What changed in this filing

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Item 1. Financial Statements

2024-02-12 compared with 2023-11-14 · 151 added, 120 removed, 628 unchanged (30% of the section changed)

3 unchanged sentences

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

September 30, Six Months Ended

September 30,

December 31, Nine Months Ended

2023 2022 2023 2022

14 unchanged sentences

65,364 61,261 214,343 171,799

Operating Income 761 179 1,422 1,012

Operating (Loss) Income ( 1,608 ) 135 ( 189 ) 1,147

Non-operating (Expense) Income:

5 unchanged sentences

Income Taxes Expense (Benefit) 153 ( 156 ) 851 ( 536 )

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

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

Net (Loss) Income ( 2,109 ) 108 ( 3,744 ) ( 2,029 )

Net Income Attributable to Non-controlling Interests ( 870 ) ( 698 ) ( 1,375 ) ( 1,226 )

Net Loss Attributable to Air T, Inc.

10 unchanged sentences

Three Months Ended

September 30, Six Months Ended

September 30,

December 31, Nine Months Ended

(In Thousands) 2023 2022 2023 2022

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

Foreign currency translation loss ( 170 ) ( 606 ) ( 235 ) ( 1,135 )

Unrealized gain on interest rate swaps 16 957 40 1,432

Net (Loss) Income $ ( 2,109 ) $ 108 $ ( 3,744 ) $ ( 2,029 )

Foreign currency translation gain (loss) 216 775 ( 19 ) ( 360 )

Unrealized (loss) gain on interest rate swaps ( 38 ) ( 61 ) 2 1,371

Reclassification of interest rate swaps into earnings ( 188 ) 18 ( 568 ) 52

Total Other Comprehensive (Loss) Income ( 10 ) 732 ( 585 ) 1,063

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

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

Comprehensive Loss Attributable to Air T, Inc.

Total Comprehensive (Loss) Income ( 2,119 ) 840 ( 4,329 ) ( 966 )

Comprehensive Income Attributable to Non-controlling Interests ( 870 ) ( 698 ) ( 1,375 ) ( 1,226 )

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

Stockholders $ ( 2,989 ) $ 142 $ ( 5,704 ) $ ( 2,192 )

2 unchanged sentences

CONDENSED CONSOLIDATED BALANCE SHEETS

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

(In thousands, except share amounts) December 31, 2023 March 31, 2023

Current Assets:

Cash and cash equivalents $ 4,480 $ 5,806

Marketable securities 326 —

Restricted cash 707 1,284

29 unchanged sentences

Total Liabilities 141,742 163,870

Redeemable non-controlling interest 12,303 12,710

Redeemable non-controlling interests 13,086 12,710

Commitments and contingencies (Note 15)

16 unchanged sentences

CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS

(In Thousands) Six Months Ended

September 30,

(In Thousands) Nine Months Ended

CASH FLOWS FROM OPERATING ACTIVITIES:

25 unchanged sentences

Payments on term loan ( 17,116 ) ( 12,300 )

Proceeds from issuance of Trust Preferred Securities ("TruPs") 7,285 —

Other ( 629 ) ( 1,161 )

1 unchanged sentence

Effect of foreign currency exchange rates on cash and cash equivalents ( 116 ) 181

NET (DECREASE) INCREASE IN CASH AND CASH EQUIVALENTS AND RESTRICTED CASH ( 1,167 ) 1,097

NET DECREASE IN CASH AND CASH EQUIVALENTS AND RESTRICTED CASH ( 1,903 ) ( 1,858 )

CASH AND CASH EQUIVALENTS AND RESTRICTED CASH AT BEGINNING OF PERIOD 7,090 8,368

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

Net loss* — — — — — ( 590 ) — ( 7 ) ( 597 )

Repurchase of common stock — — 29 ( 642 ) — — — — ( 642 )

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

Foreign currency translation gain — — — — — — 775 — 775

Adjustment to fair value of redeemable non-controlling interest — — — — — ( 1,059 ) — — ( 1,059 )

