Insight

Air T, Inc. (the "Company," "Air T," "we" or "us" or "our") is a holding company
with a portfolio of operating businesses and financial assets. Our goal is to
prudently and strategically diversify Air T's earnings power and compound the
growth in its free cash flow per share over time.

We currently operate in four industry segments:

• Night air cargo, which operates in the air express delivery services sector;

•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 others, which acts as a capital and resource distributor for the other consolidated companies. In addition, Corporate and Other also includes non-significant activities that do not relate to other reportable segments.

Acquisitions

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
                                       22
--------------------------------------------------------------------------------

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.

Non-consolidated investments

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 holds 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.

Each line of business has distinct management teams and infrastructures that offer different products and services. We evaluate the performance of our business segments based on operating profit (loss) and adjusted EBITDA.

Discontinued operations

On September 30, 2019, the Company completed the sale of GAS. The results of
operations of GAS are reported as discontinued operations in the condensed
consolidated statements of operations for the year ended March 31, 2021. Unless
otherwise indicated, the disclosures accompanying the condensed consolidated
financial statements reflect the Company's continuing operations.


                                       23
--------------------------------------------------------------------------------

Forward-looking statements

Certain statements in this Report, including those contained in "Overview," are
"forward-looking" statements within the meaning of the Private Securities
Litigation Reform Act of 1995 with respect to the Company's financial condition,
results of operations, plans, objectives, future performance and business.
Forward-looking statements include those preceded by, followed by or that
include the words "believes", "pending", "future", "expects," "anticipates,"
"estimates," "depends" or similar expressions. These forward-looking statements
involve risks and uncertainties. Actual results may differ materially from those
contemplated by such forward-looking statements, because of, among other things,
potential risks and uncertainties, such as:

•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.

A forward-looking statement is neither a prediction nor a guarantee of future
events or circumstances, and those future events or circumstances may not occur.
We are under no obligation, and we expressly disclaim any obligation, to update
or alter any forward-looking statements, whether as a result of new information,
future events or otherwise.
                                       24
--------------------------------------------------------------------------------

Operating results

Outlook

COVID-19 and its impact on the current financial, economic and capital markets
environment, and future developments in these and other areas present
uncertainty and risk with respect to our financial condition and results of
operations. Each of our businesses implemented measures to attempt to limit the
impact of COVID-19 but we still experienced a substantial number of disruptions,
and we experienced and continue to experience a reduction in demand for
commercial aircraft, jet engines and parts compared to historical periods. Many
of our businesses may continue to generate reduced operating cash flow and may
operate at a loss beyond fiscal 2022. We expect that the impact of COVID-19 will
continue to some extent. The fluidity of this situation precludes any prediction
as to the ultimate adverse impact of COVID-19 on economic and market conditions
and our business in particular, and, as a result, present material uncertainty
and risk with respect to us and our results of operations.

Financial year 2022 compared to 2021

Consolidated revenue increased by $2.0 million (1%) to $177.1 million for the
fiscal year ended March 31, 2022 compared to the prior fiscal year. Following is
a table detailing revenue (after elimination of intercompany transactions), in
thousands:

                                               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  %


Revenues from the air cargo segment increased by $8.2 million (12%) compared to
the prior fiscal year, principally attributable to higher FedEx pass through
revenues, higher admin fee as a result of increased contract rates starting in
June 2021 and higher maintenance labor revenue. In addition, maintenance revenue
with customers outside of FedEx also increased compared to the prior year.
Pass-through costs under the dry-lease agreements with FedEx totaled
$23.0 million and $19.9 million for the years ended March 31, 2022 and 2021,
respectively.

The ground equipment sales segment contributed approximately $42.2 million and
$60.7 million to the Company's revenues for the fiscal periods ended March 31,
2022 and 2021, respectively, representing a $18.4 million (30%) decrease in the
current year. The decrease was primarily driven by a lower volume of truck sales
to the USAF in the current fiscal year. At March 31, 2022, the ground equipment
sales segment's order backlog was $14.0 million compared to $10.3 million at
March 31, 2021.

