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☒ ANNUAL REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934

For the fiscal year ended			March 31, 2022

☐ 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 of

(I.R.S. Employer

incorporation or organization

Identification No.)

Title of each class			Trading Symbol(s)			Name of each exchange on which registered
Common Stock			AIRT			NASDAQ Stock Market
Alpha Income Preferred Securities (also referred to as 8% Cumulative Capital Securities) ("AIP")*			AIRTP			NASDAQ Stock Market
*Issued by Air T Funding

Yes ☐ No ☒

Yes ☒ No ☐

Large accelerated Filer			☐			Accelerated Filer			☐
Non-accelerated Filer			☒			Smaller reporting company			☒
						Emerging growth company			☐

Yes ☐ No ☒

Common Stock			Common Shares, par value of $.25 per share
Outstanding Shares at May 31, 2022			2,866,418

AIR T, INC. AND SUBSIDIARIES
2022 ANNUAL REPORT ON FORM 10-K
TABLE OF CONTENTS

						Page
			PART I
Item 1.			Business			4
Item 1A.			Risk Factors			8
Item 1B.			Unresolved Staff Comments			20
Item 2.			Properties			20
Item 3.			Legal Proceedings			20
Item 4.			Mine Safety Disclosures			21
			PART II
Item 5.			Market for Registrant's Common Equity, Related Stockholder Matters and Issuer Purchases of Equity Securities			21
Item 6.			[Reserved]			21
Item 7.			Management's Discussion and Analysis of Financial Condition and Results of Operations			22
Item 7A.			Quantitative and Qualitative Disclosures About Market Risk			33
Item 8.			Financial Statements and Supplementary Data			34
Item 9.			Changes in and Disagreements with Accountants on Accounting and Financial Disclosure			75
Item 9A.			Controls and Procedures			75
Item 9B.			Other Information			76
Item 9C.			Disclosure Regarding Foreign Jurisdictions that Prevent Inspections			76
			PART III
Item 10.			Directors, Executive Officers and Corporate Governance			76
Item 11.			Executive Compensation			77
Item 12.			Security Ownership of Certain Beneficial Owners and Management and Related Stockholder Matters			77
Item 13.			Certain Relationships and Related Transactions, and Director Independence			78
Item 14.			Principal Accountant Fees and Services			78
			PART IV
Item 15.			Exhibits and Financial Statement Schedules			79
Item 16.			Form 10-K Summary			88
			Signatures
			Interactive Data Files

Item 1.    Business

•Overnight air cargo, which operates in the air express delivery services industry;

•Ground equipment sales, which manufactures and provides mobile deicers and other specialized equipment products to passenger and cargo airlines, airports, the military and industrial customers;

•Commercial jet engines and parts, which manages and leases aviation assets; supplies surplus and aftermarket commercial jet engine components; provides commercial aircraft disassembly/part-out services; commercial aircraft parts sales; procurement services and overhaul and repair services to airlines and;

•Corporate and other, which acts as the capital allocator and resource for other consolidated businesses. Further, Corporate and other is also comprised of insignificant businesses that do not pertain to other reportable segments.

Wolfe Lake HQ, LLC. On December 2, 2021, the Company, through its wholly-owned subsidiary Wolfe Lake HQ, LLC ("Wolfe Lake"), completed the purchase of the real estate located at 5000 36th Street West, St. Louis Park, Minnesota for $13.2 million pursuant to the real estate purchase agreement with WLPC East, LLC, a Minnesota limited liability company dated October 11, 2021. The real estate purchased consists of a 2-story office building, asphalt-paved driveways and parking areas, and landscaping. The building was constructed in 2004 and contains an estimated 54,742 total square feet of space. Air T's Minnesota executive office is currently located in the property. With this purchase, the Company assumed 11 leases from existing tenants occupying the building. Wolfe Lake HQ, LLC is included within the Corporate and other segment. See Note 2 of Notes to Consolidated Financial Statements included under Part II, Item 8 of this report.

GdW Beheer B.V. On February 10, 2022, the Company acquired GdW Beheer B.V. ("GdW"), a Dutch holding company in the business of providing global aviation data and information for EUR 12.5 million. The acquisition was completed through a wholly-owned subsidiary of the Company, Air T Acquisition 22.1, LLC ("Air T Acquisition 22.1", “Subsidiary”), a Minnesota limited liability company, through its Dutch subsidiary, Shanwick B.V. ("Shanwick"), and was funded with cash, investment by executive management of the underlying business, and the loans described in Note 14 of Notes to Consolidated Financial Statements included under Part II, Item 8 of this report. As part of the transaction, the executive management of the underlying business purchased 30% of Shanwick. Air T Acquisition 22.1 and its consolidated subsidiaries are included within the Corporate and other segment. See Note 2 of Notes to Consolidated Financial Statements included under Part II, Item 8 of this report.

On May 5, 2021, the Company helped form an aircraft asset management business called Contrail Asset Management, LLC (“CAM”), and an aircraft capital joint venture called Contrail JV II LLC (“CJVII”). The Company and Mill Road Capital (“MRC”) agreed to become common members in CAM. CAM serves two separate and distinct functions: 1) to direct the sourcing, acquisition and management of aircraft assets owned by CJVII (“Asset Management Function”), and 2) to directly invest into CJVII alongside other institutional investment partners (“Investment Function”). For the Asset Management Function, CAM receives origination fees, management fees, consignment fees (where applicable) and a carried interest. For its Investment Function, CAM has an initial commitment to CJVII of approximately $53.0 million, which is comprised of an $8.0 million initial commitment from the Company and an approximately $45.0 million initial commitment from MRC. Any investment returns are shared pro-rata between the Company and MRC. See Note 24 of Notes to Consolidated Financial Statements included under Part II, Item 8 of this report.

The Company also has ownership interests in Insignia Systems, Inc. ("Insignia") and Cadillac Casting, Inc. ("CCI"). The operations of these companies are not consolidated into the operations of the Company. See Note 10 of Notes to Consolidated Financial Statements included under Part II, Item 8 of this report.

Certain financial data with respect to the Company’s geographic areas and segments is set forth in Notes 21 and 22 of Notes to Consolidated Financial Statements included under Part II, Item 8 of this report.

Type of Aircraft			Model Year						Form of Ownership						Number of Aircraft
Cessna Caravan 208B (single turbo prop)			1985-1996						Dry lease						54
ATR-42 (twin turbo prop)			1992						Dry lease						9
ATR-72 (twin turbo prop)			1992						Dry lease						9
															72

Ground Equipment Sales.

Commercial Jet Engines and Parts.

Item 1A.    Risk Factors.

General Business Risks

Our business, financial condition and results of operations have been and may continue to be adversely affected if the COVID-19 pandemic, or another global health crisis, impacts our employees, suppliers, customers, financing sources or others’ ability to conduct business or negatively affects consumer and business confidence or the global economy. The COVID-19 health crisis has affected large segments of the global economy, including the markets we operate in, disrupted global supply chains, resulted in significant travel and transport restrictions, and created significant disruption of the financial markets. Economic uncertainty as a result of any global health crisis could negatively affect our business, suppliers, distribution channels, and customers, including as a result of business shutdowns or disruptions for an indefinite period of time, reduced operations, restrictions on shipping, fabricating or installing products, reduced consumer demand or customers’ ability to make payments. We have and may continue to experience additional operating costs due to increased challenges with our workforce (including as a result of illness, absenteeism or government orders), implementing further precautionary measures to protect the health of our workforce, orders put on hold or reduced access to supplies, capital, and fundamental support services (such as shipping and transportation). Furthermore, we do operate and compete globally and the response to the COVID-19 pandemic by domestic and foreign governments has been and may continue to be varied and those differences may impact our competitiveness. Any resulting financial impact cannot be fully estimated at this time, but may materially affect our business, financial condition, or results of operations.

