PART I - FINANCIAL INFORMATION [Item 1. Financial Statements](index=4&type=section&id=Item%201.%20Financial%20Statements) This section presents unaudited condensed consolidated financial statements, showing a net income turnaround to **$0.3 million**, asset growth to **$145.1 million**, and detailed notes on accounting policies and new business formations [Condensed Consolidated Statements of Income (Loss)](index=4&type=section&id=Condensed%20Consolidated%20Statements%20of%20Income%20(Loss)) The company reported a net income of **$327 thousand** for Q1 2022, a significant turnaround from a **$956 thousand** net loss in Q1 2021, with diluted EPS of **$0.10** Consolidated Income Statement Highlights (in thousands, except per share data) | Metric | Three Months Ended June 30, 2021 | Three Months Ended June 30, 2020 | | :--- | :--- | :--- | | **Operating Revenues** | **$36,968** | **$36,970** | | Overnight air cargo | $18,851 | $16,171 | | Ground equipment sales | $8,182 | $15,828 | | Commercial jet engines and parts | $9,594 | $4,693 | | **Operating Loss** | **($4)** | **($266)** | | **Net Income (Loss)** | **$327** | **($956)** | | Net Income (Loss) Attributable to Air T, Inc. Stockholders | $289 | ($841) | | **Diluted Income (Loss) per share** | **$0.10** | **($0.29)** | [Condensed Consolidated Balance Sheets](index=6&type=section&id=Condensed%20Consolidated%20Balance%20Sheets) Total assets increased to **$145.1 million** as of June 30, 2021, driven by inventories and receivables, with total liabilities rising to **$123.2 million** Consolidated Balance Sheet Highlights (in thousands) | Metric | June 30, 2021 | March 31, 2021 | | :--- | :--- | :--- | | Cash and cash equivalents | $7,085 | $10,996 | | Inventories, net | $75,770 | $71,971 | | **Total Current Assets** | **$109,430** | **$105,774** | | **Total Assets** | **$145,120** | **$140,750** | | Total Current Liabilities | $30,253 | $28,179 | | Long-term debt | $83,804 | $81,857 | | **Total Liabilities** | **$123,237** | **$119,438** | | **Total Equity** | **$14,879** | **$14,714** | [Condensed Consolidated Statements of Cash Flows](index=8&type=section&id=Condensed%20Consolidated%20Statements%20of%20Cash%20Flows) Net cash used in operating activities significantly increased to **$8.8 million**, while financing activities provided **$5.8 million**, ending the period with **$11.4 million** in cash Consolidated Cash Flow Summary (in thousands) | Cash Flow Activity | Three Months Ended June 30, 2021 | Three Months Ended June 30, 2020 | | :--- | :--- | :--- | | Net cash used in operating activities | ($8,821) | ($3,335) | | Net cash used in investing activities | ($1,449) | ($548) | | Net cash provided by financing activities | $5,819 | $5,040 | | **Net (Decrease) Increase in Cash** | **($4,500)** | **$1,085** | | Cash and Restricted Cash at End of Period | $11,427 | $16,656 | [Notes to Condensed Consolidated Financial Statements](index=11&type=section&id=Notes%20to%20Condensed%20Consolidated%20Financial%20Statements) Detailed notes disclose accounting policies, the formation of a new aircraft asset management business with a **$53 million** commitment, COVID-19 impacts, and total debt of **$94.4 million** - On May 5, 2021, the Company formed a new aircraft asset management business, Contrail Asset Management, LLC ("CAM"), and a new aircraft capital joint venture, Contrail JV II LLC ("CJVII"). CAM has an initial commitment to CJVII of approximately **$53 million**, comprised of **$8 million** from the Company and **$45 million** from Mill Road Capital ("MRC")[32](index=32&type=chunk)[94](index=94&type=chunk) - The COVID-19 pandemic continues to present uncertainty, with the company experiencing a reduction in demand for commercial aircraft, jet engines, and parts compared to historical periods. Management expects the impact to continue to some extent[33](index=33&type=chunk) Disaggregated Revenues by Type (in thousands) | Revenue Type | Three Months Ended June 30, 2021 | Three Months Ended June 30, 2020 | | :--- | :--- | :--- | | Product Sales | $21,941 | $22,781 | | Support Services | $14,504 | $13,511 | | Leasing Revenue | $243 | $455 | | Other | $282 | $223 | | **Total** | **$36,968** | **$36,970** | Total Debt Summary (in thousands) | Debt Category | June 30, 2021 | March 31, 2021 | | :--- | :--- | :--- | | Air T Debt | $44,577 | $38,807 | | AirCo 1 Debt | $6,200 | $6,200 | | Contrail Debt | $43,598 | $43,598 | | Delphax Solutions Debt | $33 | $32 | | **Total Debt** | **$94,408** | **$88,637** | | Total Debt, net | $93,341 | $87,496 | [Item 2. Management's Discussion and Analysis of Financial Condition and Results of Operations (MD&A)](index=28&type=section&id=Item%202.%20Management's%20Discussion%20and%20Analysis%20of%20Financial%20Condition%20and%20Results%20of%20Operations) MD&A covers Q1 FY2022 financial performance, noting flat revenue at **$37.0 million**, significant segment shifts, improved operating loss, and increased Adjusted EBITDA to **$0.3 million** [Results of Operations](index=28&type=section&id=Results%20of%20Operations) Q1 FY2022 consolidated revenue remained flat at **$37.0 million**, with Commercial Jet Engines and Parts revenue surging **104%** while Ground Equipment Sales declined **48%**, narrowing the operating loss to **$4 thousand** Revenue by Segment (in thousands) | Segment | Q1 FY2022 | Q1 FY2021 | Change ($) | Change (%) | | :--- | :--- | :--- | :--- | :--- | | Overnight Air Cargo | $18,851 | $16,171 | $2,680 | 17% | | Ground Equipment Sales | $8,182 | $15,828 | ($7,646) | (48)% | | Commercial Jet Engines and Parts | $9,594 | $4,693 | $4,901 | 104% | | Corporate and Other | $341 | $278 | $63 | 23% | | **Total** | **$36,968** | **$36,970** | **($2)** | **—%** | - The Ground Equipment Sales segment's order backlog was **$7.1 million** at June 30, 2021, a sharp decrease from **$48.7 million** at June 30, 2020, primarily due to the expiration of a USAF contract[103](index=103&type=chunk) Operating Income (Loss) by Segment (in thousands) | Segment | Q1 FY2022 | Q1 FY2021 | Change ($) | | :--- | :--- | :--- | | Overnight Air Cargo | $732 | $555 | $177 | | Ground Equipment Sales | $1,423 | $2,216 | ($793) | | Commercial Jet Engines and Parts | ($238) | ($902) | $664 | | Corporate and Other | ($1,921) | ($2,135) | $214 | | **Total** | **($4)** | **($266)** | **$262** | [Liquidity and Capital Resources](index=32&type=section&id=Liquidity%20and%20Capital%20Resources) The company maintains strong liquidity with **$11.4 million** cash and **$54.5 million** available credit, actively managing debt including an **$8.2 million** PPP loan forgiveness application and a **$6.9 million** unfunded joint venture commitment - As of June 30, 2021, the Company had approximately **$11.4 million** in cash and restricted cash, **$2.4 million** in marketable securities, and an aggregate of **$54.5 million** in available funds under its lines of credit[112](index=112&type=chunk) - The company has applied for forgiveness of its **$8.2 million** Paycheck Protection Program (PPP) loan obtained in April 2020[117](index=117&type=chunk) - The company has an unfunded capital commitment of approximately **$6.9 million** to its new aircraft capital joint venture, CJVII, as of June 30, 2021[119](index=119&type=chunk) [Non-GAAP Financial Measures](index=35&type=section&id=Non-GAAP%20Financial%20Measures) Adjusted EBITDA, a non-GAAP measure, significantly improved to **$283 thousand** for Q1 2022 from **$87 thousand** in the prior year, driven by strong segment performance Reconciliation of Operating Loss to Adjusted EBITDA (in thousands) | Line Item | Three months ended 6/30/2021 | Three months ended 6/30/2020 | | :--- | :--- | :--- | | Operating loss | ($4) | ($266) | | Depreciation and amortization (excluding leased engines) | $279 | $353 | | Loss on disposition of assets | $3 | — | | Amortization of security issuance expenses | $5 | — | | **Adjusted EBITDA** | **$283** | **$87** | [Item 3. Quantitative and Qualitative Disclosures About Market Risk](index=35&type=section&id=Item%203.%20Quantitative%20and%20Qualitative%20Disclosures%20About%20Market%20Risk) The company is exposed to interest rate risk on variable-rate debt and uses derivative instruments like interest rate swaps for protection - The Company is exposed to interest rate risk and utilizes derivative instruments as part of its risk management policy to provide protection against rising interest rates on its variable rate debt[129](index=129&type=chunk) [Item 4. Controls and Procedures](index=37&type=section&id=Item%204.%20Controls%20and%20Procedures) Disclosure controls and procedures were deemed effective as of June 30, 2021, with no material changes to internal control over financial reporting during the quarter - The Certifying Officers concluded that the Company's disclosure controls and procedures were effective as of June 30, 2021[131](index=131&type=chunk) - No material changes were made to the Company's internal control over financial reporting during the quarter ended June 30, 2021[132](index=132&type=chunk) PART II - OTHER INFORMATION [Item 2. Unregistered Sales of Equity Securities and Use of Proceeds](index=37&type=section&id=Item%202.%20Unregistered%20Sales%20of%20Equity%20Securities%20and%20Use%20of%20Proceeds) No unregistered sales of equity securities or share repurchases occurred during the quarter ended June 30, 2021 - No shares were repurchased under the company's stock repurchase program during the quarter ended June 30, 2021[133](index=133&type=chunk) [Item 5. Other Information](index=37&type=section&id=Item%205.%20Other%20Information) No other information required disclosure under this item for the reporting period [Item 6. Exhibits](index=38&type=section&id=Item%206.%20Exhibits) This section lists exhibits filed with the Form 10-Q, including agreements for Contrail Asset Management, an At the Market Offering, and required officer certifications - Exhibits filed with this report include agreements related to the new Contrail Asset Management venture, an At the Market Offering Agreement, and officer certifications[135](index=135&type=chunk)