The commercial jet engines and parts segment contributed $57.7 million of
revenues in fiscal year ended March 31, 2022 compared to $46.8 million in the
prior fiscal year which is an increase of $10.9 million (23%). The increase is
primarily attributable to the fact that all the companies within this segment
had higher component sales as the aviation industry started to see more activity
in the current year as COVID-19 related restrictions continued to loosen.

The following is a table detailing operating income (loss) by segment, net of intercompany during fiscal 2022 and fiscal 2021 (in thousands):

                                                 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


Consolidated operating income for the fiscal year ended March 31, 2022 was $8.8
million compared to consolidated operating loss of $9.2 million in the prior
fiscal year.

The operating result of the air cargo segment increased by $0.6 million in the current fiscal year, primarily due to higher segment revenues, as described above, offset by higher salaries for pilots and staff as well as contract labor.

The ground equipment sales segment operating income decreased by $5.7 million
from $8.9 million in the prior year to $3.2 million in the current year. This
decrease was primarily attributable to the decreased sales noted in the segment
revenue discussion above.

Operating income of the commercial jet engines and parts segment was $3.6
million compared to operating loss of $10.9 million in the prior year. The
change was primarily attributable to the increased component sales with more
favorable margin as the aviation industry started to see more activity as
explained in the segment revenue discussion above. In addition, this segment
incurred an inventory write-down of $6.4 million in the prior year compared to
only $0.8 million in the current year.

The table below presents adjusted EBITDA by segment for the year ended
March 31, 2022 and 2021 (in thousands):

                                                    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

Consolidated adjusted EBITDA for the year ended March 31, 2022 has been $11.4 millionan augmentation of $12.7 million compared to the previous year.

Adjusted EBITDA for the Air Cargo segment increased by $0.6 million in the current fiscal year, primarily due to higher segment operating profit, as described above.

The ground equipment sales segment Adjusted EBITDA decreased by $5.7 million
from $9.1 million in the prior year to $3.5 million in the current year. This
decrease was primarily attributable to the decreased operating income noted in
the discussion above.

Adjusted EBITDA of the commercial jet engines and parts segment was $5.2
million, an increase of $9.1 million from the prior fiscal year. The increase
was primarily driven by the change in operating income (loss) as described
above, partially offset by a lower EBITDA adjustment in inventory write-down of
$5.5 million in this fiscal year compared to the prior fiscal year.

The corporate and other segment Adjusted EBITDA increased by $8.7 million from
fiscal 2021 to fiscal 2022. The increase was driven by the $9.1 million offset
to general and administrative expenses in the current fiscal year as a result of
the ERC credit.

The following is a table detailing consolidated non-operating income (expenses), net of intercompany during fiscal year 2022 and fiscal year 2021 (in thousands):

                                                          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 had net non-operating income of $4.6 million for the year ended
March 31, 2022, an increase of $7.2 million from $2.6 million non-operating
expense in the prior year. The increase was primarily attributable to the $8.3
million gain recognized on the SBA's forgiveness of the Company's PPP loan
offset by a decrease of $1.5 million in other income primarily driven by
prior-year's unrealized and realized gain on sale of investments that did not
recur in the current-year.

During the year ended March 31, 2022, the Company recorded $1.2 million of
income tax expense related to continuing operations, which yielded an effective
rate of 8.7%. The primary factors contributing to the difference between the
federal statutory rate of 21% and the Company's effective tax rate for the
fiscal year ended March 31, 2022 were the estimated benefit for the exclusion of
income for the Company's captive insurance company subsidiary under §831(b), the
exclusion of the minority owned portion of pretax income of Contrail, state
income tax expense, the exclusion of PPP loan forgiveness proceeds from taxable
income, and changes in the valuation allowance. The change in the valuation
allowance is primarily due to unrealized losses on investments and the
generation of foreign tax credits through the NOL carryback claim that the
Company expects to expire before they are fully utilized, and attribute
reduction incurred by Delphax related to dissolution of its French subsidiary.

