EX-2 3 a102proformadocuments.htm EXHIBIT 2 Exhibit


Air T Inc.
PRO FORMA CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
(Unaudited)


On September 30, 2019, CSA Air, Inc., a North Carolina corporation (“CSA”) and wholly-owned subsidiary of Air T Inc. ("the Company") completed the sale of Global Aviation Services, LLC ("GAS").

The following unaudited pro forma condensed consolidated financial information is based on the historical consolidated financial statements of the Company including certain pro forma adjustments and has been prepared to illustrate the effect on the historical condensed consolidated financial statements of the Company of the sale of GAS ("GAS Disposition").

The unaudited pro forma condensed consolidated statements of operations for the three months ended June 30, 2019 and the years ended March 31, 2019 and 2018, give effect to the GAS Disposition as if it had occurred as of the beginning of the earliest period presented. The unaudited pro forma condensed consolidated balance sheet gives effect to the pro forma adjustments necessary to reflect the GAS Disposition as if it occurred on June 30, 2019.

The "as reported" financial information for both the Company and GAS are derived from the audited financial statements of the Company for the years ended March 31, 2019 and 2018 as filed on Form 10-K and the unaudited condensed consolidated balance sheet of the Company as of June 30, 2019 and statement of operations for the three months ended June 30, 2019, as filed on Form 10-Q.

The unaudited pro forma financial information is prepared in accordance with Article 11 of Regulation S-X. The unaudited pro forma financial information is for informational purposes only and does not purport to present what our results would actually have been had the GAS Disposition actually occurred on the dates presented or to project our results of operations or financial position for any future period. This financial information may not be predictive of the future results of operations or financial condition of the Company, as the Company's future results of operation and financial condition may differ significantly from the proforma amounts reflected herein due to a variety of factors.

The pro forma adjustments are described in the accompanying notes and are based upon information available at the time of the filing of this Current Report on Form 8-K and assumptions that management considers to be reasonable. This unaudited pro forma condensed consolidated financial information should be read in conjunction with the consolidated financial statements, including the notes thereto, and Management's Discussion and Analysis of Financial Condition and Results of Operations contained in our annual report on Form 10-K for the year ended March 31, 2019 and the condensed consolidated financial statements, and notes thereto, and Management's Discussion and Analysis of Financial Condition and Results of Operations contained in our quarterly report on Form 10-Q for the quarterly period ended June 30, 2019.

The pro forma adjustments to the statements of operations for all periods presented do not include the following:

•
The non-recurring gain on the GAS Disposition. The gain will be included in the Company’s results for the three and six month periods ended September 30, 2019, and,
•
Certain non-recurring transaction costs on closing of the sale estimated to be approximately $150,000.





Air T Inc.
Condensed Consolidated Pro Forma Balance Sheet
at June 30, 2019
(unaudited)

 
Air T
 
 
 
 
 
 
 
As Reported
 
 Adjustments

 
Notes
 
Pro Forma

ASSETS
 
 
 
 
 
 
 
Current Assets:
 
 
 
 
 
 
 
Cash and cash equivalents
$
16,196,626

 
20,546,254

 
(a) (b)
 
$
36,742,880

Marketable securities
1,752,727

 
—

 
 
 
1,752,727

Restricted cash
68,979

 
—

 
 
 
68,979

Restricted investments
796,958

 
—

 
 
 
796,958

Accounts receivable, net
23,723,077

 
(8,129,079
)
 
(b)
 
15,593,998

Notes and other receivables-current
7,170,143

 
—

 
 
 
7,170,143

Income tax receivable
883,131

 
—

 
 
 
883,131

Inventories, net
36,528,777

 
(2,552,759
)
 
(b)
 
33,976,018

Prepaid expenses and other
1,795,614

 
(915,460
)
 
(b)
 
880,154

Total Current Assets
88,916,032

 
8,948,956

 
 
 
97,864,988

 
 
 
 
 
 
 
 
Asset on lease, net
17,982,582

 
—

 
 
 
17,982,582

Property and equipment, net
4,752,051

 
(517,189
)
 
(b)
 
4,234,862

Right-of-use assets
10,071,405

 
(2,603,380
)
 
(b)
 