We sustained a cybersecurity attack in May 2022 involving ransomware that caused a network disruption and impacted certain of our systems. Upon detection, we undertook steps to address the incident, including engaging a team of third-party forensic experts and notifying law enforcement. We restored network systems and resumed normal operations. We are continuing to assess all actions that we will take to improve our existing systems. While we do not believe this event or resultant actions will have a material adverse effect on our business, this or similar incidents, or any other such breach of our data security infrastructure could have a material adverse effect on our business, results of operations and financial condition.

a.the economic health of the economy and the aviation industry in general;

b.FedEx’s demand for the use of the services of our Air Cargo segment;

c.the timing and number of purchases and sales of engines or aircraft;

d.the timing and amount of maintenance reserve revenues recorded resulting from the termination of long term leases, for which significant amounts of maintenance reserves may have accumulated;

e.the termination or announced termination of production of particular aircraft and engine types;

f.the retirement or announced retirement of particular aircraft models by aircraft operators;

g.the operating history of any particular engine, aircraft or engine or aircraft model;

h.the length of our operating leases; and

i.the timing of necessary overhauls of engines and aircraft.

•Economic conditions and anti-trade measures/trade policies and relations in the global markets in which it operates;

•Additional changes in international trade policies and relations could significantly reduce the volume of goods transported globally and adversely affect our business and results of operations.

•The price and availability of fuel.

•Dependence on its strong reputation and value of its brand;

•Potential disruption to operations resulting from a significant data breach or other disruption to FedEx’s technology infrastructure;

•The continuing impact of the COVID-19 pandemic;

•The impact of being self-insured for certain costs;

•The transportation infrastructure continues to be a target for terrorist activities;

•Any inability to execute and effectively operate, integrate, leverage and grow acquired businesses and realize the anticipated benefits of acquisitions, joint ventures or strategic alliances;

•FedEx's ability to manage capital and its assets, including aircraft, to match shifting and future shipping volumes;

•Intense competition;

•Its autonomous delivery strategy is dependent upon the ability to successfully mitigate unique technological, operational and regulatory risks.

•The failure to successfully implement its business strategy and effectively respond to changes in market dynamics and customer preferences;

•Failure to attract and maintain employee talent or maintain company culture, as well as increases in labor and purchased transportation cost;

•Labor organizations attempt to organize groups of our employees from time to time, and potential changes in labor laws could make it easier for them to do so.

•FedEx Ground relies on service providers to conduct its linehaul and pickup-and-delivery operations, and the status of these service providers as direct employers of drivers providing these services is being challenged.

•Disruptions, modifications in service or changes in the business or financial soundness of the United States Postal Service, a significant customer and vendor of FedEx;

•The impact of proposed pilot flight and duty time regulations;

•Increasing costs, the volatility of costs and funding requirements and other legal mandates for employee benefits, especially pension and healthcare benefits;

•The impact of global climate change or by legal, regulatory or market responses to such change;

•Potentially being unable to achieve our goal of carbon neutrality for its global operations by calendar 2040;

•Any inability to quickly and effectively restore operations following adverse weather or a localized disaster or disturbance in a key geography;

•Evolving Government regulation and enforcement;

•Any adverse changes in regulations and interpretations or challenges to its tax positions;

•Complex and evolving U.S. and foreign laws and regulations regarding data protection;

•The regulatory environment for global aviation or other transportation rights;

•Other risks and uncertainties, including:

◦widespread outbreak of an illness or any other communicable disease, or any other public health crisis;

◦the increasing costs of compliance with federal, state and foreign governmental agency mandates (including the Foreign Corrupt Practices Act and the U.K. Bribery Act) and defending against inappropriate or unjustified enforcement or other actions by such agencies;

◦changes in foreign currency exchange rates, especially in the euro, Chinese yuan, British pound, Canadian dollar, Australian dollar, Hong Kong dollar, Mexican peso, Japanese yen and Brazilian real, which can affect our sales levels and foreign currency sales prices;

◦any liability resulting from and the costs of defending against class-action, derivative and other litigation, such as wage-and-hour, joint employment, securities and discrimination and retaliation claims, and any other legal or governmental proceedings;

◦the impact of technology developments on our operations and on demand for our services, and our ability to continue to identify and eliminate unnecessary information-technology redundancy and complexity throughout the organization;

◦governmental underinvestment in transportation infrastructure, which could increase our costs and adversely impact our service levels due to traffic congestion, prolonged closure of key thoroughfares or sub-optimal routing of our vehicles and aircraft;

◦disruptions in global supply chains, which can limit the access of FedEx and our service providers to vehicles and other key capital resources and increase our costs;

◦stockholder activism, which could divert the attention of management and our board of directors from our business, hinder execution of our business strategy, give rise to perceived uncertainties as to our future and cause the price of our common stock to fluctuate significantly;

◦constraints, volatility or disruption in the capital markets, our ability to maintain our current credit ratings, commercial paper ratings, and senior unsecured debt and pass-through certificate credit ratings, and our ability to meet credit agreement financial covenants; and

◦the alternative interest rates we are able to negotiate with counterparties pursuant to the relevant provisions of our credit agreements following cessation of the publication of the London Interbank Offered Rate in the event the euro interbank offered rate also ceases to exist and we make borrowings under the agreements.

a.a grounding of the related engine or aircraft;

b.a repossession that would likely cause us to incur additional and potentially substantial expenditures in restoring the engine or aircraft to an acceptable maintenance condition;

c.a need to incur additional costs and devote resources to recreate the records prior to the sale or lease of the engine or aircraft;

d.a decline in the market value of the aircraft or engine resulting in lower revenues upon a subsequent lease or sale;

e.loss of lease revenue while we perform refurbishments or repairs and recreate records; and

f.a lower lease rate and/or shorter lease term under a new lease entered into by us following repossession of the engine or aircraft.

Anti-corruption Laws. As a U.S. corporation with international operations, we are required to comply with a number of U.S. and international laws and regulations which combat corruption. For example, the U.S. Foreign Corrupt Practices Act (the “FCPA”) and similar world-wide anti-bribery laws generally prohibit improper payments to foreign officials for the purpose of influencing any official act or decision or securing any improper advantage. The scope and enforcement of such anti-corruption laws and regulations may vary. Although our policies expressly mandate compliance with the FCPA and similarly applicable laws, there can be no assurance that none of our employees or agents will take any action in violation of our policies. Violations of such laws or regulations could result in substantial civil or criminal fines or penalties. Actual or alleged violations could also damage our reputation, be expensive to defend, and impair our ability to do business.

•a significant decline in revenues,

•a material increase in interest expense that is not matched by a corresponding increase in revenues,

•a significant increase in operating expenses,

•a reduction in our available credit under our credit facilities, or

•general economic or national events.

Item 1B.    Unresolved Staff Comments

Not applicable.

Item 2.    Properties.