During the fiscal year ended March 31, 2021, the Company recorded $3.4 million
of income tax benefit related to continuing operations at an effective tax rate
of 28.8%. The primary factors contributing to the difference between the federal
statutory rate of 21% and the Company's effective tax rate for the fiscal year
ended March 31, 2021 were the estimated benefit for the exclusion of income for
the Company's captive insurance company subsidiary under §831(b), the exclusion
of the minority owned portion of pretax income of Contrail, state income tax
expense, the rate differential for the Net Operating Loss ("NOL") carryback
claim and changes in the valuation allowance. The change in the valuation
allowance is primarily due to unrealized losses on investments and the
generation of foreign tax credits through the NOL carryback claim that the
Company expects to expire before they are fully utilized.

                                       25
--------------------------------------------------------------------------------

Market Outlook

COVID-19 and its impact on the current financial, economic and capital markets
environment, and future developments in these and other areas (such as inflation
and supply chain issues) present uncertainty and risk with respect to our
financial condition and results of operations. Each of our businesses
implemented measures to attempt to limit the impact of COVID-19 but we still
experienced a substantial number of disruptions, and we experienced and continue
to experience a reduction in demand for commercial aircraft, jet engines and
parts compared to historical periods. Many of our businesses may continue to
generate reduced operating cash flow and could operate at a loss from time to
time beyond fiscal 2022. We expect that the impact of COVID-19 will continue to
some extent. The fluidity of this situation precludes any prediction as to the
ultimate adverse impact of COVID-19 on economic and market conditions and our
businesses in particular, and, as a result, present material uncertainty and
risk with respect to us and our results of operations.
                                       26
--------------------------------------------------------------------------------

Cash and capital resources

As of March 31, 2022, the Company held approximately $8.4 million in total cash,
cash equivalents and restricted cash. Of which, $2.3 million related to cash
collateral for three Opportunity Zone fund investments. The Company also held
$1.7 million in restricted investments held as statutory reserve of SAIC. The
Company also has approximately $0.9 million of marketable securities.

As of March 31, 2022, the Company's working capital amounted to $97.3 million,
an increase of $19.7 million compared to March 31, 2021, primarily driven by the
$9.1 million Employee Retention Credit ("ERC") receivable and an increase of
$13.2 million in accounts receivable.

The Company's Credit Agreement with Minnesota Bank & Trust, a Minnesota state
banking corporation ("MBT") (the Air T debt in   Note 1    4   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
1    4   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 the consolidated financial statements included in 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.

In April 2020, the Company obtained loans under the PPP loan, as authorized by
the CARES Act, of $8.2 million to help pay for payroll costs, mortgage interest,
rent and utility costs. As of March 31, 2022, the Company's PPP Loan was fully
forgiven by the SBA. As such, the Company accounted for its then outstanding
principal and accrued interest as a gain on extinguishment in accordance with
ASC 470.

As mentioned in   Note 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.

The Shelf Registration Statement registers a number of securities that may be
issued by the Company in a maximum aggregate amount of up to $15 million. The
Registration Statement is subject to the offering limits set forth in General
Instruction I.B.6 of Form S-3 because the Company's public float is less than
$75 million. For so long as the Company's public float is less than $75 million,
the aggregate market value of securities sold by the Company under the Shelf
Registration Statement pursuant to Instruction I.B.6 to Form S-3 during any 12
consecutive months may not exceed one-third of the Company's public float. For
purposes of this limitation, the aggregate market value of our outstanding
common stock held by non-affiliates, or public float, was $23.7 million, based
on 1.0 million shares of our outstanding common stock held by non-affiliates and
a price of $22.75 per share, which was the price as of March 31, 2022, a date
within 60 days of the date that our common stock was last sold on The Nasdaq
Global Market on May 26, 2022, calculated in accordance with General Instruction
I.B.6 of Form S-3. After giving effect to the $7.9 million offering limit
imposed by General Instruction I.B.6 of Form S-3, we have now reached the
offering limit under the current Prospectus Supplement.