7,468,025

Cash surrender value of life insurance policies, net of policy loans
101,259

 
—

 
 
 
101,259

Other tax receivables-long-term
—

 
—

 
 
 
—

Deferred income taxes
600,303

 
(251,302
)
 
(b)
 
349,001

Investments in funds
318,020

 
—

 
 
 
318,020

Investments in securities
557,329

 
—

 
 
 
557,329

Equity method investments
4,475,738

 
—

 
 
 
4,475,738

Other assets
297,507

 
(292,847
)
 
(b)
 
4,660

Intangible assets, net
1,161,111

 
(220,000
)
 
(b)
 
941,111

Goodwill
4,417,605

 
(190,400
)
 
(b)
 
4,227,205

Total Assets
$
133,650,942

 
$
4,873,838

 
 
 
$
138,524,780

 
 
 
 
 
 
 
 
LIABILITIES AND STOCKHOLDERS' EQUITY
 
 
 
 
 
 
 
Current Liabilities:
 
 
 
 
 
 
 
Accounts payable
$
13,296,498

 
(1,258,062
)
 
(b)
 
12,038,436

Income tax payable
550,727

 
189,739

 
(b)
 
740,466

Accrued payroll and related items
2,729,056

 
(552,979
)
 
(b)
 
2,176,077

Customer deposits
2,794,277

 
—

 
 
 
2,794,277

Accrued insurance liability
1,254,396

 
—

 
 
 
1,254,396

Other accrued expenses
3,905,819

 
(183,784
)
 
(b)
 
3,722,035

Deferred income
5,599,423

 
—

 
 
 
5,599,423

Current portion of long-term debt
27,774,151

 
—

 
 
 
27,774,151

Short-term lease liability
2,486,842

 
(1,308,014
)
 
(b)
 
1,178,828

Total Current Liabilities
60,391,189

 
(3,113,100
)
 
 
 
57,278,089

 
 
 
 
 
 
 
 
Long-term debt
36,285,910

 
—

 
 
 
36,285,910

Deferred income taxes
—

 
—

 
 
 
—

Long-term lease liability
8,071,541

 
(1,378,390
)
 
(b)
 
6,693,151

Other non-current liabilities
1,229,495

 
—

 
 
 
1,229,495

Total Liabilities
105,978,135

 
(4,491,490
)
 
 
 
101,486,645

 
 
 
 
 
 
 
 




Redeemable non-controlling interest
6,685,000

 
—

 
 
 
6,685,000

 
 
 
 
 
 
 
 
Equity:
 
 
 
 
 
 
 
Air T, Inc. Stockholders' Equity:
 
 
 
 
 
 
 
Common stock
753,770

 
—

 
 
 
753,770

Additional paid-in capital
1,629,202

 
—

 
 
 
1,629,202

Retained earnings
17,970,387

 
9,365,328

 
(c)
 
27,335,715

Accumulated other comprehensive loss
(411,479
)
 
—

 
 
 
(411,479
)
Total Air T, Inc. Stockholders' Equity
19,941,880

 
9,365,328

 
 
 
29,307,208

Non-controlling Interests
1,045,927

 
—

 
 
 
1,045,927

Total Equity
20,987,807

 
9,365,328

 
 
 
30,353,135

Total Liabilities and Equity
$
133,650,942

 
$
4,873,838

 
 
 
$
138,524,780





Air T Inc.
Condensed Consolidated Pro Forma Statement of Operations
for the three months ended June 30, 2019
(unaudited)


 
Air T Inc.
 
 
 
 
 
 
 
as Reported
 
Adjustments
 
Notes
 
Pro Forma
Operating Revenues:
 
 
 
 
 
 
 
Overnight air cargo
$ 18,319,682
 
—

 
 
 
$ 18,319,682

Ground equipment sales
          12,248,891
 
—

 
 
 
         12,248,891

Ground support services
            8,516,800
 
              (8,516,800)

 
(d)
 
—

Commercial jet engines and parts
          16,326,905
 
—

 
 
 
         16,326,905

Printing equipment and maintenance
                  64,270
 
—

 
 
 
                 64,270

Corporate and other
                227,987
 
—

 
 
 
               227,987

 
          55,704,535
 
              (8,516,800)

 
 
 
         47,187,735

 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
Operating Expenses:
 