Contrail leases a 21,000 square foot facility in Verona, Wisconsin. This is a lease from a related party. See Note 15 “Related Party Matters” of Notes to Consolidated Financial Statements included under Part II, Item 8 of this report. This lease expires on July 17, 2026. Contrail also leases a 1,453 square foot office space in Denver, Colorado. The lease is a 60 month lease that extends through June 2026.

Item 3.    Legal Proceedings.

Item 4.    Mine Safety Disclosures.

Item 5.    Market for Registrant’s Common Equity, Related Stockholder Matters and Issuer Purchases of Equity Securities.

Dates of Shares Purchased						Total Number of Shares Purchased						Average Price Paid per Share						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, 2022						5,660						$	25.47					178,970						933,282
Feb 1 - Feb 28, 2022						9,775						$	24.65					188,745						923,507
March 1 - March 31, 2022						—						$	—					188,745						923,507

Item 6.    [Reserved]

Item 7.    Management’s Discussion and Analysis of Financial Condition and Results of Operations.

•Overnight air cargo, which operates in the air express delivery services industry;

•Ground equipment sales, which manufactures and provides mobile deicers and other specialized equipment products to passenger and cargo airlines, airports, the military and industrial customers;

•Commercial aircraft, engines and parts, which manages and leases aviation assets; supplies surplus and aftermarket commercial jet engine components; provides commercial aircraft disassembly/part-out services; commercial aircraft parts sales; procurement services and overhaul and repair services to airlines and;

•Corporate and other, which acts as the capital allocator and resource for other consolidated businesses. Further, Corporate and other is also comprised of insignificant businesses that do not pertain to other reportable segments.

Wolfe Lake HQ, LLC. On December 2, 2021, the Company, through its wholly-owned subsidiary Wolfe Lake, completed the purchase of the real estate located at 5000 36th Street West, St. Louis Park, Minnesota for $13.2 million pursuant to the real estate purchase agreement with WLPC East, LLC, a Minnesota limited liability company dated October 11, 2021. The real estate purchased consists of a 2-story office building, asphalt-paved driveways and parking areas, and landscaping. The building was constructed in 2004 and contains an estimated 54,742 total square feet of space. Air T's Minnesota executive office is currently located in the building. With this purchase, the Company assumed 11 leases from existing tenants occupying the building. Wolfe Lake HQ, LLC is included within the Corporate and other segment. See Note 2 of Notes to Consolidated Financial Statements included under Part II, Item 8 of this report.

GdW Beheer B.V. On February 10, 2022, the Company, acquired GdW, a Dutch holding company in the business of providing global aviation data and information for EUR 12.5 million. The acquisition was completed through a wholly-owned subsidiary of the Company, Air T Acquisition 22.1, a Minnesota limited liability company, through its Dutch subsidiary, Shanwick, and

was funded with cash, investment by executive management of the underlying business, and the loans described in Note 14 of Notes to Consolidated Financial Statements included under Part II, Item 8 of this report. As part of the transaction, the executive management of the underlying business purchased 30% of Shanwick. Air T Acquisition 22.1 and its consolidated subsidiaries are included within the Corporate and other segment. See Note 2 of Notes to Consolidated Financial Statements included under Part II, Item 8 of this report.

On May 5, 2021, the Company helped form an aircraft asset management business called CAM, and a new aircraft capital joint venture called CJVII. The Company and MRC agreed to become common members in CAM. CAM serves two separate and distinct functions: 1) to direct the sourcing, acquisition and management of aircraft assets owned by CJVII, and 2) to directly invest into CJVII alongside other institutional investment partners. For the Asset Management Function, CAM receives origination fees, management fees, consignment fees (where applicable) and a carried interest. For its Investment Function, CAM has an initial commitment to CJVII of approximately $53.0 million, which is comprised of an $8.0 million initial commitment from the Company and an approximately $45.0 million initial commitment from MRC. Any investment returns are shared pro-rata between the Company and MRC. See Note 24 of Notes to Consolidated Financial Statements included under Part II, Item 8 of this report.

The Company also has ownership interests in Insignia and CCI. The operations of these companies are not consolidated into the operations of the Company. See Note 10 of Notes to Consolidated Financial Statements included under Part II, Item 8 of this report.

•Economic and industry conditions in the Company’s markets;

•The risk that contracts with FedEx could be terminated or adversely modified;

•The risk that the number of aircraft operated for FedEx will be reduced;

•The risk that GGS customers will defer or reduce significant orders for deicing equipment;

•The impact of any terrorist activities on United States soil or abroad;

•The Company’s ability to manage its cost structure for operating expenses, or unanticipated capital requirements, and match them to shifting customer service requirements and production volume levels;

•The Company's ability to meet debt service covenants and to refinance existing debt obligations;

•The risk of injury or other damage arising from accidents involving the Company’s overnight air cargo operations, equipment or parts sold and/or services provided;

•Market acceptance of the Company’s commercial and military equipment and services;

•Competition from other providers of similar equipment and services;

•Changes in government regulation and technology;

•Changes in the value of marketable securities held as investments;

•Mild winter weather conditions reducing the demand for deicing equipment;

•Market acceptance and operational success of the Company’s relatively new aircraft asset management business and related aircraft capital joint venture; and

•The length and severity of the COVID-19 pandemic.

			Year ended March 31,												Change
			2022						2021
Overnight Air Cargo			$	74,409					$	66,251					$	8,158					12		%
Ground Equipment Sales			42,239						60,679						(18,440)						(30)		%
Commercial Jet Engines and Parts			57,689						46,793						10,896						23		%
Corporate and Other			2,740						1,398						1,342						96		%
Total			$	177,077					$	175,121					$	1,956					1		%

			Year ended March 31,												Change
			2022						2021
Overnight Air Cargo			$	2,794					$	2,178					$	616
Ground Equipment Sales			3,220						8,948						(5,728)
Commercial Jet Engines and Parts			3,619						(10,882)						14,501
Corporate and Other			(878)						(9,419)						8,541
Total			$	8,755					$	(9,175)					$	17,930

						Twelve Months Ended									Change
						March 31, 2022						March 31, 2021
Overnight Air Cargo						$	2,854					$	2,248		606
Ground Equipment Sales						3,455						9,132			(5,677)
Commercial Jet Engines and Parts						5,200						(3,933)			9,133
Corporate and Other						(103)						(8,777)			8,674
Adjusted EBITDA						$	11,406					$	(1,330)		12,736

			Year Ended March 31,												Change
			2022						2021
Interest expense, net			$	(4,948)					$	(4,624)					$	(324)
Gain on forgiveness of Paycheck Protection Program ("PPP")			8,331						—						8,331
Income (loss) from equity method investments			37						(723)						760
Other			1,221						2,741						(1,520)
Total			$	4,641					$	(2,606)					$	7,247

The Company’s Credit Agreement with Minnesota Bank & Trust, a Minnesota state banking corporation (“MBT”) (the Air T debt in Note 14 of Notes to Consolidated Financial Statements included under Part II, Item 8 of this report) includes several covenants that are measured once a year at March 31, including but not limited to, a negative covenant requiring a debt service coverage ratio of 1.25. The AirCo 1 Credit Agreement (the AirCo 1 debt in Note 14 of Notes to Consolidated Financial Statements included under Part II, Item 8 of this report) contains an affirmative covenant relating to collateral valuation. The Contrail Credit Agreement (the Contrail debt in Note 14 of Notes to Consolidated Financial Statements included under Part II, Item 8 of this report) contains affirmative and negative covenants, including covenants that restrict the ability of Contrail and its subsidiaries to, among other things, incur or guarantee indebtedness, incur liens, dispose of assets, engage in mergers and consolidations, make acquisitions or other investments, make changes in the nature of its business, and engage in transactions with affiliates. The Contrail Credit Agreement also contains quarterly financial covenants applicable to Contrail and its subsidiaries, including a minimum debt service coverage ratio of 1.25 to 1.0 and a minimum tangible net worth ("TNW") of $8 million. The obligations of Contrail under the Contrail Credit Agreement are guaranteed by the Company, up to a maximum of $1.6 million, plus costs of collection. The Company is not liable for any other assets or liabilities of Contrail and there are no cross-default provisions with respect to Contrail’s debt in any of the Company’s debt agreements with other lenders. As of March 31, 2022, the Company, AirCo 1 and Contrail were in compliance with all financial covenants.