PART I [Business](index=4&type=section&id=Item%201.%20Business) Air T, Inc. operates as a holding company with key segments in air cargo, ground equipment sales, and commercial aviation assets - The company operates through **four main business segments**: Overnight air cargo, Ground equipment sales, Commercial aircraft, engines and parts, and a Corporate segment for capital allocation[15](index=15&type=chunk) - The Overnight Air Cargo segment's revenue from FedEx contracts represented approximately **37% of the company's consolidated revenue** for the fiscal year ended March 31, 2021[23](index=23&type=chunk) - The Ground Equipment Sales segment (GGS) manufactures aircraft deicers and other specialized equipment, with deicing equipment sales accounting for about **94% of GGS's revenues in fiscal 2021**[29](index=29&type=chunk) - The Commercial Jet Engines and Parts segment focuses on trading, leasing, and servicing commercial aircraft assets, contributing **18% of total consolidated revenue in fiscal 2021**[34](index=34&type=chunk) - The company's operations are heavily regulated by governmental agencies including the Department of Transportation (DOT), the Transportation Security Administration (TSA), and the Federal Aviation Administration (FAA)[39](index=39&type=chunk)[40](index=40&type=chunk)[41](index=41&type=chunk) [Risk Factors](index=9&type=section&id=Item%201A.%20Risk%20Factors) The company faces diverse risks including pandemic impacts, market volatility, key customer dependence, aviation industry cyclicality, and debt financing - The COVID-19 pandemic has created material uncertainty, negatively affecting demand for commercial aircraft, jet engines, and parts, and could continue to adversely affect financial results[46](index=46&type=chunk)[47](index=47&type=chunk)[48](index=48&type=chunk) - The Air Cargo business is significantly dependent on its contractual relationship with FedEx, which accounted for **37% of consolidated operating revenues in fiscal year 2021** and can be terminated with 90 days' notice[62](index=62&type=chunk)[63](index=63&type=chunk) - The Commercial Jet Engines and Parts segment faces risks from the cyclical aviation industry, including potential declines in engine values and lease rates, difficulties in re-leasing or selling assets, and failures by lessees to meet maintenance obligations[71](index=71&type=chunk)[72](index=72&type=chunk)[74](index=74&type=chunk) - The company has a highly concentrated stockholder base, with the three largest stockholders controlling approximately **62% of the outstanding common stock**, giving them significant power over stockholder matters[104](index=104&type=chunk) - The company relies on significant debt financing, and an inability to maintain sufficient liquidity, service debt, or refinance existing debt could limit operational flexibility and adversely affect business operations[107](index=107&type=chunk)[109](index=109&type=chunk)[112](index=112&type=chunk) [Unresolved Staff Comments](index=29&type=section&id=Item%201B.%20Unresolved%20Staff%20Comments) The company reports that there are no unresolved staff comments - Not applicable[131](index=131&type=chunk) [Properties](index=29&type=section&id=Item%202.%20Properties) The company owns its headquarters in North Carolina and leases various facilities for its diverse operational segments - The company owns its main operational facility of **4.626 acres in Denver, North Carolina**[131](index=131&type=chunk) - Subsidiary GGS leases a **112,500 square foot production facility in Olathe, Kansas**, under a lease expiring in August 2024[132](index=132&type=chunk) - Subsidiary Jet Yard leases approximately **48.5 acres of land at Pinal Air Park in Marana, Arizona**, for aircraft storage and part-out services, with the lease expiring in May 2046[134](index=134&type=chunk) [Legal Proceedings](index=31&type=section&id=Item%203.%20Legal%20Proceedings) The company and its subsidiaries are involved in ordinary course legal proceedings not expected to materially impact financial condition or operations - The company states that current legal proceedings are not expected to have a material adverse effect on its financial condition, liquidity, or results of operations[139](index=139&type=chunk) [Mine Safety Disclosures](index=31&type=section&id=Item%204.%20Mine%20Safety%20Disclosures) This item is not applicable to the company - Not applicable[139](index=139&type=chunk) PART II [Market for Registrant's Common Equity, Related Stockholder Matters and Issuer Purchases of Equity Securities](index=31&type=section&id=Item%205.%20Market%20for%20Registrant%27s%20Common%20Equity%2C%20Related%20Stockholder%20Matters%20and%20Issuer%20Purchases%20of%20Equity%20Securities) The company's common stock trades on NASDAQ under 'AIRT', has not paid cash dividends since 2014, and made no share repurchases in FY2021 - The company's common stock is traded on the NASDAQ Global Market under the symbol **"AIRT"**[140](index=140&type=chunk) - No cash dividends have been paid since **2014**[140](index=140&type=chunk) - The company did not repurchase any of its common stock during the fiscal year ended March 31, 2021[140](index=140&type=chunk) [Management's Discussion and Analysis of Financial Condition and Results of Operations](index=31&type=section&id=Item%207.%20Management%27s%20Discussion%20and%20Analysis%20of%20Financial%20Condition%20and%20Results%20of%20Operations) Consolidated revenue decreased 26% to $175.1 million in FY2021, leading to a $9.2 million operating loss, primarily due to the Commercial Jet Engines and Parts segment's 54% decline [Results of Operations](index=34&type=section&id=Results%20of%20Operations) Consolidated revenue decreased 26% to $175.1 million in fiscal 2021, primarily due to a 54% decline in the Commercial Jet Engines and Parts segment, leading to a $9.2 million consolidated operating loss Consolidated Revenue by Segment (in thousands) | Segment | Year ended 2021 | Year ended 2020 | Change ($) | Change (%) | | :--- | :--- | :--- | :--- | :--- | | Overnight Air Cargo | $66,251 | $75,275 | $(9,024) | (12)% | | Ground Equipment Sales | $60,679 | $59,156 | $1,523 | 3% | | Commercial Jet Engines and Parts | $46,793 | $101,284 | $(54,491) | (54)% | | Corporate and Other | $1,398 | $1,070 | $328 | 31% | | **Total** | **$175,121** | **$236,785** | **$(61,664)** | **(26)%** | Operating (Loss) Income by Segment (in thousands) | Segment | Year ended 2021 | Year ended 2020 | Change ($) | | :--- | :--- | :--- | :--- | | Overnight Air Cargo | $2,178 | $749 | $1,429 | | Ground Equipment Sales | $8,948 | $7,302 | $1,646 | | Commercial Jet Engines and Parts | $(10,882) | $8,322 | $(19,204) | | Corporate and Other | $(9,419) | $(9,082) | $(337) | | **Total** | **$(9,175)** | **$7,291** | **$(16,466)** | - The Commercial Jet Engines and Parts segment's operating loss was exacerbated by a **$6.4 million inventory write-down** in fiscal 2021[156](index=156&type=chunk) [Liquidity and Capital Resources](index=37&type=section&id=Liquidity%20and%20Capital%20Resources) As of March 31, 2021, the company held $15.9 million in cash and $77.6 million in working capital, addressing Contrail's covenant non-compliance and securing pandemic-related loans - As of March 31, 2021, the company held **$15.9 million in cash and cash equivalents and restricted cash**, with working capital standing at **$77.6 million**, a significant increase from the previous year[165](index=165&type=chunk) - The Contrail subsidiary was not in compliance with its minimum Tangible Net Worth (TNW) covenant of **$15 million** as of March 31, 2021, but this non-compliance was subsequently cured via a capital contribution[169](index=169&type=chunk) - In late 2020, subsidiaries Contrail and AirCo 1 secured loans under the Main Street Priority Loan Facility for **$43.6 million and $6.2 million**, respectively, to pay down revolvers and support working capital[171](index=171&type=chunk)[172](index=172&type=chunk) - In April 2020, the company obtained an **$8.2 million loan** under the Payroll Protection Program (PPP) and has applied for forgiveness[173](index=173&type=chunk) [Cash Flows](index=39&type=section&id=Cash%20Flows) Net cash used in operating activities significantly improved to $1.8 million in FY2021, driven by reduced inventory purchases, while investing activities provided $2.5 million and financing activities decreased Changes in Cash Flow from Continuing Operations (in thousands) | Cash Flow Activity | Year Ended 2021 | Year Ended 2020 | Change | | :--- | :--- | :--- | :--- | | Net Cash Used in Operating Activities | $(1,823) | $(26,231) | $24,408 | | Net Cash Provided by (Used in) Investing Activities | $2,516 | $(11,568) | $14,084 | | Net Cash Provided by Financing Activities | $71 | $19,240 | $(19,169) | [Non-GAAP Financial Measures](index=41&type=section&id=Non-GAAP%20Financial%20Measures) Adjusted EBITDA, a non-GAAP measure, was a loss of $1.3 million in fiscal 2021, a sharp decline from $9.0 million in fiscal 2020, primarily due to the Commercial Jet Engines and Parts segment's negative performance Reconciliation of Operating (Loss) Income to Adjusted EBITDA (in thousands) | | Twelve Months Ended March 31, 2021 | Twelve Months Ended March 31, 2020 | | :--- | :--- | :--- | | Operating (loss) income from continuing operations | $(9,175) | $7,291 | | Depreciation and amortization (excluding leased engines) | 1,231 | 1,329 | | Asset impairment, restructuring or impairment charges | 6,592 | 18 | | Gain on sale of property and equipment | (10) | (37) | | Security issuance expenses | 32 | 363 | | **Adjusted EBITDA** | **$(1,330)** | **$8,964** | Adjusted EBITDA by Segment (in thousands) | Segment | Twelve Months Ended March 31, 2021 | Twelve Months Ended March 31, 2020 | | :--- | :--- | :--- | | Overnight Air Cargo | $2,248 | $821 | | Ground Equipment Sales | $9,132 | $7,588 | | Commercial Jet Engines and Parts | $(3,933) | $8,718 | | Corporate and Other | $(8,777) | $(8,163) | | **Adjusted EBITDA** | **$(1,330)** | **$8,964** | [Critical Accounting Policies and Estimates](index=43&type=section&id=Critical%20Accounting%20Policies%20and%20Estimates) The company's critical accounting policies involve significant estimates and judgments for inventory valuation, assets on lease, and the redeemable non-controlling interest, requiring assumptions about future demand and fair value - Inventory valuation requires significant estimates regarding net realizable value, considering sales patterns and future demand, which could be impacted by changing economic conditions like the COVID-19 pandemic[192](index=192&type=chunk)[193](index=193&type=chunk) - Valuation of assets on lease or held for lease involves subjective estimates of fair value and future cash flows (including market lease rates and demand) to test for impairment[194](index=194&type=chunk)[195](index=195&type=chunk) - Accounting for the redeemable non-controlling interest in Contrail requires complex fair value determination using income and market approaches, which rely on significant management judgment for forecasts, margins, and discount rates[197](index=197&type=chunk) [Quantitative and Qualitative Disclosures About Market Risk](index=45&type=section&id=Item%207A.