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.

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


                                       27
--------------------------------------------------------------------------------

Cash flow

The following is a table of changes in cash flow from continuing operations for the respective years ended March 31, 2022 and 2021 (in thousands):

                                                             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)



Cash used in operating activities was $33.1 million in fiscal year 2022 compared
to cash used in operating activities of $1.8 million in fiscal year 2021. During
fiscal year 2022, the Company's purchase of engines and components received into
inventory exceeded amounts spent in fiscal year 2021 by $17.5 million. Further,
less cash was collected this year due to timing and less concentration of cash
receipts compared to the prior year as accounts receivable increased by $13.2
million.

Cash used in investing activities for fiscal year 2022 was $33.4 million
compared to cash provided by investing activities for the prior fiscal year of
$2.5 million. This difference was primarily driven by cash used for the
acquisitions of Wolfe Lake assets of $13.4 million, GdW's acquisition of $12.8
million, and investment in unconsolidated entities of $6.8 million.

Cash provided by financing activities for fiscal year 2022 was $59.2 million
more compared to the prior fiscal year. This was primarily due to the current
year's increase in net proceeds from lines of credit of $33.0 million, increase
in proceeds received from issuance of Trust Preferred Securities ("TruPs") of
$10.0 million, and decrease in payments on line of credit of $21.0 million
compared to prior year, offset by prior year's proceeds from PPP loan of $8.2
million that did not recur in the current year.
                                       28
--------------------------------------------------------------------------------

Off-balance sheet arrangements

The Company defines an off-balance sheet arrangement as any transaction,
agreement or other contractual arrangement involving an unconsolidated entity
under which a Company has (1) made guarantees, (2) a retained or a contingent
interest in transferred assets, (3) an obligation under derivative instruments
classified as equity, or (4) any obligation arising out of a material variable
interest in an unconsolidated entity that provides financing, liquidity, market
risk or credit risk support to the Company, or that engages in leasing, hedging,
or research and development arrangements with the Company. The Company is not
currently engaged in the use of any of these arrangements.

Supply chain and inflation

The Company continues to monitor a wide range of health, safety, and regulatory
matters related to the continuing COVID-19 pandemic including its impact on our
business operations. In particular, ongoing supply chain disruptions have
impacted product availability and costs across all markets including the
aviation industry in which our Company operates. Additionally, the United States
is experiencing an acute workforce shortage and increasing inflation which has
created a hyper-competitive wage environment. Thus far, the direct impact of
these items on our businesses have been immaterial. However, ongoing or future
disruptions to consumer demand, our supply chain, product pricing inflation, our
ability to attract and retain employees, or our ability to procure products and
fulfill orders, could negatively impact the Company's operations and financial
results in a material manner. We continue to look for proactive ways to mitigate
potential impacts of supply chain disruptions at our businesses.

The Company believes that inflation has not had a material effect on its
manufacturing and commercial jet engine and parts operations, because increased
costs to date have been passed on to customers. Under the terms of its overnight
air cargo business contracts the major cost components of that segment's
operations, consisting principally of fuel, crew and other direct operating
costs, and certain maintenance costs are reimbursed by its customer. Significant
increases in inflation rates could, however, have a material impact on future
revenue and operating income.
                                       29
--------------------------------------------------------------------------------

Non-GAAP Financial Measures

The Company uses adjusted earnings before taxes, interest, and depreciation and
amortization ("Adjusted EBITDA"), a non-GAAP financial measure as defined by the
SEC, to evaluate the Company's financial performance. This performance measure
is not defined by accounting principles generally accepted in the United States
and should be considered in addition to, and not in lieu of, GAAP financial
measures.

