10-Q

UNITED STATES

SECURITIES AND EXCHANGE COMMISSION

WASHINGTON, D.C.  20549

FORM 10-Q

(Mark one)

      X Quarterly Report Pursuant to Section 13 or 15(d) of the Securities Exchange Act of 1934 for the quarterly period ended September 30, 2012

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 0-11720

Air T, Inc.

(Exact name of registrant as specified in its charter)

                             Delaware                                                                                                                  52-1206400

(State or other jurisdiction of incorporation or organization)                                                                                                  (I.R.S. Employer Identification No.)

3524 Airport Road, Maiden, North Carolina 28650

(Address of principal executive offices, including zip code)

                            (828) 464 –8741                  

(Registrant’s telephone number, including area code)

Indicate by check mark whether the registrant (1) has filed all reports required to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during the preceding 12 months (or for such shorter period that the registrant was required to file such reports), and (2) has been subject to such filing requirements for the past 90 days.

Yes  __X__                                No  _____

Indicate by check mark whether the registrant has submitted electronically and posted on its corporate Web site, if any, every Interactive Data File required to be submitted and posted pursuant to Rule 405 of Regulation S-T (§232.405 of this chapter) during the preceding 12 months (or for such shorter period that the registrant was required to submit and post such files).

       Yes    __X__                                No  _____

Indicate by check mark whether the registrant is a large accelerated filer, an accelerated filer, a non-accelerated filer, or a smaller reporting company.  (See the definitions of “large accelerated filer”, “accelerated filer”, and “smaller reporting company” in Rule 12b-2 of the Exchange Act).

Large Accelerated Filer     Accelerated Filer     Non-Accelerated Filer     Smaller Reporting Company__X__

(Do not check if smaller reporting company)

Indicate by check mark whether the registrant is a shell company (as defined in Rule 12b-2 of the Exchange Act).

Yes                                  No__X__                                

Indicate the number of shares outstanding of each of the issuer's classes of common stock, as of the latest practicable date.

       Common Stock                                                                           Outstanding Shares at October 26, 2012

       Common Shares, par value of $.25 per share                                                                     2,446,286

	AIR T, INC. AND SUBSIDIARIES
	QUARTERLY REPORT ON FORM 10-Q
	TABLE OF CONTENTS
		Page
	PART I
Item 1.	Financial statements
	Condensed Consolidated Statements of Income		3
	Three Months and Six Months Ended September 30, 2012 and 2011 (Unaudited)
	Condensed Consolidated Balance Sheets		4
	September 30, 2012 (Unaudited) and March 31, 2012
	Condensed Consolidated Statements of Cash Flows		5
	Six Months Ended September 30, 2012 and 2011 (Unaudited)
	Condensed Consolidated Statements of Stockholders' Equity		6
	Six Months Ended September 30, 2012 and 2011 (Unaudited)
	Notes to Condensed Consolidated Financial Statements (Unaudited)		7
Item 2.	Management's Discussion and Analysis of Financial Condition and Results of Operations		9
Item 3.	Quantitative and Qualitative Disclosures About Market Risk		14
Item 4.	Controls and Procedures		14
	PART II
Item 6.	Exhibits		15
	Signatures		16
	Exhibit Index		17
	Certifications		18
	Interactive Data Files

Item 1.  Financial Statements

AIR T, INC. AND SUBSIDIARIES

CONDENSED CONSOLIDATED STATEMENTS OF INCOME (UNAUDITED)

	Three Months Ended September 30,						Six Months Ended September 30,
	2012			2011			2012			2011
Operating Revenues:
Overnight air cargo	$	12,051,201		$	12,339,606		$	22,784,927		$	23,166,505
Ground equipment sales		6,085,616			11,174,548			16,829,177			15,345,026
Ground support services		3,025,243			1,946,764			6,036,121			3,510,884
		21,162,060			25,460,918			45,650,225			42,022,415
Operating Expenses:
Flight-air cargo		4,939,237			4,838,168			9,399,631			9,422,514
Maintenance-air cargo		5,365,093			5,733,099			10,028,882			10,248,117
Ground equipment sales		5,132,797			9,953,745			14,564,753			13,459,595
Ground support services		2,294,367			1,299,996			4,523,799			2,416,064
General and administrative		2,975,925			2,654,301			5,920,842			5,189,608
Depreciation and amortization		103,707			62,795			207,714			116,711
		20,811,126			24,542,104			44,645,621			40,852,609
Operating Income		350,934			918,814			1,004,604			1,169,806
Non-operating Income (Expense):
Investment income		3,463			10,351			8,028			22,735
Interest expense and Other		(965	)		(1,442	)		(7,187	)		(1,669	)
		2,498			8,909			841			21,066
Income Before Income Taxes		353,432			927,723			1,005,445			1,190,872
Income Taxes		126,000			335,000			361,000			430,000
Net Income	$	227,432		$	592,723		$	644,445		$	760,872
Earnings Per Share:
Basic	$	0.09		$	0.24		$	0.26		$	0.31
Diluted	$	0.09		$	0.24		$	0.26		$	0.31
Dividends Declared Per Share	$	-		$	-		$	0.25		$	0.25
Weighted Average Shares Outstanding:
Basic		2,446,286			2,446,286			2,446,286			2,441,286
Diluted		2,450,165			2,446,286			2,454,162			2,449,583
See notes to condensed consolidated financial statements.