Unrealized loss on interest rate swaps, net of tax — — — — — — ( 61 ) — ( 61 )

Reclassification of interest rate swaps into earnings — — — — — — 18 — 18

Balance, December 31, 2022 3,026 $ 757 204 $ ( 3,995 ) $ 650 $ 23,153 $ 800 $ 1,087 $ 22,452

(In Thousands) Common Stock Treasury Stock Additional

13 unchanged sentences

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

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

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

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

Net (loss) income* — — — — — ( 2,979 ) — 9 ( 2,970 )

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

Foreign currency translation gain — — — — — — 216 — 216

Adjustment to fair value of redeemable non-controlling interest — — — — — ( 99 ) — — ( 99 )

Unrealized loss on interest rate swaps, net of tax — — — — — — ( 38 ) — ( 38 )

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

Balance, December 31, 2023 3,030 $ 758 209 $ ( 4,098 ) $ 990 $ 9,014 $ 231 $ 1,059 $ 7,954

* 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 September 30, 2023 are not necessarily indicative of the operating results for the full year.

The results of operations for the period ended December 31, 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.

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.

As previously reported in the Company's September 30, 2023 Form 10-Q, a condition existed that raised substantial doubt about its ability to continue as a going concern, for which management's plans alleviated such condition.

As of the issuance of this report, management has executed their plans and such condition no longer exists.

As described in Note 12 , the Company successfully raised $ 7.3 million of additional funds via sales of our trust preferred securities through the Company's at-the-market offering that commenced on October 18, 2023 and through various private placements.

In addition, the Company also implemented cost reduction measures and liquidated select investments as well as reduced capital expenditures.

The Company believes they have sufficient cash on hand and available liquidity, to meet its obligations as they become due in the ordinary course of business for at least 12 months following the date these financial statements are issued.

Recently Adopted Accounting Pronouncements

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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 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.

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

Recently Issued Accounting Pronouncements

In November 2023, the FASB issued ASU 2023-07- Segment Reporting (Topic 848):

Improvements to Reportable Segment Disclosures.

The amendments in this Update improve reportable segment disclosure requirements, primarily through enhanced disclosures about significant segment expenses utilized by the chief operating decision maker for a company along with details about who the chief operating decision maker is and their title.

The Update additionally requires that all annual disclosures under Topic 280 be included in interim periods financial statements, clarifies when an entity can disclose multiple segment measures of profit or loss, and provides new segment disclosure requirements for entities with a single reportable segment.

For public business entities, the amendments in this Update are effective for fiscal years beginning after December 31, 2023 and interim periods within fiscal years beginning after December 15, 2024.

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

In December 2023, the FASB issued ASU 2023-09- Income Taxes (Topic 740):

Improvements to Income Tax Disclosures.

The amendments in this Update require the addition of specific categories to be disclosed in the rate reconciliation if they meet a quantitative threshold, disclosure of disaggregated income taxes paid to federal, state, and foreign jurisdictions, and disclosure of income or loss from continuing operations disaggregated by federal, state, and foreign jurisdictions.

For public business entities, the amendments in this Update are effective for fiscal years beginning after December 15, 2024.

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

Worldwide Aviation Services, Inc.

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

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

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

2023 2022 2023 2022

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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 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):

The following table presents outstanding contract liabilities as of April 1, 2023 and December 31, 2023 and the amount of contract liabilities as of April 1, 2023 that were recognized as revenue during the nine-month period ended December 31, 2023 (in thousands):

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

Recognized as Revenue

As of September 30, 2023 $ 3,629

As of December 31, 2023 $ 3,389

As of April 1, 2023 $ 5,000

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

For the nine months ended December 31, 2023 $ 4,433

Accrued Expenses and Other

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

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

Salaries, wages and related items $ 5,707 $ 4,748

3 unchanged sentences

Total $ 12,029 $ 13,133

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 )%.

During the three-month period ended December 31, 2023, the Company recorded $ 0.2 million in income tax expense at an effective rate ("ETR") of ( 7.8 )%.

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”), 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 )%.

consolidated group, Delphax Technologies, Inc.