Adjusted EBITDA is defined as earnings before taxes, interest, and depreciation
and amortization, adjusted for specified items. The Company calculates Adjusted
EBITDA by removing the impact of specific items and adding back the amounts of
interest expense and depreciation and amortization to earnings before income
taxes. When calculating Adjusted EBITDA, the Company does not add back
depreciation expense for aircraft engines that are on lease, as the Company
believes this expense matches with the corresponding revenue earned on engine
leases. Depreciation expense for leased engines totaled $0.3 million and $1.9
million for the fiscal year ended March 31, 2022 and 2021.

Management believes that Adjusted EBITDA is a useful measure of the Company's
performance because it provides investors additional information about the
Company's operations allowing better evaluation of underlying business
performance and better period-to-period comparability. Adjusted EBITDA is not
intended to replace or be an alternative to operating income (loss) from
continuing operations, the most directly comparable amounts reported under GAAP.

The table below provides a reconciliation of operating income (loss) from
continuing operations to Adjusted EBITDA for the fiscal year ended March 31,
2022 and 2021 (in thousands):

                                                                      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)



Included in the asset impairment, restructuring or impairment charges for the
fiscal year ended March 31, 2022 was a write-down of $0.8 million on the
commercial jet engines and parts segment's inventory. The write-down was
attributable to our evaluation of the carrying value of inventory as of
March 31, 2022, where we compared its cost to its net realizable value and
considered factors such as physical condition, sales patterns and expected
future demand to estimate the amount necessary to write down any slow moving,
obsolete or damaged inventory.

The table below presents adjusted EBITDA by segment for the year ended
March 31, 2022 and 2021 (in thousands):

                                                         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)



                                       30
--------------------------------------------------------------------------------

Seasonality

The ground equipment sales segment business has historically been seasonal, with
the revenues and operating income typically being higher in the second and third
fiscal quarters as commercial deicers are typically delivered prior to the
winter season. Other segments are typically not susceptible to material seasonal
trends.
                                       31
--------------------------------------------------------------------------------

Critical accounting policies and estimates.

The significant accounting policies of the Company are described in note 1 of the

Notes to the consolidated financial statements included in 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:

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.
There are various estimates and judgments related to the valuation of
identifiable assets acquired, liabilities assumed, goodwill and non-controlling
interests. These estimates and judgments have the potential to materially impact
the Company's consolidated financial statements.

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.

The Company periodically evaluates the carrying value of inventory. In these
evaluations, the Company is required to make estimates regarding the net
realizable value, which includes the consideration of sales patterns and
expected future demand. Any slow moving, obsolete or damaged inventory and
inventory with costs exceeding net realizable value are evaluated for
write-downs. These estimates could vary significantly from actual amounts based
upon future economic conditions, customer inventory levels, or competitive
factors that were not foreseen or did not exist when the estimated write-downs
were made.

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.

The Company must make significant and subjective estimates to determine whether an impairment exists. These estimates are as follows:

•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.

If the expected undiscounted cash flows and fair value of our long-lived assets decline in the future, we may incur impairment charges.

Accounting for Redeemable Non-Controlling Interest. Policies related to
redeemable non-controlling interests involve judgment and complexity,
specifically on the classification of the non-controlling interests in the
Company's consolidated balance sheet, and the accounting treatment for changes
in the fair value or estimated redemption value for non-controlling interests
that are redeemed at other than fair value. Further, there is significant
judgment in determining whether an equity instrument is currently redeemable or
not currently redeemable but probable that the equity instrument will become
redeemable. Additionally, there are also significant estimates made in the
valuation of the Contrail's redeemable non-controlling interest. The fair value
of Contrail's non-controlling interest 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. 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. There are also significant estimates made
to determine the estimated redemption value of Shanwick's redeemable
non-controlling interest ("Shanwick RNCI"). The analysis uses significant inputs
such as forecasted earnings before interest and taxes ("EBIT"), discount rate
and expected volatility, which require significant management judgment and
assumptions.
                                       32

————————————————– ——————————

© Edgar Online, source Previews