 
 
 
 
 
 
Overnight air cargo
          16,518,823
 
—

 
 
 
         16,518,823

Ground equipment sales
            9,730,856
 
—

 
 
 
            9,730,856

Ground support services
            6,963,662
 
              (6,963,662)

 
(d)
 
—

Commercial jet engines and parts
            8,285,769
 
—

 
 
 
            8,285,769

Printing equipment and maintenance
                  39,047
 
—

 
 
 
                 39,047

General and administrative
          10,919,320
 
              (1,247,873)

 
(e)
 
            9,671,447

Depreciation and amortization
            2,026,600
 
                    (86,252)

 
(e)
 
            1,940,348

Impairment
                    6,686
 
—

 
 
 
                    6,686

Gain on sale of property and equipment
                    2,073
 
                      (5,932)

 
(e)
 
                 (3,859)

 
          54,492,836
 
              (8,303,719)

 
 
 
         46,189,117

 
 
 
 
 
 
 
 
Operating Income
            1,211,699
 
                  (213,081)

 
 
 
               998,618

 
 
 
 
 
 
 
 
Non-operating Income (Expense):
 
 
 
 
 
 
 
Gain on sale of marketable securities
                  36,460
 
—

 
 
 
                 36,460

Foreign currency gain (loss), net
                  35,755
 
—

 
 
 
                 35,755

Other-than-temporary impairment loss on investments
             (814,558)
 
—

 
 
 
            (814,558)

Other investment income (loss), net
                162,957
 
—

 
 
 
               162,957

Interest expense and other
          (1,023,622)
 
—

 
 
 
         (1,023,622)

Gain on settlement of bankruptcy
            4,509,302
 
—

 
 
 
            4,509,302

Bargain purchase acquisition gain
                  34,244
 
—

 
 
 
                 34,244

Income (loss) from equity method investments
             (320,578)
 
—

 
 
 
            (320,578)

 
            2,619,960
 
—

 
 
 
            2,619,960

 
 
 
 
 
 
 
 
Income (Loss) Before Income Taxes
            3,831,659
 
                  (213,081)

 
 
 
            3,618,578

 
 
 
 
 
 
 
 
Income Taxes (Benefit)
             (324,000)
 
                       44,747

 
(f)
 
            (279,253)

 
 
 
 
 
 
 
 
Net Income (Loss)
            4,155,659
 
                  (257,828)

 
 
 
            3,897,831

 
 
 
 
 
 
 
 
Net (Income) Loss Attributable to Non-controlling
 
 
 
 
 
 
 
Interests
$ (2,373,307)
 
—

 
 
 
$ (2,373,307)

 
 
 
 
 
 
 
 
Net Income (Loss) Attributable to Air T, Inc. Stockholders
$ 1,782,352
 
$ (257,828)

 
 
 
$ 1,524,524






Air T Inc.
Condensed Consolidated Pro Forma Statement of Operations
for the year ended March 31, 2019
(unaudited)
 
Air T Inc.
 
 
 
 
 
 
 
as Reported
 
Adjustments
 
Notes
 
Pro Forma
Operating Revenues:
 
 
 
 
 
 
 
Overnight air cargo
 $ 72,978,361
 
—

 
 
 
 $ 72,978,361

Ground equipment sales
         47,152,125
 
—

 
 
 
        47,152,125

Ground support services
         34,331,784
 
            (34,331,784)

 
(d)
 
—

Commercial jet engines and parts
         93,968,014
 
—

 
 
 
        93,968,014

Printing equipment and maintenance
               654,617
 
—

 
 
 
              654,617

Corporate and other
               749,577
 
—

 
 
 
              749,577

 
       249,834,478
 
            (34,331,784)

 
 
 
      215,502,694

 
 
 
 
 
 
 
 
Operating Expenses:
 
 
 
 
 
 
 
Overnight air cargo
         65,099,491
 
—

 
 
 
        65,099,491

Ground equipment sales
         38,911,228
 
—

 
 
 
        38,911,228

Ground support services
         30,376,988
 
            (30,376,988)

 
(d)
 
—

Commercial jet engines and parts
         60,948,561
 
—

 
 
 
        60,948,561

Printing equipment and maintenance
               350,116
 
—

 
 