(“DTI”) and Landing Gear Support Services PTE LTD (“LGSS”), Delphax Solutions, Inc.

("DSI") and BCCM Advisors (Kenya) Limited ("BCCM Kenya"), and the foreign rate differentials for Air T’s operations located in the Netherlands and Puerto Rico.

During the three-month period ended December 31, 2022, the Company recorded income tax benefit of $ 0.2 million at an ETR of 325.0 %.

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

The primary factors contributing to the difference between the federal statutory rate of 21.0% and the Company's effective tax rate for the three-month period ended December 31, 2022 were the change in valuation allowance related to the Company's subsidiaries in the corporate and other segment, DSI and DTI, and other capital losses, the estimated benefit for the exclusion of income for the Company's captive insurance company subsidiary ("SAIC") under Section 831(b), the foreign rate differentials between the federal and foreign tax rates for Air T's ownership of foreign operations in Puerto Rico, the Netherlands, and Singapore, and the exclusion from the tax provision of the minority owned portion of the pretax income of Contrail.

During the nine-month period ended December 31, 2023, the Company recorded $ 0.9 million in income tax expense at an ETR of ( 29.4 )%.

The primary factors contributing to the difference between the federal statutory rate of 21.0% and the Company's effective tax rate for the six-month period ended September 30, 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 primary factors contributing to the difference between the federal statutory rate of 21.0% and the Company's effective tax rate for the nine-month period ended December 31, 2023, were the valuation allowance related to the Company’s U.S.

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

During the nine-month period ended December 31, 2022, the Company recorded income tax benefit of $ 0.5 million at an ETR of 20.9 %.

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.

The primary factors contributing to the difference between the federal statutory rate of 21% and the Company's effective tax rate for the nine-month period ended December 31, 2022 were the change in valuation allowance related to DSI and DTI and other capital losses, the estimated benefit for the exclusion of income for SAIC under Section 831(b), the foreign rate differentials between the federal and foreign tax rates for Air T's ownership of foreign operations in Puerto Rico, the Netherlands, and Singapore, and the exclusion from the tax provision of the minority owned portion of the pretax income of Contrail.

Net Earnings (Loss) Per Share

3 unchanged sentences

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.

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 December 31, 2023.

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

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

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

2023 2022 2023 2022

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

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

Net (loss) income $ ( 2,109 ) $ 108 $ ( 3,744 ) $ ( 2,029 )

Net income attributable to non-controlling interests ( 870 ) ( 698 ) ( 1375 ) ( 1,226 )

Net loss attributable to Air T, Inc.

8 unchanged sentences

Intangible Assets and Goodwill

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

September 30, 2023

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

December 31, 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 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:

Based on the intangible assets recorded at December 31, 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 six months ended September 30, 2023) $ 609

2024 (excluding the nine months ended December 31, 2023) $ 310

Thereafter 5,683

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.

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

There was no impairment on goodwill during the nine months ended December 31, 2023.

Investments in Securities and Derivative Instruments

18 unchanged sentences

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.

During the three and nine months ended December 31, 2023, the Company recorded a loss of approximately $ 38.0 thousand and a gain of $ 2.0 thousand, net of tax, respectively.

During the three and nine months ended December 31, 2022, the Company recorded a loss of approximately $ 0.1 million and a gain of $ 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 and losses 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 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.

As of December 31, 2023 and March 31, 2023, the fair value of these interest-rate swap contracts was an asset of $ 1.8 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.

1 unchanged sentence

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

During the three months ended 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.

During the three months ended December 31, 2023, the Company had a gross unrealized gain aggregating to $ 0.5 million and no gross unrealized loss.

During the nine months ended December 31, 2023, the Company had a gross unrealized gain aggregating to $ 1.4 million and a gross unrealized loss aggregating to $ 1.8 million.

During the three months ended December 31, 2022, the Company had a gross unrealized gain aggregating to $ 0.3 million and a gross unrealized loss aggregating to $ 0.5 million.