%20Quantitative%20and%20Qualitative%20Disclosures%20About%20Market%20Risk) This item is not applicable - Not Applicable[198](index=198&type=chunk) [Financial Statements and Supplementary Data](index=46&type=section&id=Item%208.%20Financial%20Statements%20and%20Supplementary%20Data) Deloitte & Touche LLP issued an unqualified opinion on the consolidated financial statements but highlighted critical audit matters regarding the valuation of Contrail's non-controlling interest and Commercial Jet Engines and Parts inventory [Report of Independent Registered Public Accounting Firm](index=47&type=section&id=Report%20of%20Independent%20Registered%20Public%20Accounting%20Firm) Deloitte & Touche LLP issued an unqualified opinion on the consolidated financial statements, noting critical audit matters for Contrail's non-controlling interest and Commercial Jet Engines and Parts inventory valuation - The auditor issued an unqualified opinion, stating the financial statements are presented fairly in all material respects[204](index=204&type=chunk) - A Critical Audit Matter was identified regarding the valuation of the redeemable non-controlling interest in Contrail Aviation Support, LLC, which required significant management judgment regarding forecasts, margins, and discount rates[208](index=208&type=chunk)[210](index=210&type=chunk) - A second Critical Audit Matter was the valuation of inventory in the Commercial Jet Engines and Parts segment, due to the significant judgments required to estimate net realizable value, sales patterns, and future demand, particularly given the impact of COVID-19[214](index=214&type=chunk)[215](index=215&type=chunk)[216](index=216&type=chunk) [Consolidated Financial Statements](index=51&type=section&id=Consolidated%20Financial%20Statements) In fiscal 2021, the company reported a net loss of $8.4 million, a reversal from prior year's net income, with total assets decreasing to $140.8 million and total equity declining to $14.7 million Consolidated Statements of Income Highlights (in thousands) | | Year Ended 2021 | Year Ended 2020 | | :--- | :--- | :--- | | Operating Revenues | $175,121 | $236,785 | | Operating (Loss) Income | $(9,175) | $7,291 | | Net (Loss) Income | $(8,390) | $11,233 | | Net (Loss) Income Attributable to Air T, Inc. Stockholders | $(7,277) | $7,656 | Consolidated Balance Sheets Highlights (in thousands) | | March 31, 2021 | March 31, 2020 | | :--- | :--- | :--- | | Total Current Assets | $105,774 | $98,486 | | Total Assets | $140,750 | $151,427 | | Total Current Liabilities | $28,179 | $67,746 | | Total Liabilities | $119,438 | $120,336 | | Total Equity | $14,714 | $25,011 | [Notes to Consolidated Financial Statements](index=60&type=section&id=Notes%20to%20Consolidated%20Financial%20Statements) The notes detail accounting policies, segment performance, and financial arrangements, including COVID-19 impacts, the GAS subsidiary sale, FedEx reliance, financing details, and Contrail's non-controlling interest valuation - The company completed the sale of its subsidiary Global Aviation Services, LLC (GAS) on September 30, 2019, recognizing a pre-tax gain of approximately **$10.5 million**, with GAS results reported as discontinued operations[288](index=288&type=chunk) - FedEx Corporation is a major customer, accounting for approximately **37% of consolidated revenues in fiscal 2021** and **35% of consolidated accounts receivable** at March 31, 2021[293](index=293&type=chunk) - The company's subsidiary Contrail was not in compliance with its minimum Tangible Net Worth (TNW) covenant as of March 31, 2021, but this was cured post-year-end with a capital contribution, and Contrail also secured a **$43.6 million loan** under the Main Street Priority Loan Facility[277](index=277&type=chunk)[279](index=279&type=chunk) - The fair value of the redeemable non-controlling interest in Contrail was **$6.6 million** as of March 31, 2021, an increase of **$0.5 million** from the prior year, primarily driven by the value associated with a new aircraft asset management joint venture[269](index=269&type=chunk) [Changes in and Disagreements with Accountants on Accounting and Financial Disclosure](index=99&type=section&id=Item%209.%20Changes%20in%20and%20Disagreements%20with%20Accountants%20on%20Accounting%20and%20Financial%20Disclosure) There were no changes in or disagreements with accountants on accounting and financial disclosure - None[390](index=390&type=chunk) [Controls and Procedures](index=99&type=section&id=Item%209A.%20Controls%20and%20Procedures) Management concluded that the company's disclosure controls and internal control over financial reporting were effective as of March 31, 2021 - The Chief Executive Officer and Chief Financial Officer concluded that the company's disclosure controls and procedures were effective as of March 31, 2021[391](index=391&type=chunk) - Management concluded that the company's internal control over financial reporting was effective as of March 31, 2021, based on the criteria established in the Internal Control-Integrated Framework (2013) by COSO[393](index=393&type=chunk) [Other Information](index=99&type=section&id=Item%209B.%20Other%20Information) On June 23, 2021, the company amended its trust agreement and added two subsidiaries as guarantors to its credit agreement with MBT - On June 23, 2021, the company amended its trust agreement and added two subsidiaries, Air'Zona Aircraft Services, Inc. and Jet Yard Solutions, LLC, as guarantors to its credit agreement with MBT[395](index=395&type=chunk) PART III [Directors, Executive Officers and Corporate Governance](index=100&type=section&id=Item%2010.%20Directors%2C%20Executive%20Officers%20and%20Corporate%20Governance) Information regarding directors, executive officers, corporate governance, and the Audit Committee report is incorporated by reference from the company's definitive proxy statement - Required information is incorporated by reference from the company's Proxy Statement to be filed within 120 days of the fiscal year end[397](index=397&type=chunk) [Executive Compensation](index=100&type=section&id=Item%2011.%20Executive%20Compensation) Information regarding executive and director compensation is incorporated by reference from the company's definitive proxy statement - Required information is incorporated by reference from the company's Proxy Statement[402](index=402&type=chunk) [Security Ownership of Certain Beneficial Owners and Management and Related Stockholder Matters](index=101&type=section&id=Item%2012.%20Security%20Ownership%20of%20Certain%20Beneficial%20Owners%20and%20Management%20and%20Related%20Stockholder%20Matters) Information regarding security ownership of beneficial owners and management, and equity compensation plans, is incorporated by reference from the company's definitive proxy statement - Required information is incorporated by reference from the company's Proxy Statement[402](index=402&type=chunk) Equity Compensation Plan Information as of March 31, 2021 | Plan Category | Number of securities to be issued upon exercise | Weighted-average exercise price | Number of securities remaining available for future issuance | | :--- | :--- | :--- | :--- | | Equity compensation plans approved by security holders | 11,250 | $6.61 | — | | Equity compensation plans not approved by security holders | — | — | — | | **Total** | **11,250** | **$6.61** | **—** | [Certain Relationships and Related Transactions, and Director Independence](index=101&type=section&id=Item%2013.%20Certain%20Relationships%20and%20Related%20Transactions%2C%20and%20Director%20Independence) Information regarding related party transactions and director independence is incorporated by reference from the company's definitive proxy statement - Required information is incorporated by reference from the company's Proxy Statement[405](index=405&type=chunk) [Principal Accountant Fees and Services](index=101&type=section&id=Item%2014.%20Principal%20Accountant%20Fees%20and%20Services) Information regarding principal accountant fees and services is incorporated by reference from the company's definitive proxy statement - Required information is incorporated by reference from the company's Proxy Statement[405](index=405&type=chunk) PART IV [Exhibits and Financial Statement Schedules](index=101&type=section&id=Item%2015.%20Exhibits%20and%20Financial%20Statement%20Schedules) This section lists the financial statements, financial statement schedules, and exhibits filed as part of the Form 10-K, including audit reports and material contracts - This section provides a comprehensive list of all financial statements and exhibits filed with the annual report, including governance documents, material contracts, and certifications[406](index=406&type=chunk)[407](index=407&type=chunk) [Form 10-K Summary](index=109&type=section&id=Item%2016.%20Form%2010-K%20Summary) The company has elected not to include an optional summary of the Form 10-K - The company has chosen not to include an optional Form 10-K summary[417](index=417&type=chunk)

UNITED STATES SECURITIES AND EXCHANGE COMMISSION WASHINGTON, D.C. 20549 FORM 10-Q (Mark one) ☒ Quarterly Report Pursuant to Section 13 or 15(d) of the Securities Exchange Act of 1934 for the quarterly period ended September 30, 2020 ☐ Transition Report Pursuant to Section 13 or 15(d) of the Securities Exchange Act of 1934 for the transition period from _____to _____ Commission File Number 001-35476 Air T, Inc. (Exact name of registrant as specified in its charter) Delaware 52-1206400 (State or other jurisdi ...

UNITED STATES SECURITIES AND EXCHANGE COMMISSION WASHINGTON, D.C. 20549 FORM 10-Q (Mark one) ☒ Quarterly Report Pursuant to Section 13 or 15(d) of the Securities Exchange Act of 1934 for the quarterly period ended June 30, 2020 ☐ Transition Report Pursuant to Section 13 or 15(d) of the Securities Exchange Act of 1934 for the transition period from _____to _____ Commission File Number 001-35476 Air T, Inc. (Exact name of registrant as specified in its charter) Delaware 52-1206400 (State or other jurisdiction ...