AIR T, INC. AND SUBSIDIARIES

CONDENSED CONSOLIDATED BALANCE SHEETS

	September 30, 2012		March 31, 2012
ASSETS	(Unaudited)
Current Assets:
Cash and cash equivalents	$	5,756,492	$	5,814,184
Accounts receivable, less allowance for
doubtful accounts of $107,000 and $108,000		8,308,670		8,952,007
Notes and other receivables-current		43,083		64,254
Income tax receivable		327,000		642,000
Inventories		13,924,278		14,542,890
Deferred income taxes		430,000		430,000
Prepaid expenses and other		457,592		761,025
Total Current Assets		29,247,115		31,206,360
Property and Equipment, net		1,898,509		1,889,658
Cash Surrender Value of Life Insurance Policies		1,717,674		1,683,672
Notes and Other Receivables-Long Term		-		191,505
Other Assets		111,145		112,172
Total Assets	$	32,974,443	$	35,083,367
LIABILITIES AND STOCKHOLDERS' EQUITY
Current Liabilities:
Accounts payable	$	4,120,838	$	5,999,598
Accrued expenses		1,702,801		1,966,839
Total Current Liabilities		5,823,639		7,966,437
Deferred Income Taxes		64,000		64,000
Stockholders' Equity:
Preferred stock, $1.00 par value, 50,000 shares authorized,		-		-
Common stock, $.25 par value; 4,000,000 shares authorized,
2,446,286 shares issued and outstanding		611,571		611,571
Additional paid-in capital		6,309,411		6,308,411
Retained earnings		20,165,822		20,132,948
Total Stockholders' Equity		27,086,804		27,052,930
Total Liabilities and Stockholders’ Equity	$	32,974,443	$	35,083,367
See notes to condensed consolidated financial statements.

AIR T, INC. AND SUBSIDIARIES

CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS (UNAUDITED)

	Six Months Ended September 30,
	2012			2011
CASH FLOWS FROM OPERATING ACTIVITIES:
Net income	$	644,445		$	760,872
Adjustments to reconcile net income to net
cash provided by (used in) operating activities:
Loss on disposal of equipment		541			875
Change in accounts receivable and inventory reserves		16,457			35,760
Depreciation and amortization		207,714			116,711
Change in cash surrender value of life insurance		(34,002	)		(34,002	)
Warranty reserve		99,186			200,245
Compensation expense related to stock options		1,000			1,469
Change in operating assets and liabilities:
Accounts receivable		644,815			(519,568	)
Notes receivable and other non-trade receivables		212,676			128,340
Inventories		600,677			(1,204,781	)
Prepaid expenses and other		304,460			(113,093	)
Accounts payable		(1,878,760	)		460,839
Accrued expenses		(363,224	)		(412,785	)
Income taxes receivable/ payable		315,000			(596,890	)
Total adjustments		126,540			(1,936,880	)
Net cash provided by (used in) operating activities		770,985			(1,176,008	)
CASH FLOWS FROM INVESTING ACTIVITIES:
Proceeds from sale of investments		-			51,035
Capital expenditures		(220,606	)		(605,709	)
Proceeds from sale of assets		3,500			-
Net cash used in investing activities		(217,106	)		(554,674	)
CASH FLOWS FROM FINANCING ACTIVITIES:
Payment of cash dividend		(611,571	)		(611,571	)
Payment on capital leases		-			(6,496	)
Proceeds from exercise of stock options		-			124,350
Net cash used in financing activities		(611,571	)		(493,717	)
NET DECREASE IN CASH AND CASH EQUIVALENTS		(57,692	)		(2,224,399	)
CASH AND CASH EQUIVALENTS AT BEGINNING OF PERIOD		5,814,184			6,515,067
CASH AND CASH EQUIVALENTS AT END OF PERIOD	$	5,756,492		$	4,290,668
SUPPLEMENTAL DISCLOSURE OF CASH FLOW INFORMATION:
Cash paid during the period for:
Interest	$	17,000		$	2,000
Income taxes		46,000			1,027,000
See notes to condensed consolidated financial statements.