During the nine months ended December 31, 2022, the Company had a gross unrealized gain aggregating to $ 0.3 million and a gross unrealized loss aggregating to $ 0.8 million.

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

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

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

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.

As of December 31, 2023, the Company owned 0.5 million Lendway shares, representing approximately 27.8 % of Lendway's outstanding shares.

During the three and nine months ended December 31, 2023, the Company's share of Lendway's net income for the three and nine months ended September 30, 2023 was $ 0.3 million and $ 0.8 million, respectively, principally driven by the gain recognized on the aforementioned sale of Lendway's legacy business on August 4, 2023.

The Company's net investment basis in Lendway is $ 2.4 million as of December 31, 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 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

The Company recorded income of $ 0.2 million and $ 1.5 million as its share of CCI's net income for the three and nine months ended December 31, 2023, along with a basis difference adjustment of $ 12.0 thousand and $ 37.0 thousand, respectively.

The Company's net investment basis in CCI is $ 4.2 million as of December 31, 2023.

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

Three Months Ended Nine Months Ended

September 30, 2023 September 30, 2022 September 30, 2023 September 30, 2022

Revenue $ 34,365 $ 37,532 $ 133,427 $ 111,522

Gross Profit 2,746 4,045 18,076 13,210

Operating income 3,984 1,809 9,245 3,790

Operating (loss) income ( 124 ) 13,382 9,100 17,172

Net income 2,050 13,375 10,439 16,180

2 unchanged sentences

Inventories consisted of the following (in thousands):

September 30,

2023 March 31,

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

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

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

The components of lease cost for the three and nine months ended December 31, 2023 and 2022 are as follows (in thousands):

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

2023 2022 2023 2022

3 unchanged sentences

Total lease cost $ 965 $ 870 $ 3,135 $ 2,508

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

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

December 31, 2023 March 31, 2023

Operating leases

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Weighted-average remaining lease term

Operating leases 12 years, 2 months 12 years, 10 months

Operating leases 12 years 12 years, 10 months

Weighted-average discount rate

Operating leases 5.08 % 4.95 %

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

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

Operating Leases

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

2024 (excluding the nine months ended December 31, 2023) $ 640

Thereafter 8,225

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Financing Arrangements

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

Borrowings of the Company and its subsidiaries are summarized below at December 31, 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.

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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,

The revolving line of credit at Air T with MBT ("Revolver - MBT") has $ 6.5 million outstanding as of December 31, 2023 and matures on August 31, 2024.

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

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

(In Thousands) December 31,

2023 March 31,

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

2023 Maturity Date Interest Rate Unused commitments at December 31, 2023

Revolver - MBT $ 6,492 $ 8,742 8/31/2024 SOFR + range of 2.25 % - 3.25 %

28 unchanged sentences

Total Debt 101,231 125,914

Unamortized Debt Issuance Costs ( 761 ) ( 829 )

Unamortized Premiums and Debt Issuance Costs ( 445 ) ( 829 )

Total Debt, net $ 100,786 $ 125,085

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

At December 31, 2023, our contractual financing obligations, including payments due by period, are as follows (in thousands):

Due by Amount

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

December 31, 2024 $ 17,367

December 31, 2025 26,335

December 31, 2026 3,075

December 31, 2027 7,219

December 31, 2028 1,755

Thereafter 45,480

Unamortized Debt Issuance Costs ( 761 )

Unamortized Premiums and Debt Issuance Costs ( 445 )

On October 17, 2023, the Company and Air T Funding (the “Trust”) entered into an At-the-Market Offering Agreement (the “ATM Agreement”) with Ascendiant Capital Markets, LLC (the “sales agent” or “Ascendiant”), pursuant to which the Trust may sell and issue its TruPs having an aggregate offering price of up to $ 6.5 million from time to time through Ascendiant, as the Trust’s sales agent (the “ATM Offering”).

During the three months ended December 31, 2023, the Trust issued 15,000 TruPs and received $ 0.3 million in gross proceeds from the sale of TruPs through a S-3 Registration Statement filed by the Company.