As mentioned in Note 14 of Notes to Consolidated Financial Statements included under Part II, Item 8 of this report, during fiscal 2022, the Company received $8.5 million in gross proceeds from the sale of TruPs through a S-3 Registration Statement filed by the Company. The TruPs were sold and issued under the S-3 “shelf” Registration Statement base prospectus filed with the Securities and Exchange Commission on March 10, 2021 and declared effective by the SEC on March 19, 2021, and under an At the Market Offering Agreement and a First Amendment to the At the Market Offering Agreement filed with the SEC on May 14, 2021 and November 19, 2021, respectively, and prospectus supplements filed with the SEC on May 14, 2021 and November 19, 2021, respectively.

As mentioned in Note 24 of Notes to Consolidated Financial Statements included under Part II, Item 8 of this report, Contrail entered into an Operating Agreement with the Seller providing for the put and call options with regard to the 21% non-controlling interest retained by the Seller. The Seller is the founder of Contrail and its current Chief Executive Officer. The Put/Call Option permits the Seller to require Contrail to purchase all of the Seller’s equity membership interests in Contrail commencing on July 18, 2021 ("Contrail RNCI"). As of the date of this filing, neither the Seller nor Air T 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. The Company currently expects that it would fund any required payment from cash provided by operations.

As mentioned in Note 24 of Notes to Consolidated Financial Statements included under Part II, Item 8 of this report, on May 5, 2021, the Company formed a new aircraft asset management business called CAM and a new aircraft capital joint venture called CJVII. The new venture will focus on acquiring commercial aircraft and jet engines for leasing, trading and disassembly. CJVII will target investments in current generation narrow-body aircraft and engines, building on Contrail’s origination and asset management expertise. CAM will serve two separate and distinct functions: 1) to direct the sourcing, acquisition and management of aircraft assets owned by CJVII, and 2) to directly invest into CJVII alongside other institutional investment partners. CAM has an initial commitment to CJVII of approximately $53 million, which is comprised of an $8 million initial commitment from the Company and an approximately $45 million initial commitment from MRC. As of March 31, 2022, CAM's remaining capital commitments are approximately $2.0 million from the Company and $22.0 million from MRC. CJVII will initially be capitalized with up to $408.0 million of equity from the Company and three institutional investor partners, consisting of $108.0 million in initial commitments and $300.0 million in upsize capacity, contingent on underwriting and transaction appeal. As of the date of this filing, $75.8 million of capital has been deployed to CJVII. The timing of the remaining capital commitment is not yet known at this time.

			Year Ended March 31,												Change
			2022						2021
Net Cash Used in Operating Activities			$	(33,084)					$	(1,823)					$	(31,261)
Net Cash (Used) Provided by Investing Activities			(33,388)						2,516						(35,904)
Net Cash Provided by Financing Activities			59,254						71						59,183
Effect of foreign currency exchange rates			(341)						(412)						71
Net (Decrease) Increase in Cash and Cash Equivalents and Restricted Cash			$	(7,559)					$	352					$	(7,911)

						Twelve Months Ended
						March 31, 2022						March 31, 2021
Operating income (loss) from continuing operations						$	8,755					$	(9,175)
Depreciation and amortization (excluding leased engines depreciation)						1,589						1,231
Asset impairment, restructuring or impairment charges						805						6,592
Loss (gain) on sale of property and equipment						5						(10)
Security issuance expenses						252						32
Adjusted EBITDA						$	11,406					$	(1,330)

						Twelve Months Ended
						March 31, 2022						March 31, 2021
Overnight Air Cargo						$	2,854					$	2,248
Ground Equipment Sales						3,455						9,132
Commercial Jet Engines and Parts						5,200						(3,933)
Corporate and Other						(103)						(8,777)
Adjusted EBITDA						$	11,406					$	(1,330)

The Company’s significant accounting policies are described in Note 1 of Notes to Consolidated Financial Statements included under Part II, Item 8 of this report. The preparation of the Company’s consolidated financial statements in conformity with accounting principles generally accepted in the United States requires the use of estimates and assumptions to determine certain assets, liabilities, revenues and expenses. Management bases these estimates and assumptions upon the best information available at the time of the estimates or assumptions. The Company’s estimates and assumptions could change materially as conditions within and beyond our control change. Accordingly, actual results could differ materially from estimates. The Company believes that the following are its most critical accounting policies:

Inventories – Inventories are carried at the lower of cost or net realizable value. Within the Company’s commercial jet engines and parts segment, there are various estimates and judgments made in relief of inventory as parts are sold from established groups of parts from one engine or airframe purchase. The estimates and judgments made in relief of inventory are based on assumptions that are consistent with a market participant’s future expectations for the commercial aircraft, jet engines and parts industry and the economy in general and our expected intent for the inventory. These assumptions and estimates are complex and subjective in nature. Changes in economic and operating conditions, including those occurring as a result of the impact of the COVID-19 pandemic or its effects could impact the assumptions and result in future losses to our inventory.

Valuation of Assets on Lease or Held for Lease - Engine assets on lease or held for lease are stated at cost, less accumulated depreciation. On a quarterly basis, we monitor the portfolio for events which may indicate that a particular asset may need to be evaluated for potential impairment. These events may include a decision to part-out or sell an asset, knowledge of specific damage to an asset, or supply/demand events which may impact the Company’s ability to lease an asset in the future. On an annual basis, even absent any such ‘triggering event’, we evaluate the assets in our portfolio to determine if their carrying amount may not be recoverable. If an asset is determined to be unrecoverable, the asset is written down to fair value. When evaluating for impairment, we test at the individual asset level (e.g., engine, airframe or aircraft), as each asset generates its own stream of cash flows, including lease rents and maintenance reserves.

•Fair value – we determine fair value by reference to independent appraisals, quoted market prices (e.g., an offer to purchase) and other factors such as current data from airlines, engine manufacturers and MRO providers as well as specific market sales and repair cost data.

•Future cash flows – when evaluating the future cash flows that an asset will generate, we make assumptions regarding the lease market for specific engine models, including estimates of market lease rates and future demand. These assumptions are based upon lease rates that we are obtaining in the current market as well as our expectation of future demand for the specific engine/aircraft model.

Item 7A. Quantitative and Qualitative Disclosures about Market Risk.