 
              350,116

General and administrative
         38,376,113
 
              (4,768,192)

 
(e)
 
        33,607,921

Depreciation and amortization
           7,686,070
 
                  (446,417)

 
(e)
 
           7,239,653

Impairment on property and equipment
                 34,504
 
—

 
 
 
                34,504

(Gain) loss on sale of property and equipment
               (13,298)
 
                      (6,652)

 
(e)
 
               (19,950)

 
       241,769,773
 
            (35,598,249)

 
 
 
      206,171,524

 
 
 
 
 
 
 
 
Operating Income
           8,064,705
 
                1,266,465

 
 
 
           9,331,170

 
 
 
 
 
 
 
 
Non-operating Income (Expense):
 
 
 
 
 
 
 
Gain on sale of marketable securities
                 81,388
 
—

 
 
 
                81,388

Foreign currency loss, net
             (113,528)
 
—

 
 
 
            (113,528)

Other-than-temporary impairment loss on investments
          (2,000,000)
 
—

 
 
 
         (2,000,000)

Other investment income (loss), net
             (373,060)
 
—

 
 
 
            (373,060)

Interest expense
          (3,427,102)
 
—

 
 
 
         (3,427,102)

Bargain purchase acquisition gain
           1,983,777
 
—

 
 
 
           1,983,777

Unrealized gain (loss) on interest rate swap
               145,222
 
—

 
 
 
              145,222

Income from equity method investments
               340,714
 
—

 
 
 
              340,714

 
          (3,362,589)
 
—

 
 
 
         (3,362,589)

 
 
 
 
 
 
 
 
Income Before Income Taxes
           4,702,116
 
                1,266,465

 
 
 
           5,968,581

 
 
 
 
 
 
 
 
Income Taxes
           1,502,184
 
                   265,958

 
(f)
 
           1,768,142

 
 
 
 
 
 
 
 
Net Income
           3,199,932
 
                1,000,507

 
 
 
           4,200,439

 
 
 
 
 
 
 
 
Net Income Attributable to Non-controlling
 
 
 
 
 
 
 
Interests
          (1,859,937)
 
—

 
 
 
         (1,859,937)

 
 
 
 
 
 
 
 
Net Income Attributable to Air T, Inc. Stockholders
 $ 1,339,995
 
 $ 1,000,507

 
 
 
 $ 2,340,502









Air T Inc.
Condensed Consolidated Pro Forma Statement of Operations
for the year ended March 31, 2018
(unaudited)

 
Air T Inc.
 
 
 
 
 
 
 
as Reported
 
Adjustments
 
Notes
 
Pro Forma
Operating Revenues:
 
 
 
 
 
 
 
Overnight air cargo
 $ 72,845,353
 
—

 
 
 
 $ 72,845,353

Ground equipment sales
         50,004,507
 
—

 
 
 
        50,004,507

Ground support services
         35,698,171
 
            (35,698,171)

 
(d)
 
—

Commercial jet engines and parts
         29,506,873
 
—

 
 
 
        29,506,873

Printing equipment and maintenance
           6,144,403
 
—

 
 
 
           6,144,403

Corporate and other
               320,038
 
—

 
 
 
              320,038

 
       194,519,345
 
            (35,698,171)

 
 
 
      158,821,174

 
 
 
 
 
 
 
 
Operating Expenses:
 
 
 
 
 
 
 
Overnight air cargo
         63,049,619
 
—

 
 
 
        63,049,619

Ground equipment sales
         41,567,109
 
—

 
 
 
        41,567,109

Ground support services
         30,135,613
 
            (30,135,613)

 
(d)
 
—

Commercial jet engines and parts
         20,502,205
 
—

 
 
 
        20,502,205

Printing equipment and maintenance
           2,975,999
 
—

 
 
 
           2,975,999

Research and development
               195,653
 
—

 
 
 
              195,653

General and administrative
         29,138,534
 
              (5,256,219)

 
(e)
 
        23,882,315

Depreciation and amortization
           2,428,732
 
                  (471,776)

 
(e)
 
           1,956,956

Impairment on property and equipment
               250,126
 
—

 
 
 
              250,126

(Gain) loss on sale of property and equipment
                 30,232
 
                           394

 
(e)
 