[PART I](index=4&type=section&id=PART%20I) [Business Overview](index=4&type=section&id=Item%201.%20Business) Air T, Inc. is a holding company operating in five industry segments: overnight air cargo, ground equipment sales, commercial jet engines and parts, printing equipment and maintenance, and corporate and other, aiming to diversify earnings and grow free cash flow per share - Air T, Inc. operates in five industry segments: Overnight air cargo, Ground equipment sales, Commercial jet engines and parts, Printing equipment and maintenance, and Corporate and other[14](index=14&type=chunk) - The company completed the sale of its wholly-owned subsidiary, Global Aviation Services, LLC (GAS), which previously constituted the ground support services segment, on September 30, 2019[15](index=15&type=chunk) - MAC and CSA, operating in the Overnight Air Cargo segment, have a 35-year relationship with FedEx, with FedEx accounting for approximately **30% and 29% of consolidated revenue** for fiscal years 2020 and 2019, respectively[19](index=19&type=chunk)[22](index=22&type=chunk) - Ground Equipment Sales (GGS) manufactures and sells aircraft deicers and other specialized equipment, with deicing equipment sales accounting for approximately **89% of GGS's revenues in fiscal year 2020**, up from 77% in the prior fiscal year[30](index=30&type=chunk) - The Commercial Jet Engines and Parts segment (Contrail, Jet Yard, AirCo, Worthington) focuses on trading, leasing, and supplying surplus commercial jet engines and parts, with Contrail contributing approximately **31% and 38% of total consolidated revenue** for fiscal years 2020 and 2019, respectively[36](index=36&type=chunk) - The Printing Equipment and Maintenance segment (Delphax) designs, manufactures, and sells digital print production equipment, with Delphax Canada and Delphax UK dissolved in June 2019[40](index=40&type=chunk)[42](index=42&type=chunk)[44](index=44&type=chunk) GGS Order Backlog (in millions) | As of March 31, | Backlog (USD) | | :-------------- | :------------ | | 2020 | $51.5 | | 2019 | $26.1 | [Risk Factors](index=9&type=section&id=Item%201A.%20Risk%20Factors) The company faces significant risks, including the material adverse effects of the COVID-19 pandemic, substantial dependency on FedEx, market fluctuations, IT disruptions, and the cyclical nature of the aviation industry - The COVID-19 pandemic has resulted in significant negative impacts, including a reduction in demand for commercial aircraft, jet engines, and parts, presenting material uncertainty and risk to the company's business[58](index=58&type=chunk)[59](index=59&type=chunk)[61](index=61&type=chunk) - The Air Cargo Segment is highly dependent on FedEx, which accounted for **30% of consolidated operating revenues** and **96% of the segment's operating revenues** in fiscal year 2020, making loss of this relationship a material adverse effect[62](index=62&type=chunk) - Sales of deicing equipment can be adversely affected by mild winter weather conditions, reducing demand for new units as airports extend the useful lives of existing equipment[69](index=69&type=chunk) - The company's investment portfolio, with **$3.2 million in marketable securities** as of March 31, 2020, is subject to value fluctuations that could result in losses and affect operating results[71](index=71&type=chunk) - The company faces risks from information technology disruptions, including cybersecurity attacks, which could lead to operational delays, data breaches, financial losses, and reputational damage[73](index=73&type=chunk) - The company's substantial indebtedness and capital-intensive nature of its aircraft and engine business require maintaining sufficient liquidity, which could be adversely impacted by revenue declines, increased expenses, or reduced credit availability[111](index=111&type=chunk)[112](index=112&type=chunk) [Unresolved Staff Comments](index=20&type=section&id=Item%201B.%20Unresolved%20Staff%20Comments) The company has no unresolved staff comments to report - Not applicable[142](index=142&type=chunk) [Properties](index=20&type=section&id=Item%202.%20Properties) The company owns approximately 4.626 acres in Denver, North Carolina, and leases various facilities for its subsidiaries across multiple locations, including Michigan, North Carolina, Kansas, Wisconsin, Arizona, Minnesota, Oklahoma, and Australia - The Company owns approximately **4.626 acres in Denver, North Carolina**, which houses the operations of Air T and MAC[142](index=142&type=chunk) - CSA's operations are headquartered at leased office and hangar space at the Ford Airport in Iron Mountain, Michigan[143](index=143&type=chunk) - GGS leases an **112,500 square foot production facility** in Olathe, Kansas, with the lease expiring in August 2024[145](index=145&type=chunk) - Jet Yard leases approximately **48.5 acres of land** at the Pinal Air Park in Marana, Arizona, with the lease expiring in May 2046[147](index=147&type=chunk) - AirCo and Worthington consolidated back office operations and inventory to a **41,280 square-foot facility** in Eagan, Minnesota, with the lease expiring in December 2027[149](index=149&type=chunk)[150](index=150&type=chunk) [Legal Proceedings](index=21&type=section&id=Item%203.%20Legal%20Proceedings) The company and its subsidiaries are involved in ordinary course legal proceedings, which management believes will not materially adversely affect financial condition, liquidity, or results of operations - The Company and its subsidiaries are subject to legal proceedings and claims that arise in the ordinary course of their business[151](index=151&type=chunk) - Management believes that current proceedings will not have a material adverse effect on the Company's financial condition, liquidity, or results of operations[151](index=151&type=chunk) [Mine Safety Disclosures](index=21&type=section&id=Item%204.%20Mine%20Safety%20Disclosures) The company has no mine safety disclosures to report - Not applicable[151](index=151&type=chunk) [PART II](index=22&type=section&id=PART%20II) [Market for Common Equity, Stockholder Matters & Equity Purchases](index=22&type=section&id=Item%205.%20Market%20for%20Registrant's%20Common%20Equity,%20Related%20Stockholder%20Matters%20and%20Issuer%20Purchases%20of%20Equity%20Securities) Air T, Inc.'s common stock trades on NASDAQ under 'AIRT', with 163 holders of record as of March 31, 2020, no cash dividends since 2014, and **$2.8 million in share repurchases** during fiscal year 2020 - The Company's common stock is publicly traded on the NASDAQ Global Market under the symbol "AIRT"[152](index=152&type=chunk) - As of March 31, 2020, the number of holders of record of the Company's Common Stock was **163**[152](index=152&type=chunk) - The Company has not paid any cash dividends since **2014**[152](index=152&type=chunk) - The Company repurchased **150,658 shares** of common stock for an aggregate cost of **$2.8 million** during the fiscal year ended March 31, 2020, under an authorized program[153](index=153&type=chunk)[348](index=348&type=chunk) Common Stock Repurchases (Q4 Fiscal 2020) | Dates of Shares Purchased | Total Number of Shares Purchased | Average Price per Share (USD) | Total Number of Shares Purchased as Part of Public Announced Plans or Programs | Maximum Number of Shares that May Yet Be Purchased Under the Plans or Programs | | :------------------------ | :------------------------------- | :---------------------- | :----------------------------------------------------------------------------- | :----------------------------------------------------------------------------- | | Jan 1 - Jan 31, 2020 | — | — | 142,564 | 969,688 | | Feb 1 - Feb 29, 2020 | — | — | 142,564 | 969,688 | | March 1 - March 31, 2020 | 30,746 | $14.94 | 173,310 | 938,942 | [Selected Financial Data](index=22&type=section&id=Item%206.%20Selected%20Financial%20Data) The company has chosen not to provide selected financial data in this section - Not applicable[155](index=155&type=chunk) [Management's Discussion and Analysis](index=22&type=section&id=Item%207.%20Management's%20Discussion%20and%20Analysis%20of%20Financial%20Condition%20and%20Results%20of%20Operations) This section analyzes Air T, Inc.'s financial condition and results of operations for fiscal years 2020 and 2019, covering segment performance, COVID-19 impact, critical accounting policies, liquidity, and capital resources, with a focus on diversifying earnings and growing free cash flow per share [Overview](index=22&type=section&id=Overview) Air T, Inc. is a holding company with a portfolio of operating businesses and financial assets, aiming to strategically diversify earnings and compound free cash flow per share across five segments, with the ground support services segment sold in September 2019 - Air T, Inc. is a holding company with a portfolio of operating businesses and financial assets, aiming to prudently and strategically diversify earnings power and compound the growth in its free cash flow per share over time[156](index=156&type=chunk) - The company operates in five industry segments: Overnight air cargo, Ground equipment sales, Commercial jet engines and parts, Printing equipment and maintenance, and Corporate and other[156](index=156&type=chunk) - The ground support services segment was discontinued with the sale of Global Aviation Services, LLC (GAS) on September 30, 2019[157](index=157&type=chunk) [Forward Looking Statements](index=23&type=section&id=Forward%20Looking%20Statements) The report contains forward-looking statements involving risks and uncertainties, including economic conditions, FedEx contract risks, aircraft reduction, deferred USAF orders, terrorist activities, cost management, accident risks, market acceptance, competition, regulatory changes, investment value fluctuations, weather, debt service, and the COVID-19 pandemic - Forward-looking statements involve risks and uncertainties, and actual results may differ materially[158](index=158&type=chunk) - Economic conditions in the Company's markets - Risk of FedEx contract termination or adverse modification - Risk of further reduction in aircraft operated for FedEx - Impact of COVID-19 pandemic length and severity [Results of Operations](index=23&type=section&id=Results%20of%20Operations) Consolidated revenue increased by **10% to $236.8 million** in fiscal year 2020, driven by ground equipment sales and commercial jet engines, while consolidated operating income decreased by **22% to $7.3 million** due to higher operational costs and increased corporate expenses, with non-operating expenses rising from increased interest and investment losses, partially offset by a bankruptcy settlement gain Consolidated Revenue by Segment (in thousands) | Segment | FY2020 Revenue (USD) | FY2019 Revenue (USD) | Change (USD) | Change (%) | | :------------------------------- | :------------- | :------------- | :----------- | :--------- | | Overnight Air Cargo | $75,275 | $72,978 | $2,297 | 3% | | Ground Equipment Sales | $59,156 | $47,152 | $12,004 | 25% | | Printing Equipment and Maintenance | $306 | $655 | $(349) | (53)% | | Commercial Jet Engines and Parts | $101,284 | $93,968 | $7,316 | 8% | | Corporate and Other | $764 | $749 | $15 | 2% | | **Total** | **$236,785** | **$215,502** | **$21,283** | **10%** | - Ground equipment sales revenue increased by **$12.0 million (25%)** due to increased sales of commercial and military deicers, driven by market requirements and more business[163](index=163&type=chunk) - Commercial jet engines and parts revenue increased by **$7.3 million (8%)**, primarily due to Contrail trading two more aircraft in the current year[164](index=164&type=chunk) Consolidated Operating Income by Segment (in thousands) | Segment | FY2020 Operating Income (USD) | FY2019 Operating Income (USD) | Change (USD) | Change (%) | | :------------------------------- | :---------------------- | :---------------------- | :----------- | :--------- | | Overnight