Item 8.    Financial Statements and Supplementary Data.

INDEX TO FINANCIAL STATEMENTS

			Page
AIR T, INC. CONSOLIDATED FINANCIAL STATEMENTS
Report of Independent Registered Public Accounting Firm			35
Consolidated Statements of Income (Loss) for the Years Ended March 31, 2022 and 2021			37
Consolidated Statements of Comprehensive Income (Loss) for the Years Ended March 31, 2022 and 2021			38
Consolidated Balance Sheets as of March 31, 2022 and 2021			39
Consolidated Statements of Cash Flows for the Years Ended March 31, 2022 and 2021			40
Consolidated Statements of Equity for the Years Ended March 31, 2022 and 2021			41
Notes to Consolidated Financial Statements			42

•We evaluated the reasonableness of management’s forecasts of future revenue and operating margins by comparing the forecasts to:

◦Historical results of Contrail Aviation Support, LLC, and

◦Forecasted information included in industry reports.

•We considered the impact of industry and market conditions on management’s forecasts for Contrail Aviation Support, LLC.

•We involved our fair value specialists to assist in the evaluation of:

◦The valuation methodologies used by the Company to determine whether they were consistent with generally accepted valuation practices, and reasonably weighted.

◦The discount rates, including testing the underlying source information and the mathematical accuracy of the calculations, and developing a range of independent estimates and comparing those to the discount rates selected by management.

◦Earnings multiples, including testing the underlying source information and mathematical accuracy of the calculations, and evaluating the appropriateness of the Company’s selection of companies in its industry comparable groups.

•We performed sensitivity analyses with regard to forecasted revenue and the discount rate to evaluate the changes in the fair value of the redeemable non-controlling interest in Contrail Aviation Support, LLC, that would result from changes in those significant assumptions.

•We evaluated whether the business and valuation assumptions used were consistent with evidence obtained in other areas of the audit.

CONSOLIDATED STATEMENTS OF INCOME (LOSS)

			Year Ended March 31,
(In thousands, except per share data)			2022						2021
Operating Revenues:
Overnight air cargo			$	74,409					$	66,251
Ground equipment sales			42,239						60,679
Commercial jet engines and parts			57,689						46,793
Corporate and other			2,740						1,398
			177,077						175,121
Operating Expenses:
Overnight air cargo			65,694						58,351
Ground equipment sales			33,538						45,282
Commercial jet engines and parts			36,603						36,710
General and administrative			29,817						34,264
Depreciation and amortization			1,860						3,107
Write-down of inventory			768						6,405
Impairment of property and equipment			37						187
Loss (gain) on sale of property and equipment			5						(10)
			168,322						184,296
Operating Income (Loss) from continuing operations			8,755						(9,175)
Non-operating Income (Expense):
Interest expense, net			(4,948)						(4,624)
Gain on forgiveness of PPP			8,331						—
Income (loss) from equity method investments			37						(723)
Other			1,221						2,741
			4,641						(2,606)
Income (Loss) from continuing operations before income taxes			13,396						(11,781)
Income Tax Expense (Benefit)			1,169						(3,387)
Net Income (Loss) from continuing operations			12,227						(8,394)
Gain on sale of discontinued operations, net of tax			—						4
Net Income (Loss)			12,227						(8,390)
Net (Income) Loss Attributable to Non-controlling Interests			(1,299)						1,113
Net Income (Loss) Attributable to Air T, Inc. Stockholders			$	10,928					$	(7,277)
Income (loss) from continuing operations per share (Note 23)
Basic			$	3.79					$	(2.53)
Diluted			$	3.78					$	(2.53)
Income from discontinued operations per share (Note 23)
Basic			$	—					$	—
Diluted			$	—					$	—
Income (Loss) per share (Note 23)
Basic			$	3.79					$	(2.53)
Diluted			$	3.78					$	(2.53)
Weighted Average Shares Outstanding:
Basic			2,880						2,882
Diluted			2,888						2,882

CONSOLIDATED STATEMENTS OF COMPREHENSIVE INCOME (LOSS)

			Year Ended March 31,
(In thousands)			2022						2021
Net Income (Loss)			$	12,227					$	(8,390)
Other Comprehensive Loss:
Foreign currency translation loss			(549)						(409)
Unrealized gain on interest rate swaps, net of tax of $294 and $78			929						262
Reclassification of interest rate swaps into earnings			41						(18)
Total Other Comprehensive Loss			421						(165)
Total Comprehensive Income (Loss)			12,648						(8,555)
Comprehensive (Income) Loss Attributable to Non-controlling Interests			(1,299)						1,113
Comprehensive Income (Loss) Attributable to Air T, Inc. Stockholders			$	11,349					$	(7,442)

CONSOLIDATED BALANCE SHEETS

(In thousands, except per share data)			March 31, 2022						March 31, 2021
ASSETS
Current Assets:
Cash and cash equivalents			$	5,616					$	10,996
Marketable securities			859						1,407
Restricted cash			2,752						4,931
Restricted investments			1,691						1,507
Accounts receivable, net of allowance for doubtful accounts of $1,368 and $1,177			19,684						6,505
Income tax receivable			3,230						4,389
Inventories, net			75,167						71,971
Employee retention credit receivable			9,138						—
Other current assets			10,106						4,068
Total Current Assets			128,243						$	105,774
Assets on lease or held for lease, net of accumulated depreciation of $780 and $436			14,509						2,131
Property and equipment, net of accumulated depreciation of $5,405 and $4,510			21,212						8,519
Intangible assets, net of accumulated amortization of $2,947 and $2,467			13,260						1,600
Right-of-use assets			7,354						7,757
Equity method investments			9,864						4,475
Goodwill			10,126						4,227
Other assets			3,031						6,267
Total Assets			207,599						140,750
LIABILITIES AND STOCKHOLDERS' EQUITY
Current Liabilities:
Accounts payable			9,397						8,344
Income tax payable			194						39
Accrued expenses and other (Note 12)			13,391						12,787
Current portion of long-term debt			6,482						5,639
Short-term lease liability			1,443						1,370
Total Current Liabilities			30,907						28,179
Long-term debt			129,326						81,857
Deferred income tax liabilities, net			2,812						595
Long-term lease liability			6,734						7,075
Other non-current liabilities			1,342						1,732
Total Liabilities			171,121						$	119,438
Redeemable non-controlling interest			10,761						6,598
Commitments and contingencies (Note 24)
Equity:
Air T, Inc. Stockholders' Equity:
Preferred stock, $1.00 par value, 50,000 shares authorized			—						—
Common stock, $0.25 par value; 4,000,000 shares authorized, 3,022,745 shares issued, 2,866,418 and 2,881,853 shares outstanding			756						756
Treasury stock, 156,327 at $19.20 and 140,892 shares at $18.58			(3,002)						(2,617)
Additional paid-in capital			393						—
Retained earnings			26,729						16,270
Accumulated other comprehensive loss			(263)						(684)
Total Air T, Inc. Stockholders' Equity			24,613						13,725
Non-controlling Interests			1,104						989
Total Equity			25,717						14,714
Total Liabilities and Equity			$	207,599					$	140,750