                30,626

 
       190,273,822
 
            (35,863,214)

 
 
 
      154,410,608

 
 
 
 
 
 
 
 
Operating Income
           4,245,523
 
                   165,043

 
 
 
           4,410,566

Non-operating Income (Expense):
 
 
 
 
 
 
 
Gain on sale of marketable securities
                 93,066
 
—

 
 
 
                93,066

Foreign currency loss, net
             (228,714)
 
—

 
 
 
            (228,714)

Other-than-temporary impairment loss on investments
          (1,559,972)
 
—

 
 
 
         (1,559,972)

Other investment income (loss), net
               121,860
 
—

 
 
 
              121,860

Interest expense
          (1,724,771)
 
—

 
 
 
         (1,724,771)

Gain on asset retirement obligation
               562,500
 
—

 
 
 
              562,500

Bargain purchase acquisition gain
               501,880
 
—

 
 
 
              501,880

Unrealized gain (loss) on interest rate swap
               (66,706)
 
—

 
 
 
               (66,706)

Unrealized gain on transition to equity method
               721,585
 
—

 
 
 
              721,585

Income from equity method investments
               (14,644)
 
—

 
 
 
               (14,644)

 
          (1,593,916)
 
—

 
 
 
         (1,593,916)

 
 
 
 
 
 
 
 
Income Before Income Taxes
           2,651,607
 
                   165,043

 
 
 
           2,816,650

 
 
 
 
 
 
 
 
Income Taxes
               195,000
 
                      34,659

 
(f)
 
              229,659

 
 
 
 
 
 
 
 
Net Income
           2,456,607
 
                   130,384

 
 
 
           2,586,991

Net Income Attributable to Non-controlling
 
 
 
 
 
 
 
Interests
             (179,498)
 
—

 
 
 
            (179,498)

 
 
 
 
 
 
 
 
Net Income Attributable to Air T, Inc. Stockholders
 $ 2,277,109
 
 $ 130,384

 
 
 
 $ 2,407,493






Notes to Pro Forma Condensed Consolidated Financial Statements
(Unaudited)

Pro forma information is intended to reflect the impact of the GAS Disposition on the Company's historical financial position and results of operations through adjustments that are directly attributable to the transaction, that are factually supportable and, with respect to the pro forma statements of operations, that are expected to have a continuing impact. To accomplish this, the Company eliminated the historical results of GAS from the Company's historical financial position and results of operations. GAS's historical operations, for the current and prior period, including the gain on sale, will be presented as discontinued operations for financial reporting purposes beginning with the Company's Quarterly Report on Form 10-Q for the three and six months ended September 30, 2019.

The information in Note 1 provides a description of the pro forma adjustments from each line item in the pro forma condensed financial statements together with information explaining how the amounts were derived or calculated.

Note 1 - Pro Forma Adjustments
Balance Sheet
The following adjustments correspond to those included in the unaudited condensed consolidated pro forma balance sheet as of June 30, 2019:

(a)
This adjustment represents the receipt of cash consideration at the closing of the transaction. The net cash proceeds ultimately recognized may change based on adjustments to transaction costs and the working capital adjustment as defined in the equity purchase agreement dated September 30, 2019.
(b)
These adjustments reflect the elimination of assets and liabilities attributable to GAS.
(c)
This adjustment reflects the estimated gain arising from the GAS disposition as if the sale had occurred on June 30, 2019. This gain may not be representative of what will actually be recorded during the three and six months ended September 30, 2019. This estimated gain has not been reflected in the pro forma consolidated statement of operations as it is considered to be nonrecurring in nature.

Statement of Operations
The following adjustments correspond to those included in the unaudited condensed consolidated pro forma statement of operations for the three months ended June 30, 2019 and the years ended March 31, 2019 and 2018:

(d)
This adjustment reflects the elimination of revenues and cost of goods sold of GAS.
(e)
This adjustment reflects the elimination of operating and administrative expenses. Not included in the pro-forma results are anticipated savings due to costs that may be reduced or eliminated.
(f)
This adjustment represents the estimated income tax effect of the pro-forma adjustments. The tax effect of the pro-forma adjustments was calculated using the historical statutory rates in effect for the periods presented.