Air Cargo | $749 | $1,918 | $(1,169) | (61)% | | Ground Equipment Sales | $7,302 | $3,420 | $3,882 | 114% | | Commercial Jet Engines and Parts | $8,322 | $12,298 | $(3,976) | (32)% | | Printing Equipment and Maintenance | $(1,596) | $(1,403) | $(193) | (14)% | | Corporate and Other | $(7,486) | $(6,902) | $(584) | (8)% | | **Total** | **$7,291** | **$9,331** | **$(2,040)** | **(22)%** | - Operating income for the air cargo segment decreased by **$1.2 million (61%)** due to fewer aircraft (69 in FY2020 vs. 79 in FY2019) from the loss of the Caribbean service area[166](index=166&type=chunk) - Ground equipment sales operating income increased by **$3.9 million (114%)** due to additional sales and higher margin orders in the current year[167](index=167&type=chunk)[168](index=168&type=chunk) - Commercial jet engines and parts operating income declined by **$4.0 million (32%)** due to higher operational costs, mainly material costs and legal fees for aircraft and jet engine deals[168](index=168&type=chunk) Consolidated Non-Operating Expenses (in thousands) | Item | FY2020 (USD) | FY2019 (USD) | Change (USD) | Change (%) | | :---------------------------------------- | :----------- | :----------- | :----------- | :--------- | | Other-than-temporary impairment loss on investments | $(2,305) | $(2,000) | $(305) | (15)% | | Interest expense, net | $(4,692) | $(3,427) | $(1,265) | (37)% | | Gain on settlement of bankruptcy | $4,527 | — | $4,527 | 100% | | Bargain purchase acquisition gain | $49 | $1,984 | $(1,935) | (98)% | | Income (loss) from equity method investments | $(910) | $341 | $(1,251) | n/m | | Other | $(1,336) | $(261) | $(1,075) | (412)% | | **Total** | **$(4,667)** | **$(3,363)** | **$(1,304)** | **(39)%** | - Net non-operating expenses increased by **$1.3 million**, primarily due to a **$1.3 million increase in interest expense** and **$1.3 million in investment losses**, partially offset by a **$4.5 million gain on bankruptcy settlement** related to Delphax Canada and UK[169](index=169&type=chunk) - The company recorded an income tax benefit of **$0.5 million** in FY2020 (effective rate of **-20.7%**) compared to an expense of **$1.8 million** in FY2019 (effective rate of **29.5%**)[170](index=170&type=chunk)[171](index=171&type=chunk) [Market Outlook](index=25&type=section&id=Market%20Outlook) The global COVID-19 outbreak creates significant uncertainty and risk for the company's financial condition, results of operations, cash flows, and liquidity, with a sharp decline in demand for commercial aircraft, jet engines, and parts, leading to expected reduced operating cash flow and potential losses in fiscal 2021 - The COVID-19 pandemic has led to a sharp decline in travel demand, directly impacting the commercial aircraft, jet engines, and parts industry[173](index=173&type=chunk) - The company has experienced and continues to experience a reduction in demand for commercial aircraft, jet engines, and parts[173](index=173&type=chunk) - The company expects reduced operating cash flow and potential losses in fiscal 2021 due to COVID-19, with the full impact remaining highly uncertain[160](index=160&type=chunk)[161](index=161&type=chunk)[174](index=174&type=chunk) [Liquidity and Capital Resources](index=26&type=section&id=Liquidity%20and%20Capital%20Resources) As of March 31, 2020, the company held **$15.6 million in cash and equivalents** and **$1.7 million in marketable securities**, with working capital increasing by **$12.2 million to $30.7 million**, while Contrail forecasted probable non-compliance with financial covenants for Q2 FY2021 due to COVID-19, leading to the company obtaining **$8.2 million in PPP loans** Cash and Equivalents (in millions) | Item | March 31, 2020 (USD) | March 31, 2019 (USD) | | :---------------------------------- | :------------------- | :------------------- | | Cash and cash equivalents | $5.952 | $12.417 | | Restricted cash | $9.619 | $0.123 | | Restricted investments | $1.085 | $0.831 | | Marketable securities | $1.677 | $1.760 | - Working capital increased by **$12.2 million to $30.7 million** as of March 31, 2020, primarily due to a **$33.2 million increase in inventory**, offset by a **$17.9 million increase in short-term borrowings**[177](index=177&type=chunk) - As of March 31, 2020, both the Company and Contrail were in compliance with all financial covenants[175](index=175&type=chunk) - Contrail forecasted probable non-compliance with its financial covenants for the quarter ended September 30, 2020, due to the impact of COVID-19 on its business[182](index=182&type=chunk) - Subsequent to March 31, 2020, the company obtained approximately **$8.2 million in loans** under the Paycheck Protection Program (PPP) to cover payroll and other costs[185](index=185&type=chunk) - Revenues for Overnight Air Cargo, Ground Equipment Sales, and Commercial Jet Engines and Parts segments were down **14%, 26%, and 67%** respectively, for April and May 2020 due to COVID-19 - The company expects a negative impact on consolidated cash flow from operations in Q1 fiscal 2021 [Cash Flows](index=28&type=section&id=Cash%20Flows) In fiscal year 2020, cash used in operating activities increased significantly to **$26.2 million** from **$22.4 million provided** in fiscal year 2019, primarily due to additional inventory purchases, while cash used in investing activities decreased by **$11.3 million to $11.6 million** due to higher proceeds from asset sales, and cash provided by financing activities increased by **$9.7 million** from increased net proceeds from term loans, lines of credit, and warrant exercises Changes in Cash Flow (in thousands) | Cash Flow Category | FY2020 (USD) | FY2019 (USD) | Change (USD) | | :-------------------------------------- | :----------- | :----------- | :----------- | | Net Cash Provided by (Used in) Operating Activities | $(26,231) | $22,356 | $(48,587) | | Net Cash Used in Investing Activities | $(11,568) | $(22,853) | $11,285 | | Net Cash Provided by Financing Activities | $19,240 | $9,546 | $9,694 | | Effect of foreign currency exchange rates | $260 | $96 | $164 | | **Net Increase in Cash and Cash Equivalents and Restricted Cash** | **$(18,299)**| **$9,145** | **$(27,444)**| - Cash used in operating activities in fiscal year 2020 increased due to additional purchases of inventory[188](index=188&type=chunk) - Cash used in investing activities decreased in fiscal year 2020 primarily because the Company received **$26.5 million more of proceeds** from sale of assets on lease or held for lease[189](index=189&type=chunk) - Cash provided by financing activities increased due to increased net proceeds from term loans and lines of credit, in addition to proceeds received from the exercise of warrants[190](index=190&type=chunk) [Off-Balance Sheet Arrangements](index=29&type=section&id=Off-Balance%20Sheet%20Arrangements) The company is not currently engaged in any off-balance sheet arrangements, which are defined as transactions involving unconsolidated entities where the company has guarantees, retained interests in transferred assets, obligations under derivative instruments classified as equity, or material variable interests providing financing or risk support - The Company is not currently engaged in the use of any off-balance sheet arrangements[192](index=192&type=chunk) [Impact of Inflation](index=29&type=section&id=Impact%20of%20Inflation) The company believes inflation has not materially affected its manufacturing and commercial jet engine and parts operations, as increased costs have been passed on to customers, and major cost components of its overnight air cargo business are reimbursed by customers, though significant future increases in inflation rates could materially impact revenue and operating income - Inflation has not had a material effect on manufacturing and commercial jet engine and parts operations, as increased costs have been passed on to customers[193](index=193&type=chunk) - Major cost components of the overnight air cargo business (fuel, crew, direct operating costs, certain maintenance) are reimbursed by customers[193](index=193&type=chunk) - Significant increases in inflation rates could have a material impact on future revenue and operating income[193](index=193&type=chunk) [Seasonality](index=30&type=section&id=Seasonality) The ground equipment sales segment experiences seasonality, with lower revenues and operating income in the first and fourth fiscal quarters as commercial deicers are typically delivered before the winter season, while other segments are not materially affected by seasonal trends - The ground equipment sales segment business has historically been seasonal, with revenues and operating income typically lower in the first and fourth fiscal quarters[195](index=195&type=chunk) - Commercial deicers are typically delivered prior to the winter season[195](index=195&type=chunk) - Other segments are not susceptible to material seasonal trends[195](index=195&type=chunk) [Critical Accounting Policies and Estimates](index=31&type=section&id=Critical%20Accounting%20Policies%20and%20Estimates) The company's critical accounting policies involve significant estimates and judgments in business combinations, variable interest entities, inventories, and redeemable non-controlling interest, with actual results potentially differing materially due to COVID-19 uncertainties - **Business Combinations:** Accounts for acquisitions using the acquisition method, recording identifiable assets and liabilities at fair value, and recognizing goodwill for any excess purchase consideration, involving estimates and judgments in valuation - **Variable Interest Entities (VIEs):** Analyzes variable interests to determine if consolidation is required as the primary beneficiary, based on power to direct activities and right to receive benefits/absorb losses - **Inventories:** Carried at the lower of cost or net realizable value, with estimates and judgments made in relief of inventory for the commercial jet engines and parts segment, consistent with market expectations - **Accounting for Redeemable Non-Controlling Interest:** Involves judgment in classification (temporary equity) and significant estimates in valuation (fair value vs. carrying value), with adjustments recognized through retained earnings - The COVID-19 pandemic makes estimates and assumptions inherently less certain, potentially impacting future losses to inventory and investments[200](index=200&type=chunk)[232](index=232&type=chunk)[233](index=233&type=chunk) [Market Risk Disclosures](index=32&type=section&id=Item%207A.%20Quantitative%20and%20Qualitative%20Disclosures%20About%20Market%20Risk) The company has no quantitative and qualitative disclosures about market risk to report in this section - Not Applicable[203](index=203&type=chunk) [Financial Statements and Supplementary Data](index=33&type=section&id=Item%208.