CONSOLIDATED STATEMENTS OF CASH FLOWS

			Year Ended March 31,
(In thousands)			2022						2021
CASH FLOWS FROM OPERATING ACTIVITIES:
Net income (loss)			$	12,227					$	(8,390)
Gain on sale of discontinued operations, net of income tax			—						(4)
Net income (loss) from continuing operations			12,227						(8,394)
Adjustments to reconcile net income to net cash provided by operating activities:
Depreciation and  amortization			1,860						3,107
Profit from sale of assets on lease and held for lease			—						(1,473)
Gain on forgiveness of PPP loan			(8,331)						—
Write-down of inventory			768						6,405
Other			876						1,019
Change in operating assets and liabilities:
Accounts receivable			(12,654)						6,074
Inventories			(17,602)						(129)
Accounts payable			1,050						(2,521)
Accrued expenses			(485)						(341)
Employee retention credit receivable			(9,138)						—
Other			(1,655)						(5,570)
Total adjustments			(40,484)						(2,487)
Net cash used in operating activities - continuing operations			(33,084)						(1,823)
Net cash provided by operating activities - discontinued operations			—						4
Net cash used in operating activities			(33,084)						(1,819)
CASH FLOWS FROM INVESTING ACTIVITIES:
Purchases of marketable securities			—						(659)
Sale of marketable securities			815						2,452
Proceeds from sale of assets on lease and held for lease			—						8,183
Acquisition of businesses, net of cash acquired			(12,804)						(536)
Investment in unconsolidated entities			(6,797)						—
Acquisition of assets			(13,408)						—
Capital expenditures related to property & equipment			(1,530)						(3,899)
Capital expenditures related to assets on lease or held for lease			(28)						(2,106)
Other			364						(919)
Net cash (used) provided by investing activities - continuing operations			(33,388)						2,516
Net cash (used) provided by investing activities - discontinued operations			—						—
Net cash (used) provided by investing activities			(33,388)						2,516
CASH FLOWS FROM FINANCING ACTIVITIES:
Proceeds from lines of credit			99,363						66,383
Payments on lines of credit			(84,551)						(105,552)
Proceeds from term loan			34,232						59,278
Payments on term loan			(3,813)						(27,275)
Proceeds from PPP loan			—						8,215
Proceeds received from issuance of TruPs			11,278						1,341
Other			2,745						(2,319)
Net cash provided by financing activities - continuing operations			59,254						71
Effect of foreign currency exchange rates on cash and cash equivalents			(341)						(412)
NET (DECREASE) INCREASE IN CASH AND CASH EQUIVALENTS AND RESTRICTED CASH			(7,559)						356
CASH AND CASH EQUIVALENTS AND RESTRICTED CASH AT BEGINNING OF PERIOD			15,927						15,571
CASH AND CASH EQUIVALENTS AND RESTRICTED CASH AT END OF PERIOD			8,368						15,927
SUPPLEMENTAL DISCLOSURE OF NON-CASH ACTIVITIES:
Non-cash capital expenditures related to property & equipment			13						31
Equipment leased or held for lease transferred to Inventory			12						19,623
Equipment in Inventory transferred to Assets on Lease			13,100						—
SUPPLEMENTAL DISCLOSURE OF CASH FLOW INFORMATION:
Operating cash payments for operating leases			1,824						1,683
Cash paid during the year for interest			1,523						2,732
Cash paid during the year for income taxes			$	429					$	477

(In thousands)			Common Stock												Treasury Stock
			Shares						Amount						Share						Amount						Additional Paid-In Capital						Retained Earnings						Accumulated Other Comprehensive Income (Loss)						Non-controlling Interests*						Total Equity
Balance, March 31, 2020			3,023						$	756					141						$	(2,617)					$	2,636					$	23,768					$	(537)					$	1,005					$	25,011
Net loss*			—						—						—						—						—						(7,277)						—						(16)						(7,293)
Foreign currency translation loss			—						$	—					—						—						—						—						(409)						—						(409)
Adjustment to fair value of redeemable non-controlling interest			—						—						—						—						(2,636)						(221)						—						—						(2,857)
Unrealized gain of interest rate swaps, net of tax			—						—						—						—						—						—						262						—						262
Balance, March 31, 2021			3,023						$	756					141						$	(2,617)					$	—					$	16,270					$	(684)					$	989					$	14,714

(In thousands)			Common Stock												Treasury Stock
			Share						Amount						Share						Amount						Additional Paid-In Capital						Retained Earnings						Accumulated Other Comprehensive Income (Loss)						Non-controlling Interests*						Total Equity
Balance, March 31, 2021			3,023						$	756					141						$	(2,617)					$	—					$	16,270					$	(684)					$	989					$	14,714
Net income*			—						—						—						—						—						10,928						—						115						11,043
Repurchase of common stock			—						—						15						(385)						—						—						—						—						(385)
Stock compensation expense			—						—						—						—						393						—						—						—						393
Foreign currency translation loss			—						—						—						—						—						—						(549)						—						(549)
Adjustment to fair value of redeemable non-controlling interest			—						—						—						—						—						531						—						—						531
Unrealized gain on interest rate swaps, net of tax			—						—						—						—						—						—						929						—						929
Put option issued to co-investor in CAM			—						—						—						—						—						(1,000)						—						—						(1,000)
Reclassification of interest rate swaps into earnings			—						—						—						—						—						—						41						—						41
Balance, March 31, 2022			3,023						$	756					156						$	(3,002)					$	393					$	26,729					$	(263)					$	1,104					$	25,717

YEARS ENDED MARCH 31, 2022 AND 2021

•Overnight air cargo, which operates in the air express delivery services industry;

•Ground equipment sales, which manufactures and provides mobile deicers and other specialized equipment products to passenger and cargo airlines, airports, the military and industrial customers;

•Commercial aircraft, engines and parts, which manages and leases aviation assets; supplies surplus and aftermarket commercial jet engine components; provides commercial aircraft disassembly/part-out services; commercial aircraft parts sales; procurement services and overhaul and repair services to airlines and;

•Corporate and other, which acts as the capital allocator and resource for other consolidated businesses. Further, Corporate and other is also comprised of insignificant businesses that do not pertain to other reportable segments.

Discontinued Operations

1.    SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES

Principles of Consolidation – The consolidated financial statements include the accounts of the Company and its wholly-owned subsidiaries as well as its non-wholly owned subsidiaries, Contrail, Shanwick and Delphax. All intercompany transactions and balances have been eliminated in consolidation. Certain reclassifications have been made to the prior period amounts to conform to the current presentation.

Accounting Estimates – The preparation of consolidated financial statements in conformity with accounting principles generally accepted in the United States of America requires management to make estimates and assumptions that affect the amounts of assets and liabilities and amounts of revenues and expenses during the reporting period. Actual results could differ from those estimates.

Segments - The Company has four reportable operating segments: overnight air cargo, ground equipment sales, commercial jet engine and parts and corporate and other. The Company assesses the performance of these segments on an individual basis (see Note 22).

Variable Interest Entities – In accordance with the applicable accounting guidance for the consolidation of variable interest entities, the Company analyzes its variable interests to determine if an entity in which we have a variable interest is a variable interest entity. Our analysis includes both quantitative and qualitative reviews to determine if we must consolidate a variable interest entity as its primary beneficiary.