The TruPs shares were offered and sold pursuant to the Company’s and the Trust’s shelf registration statement on Form S-3 (File Nos.

333-254110-01 and 333-254110) and a prospectus supplement relating to the ATM Offering filed with the Securities and Exchange Commission on October 18, 2023.

During the three months ended December 31, 2023, the Trust also issued 413,000 TruPs and received $ 7.0 million in gross proceeds from the sale of TruPs under various private placement offerings in reliance upon an exemption from registration provided by Section 4(a)(2) of the Securities Act of 1933, as amended (the “Securities Act”), and Regulation D promulgated under the Securities Act.

The TruPs were issued solely to “accredited investors” as defined in Rule 501(a) of Regulation D.

The proceeds from the sale of the TruPs were used to purchase junior subordinated debentures which funds are available to the Company for general corporate purposes.

The amount outstanding on the Company's Debt - Trust Preferred Securities was $ 32.7 million as of December 31, 2023.

Geographical Information

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

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 December 31, 2023 and March 31, 2023 (in thousands):

December 31, 2023 March 31, 2023

United States $ 20,845 $ 21,433

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Total tangible long-lived assets, net $ 20,896 $ 21,522

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

December 31, 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 six months ended September 30, 2023 and September 30, 2022 (in thousands):

September 30, 2023 September 30, 2022

Total revenue, in and outside the United States, is summarized in the following table for the nine months ended December 31, 2023 and December 31, 2022 (in thousands):

December 31, 2023 December 31, 2022

United States $ 182,334 $ 143,433

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(In Thousands) Three Months Ended

September 30, Six Months Ended

September 30,

December 31, Nine Months Ended

2023 2022 2023 2022

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Total $ 699 $ 1,097 $ 2,088 $ 2,984

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

The table below provides a reconciliation of operating income (loss) to Adjusted EBITDA for the nine months ended December 31, 2023 and 2022 (in thousands):

Nine Months Ended December 31, 2023

Operating loss $ ( 189 )

Depreciation and amortization (excluding leased engines depreciation) 2,088

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Adjusted EBITDA $ 2,495

Six Months Ended September 30, 2022

Nine Months Ended December 31, 2022

Operating income $ 1,147

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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 $ 7.7 million as of September 30, 2023.

The Contrail RNCI is a Level 3 fair value measurement that is valued at $ 7.6 million as of December 31, 2023.

The change in the redemption value compared to March 31, 2023 is a decrease of $ 0.4 million, which was driven by the decrease in fair value of $ 0.5 million and distributions to non-controlling interest of $ 0.2 million, partially offset by net income attributable to non-controlling interest of $ 0.3 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.

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

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

The new venture focuses 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 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.

As of December 31, 2023, for its Investment Function, the Company has contributed $ 1.0 million to CAM’s Onshore Series and $ 7.0 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 September 30, 2023, the Company's net investment basis in CAM is $ 4.5 million.

As of December 31, 2023, the Company's net investment basis in CAM is $ 4.9 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 $ 4.6 million as of September 30, 2023, which was comprised of the following (in thousands):

The Shanwick RNCI's estimated redemption value is $ 5.5 million as of December 31, 2023, which was comprised of the following (in thousands):

Shanwick RNCI

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Redemption value adjustments 782

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

Ending Balance as of December 31, 2023 $ 5,520

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

As of December 31, 2023, options to purchase up to 261,000 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 and six months ended September 30, 2023, total compensation cost recognized under the Plan was $ 0.1 million and $ 0.2 million, respectively.

For the three and nine months ended December 31, 2023, total compensation cost recognized under the Plan was $ 79.0 thousand and $ 0.2 million, respectively.

No options were exercisable as of December 31, 2023

Financial Guarantees

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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.

The maximum potential payments for financial guarantees were $ 12.4 million and $ 13.6 million as of December 31, 2023 and March 31, 2023, respectively.

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

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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.

The maximum potential payments for nonfinancial guarantees were $ 4.5 million and $ 4.0 million at December 31, 2023 and March 31, 2023, respectively.

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

Subsequent Events

1 unchanged sentence

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