary dates.

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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 $ 4.9 million as of June 30, 2023, which was comprised of the following (in thousands):

The Shanwick RNCI's estimated redemption value is $ 4.6 million as of September 30, 2023, which was comprised of the following (in thousands):

Shanwick RNCI

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Redemption value adjustments ( 116 )

Ending Balance as of June 30, 2023 $ 4,857

Ending Balance as of September 30, 2023 $ 4,638

2020 Omnibus Stock and Incentive Plan

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

As of June 30, 2023, options to purchase up to 260,670 shares are outstanding under the Plan.

As of September 30, 2023, options to purchase up to 260,670 shares are outstanding under the Plan.

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

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

For the three months ended June 30, 2023, total compensation cost recognized under the Plan was $ 79.0 thousand.

For the three and six months ended September 30, 2023, total compensation cost recognized under the Plan was $ 0.1 million and $ 0.2 million, respectively.

Financial Guarantees

Our financial guarantees consist of debt obligations of certain CJVII Series.

Expiration dates vary through 2028, and guarantees will terminate on payment and/or cancellation of the underlying obligation.

A payment by us would be triggered by failure of the series to fulfill its obligation covered by the guarantee.

We are entitled to recover from amounts paid by us under the guarantee by other unrelated institutional investment partners ("CJVII Series investors"), up to their pro rata ownership of the CJVII Series.

The maximum potential payments for financial guarantees were $ 12.8 million and $ 13.6 million as of September 30, 2023 and March 31, 2023, respectively.

Financial guarantees and indemnifications are recorded at fair value at their inception.

Subsequent to initial recognition, the guarantee liability is adjusted at each reporting period to reflect the current estimate of expected payments resulting from possible default events over the remaining life of the guarantee.

The financial guarantees were made only for the convenience of other CJVII Series investors in the process of obtaining third-party debt to fund acquisitions of aircraft assets.

The guarantees did not provide any value to the debt and, as such, the Company did not record a liability related to these financial guarantees.

Nonfinancial Guarantees

From time to time, we may issue guarantees or indemnifications to third parties assuring performance of lease agreements pertaining to aircraft assets owned by certain CJVII Series ("nonfinancial guarantees").

Air T's performance under these guarantees would be triggered by failure of the series to perform in accordance with the terms stated in the lease agreements.

Nonfinancial guarantees and indemnifications are recorded at fair value at their inception.

We regularly review our performance risk under these arrangements, and in the event it becomes probable that we will be required to perform under a guarantee or indemnity, the amount of probable payment will be recorded.

The maximum potential payments for nonfinancial guarantees were $ 4.0 million at both September 30, 2023 and March 31, 2023.

The carrying value of recorded liabilities related to nonfinancial guarantees was $ 0 at both September 30, 2023 and March 31, 2023.

Subsequent Events

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

What changed 10-Q

Item 1. Financial Statements