Business Combinations – The Company accounts for business combinations in accordance with Financial Accounting Standards Board (“FASB”) Accounting Standards Codification (“ASC”) 805, Business Combinations. Consistent with ASC 805, the Company accounts for each business combination by applying the acquisition method. Under the acquisition method, the Company records the identifiable assets acquired and liabilities assumed at their respective fair values on the acquisition date. Goodwill is recognized for the excess of the purchase consideration over the fair value of identifiable net assets acquired. Included in purchase consideration is the estimated acquisition date fair value of any earn-out obligation incurred. For business combinations where non-controlling interests remain after the acquisition, assets (including goodwill) and liabilities of the acquired business are recorded at the full fair value and the portion of the acquisition date fair value attributable to non-controlling interests is recorded as a separate line item within the equity section or, as applicable to redeemable non-controlling interests, between the liabilities and equity sections of the Company’s consolidated balance sheets.

Cash and Cash Equivalents – Cash equivalents consist of liquid investments with maturities of three months or less when purchased.

Financial Instruments Designated for Trading – Except for short sales of equity securities, the Company accounts for all other financial instruments (including derivative instruments) designated for trading in accordance with ASC 815. All changes in the fair value of the financial instruments designated for trading are recognized in earnings as they occur. Further, all gains and losses on derivative instruments designated for trading are presented net on the consolidated Statements of Income (Loss). The fair value of derivative instruments designated for trading in a gain position are recorded in Other Current Assets and the fair value of derivative instruments designated for trading in a loss position are recorded in Accrued Expenses and Other on the consolidated Balance Sheets.

Inventories – Inventories are carried at the lower of cost or net realizable value. When finished goods units are leased to customers under operating leases, the units are transferred to Assets on Lease or Held For Lease. The classification of cash flows associated with the purchase and sale of finished goods is based on the activity that is likely to be the predominant source or use of cash flows for the items. Consistent with aviation industry practice, the Company includes expendable aircraft parts and supplies in current assets, although a certain portion of these inventories may not be used or sold within one year.

Investments under the Equity Method – The Company utilizes the equity method to account for investments when the Company possesses the ability to exercise significant influence, but not control, over the operating and financial policies of the investee. The Company applies the equity method to investments in common stock and to other investments when such other investments possess substantially identical subordinated interests to common stock. For investments that have a different fiscal year-end, if the difference is not more than three months, the Company elects a 3-month lag to record the change in the investment.

Goodwill - The Company evaluates goodwill on an annual basis or anytime events or circumstances change that would more likely than not reduce the fair value of a reporting unit below its carrying value.

			Year Ended March 31,
			2022						2021
Goodwill, at original cost			$	10,502					$	4,603
Less accumulated impairment			(376)						(376)
Goodwill, net of impairment			$	10,126					$	4,227

Intangible Assets – Amortizable intangible assets consist of acquired patents, tradenames, customer relationships, and other finite-lived identifiable intangibles. Such intangibles are initially recorded at fair value and subsequently subject to amortization. Amortization is recorded using the straight-line method over the estimated useful lives of the assets. In accordance with the applicable accounting guidance, the Company evaluates the recoverability of amortizable intangible assets whenever events occur that indicate potential impairment. In doing so, the Company assesses whether the carrying amount of the asset is unrecoverable by estimating the sum of the future cash flows expected to result from the asset, undiscounted and without interest charges. If the carrying amount is more than the recoverable amount, an impairment charge must be recognized based on the estimated fair value of the asset.

			Years
Purchased software			3
Internally developed software			10-15
In-place lease and other intangibles			Over lease term
Trade names			5
Certification			5
Non-compete			5
License			5
Patents			9
Customer relationships			10-15

Property and Equipment and Assets on Lease or Held for Lease – Property and equipment is stated initially at cost, or fair value if purchased as part of a business combination. Depreciation and amortization are provided on a straight-line basis over the asset’s useful life. Equipment leased to customers is depreciated using the straight line method. Useful lives range from three years for computer equipment, seven years for flight equipment, ten years for deicers and other equipment leased to customers and thirty years for buildings.

Accounting for Debt - Trust Preferred Securities and Warrant Liability – On June 10, 2019, the Company issued an aggregate of 1.6 million TruPs in the amount of $4.0 million in a non-cash transaction. In connection with the issuance of these TruPs, the Company also issued an aggregate of 8.4 million warrants (representing warrants to purchase $21.0 million in stated value of TruPs). A warrant for mandatorily redeemable shares conditionally obligates the issuer to ultimately transfer assets—the obligation is conditioned only on the warrant's being exercised because the shares will be redeemed. Thus, warrants for mandatorily redeemable shares are liabilities under ASC 480. Accordingly, the Warrants are recorded within "Other non-current liabilities" on our consolidated balance sheets. The Warrants are recorded at fair value. Fair value measurement was based on quoted price for a similar asset or liability as observed on the NASDAQ Global Market. The liability is classified as Level 2 in the hierarchy. As of March 31, 2022, 5.3 million Warrants were exercised. The remaining 3.1 million Warrants were not exercised and expired on August 30, 2021.

Income Taxes – Income taxes have been provided using the asset and liability method. Deferred tax assets and liabilities are recognized for the future tax consequences attributable to differences between the financial statement carrying amounts of existing assets and liabilities and their respective tax bases. Deferred tax assets and liabilities are measured using enacted tax laws and rates expected to apply to taxable income in the years in which those temporary differences are expected to be recovered or settled. The effect of a change in tax rates on deferred tax assets and liabilities is recognized in income in the period that includes the enactment date.

Accounting for Redeemable Non-Controlling Interest – In 2016, in connection with the Company's acquisition of Contrail, Contrail entered into an Operating Agreement (the “Operating Agreement”) with the Seller providing for the governance of and the terms of membership interests in Contrail. The Operating Agreement includes put and call options (“Contrail Put/Call Option”) with regard to the 21% non-controlling interest retained by the Seller. The Seller is the founder of Contrail and its current Chief Executive Officer. The Contrail Put/Call Option permits the Seller to require Contrail to purchase all of the Seller’s equity membership interests in Contrail commencing on the fifth anniversary of the acquisition, which was on July 18, 2021. Per the agreement, the price is to be agreed upon by the parties or, failing such agreement, to be determined pursuant to third-party appraisals in a process specified in the agreement.

Per the Operating Agreement, the Contrail's non-controlling interest is redeemable at fair value, which is determined using a combination of the income approach, utilizing a discounted cash flow analysis, and the market approach, utilizing the guideline public company method. Contrail's discounted cash flow analysis requires significant management judgment with respect to forecasts of revenue, operating margins, capital expenditures, and the selection and use of an appropriate discount rate. The forecasts and assumptions are based on our annual and long-term business plans. Contrail’s market approach requires management to make significant assumptions related to market multiples of earnings derived from comparable publicly-traded companies with similar operating characteristics as Contrail. The Contrail's non-controlling interest is adjusted each reporting period for income (or loss) attributable to the non-controlling interest as well as any applicable distributions made. A measurement period adjustment, if any, is then made to adjust the non-controlling interest to the higher of the redemption value (fair value) or carrying value each reporting period. These fair value adjustments are recognized through retained earnings and are not reflected in the Company's Consolidated Statements of Income (Loss). When calculating earnings per share attributable to the Company, the Company adjusts net income attributable to the Company for the measurement period adjustment to the extent the redemption value exceeds the fair value of the non-controlling interest on a cumulative basis. As of March 31, 2022, the fair value of the Contrail's redeemable non-controlling interest is $7.2 million. See Note 24, Commitments and Contingencies.