%20Financial%20Statements%20and%20Supplementary%20Data) This section presents the audited consolidated financial statements of Air T, Inc. and its subsidiaries for fiscal years 2020 and 2019, including the statements of income, comprehensive income, balance sheets, cash flows, and equity, along with the independent auditor's report and extensive notes detailing accounting policies, operations, and subsequent events [Report of Independent Registered Public Accounting Firm](index=34&type=section&id=Report%20of%20Independent%20Registered%20Public%20Accounting%20Firm) Deloitte & Touche LLP issued an unqualified opinion on Air T, Inc.'s consolidated financial statements for fiscal years 2020 and 2019, affirming fair presentation of financial position, results of operations, and cash flows in conformity with GAAP - Deloitte & Touche LLP issued an unqualified opinion on the consolidated financial statements of Air T, Inc. and subsidiaries for the fiscal years ended March 31, 2020 and 2019[209](index=209&type=chunk) - The financial statements present fairly, in all material respects, the financial position, results of operations, and cash flows in conformity with accounting principles generally accepted in the United States of America[209](index=209&type=chunk) [Consolidated Statements of Income](index=35&type=section&id=Consolidated%20Statements%20of%20Income) The consolidated statements of income show a **10% increase in total operating revenues to $236.8 million** in fiscal year 2020, with operating income from continuing operations decreasing by **22% to $7.3 million**, while net income attributable to Air T, Inc. stockholders significantly increased to **$7.7 million** from **$1.3 million** in fiscal year 2019, largely due to a gain on sale of discontinued operations Consolidated Statements of Income Highlights (in thousands, except per share data) | Item | FY2020 (USD) | FY2019 (USD) | | :-------------------------------------------- | :----------- | :----------- | | Total Operating Revenues | $236,785 | $215,502 | | Total Operating Expenses | $229,494 | $206,171 | | Operating Income from continuing operations | $7,291 | $9,331 | | Net income from continuing operations | $3,168 | $4,207 | | Loss from discontinued operations, net of tax | $(114) | $(1,006) | | Gain on sale of discontinued operations, net of tax | $8,179 | — | | Net income | $11,233 | $3,201 | | Net Income Attributable to Air T, Inc. Stockholders | $7,656 | $1,340 | | Basic Income per share | $2.74 | $0.44 | | Diluted Income per share | $2.73 | $0.44 | [Consolidated Statements of Comprehensive Income](index=36&type=section&id=Consolidated%20Statements%20of%20Comprehensive%20Income) The consolidated statements of comprehensive income show total comprehensive income of **$10.9 million** for fiscal year 2020, a significant increase from **$3.2 million** in fiscal year 2019, including net income, foreign currency translation gains, and unrealized losses on interest rate swaps Consolidated Statements of Comprehensive Income (in thousands) | Item | FY2020 (USD) | FY2019 (USD) | | :-------------------------------------------- | :----------- | :----------- | | Net Income | $11,233 | $3,201 | | Foreign currency translation gain | $212 | $225 | | Unrealized loss on interest rate swaps, net of tax | $(529) | $(236) | | Total Other Comprehensive Loss | $(317) | $(11) | | Total Comprehensive Income | $10,916 | $3,190 | | Comprehensive Income Attributable to Air T, Inc. Stockholders | $7,324 | $1,290 | [Consolidated Balance Sheets](index=37&type=section&id=Consolidated%20Balance%20Sheets) The consolidated balance sheets show total assets increased to **$151.4 million** as of March 31, 2020, from **$115.1 million** in 2019, primarily driven by a significant increase in inventories and current portion of long-term debt, while total liabilities also increased to **$120.3 million** from **$86.3 million**, and total equity attributable to Air T, Inc. stockholders slightly decreased to **$24.0 million** from **$24.4 million** Consolidated Balance Sheets Highlights (in thousands) | Item | March 31, 2020 (USD) | March 31, 2019 (USD) | | :-------------------------------------------- | :------------------- | :------------------- | | Cash and cash equivalents | $5,952 | $12,417 | | Restricted cash | $9,619 | $123 | | Inventories, net | $60,623 | $27,455 | | Total Current Assets | $98,486 | $71,348 | | Assets on lease or held for lease, net | $27,945 | $25,164 | | Total Assets | $151,427 | $115,143 | | Current portion of long-term debt | $42,684 | $24,735 | | Total Current Liabilities | $67,746 | $52,794 | | Long-term debt | $43,136 | $32,918 | | Total Liabilities | $120,336 | $86,309 | | Redeemable non-controlling interest | $6,080 | $5,476 | | Total Air T, Inc. Stockholders' Equity | $24,006 | $24,359 | | Total Equity | $25,011 | $23,358 | - Inventories, net, increased significantly to **$60.6 million** in FY2020 from **$27.5 million** in FY2019[220](index=220&type=chunk) - Current portion of long-term debt increased to **$42.7 million** in FY2020 from **$24.7 million** in FY2019[220](index=220&type=chunk) [Consolidated Statements of Cash Flows](index=38&type=section&id=Consolidated%20Statements%20of%20Cash%20Flows) The consolidated statements of cash flows show a shift from cash provided by operating activities of **$20.9 million** in fiscal year 2019 to cash used of **$25.1 million** in fiscal year 2020, primarily due to increased inventory purchases, while investing activities shifted from cash used of **$23.0 million** in 2019 to cash provided of **$8.6 million** in 2020, largely due to higher proceeds from asset sales, and financing activities provided **$19.2 million** in 2020, up from **$9.5 million** in 2019, driven by increased debt proceeds and warrant exercises Consolidated Statements of Cash Flows Highlights (in thousands) | Cash Flow Category | FY2020 (USD) | FY2019 (USD) | | :------------------------------------------------ | :----------- | :----------- | | Net cash (used in) provided by operating activities | $(25,074) | $20,936 | | Net cash provided by (used in) investing activities | $8,605 | $(23,004) | | Net cash provided by financing activities | $19,240 | $9,546 | | Net Increase in Cash and Cash Equivalents and Restricted Cash | $3,031 | $7,574 | | Cash and Cash Equivalents and Restricted Cash at End of Period | $15,571 | $12,540 | - Cash used in operating activities increased in fiscal year 2020 due to additional purchases of inventory[188](index=188&type=chunk) - Proceeds from sale of assets on lease and held for lease significantly increased to **$30.7 million** in FY2020 from **$4.2 million** in FY2019[223](index=223&type=chunk) - Proceeds from lines of credit increased to **$174.6 million** in FY2020 from **$107.5 million** in FY2019[223](index=223&type=chunk) [Consolidated Statements of Equity](index=39&type=section&id=Consolidated%20Statements%20of%20Equity) The consolidated statements of equity reflect a slight decrease in total Air T, Inc. Stockholders' Equity to **$24.0 million** as of March 31, 2020, from **$24.4 million** in 2019, with key changes including **$7.7 million in net income** attributable to stockholders, a 3-for-2 stock split, **$2.8 million in share repurchases**, and the issuance of Trust Preferred Securities and Warrants, while redeemable non-controlling interest increased to **$6.1 million** Consolidated Statements of Equity Highlights (in thousands) | Item | March 31, 2020 (USD) | March 31, 2019 (USD) | | :-------------------------------------------- | :------------------- | :------------------- | | Common Stock (Amount) | $756 | $506 | | Treasury Stock (Amount) | $(2,617) | — | | Additional Paid-In Capital | $2,636 | $2,867 | | Retained Earnings | $23,768 | $21,191 | | Accumulated Other Comprehensive Loss | $(537) | $(205) | | Total Air T, Inc. Stockholders' Equity | $24,006 | $24,359 | | Non-controlling Interests | $1,005 | $(1,001) | | Total Equity | $25,011 | $23,358 | - Net income attributable to Air T, Inc. stockholders was **$7.7 million** in FY2020[227](index=227&type=chunk) - A **3-for-2 stock split** occurred on June 10, 2019[227](index=227&type=chunk) - Repurchase of common stock amounted to **$(2.8) million** in FY2020[227](index=227&type=chunk)[348](index=348&type=chunk) - Issuance of Debt - Trust Preferred Securities and Warrants resulted in a reduction of retained earnings by **$4.0 million** and **$0.84 million**, respectively[227](index=227&type=chunk) [Notes to Consolidated Financial Statements](index=41&type=section&id=Notes%20to%20Consolidated%20Financial%20Statements) The notes provide detailed explanations of the company's financial statements, covering significant accounting policies, discontinued operations, major customer dependency, business acquisitions, variable interest entities, fair value measurements, inventories, assets on lease, property and equipment, investments, equity method investments, accrued expenses, lease arrangements, financing arrangements, related party matters, share repurchases, stock options, revenue recognition, employee benefits, income taxes, quarterly financial data, geographical and segment information, earnings per share, commitments and contingencies, and subsequent events [SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES](index=41&type=section&id=1.%20SUMMARY%20OF%20SIGNIFICANT%20ACCOUNTING%20POLICIES) This note outlines the company's accounting policies, including principles of consolidation, use of estimates (with a specific mention of COVID-19 impact), segment reporting, variable interest entities, business combinations, cash and cash equivalents, inventories, equity method investments, goodwill, intangible assets, property and equipment, accounting for debt preferred securities and warrant liability, income taxes, redeemable non-controlling interest, and revenue recognition, also detailing recently adopted and issued accounting pronouncements - The Company operates in five reportable operating segments: overnight air cargo, ground equipment sales, commercial jet engine and parts, printing equipment and maintenance, and corporate and other[228](index=228&type=chunk)[234](index=234&type=chunk) - The preparation of financial statements involves significant estimates and assumptions, which are inherently less certain due to the COVID-19 pandemic[231](index=231&type=chunk)[232](index=232&type=chunk)[233](index=233&type=chunk) - Goodwill of approximately **$4.2 million** as of March 31, 2020, is entirely related to the acquisition of Contrail Aviation, with a quantitative impairment analysis concluding no impairment was warranted due to COVID-19[248](index=248&type=chunk)[251](index=251&type=chunk) - The company adopted ASU 2016-02, Leases (Topic 842), on April 1, 2019, recognizing right-of-use assets of approximately **$10.7 million** and lease liabilities of approximately **$11.2 million**, with an immaterial cumulative effect on retained earnings[273](index=273&type=chunk) - The fair value of the redeemable non-controlling interest was **$6.1 million** as of March 31, 2020, an increase of **$0.6 million** from March 31, 2019[264](index=264&type=chunk) - Contrail management forecasted probable non-compliance with its financial covenants for the quarter ended September 30, 2020, and is seeking waivers or alternative financing, including the Main Street Lending Program[269](index=269&type=chunk)[270](index=270&type=chunk) - Subsequent to March 31, 2020, the Company obtained **$8.2 million in PPP loans** to help pay for payroll and other costs[272](index=272&type=chunk) [DISCONTINUED OPERATIONS](index=49&type=section&id=2.%20DISCONTINUED%20OPERATIONS) On September 30, 2019, the company completed the sale of Global Aviation Services, LLC (GAS) for a purchase price of **$21.0 million**, recognizing a pre-tax gain of approximately **$10.5 million** (net of tax gain of **$8.2 million**), with GAS's results reported as discontinued operations, showing net sales of **$16.6 million** and a net loss of **$0.1 million** in fiscal year 2020 prior to disposition - The Company completed the sale of 100% of the equity ownership in Global Aviation Services, LLC (GAS) on September 30, 2019, for a purchase price of **$21.0 million**[282](index=282&type=chunk) - A pre-tax gain on the sale of GAS of approximately **$10.5 million** was recognized, with a net of tax gain of **$8.2 million**, during the fiscal year ended March 31, 2020[282](index=282&type=chunk) Summarized Results of Operations of GAS (in thousands) | Item | FY2020 (USD) | FY2019 (USD) | | :-------------------------------------------- | :----------- | :----------- | | Net sales | $16,637 | $34,332 | | Operating Expense | $(17,319) | $(35,597) | | Loss from discontinued operations before income taxes | $(682) | $(1,265) | | Income tax benefit | $(568) | $(259) | | Loss from discontinued operations, net of tax | $(114) | $(1,006) | [MAJOR CUSTOMER](index=50&type=section&id=3.