The Shanwick's non-controlling interest is redeemable at established multiples of EBIT and, as such, is considered redeemable at other than fair value. It is recorded on our consolidated balance sheets at estimated redemption value within redeemable non-controlling interests, and changes in its estimated redemption value are recorded on our consolidated statements of operations within non-controlling interests. As of March 31, 2022, the estimated redemption value of Shanwick's redeemable non-controlling interest is $3.6 million. See Note 24, Commitments and Contingencies.

Revenue Recognition – Substantially all of the Company’s revenue is derived from contracts with an initial expected duration of one year or less. As a result, the Company has applied the practical expedient to exclude consideration of significant financing components from the determination of transaction price, to expense costs incurred to obtain a contract, and to not disclose the value of unsatisfied performance obligations.We evaluate gross versus net presentation on revenues from products or services purchased and resold in accordance with the revenue recognition criteria outlined in ASC 606-10, Principal Agent Considerations.

Liquidity – The Company’s Credit Agreement with MBT (the Air T debt in Note 14) includes several covenants that are measured once a year at March 31, including, but not limited to, a financial covenant requiring a debt service coverage ratio of 1.25. The AirCo 1 Credit Agreement (the AirCo 1 debt in Note 14) contains an affirmative covenant relating to collateral valuation. As of March 31, 2022, the Company and AirCo 1 were in compliance with all financial covenants.

The Contrail Credit Agreement (the Contrail debt in Note 14) contains affirmative and negative covenants, including covenants that restrict the ability of Contrail and its subsidiaries to, among other things, incur or guarantee indebtedness, incur liens, dispose of assets, engage in mergers and consolidations, make acquisitions or other investments, make changes in the nature of its business, and engage in transactions with affiliates. The Contrail Credit Agreement also contains quarterly financial covenants applicable to Contrail and its subsidiaries, including a minimum debt service coverage ratio of 1.25 to 1.0 and a minimum TNW of $8 million. As of March 31, 2022, Contrail was in compliance with all financial covenants.

In March 2020, the FASB issued ASU 2020-04- Reference Rate Reform (Topic 848): Facilitation of the Effects of Reference Rate Reform on Financial Reporting. The amendments in this Update provide optional expedients and exceptions for applying GAAP to contracts, hedging relationships, and other transactions affected by reference rate reform if certain criteria are met. The amendments in this Update apply only to contracts, hedging relationships, and other transactions that reference LIBOR or another reference rate expected to be discontinued because of reference rate reform. The expedients and exceptions provided by the amendments do not apply to contract modifications made and hedging relationships entered into or evaluated after December 31, 2022, except for hedging relationships existing as of December 31, 2022, that an entity has elected certain optional expedients for and that are retained through the end of the hedging relationship. The amendments are effective for all entities from the beginning of an interim period that includes the issuance date of this ASU. An entity may elect to apply the amendments prospectively through December 31, 2022. The Company is currently evaluating the impact of this amendment on our contracts, hedging relationships, and other transactions affected by reference rate reform.

In July 2021, the FASB updated the Leases (Topic 842): Lessors—Certain Leases with Variable Lease Payments. The amendments in this Update address stakeholders’ concerns by amending the lease classification requirements for lessors to align them with practice under Topic 840. Lessors should classify and account for a lease with variable lease payments that do not depend on a reference index or a rate as an operating lease if both of the following criteria are met:

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

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

In October 2021, the FASB updated the 2021-08—Business Combinations (Topic 805): Accounting for Contract Assets and Contract Liabilities from Contracts with Customers. The amendments in this Update require that an entity (acquirer) recognize and measure contract assets and contract liabilities acquired in a business combination in accordance with Topic 606. At the acquisition date, an acquirer should account for the related revenue contracts in accordance with Topic 606 as if it had originated the contracts. To achieve this, an acquirer may assess how the acquiree applied Topic 606 to determine what to record for the acquired revenue contracts. Generally, this should result in an acquirer recognizing and measuring the acquired

In November 2021, the FASB issued an update on the 2021-10—Government Assistance (Topic 832): Disclosures by Business Entities about Government Assistance. The amendments in this Update apply to business entities that account for a transaction with a government by applying a grant or contribution accounting model by analogy to other accounting guidance (for example, a grant model within IAS 20, Accounting for Government Grants and Disclosure of Government Assistance, or Subtopic 958-605, Not-For-Profit Entities—Revenue Recognition).

On January 24, 2022, the Company filed an application with the Internal Revenue Service for an ERC in an amount approximating $9.1 million. The Company early adopted the amendments as of April 1, 2021 and made all the required disclosures pertaining to our ERC application in Note 11.

2.    Acquisitions

The total amount recorded for the real estate was $13.4 million, which included the purchase price of $13.2 million and total direct capitalized acquisition costs of $0.2 million. The consideration paid for the real estate consisted of approximately $3.3 million in cash and a new secured loan from Bridgewater Bank ("Bridgewater") with an aggregate principal amount of $9.9 million and a fixed interest rate of 3.65% which matures on December 2, 2031. See Note 14.

Land			$	2,794
Building			8,439
Site Improvements			798
Tenant Improvements			269
In-place lease and other intangibles			1,108
			$	13,408

On February 10, 2022, the Company acquired GdW, a Dutch holding company in the business of providing global aviation data and information. The acquisition was completed through a wholly-owned subsidiary of the Company, Air T Acquisition 22.1, LLC ("Air T Acquisition 22.1", “Subsidiary”), a Minnesota limited liability company, through its Dutch subsidiary, Shanwick, and was funded with cash, investment by executive management of the underlying business, and the loans described in Note 14. As part of the transaction, the executive management of the underlying business purchased 30% of Shanwick. Air T Acquisition 22.1 and its consolidated subsidiaries are included within the Corporate and other segment.

			February 10, 2022
Consideration paid			$	15,256
Less: Cash acquired			(2,452)
Less: Net assets acquired			(6,855)
Goodwill			$	5,949

			February 10, 2022
ASSETS
Accounts Receivable			$	715
Other current assets			67
Property, plant and equipment, net			40
Intangible - Proprietary Database			2,936
Intangible - Customer Relationships			7,354
Total assets			11,112
LIABILITIES
Accounts payable			15
Accrued expenses and deferred revenue			1,670
Deferred income tax liabilities, net			2,572
Total liabilities			4,257
Net assets acquired			$	6,855

			Income Statement Post-Acquisition
Revenue			$	887
Cost of Sales			145
Operating Expenses			701
Operating Income			41
Non-operating income			19
Net income			$	60

3.    MAJOR CUSTOMER

4.    FAIR VALUE OF FINANCIAL INSTRUMENTS

Level 1: Unadjusted quoted prices in active markets that are accessible at the measurement date for identical, unrestricted assets or liabilities.

Level 2: Quoted prices in markets that are not active or inputs which are observable, either directly or indirectly, for substantially the full term of the asset or liability.

Level 3: Prices or valuation techniques that require inputs that are both significant to the fair value measurement and unobservable (i.e., supported by little or no market activity).

						Fair Value Measurements at March 31,
						2022						2021
Marketable securities (including restricted investments) (Level 1)						$	2,550					$	2,914
Interest rate swaps (Level 2)						889						593
Warrants Liability (Level 2)						—						414
Contrail's redeemable non-controlling interest (Level 3)						$	7,178					$	6,598