%20MAJOR%20CUSTOMER) FedEx Corporation is a major customer, accounting for approximately **30% and 29% of the company's consolidated revenues** in fiscal years 2020 and 2019, respectively, and represented **16% and 20% of consolidated accounts receivable** at March 31, 2020 and 2019, respectively - Approximately **30% and 29% of the Company's consolidated revenues** were derived from services performed for FedEx Corporation in fiscal 2020 and 2019, respectively[287](index=287&type=chunk) - Approximately **16% and 20% of the Company's consolidated accounts receivable** at March 31, 2020 and 2019, respectively, were due from FedEx Corporation[287](index=287&type=chunk) [BUSINESS COMBINATIONS](index=50&type=section&id=4.%20BUSINESS%20COMBINATIONS) On May 4, 2018, Air T, Inc. acquired substantially all assets and assumed certain liabilities of Worthington Aviation Parts, Inc. for **$3.3 million cash**, resulting in a bargain purchase gain of approximately **$2.0 million** (net of tax), as Worthington was in financial distress and the acquisition was non-marketed - On May 4, 2018, the Company completed the acquisition of substantially all assets and assumed certain liabilities of Worthington Aviation Parts, Inc.[289](index=289&type=chunk) - Total consideration for the acquisition was **$3.326 million**, including **$50,000 earnest money** and **$3.3 million cash payment**[290](index=290&type=chunk)[291](index=291&type=chunk) - The transaction resulted in a bargain purchase gain of approximately **$1.983 million** (pre-tax) and **$2.0 million** (net of tax), as Worthington was in financial distress and the acquisition was non-marketed[293](index=293&type=chunk) [VARIABLE INTEREST ENTITIES](index=51&type=section&id=5.%20VARIABLE%20INTEREST%20ENTITIES) The company consolidates Delphax as a variable interest entity (VIE) since November 24, 2015, due to its significant equity and debt investments, with Delphax Canada and Delphax UK dissolved in June 2019, resulting in a **$4.5 million gain on dissolution**, and Delphax recording net income of **$6.1 million** in fiscal year 2020, primarily from this gain - The Company concluded it became the primary beneficiary of Delphax on November 24, 2015, and consolidates Delphax in its financial statements[296](index=296&type=chunk) - Delphax Canada and Delphax UK were dissolved in June 2019, leading to a **$4.5 million gain on dissolution** of entities[298](index=298&type=chunk) - Delphax recorded net income of **$6.1 million** in FY2020, primarily from the dissolution gain, compared to a net loss of **$0.5 million** in FY2019[300](index=300&type=chunk) [FAIR VALUE OF FINANCIAL INSTRUMENTS](index=52&type=section&id=6.%20FAIR%20VALUE%20OF%20FINANCIAL%20INSTRUMENTS) The company measures financial assets and liabilities at fair value, categorizing them into Level 1 (quoted prices in active markets), Level 2 (observable inputs other than active market prices), and Level 3 (unobservable significant inputs), with marketable securities as Level 1, interest rate swaps as Level 2, and acquisition contingent consideration obligations and redeemable non-controlling interest as Level 3 - **Level 1:** Unadjusted quoted prices in active markets for identical, unrestricted assets or liabilities - **Level 2:** Quoted prices in markets that are not active or observable inputs, directly or indirectly, for substantially the full term of the asset or liability - **Level 3:** Prices or valuation techniques requiring significant unobservable inputs Fair Value Measurements (in thousands) | Item | March 31, 2020 (USD) | March 31, 2019 (USD) | | :-------------------------------------------- | :------------------- | :------------------- | | Marketable securities (Level 1) | $3,240 | $3,213 | | Interest rate swaps (Level 2) | $914 | $227 | | Acquisition contingent consideration obligations (Level 3) | — | $489 | | Redeemable non-controlling interest (Level 3) | $6,080 | $5,476 | [INVENTORIES](index=53&type=section&id=7.%20INVENTORIES) Total inventories, net of reserves, significantly increased to **$60.6 million** as of March 31, 2020, from **$27.5 million** in 2019, with the commercial jet engines and parts segment accounting for the largest portion of this increase, rising from **$21.0 million to $51.1 million** Inventories (in thousands) | Category | FY2020 (USD) | FY2019 (USD) | | :-------------------------------------- | :----------- | :----------- | | Ground equipment manufacturing: | | | | Raw materials | $4,192 | $2,498 | | Work in process | $2,731 | $1,659 | | Finished goods | $1,725 | $972 | | Printing equipment and maintenance: | | | | Raw materials | $464 | $401 | | Finished goods | $910 | $1,048 | | Commercial jet engines and parts | $51,084 | $21,032 | | Total inventories | $61,106 | $27,610 | | Reserves | $(483) | $(155) | | **Total, net of reserves** | **$60,623** | **$27,455** | [ASSETS ON LEASE](index=53&type=section&id=8.%20ASSETS%20ON%20LEASE) The company leases equipment to third parties, primarily through Contrail, under operating lease agreements with terms typically between 2 and 3 years, with future fixed rental payments under non-cancelable leases totaling **$1.322 million** as of March 31, 2020, mostly due in fiscal year 2021 - The Company leases equipment to third parties, primarily through Contrail, which leases engines to aviation customers with lease terms between 2 and 3 years under operating lease agreements[307](index=307&type=chunk) Future Fixed Rental Payments from Non-Cancelable Leases (in thousands) | Fiscal Year | Amount (USD) | | :---------- | :----------- | | 2021 | $1,172 | | 2022 | $83 | | 2023 | $61 | | 2024 | $6 | | 2025 | — | | Thereafter | — | | **Total** | **$1,322** | [PROPERTY AND EQUIPMENT](index=54&type=section&id=9.%20PROPERTY%20AND%20EQUIPMENT) Property and equipment, net of accumulated depreciation, increased to **$5.3 million** as of March 31, 2020, from **$4.3 million** in 2019, primarily driven by additions to furniture, fixtures, and improvements, and buildings Property and Equipment (in thousands) | Item | FY2020 (USD) | FY2019 (USD) | | :------------------------------------ | :----------- | :----------- | | Furniture, fixtures and improvements | $7,633 | $6,100 | | Building | $1,958 | $1,634 | | Total | $9,591 | $7,734 | | Less accumulated depreciation | $(4,319) | $(3,470) | | **Property and equipment, net** | **$5,272** | **$4,264** | [INVESTMENTS IN SECURITIES](index=54&type=section&id=10.%20INVESTMENTS%20IN%20SECURITIES) During fiscal year 2020, the company recorded gross unrealized gains of **$8,360** and gross unrealized losses of **$0.5 million** on its investments in securities, which are included in the Consolidated Statements of Income - During the year ended March 31, 2020, the Company had gross unrealized gains aggregating to **$8,360** and gross unrealized losses aggregating to **$0.5 million**, which are included in the Consolidated Statements of Income[310](index=310&type=chunk) [EQUITY METHOD INVESTMENTS](index=54&type=section&id=11.%20EQUITY%20METHOD%20INVESTMENTS) The company accounts for its investments in Insignia Systems, Inc. and Cadillac Casting, Inc. (CCI) using the equity method, with the net investment basis in Insignia approximately **$1.3 million** as of March 31, 2020, after recording a **$1.5 million loss** and **$2.3 million in impairment charges**, while the **$2.8 million investment in CCI** resulted in **$0.6 million income** for the period under ownership - The Company's investment in Insignia is accounted for under the equity method of accounting[311](index=311&type=chunk) - For the year ended March 31, 2020, the Company recorded a loss of approximately **$1.5 million** as its share of Insignia's net loss and total impairment charges of **$2.3 million** on the investment[312](index=312&type=chunk) - The Company's net investment basis in Insignia is approximately **$1.3 million** as of March 31, 2020[312](index=312&type=chunk) - On November 8, 2019, the Company invested **$2.8 million** to purchase a **19.9% ownership stake** in Cadillac Casting, Inc. (CCI), accounted for using the equity method[313](index=313&type=chunk) - For the year ended March 31, 2020, Air T recorded income of **$0.6 million** as its share of CCI's net income[314](index=314&type=chunk) Summarized Financial Information for Equity Method Investees (in thousands) | Item | 12 Months Ended Dec 31, 2019 (USD) | 12 Months Ended Dec 31, 2018 (USD) | | :------------------ | :--------------------------------- | :--------------------------------- | | Revenue | $108,751 | $135,345 | | Gross Profit | $7,570 | $22,734 | | Operating income (loss) | $(2,653) | $3,340 | | Net income (loss) | $(3,645) | $2,486 | | Net income attributable to Air T, Inc. stockholders | $(887) | $391 | [ACCURUED EXPENSES](index=55&type=section&id=12.%20ACCURUED%20EXPENSES) Total accrued expenses decreased to **$13.0 million** as of March 31, 2020, from **$14.2 million** in 2019, primarily due to a decrease in salaries, wages, and related items, partially offset by an increase in profit sharing and bonus accruals Accrued Expenses (in thousands) | Item | FY2020 (USD) | FY2019 (USD) | | :------------------------------ | :----------- | :----------- | | Salaries, wages and related items | $3,616 | $6,049 | | Profit sharing and bonus | $3,349 | $2,077 | | Other deposits | $1,722 | $1,526 | | Other | $4,337 | $4,523 | | **Total** | **$13,024** | **$14,175** | [LEASE ARRANGEMENTS](index=55&type=section&id=13.%20LEASE%20ARRANGEMENTS) The company has operating leases for real estate, machinery, and office equipment, with terms ranging from 2 to 30 years, recognizing right-of-use assets of **$8.1 million** and lease liabilities of **$8.6 million** as of March 31, 2020, upon adopting ASU 2016-02, with total lease cost for the twelve months ended March 31, 2020, being **$2.9 million** - The Company has operating leases for real estate, machinery, and office equipment, with terms ranging from 2 to 30 years[317](index=317&type=chunk) Components of Lease Cost (in thousands) | Item | 12 Months Ended March 31, 2020 (USD) | | :-------------------- | :----------------------------------- | | Operating lease cost | $2,093 | | Short-term lease cost | $439 | | Variable lease cost | $342 | | Sublease income | — | | **Total lease cost** | **$2,874** | Lease Liabilities and ROU Assets (in thousands) | Item | March 31, 2020 (USD) | | :------------------------ | :------------------- | | Operating lease ROU assets | $8,116 | | Operating lease liabilities | $8,647 | | Weighted-average remaining lease term | 14 years, 4 months | | Weighted-average discount rate | 4.50% | Maturities of Lease Liabilities (in thousands) | Fiscal Year | Operating Leases (USD) | | :---------- | :--------------------- | | 2021 | $1,624 | | 2022 | $1,512 | | 2023 | $1,331 | | 2024 | $960 | | 2025 | $694 | | Thereafter | $6,388 | | **Total undiscounted lease payments** | **$12,509** | | Less: Interest | $(3,299) | | Less: Discount | $(563) | | **Total lease liabilities** | **$8,647** | [FINANCING ARRANGEMENTS](index=56&type=section&id=14.%20FINANCING%20ARRANGEMENTS) As of March 31, 2020, total debt, net of unamortized debt issuance costs, was **$85.8 million**, up from **$57.7 million** in 2019, including various revolving credit facilities and term loans, with the company issuing **$12.9 million in Trust Preferred Securities (TruPs)** and having **4.8 million Warrants outstanding**, and using interest rate swaps to hedge against rising variable interest rates, while net interest expense increased to **$4.7 million** in fiscal year 2020 Debt Summary (in thousands) | Debt Category | March 31, 2020 (USD) | March 31, 2019 (USD) | | :------------ | :------------------- | :------------------- | | Air T Debt | $35,592 | $27,135 | | AirCo Debt | $8,335 | $6,770 | | Contrail Debt | $42,247 | $24,117 | | **Total Debt**| **$86,174** | **$58,022** | | Less: Unamortized Debt Issuance Costs | $(354) | $(369) | | **Total Debt, net** | **$85,820** | **$57,653** | - The weighted average interest rate on short-term borrowings outstanding was **3.7%** as of March 31, 2020, down from **5.3%** in 2019[330](index=330&type=chunk) Contractual Financing Obligations (in thousands) | Fiscal year ended | Amount (USD) | | :---------------- | :----------- | | 2021 | $42,684 | | 2022 | $13,901 | | 2023 | $4,991 | | 2024 | $3,267 | | 2025 | $3,126 | | Thereafter | $18,205 | | **Total** | **$86,174** | | Less: Unamortized Debt Issuance Costs | $(354) | | **Total** | **$85,820** | Net Interest Expense (in thousands) | Item | FY2020 (USD) | FY2019 (USD) | | :------------------------------------ | :----------- | :----------- | | Contractual interest | $4,458 | $3,291 | | Amortization of deferred financing costs | $237 | $194 | | Interest income | $(3) | $(58) | | **Total** | **$4,692** | **$3,427** | - The Company issued **1.6 million Trust Preferred Capital Securities (TruPs)** with an aggregate stated value of **$4.0 million** and **8.4 million Warrants** to purchase TruPs in June 2019[336](index=336&type=chunk) - As of March 31, 2020, approximately **3.6 million Warrants** have been exercised, resulting in **$12.9 million outstanding** on Debt - Trust Preferred Securities[339](index=339&type=chunk) - The Company uses interest rate swaps to hedge against rising variable interest rates on Term Notes A and D, designated as cash flow hedging instruments[341](index=341&type=chunk)[342](index=342&type=chunk) [RELATED PARTY MATTERS](index=60&type=section&id=15.%20RELATED%20PARTY%20MATTERS) Related party transactions include Contrail Aviation Support, LLC leasing facilities from Cohen Kuhn Properties, LLC, owned by the CEO and CFO, Gary S. Kohler serving as Chief Investment Officer for BCCM, a subsidiary, and Nick Swenson, CEO, being the majority shareholder of Cadillac Casting, Inc. (CCI), making him the primary beneficiary under the VIE model - Contrail Aviation Support, LLC leases its corporate and operating facilities from Cohen Kuhn Properties, LLC, a limited liability company whose membership interests are owned by Mr. Joseph Kuhn, Chief Executive Officer and Mrs. Miriam Cohen-Kuhn, Chief Financial Officer equally[344](index=344&type=chunk) - Gary S. Kohler, a director, entered into an employment agreement with BCCM, a wholly-owned subsidiary, to serve as its Chief Investment Officer[345](index=345&type=chunk) - Nick Swenson, CEO, is the majority shareholder (**69%**) of Cadillac Casting, Inc. (CCI), and is considered the primary beneficiary of CCI under the VIE model[346](index=346&type=chunk) [SHARE REPURCHASE](index=61&type=section&id=16.%20SHARE%20REPURCHASE) The company repurchased **150,658 shares** of common stock at an aggregate cost of **$2.8 million** during the fiscal year ended March 31, 2020, under a Board-authorized program, with **9,766 shares retired** and **140,892 shares recorded as treasury shares** - The Company repurchased **150,658 shares** of common stock at an aggregate cost of **$2.8 million** during the year ended March 31, 2020[348](index=348&type=chunk) - **9,766 shares were retired**, and **140,892 shares were recorded as treasury shares** as of March 31, 2020[348](index=348&type=chunk) [EMPLOYEE AND NON-EMPLOYEE STOCK OPTIONS](index=62&type=section&id=17.%20EMPLOYEE%20AND%20NON-EMPLOYEE%20STOCK%20OPTIONS) The company maintains stock option plans for employees and directors, valuing options using the Black-Scholes model, with no options granted under Air T, Inc.'s plan in fiscal years 2020 or 2019, and no stock-based compensation expense recognized, while **11,250 shares** were outstanding and exercisable under the Delphax option plans as of March 31, 2020, with a weighted average exercise price of **$6.61** - No options were granted under Air T, Inc.'s stock option plan during the fiscal years ended March 31, 2020 and 2019, and no stock-based compensation expense was recognized[351](index=351&type=chunk) Stock Option Activity (in thousands, except per share data) | Item | Shares | Weighted Average Exercise Price Per Share (USD) | Weighted Average Remaining Life (Years) | Aggregate Intrinsic Value (USD) | | :------------------------------------ | :----- | :---------------------------------------------- | :-------------------------------------- | :------------------------------ | | Outstanding at March 31, 2019 | 11,250 | $6.61 | 4.07 | $152,075 | | Outstanding at March 31, 2020 | 11,250 | $6.61 | 3.07 | $66,388 | | Exercisable at March 31, 2020 | 11,250 | $6.61 | 3.07 | $66,388 | [REVENUE RECOGNITION](index=63&type=section&id=18.%20REVENUE%20RECOGNITION) The company recognizes revenue from product sales (parts, equipment, engines) at a point-in-time upon shipment or transfer of control, and from support services (maintenance, repair, aircraft routes) over time as benefits are provided, with total disaggregated revenues for fiscal year 2020 being **$236.8 million**, including **$168.7 million from product sales** and **$55.8 million from support services**, and **$23.7 million from air cargo dry-lease pass-through costs** - Product sales revenue is recognized at a point-in-time upon shipment or when control is transferred to the customer[354](index=354&type=chunk) - Support services revenue is recognized over time as the customer simultaneously receives the benefits provided by the Company's performance[354](index=354&type=chunk) Disaggregated Revenues by Type (in thousands) | Type of Revenue | FY2020 (USD) | FY2019 (USD) | | :-------------- | :----------- | :----------- | | **Product Sales** | **$168,704** | **$148,107** | | Air Cargo | $23,690 | $23,043 | | Ground equipment sales | $58,082 | $45,897 | | Commercial jet engines and parts | $86,625 | $78,174 | | Printing equipment and maintenance | $261 | $592 | | Corporate and other | — | — | | **Support Services** | **$55,771** | **$55,795** | | Air Cargo | $51,469 | $49,781 | | Ground equipment sales | $485 | $648 | | Commercial jet engines and parts | $3,675 | $5,239 | | Printing equipment and maintenance | $42 | $47 | | Corporate and other | $104 | $89 | | **Leasing Revenue** | **$11,138** | **$10,391** | | Ground equipment sales | $189 | $76 | | Commercial jet engines and parts | $10,797 | $10,189 | | Corporate and other | $152 | $126 | | **Other** | **$1,214** | **$1,065** | | **Total** | **$236,785** | **$215,502** | - Pass-through costs under overnight air cargo dry-lease agreements with FedEx totaled **$23.7 million** and **$23.6 million** for fiscal years 2020 and 2019, respectively[267](index=267&type=chunk) [EMPLOYEE BENEFITS](index=66&type=section&id=19.%20EMPLOYEE%20BENEFITS) The company offers a 401(k) defined contribution plan for domestic employees and an 1165(E) plan for Puerto Rico-based employees, with contributions of approximately **$0.6 million** in both fiscal years 2020 and 2019, and paid a discretionary profit sharing bonus with expenses of **$3.5 million** in fiscal year 2020 and **$2.4 million** in fiscal year 2019 - The Company's contribution to its 401(k) and 1165(E) defined contribution plans was approximately **$0.6 million** for both fiscal years ended March 31, 2020 and 2019[361](index=361&type=chunk) - Profit sharing expense was approximately **$3.5 million** in fiscal 2020 and **$2.4 million** in fiscal 2019[362](index=362&type=chunk) [INCOME TAXES](index=67&type=section&id=20.%20INCOME%20TAXES) The company recorded an income tax benefit of **$0.5 million** in fiscal year 2020, compared to an expense of **$1.8 million** in 2019, resulting in effective tax rates of **-20.7%** and **29.5%**, respectively, influenced by the micro-captive insurance benefit, non-taxable cancellation of debt income, changes in valuation allowance, and the write-off of Delphax tax attributes, with a full valuation allowance of **$6.4 million** established against Delphax's net deferred tax assets in 2020 Income Tax Expense (Benefit) (in thousands) | Item | FY2020 (USD) | FY2019 (USD) | | :------------ | :----------- | :----------- | | Current: | | | | Federal | $43 | $2,484 | | State | $(8) | $418 | | Foreign | — | $23 | | Total current | $35 | $2,925 | | Deferred: | | | | Federal | $(481) | $(1,101) | | State | $(98) | $(63) | | Total deferred| $(579) | $(1,164) | | **Total** | **$(544)** | **$1,761** | Reconciliation of Income Tax Expense to U.S. Federal Statutory Rate (in thousands) | Item | FY2020 (USD) | FY2020 (%) | FY2019 (USD) | FY2019 (%) | | :-------------------------------------------- | :----------- | :--------- | :----------- | :--------- | | Expected Federal income tax expense U.S. statutory rate | $551 | 21.0% | $1,253 | 21.0% | | State income taxes, net of federal benefit | $(519) | -19.8% | $201 | 3.4% | | Nontaxable cancellation of debt income | $(1,331) | -50.7% | — | 0.0% | | Micro-captive insurance benefit | $(172) | -6.6% | $(197) | -3.3% | | Change in valuation allowance | $(7,789) | -296.8% | $1,405 | 23.5% | | Income attributable to minority interest - Contrail | $(325) | -12.4% | $(434) | -7.3% | | Write-off Delphax tax attributes | $9,353 | 356.4% | — | 0.0% | | Acquired NOL carrybacks; CARES Act | $(363) | -13.8% | — | 0.0% | | Other differences, net | $51 | 1.9% | $(467) | -7.8% | | **Income tax (benefit) expense** | **$(544)** | **-20.7%** | **$1,761** | **29.5%** | - A full valuation allowance of **$6.4 million** was established against Delphax's net deferred tax assets at March 31, 2020, primarily due to cumulative tax losses[373](index=373&type=chunk) - The CARES Act, enacted in March 2020, made significant changes to federal tax laws, with no material income tax consequences on the reporting period of these financial statements[375](index=375&type=chunk) [QUARTERLY FINANCIAL INFORMATION (UNAUDITED)](index=71&type=section&id=21.%20QUARTERLY%20FINANCIAL%20INFORMATION%20(UNAUDITED)) Unaudited quarterly financial information for fiscal years 2020 and 2019 shows fluctuations in operating revenues, income from continu

UNITED STATES SECURITIES AND EXCHANGE COMMISSION WASHINGTON, D.C. 20549 FORM 10-Q (Mark one) ☒ Quarterly Report Pursuant to Section 13 or 15(d) of the Securities Exchange Act of 1934 for the quarterly period ended December 31, 2019 ☐ Transition Report Pursuant to Section 13 or 15(d) of the Securities Exchange Act of 1934 for the transition period from _____to _____ Commission File Number 001-35476 Air T, Inc. (Exact name of registrant as specified in its charter) Delaware 52-1206400 (State or other jurisdic ...

UNITED STATES SECURITIES AND EXCHANGE COMMISSION WASHINGTON, D.C. 20549 FORM 10-Q (Mark one) x Quarterly Report Pursuant to Section 13 or 15(d) of the Securities Exchange Act of 1934 for the quarterly period ended September 30, 2019 ☐ Transition Report Pursuant to Section 13 or 15(d) of the Securities Exchange Act of 1934 for the transition period from _____to _____ Commission File Number 001-35476 Air T, Inc. (Exact name of registrant as specified in its charter) Delaware 52-1206400 (State or other jurisdi ...

UNITED STATES SECURITIES AND EXCHANGE COMMISSION WASHINGTON, D.C. 20549 FORM 10-Q (Mark one) x Quarterly Report Pursuant to Section 13 or 15(d) of the Securities Exchange Act of 1934 for the quarterly period ended June 30, 2019 ☐ Transition Report Pursuant to Section 13 or 15(d) of the Securities Exchange Act of 1934 for the transition period from _____to _____ Commission File Number 001-35476 Air T, Inc. (Exact name of registrant as specified in its charter) Delaware 52-1206400 (State or other jurisdiction ...

UNITED STATES SECURITIES AND EXCHANGE COMMISSION Washington, D.C. 20549 Title of each class Trading Symbol(s) Name of each exchange on which registered Common stock, par value $0.25 per share AIRT The NASDAQ Stock Market (Mark one) FORM 10-K [X] ANNUAL REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934 For the fiscal year ended March 31, 2019 or [ ] TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934 For the transition period from to Commission ...