AIR T, INC AND SUBSIDIARIES

CONDENSED CONSOLIDATED STATEMENTS OF STOCKHOLDERS’ EQUITY (UNAUDITED)

	Common Stock				Additional					Total
					Paid-In		Retained			Stockholders'
	Shares		Amount		Capital		Earnings			Equity
Balance, March 31, 2011		2,431,286	$	607,821	$	6,238,498	$	19,394,295		$	26,240,614
Net income		-		-		-		760,872			760,872
Cash dividend ($0.25 per share)		-		-		-		(611,571	)		(611,571	)
Exercise of stock options		15,000		3,750		120,600		-			124,350
Compensation expense related to
stock options		-		-		1,469		-			1,469
Balance, September 30, 2011		2,446,286	$	611,571	$	6,360,567	$	19,543,596		$	26,515,734
	Common Stock				Additional					Total
					Paid-In		Retained			Stockholders'
	Shares		Amount		Capital		Earnings			Equity
Balance, March 31, 2012		2,446,286	$	611,571	$	6,308,411	$	20,132,948		$	27,052,930
Net income		-		-		-		644,445			644,445
Cash dividend ($0.25 per share)		-		-		-		(611,571	)		(611,571	)
Compensation expense related to
stock options		-		-		1,000		-			1,000
Balance, September 30, 2012		2,446,286	$	611,571	$	6,309,411	$	20,165,822		$	27,086,804
See notes to condensed consolidated financial statements.

AIR T, INC. AND SUBSIDIARIES

NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (UNAUDITED)

1.   Financial Statement Presentation

The condensed consolidated financial statements of Air T, Inc. (the “Company”) have been prepared, without audit, pursuant to the rules and regulations of the Securities and Exchange Commission.  Certain information and disclosures normally included in financial statements prepared in accordance with accounting principles generally accepted in the United States of America have been condensed or omitted pursuant to such rules and regulations, although the Company believes that the following disclosures are adequate to make the information presented not misleading.  In the opinion of management, all adjustments (consisting only of normal recurring adjustments) considered necessary for a fair presentation of the results for the periods presented have been made.

It is suggested that these financial statements be read in conjunction with the consolidated financial statements and notes thereto included in the Company's Annual Report on Form 10-K for the year ended March 31, 2012.  The results of operations for the periods ended September 30 are not necessarily indicative of the operating results for the full year.

2.   Income Taxes

The tax effect of temporary differences, primarily asset reserves, stock-based compensation and accrued liabilities, gave rise to the Company's deferred tax asset in the accompanying September 30, 2012 and March 31, 2012 consolidated balance sheets. Deferred income taxes are recognized for the tax consequence of such temporary differences at the enacted tax rate expected to be in effect when the differences reverse.

The income tax provisions for the respective three-month and six-month periods ended September 30, 2012 and 2011 differ from the federal statutory rate primarily as a result of state income taxes offset by permanent tax differences.

3.   Net Earnings Per Share

Basic earnings per share have been calculated by dividing net earnings by the weighted average number of common shares outstanding during each period.  For purposes of calculating diluted earnings per share, shares issuable under employee stock options were considered potential common shares and were included in the weighted average common shares unless they were anti-dilutive.

The computation of basic and diluted earnings per common share is as follows:

	Three Months Ended September 30,				Six Months Ended September 30,
	2012		2011		2012		2011
Net earnings	$	227,432	$	592,723	$	644,445	$	760,872
Earnings Per Share:
Basic	$	0.09	$	0.24	$	0.26	$	0.31
Diluted	$	0.09	$	0.24	$	0.26	$	0.31
Weighted Average Shares Outstanding:
Basic		2,446,286		2,446,286		2,446,286		2,441,286
Diluted		2,450,165		2,446,286		2,454,162		2,449,583

For the three months ended September 30, 2012 and 2011, respectively, options to acquire 33,500 and 200,000 shares of common stock, and for the six months ended September 30, 2012 and 2011, respectively, options to acquire 31,000 shares of common stock, were not included in computing diluted earnings per common share because their effects were anti-dilutive.

4.   Inventories

Inventories consisted of the following:

	September 30, 2012			March 31, 2012
Aircraft parts and supplies	$	119,637		$	119,638
Ground equipment manufacturing:
Raw materials		8,433,365			9,127,113
Work in process		4,630,758			4,363,789
Finished goods		1,531,371			1,705,268
Total inventories		14,715,131			15,315,808
Reserves		(790,853	)		(772,918	)
Total, net of reserves	$	13,924,278		$	14,542,890

5.   Stock-Based Compensation

The Company maintains stock-based compensation plans which allow for the issuance of stock options to officers, other key employees of the Company, and to members of the Board of Directors.  The Company accounts for stock compensation using fair value recognition provisions.

During the three months ended September 30, 2012, options for 2,500 shares were granted to a director.  During the three months ended June 30, 2011, options were exercised for the issuance of 15,000 shares.  No other options were granted or exercised during the six-month periods ended September 30, 2012 and 2011.  Stock-based compensation expense in the amount of $1,000 and $1,469 was recognized for the six-month periods ended September 30, 2012 and 2011, respectively.  At September 30, 2012, there was $2,700 in unrecognized compensation expense related to the stock options.

6.   Financing Arrangements

The Company has a $7,000,000 secured long-term revolving credit line.  In August 2012, the expiration date of the credit line was extended from August 31, 2013 to August 31, 2014.  The revolving credit line contains customary events of default, a subjective acceleration clause and a fixed charge coverage requirement, with which the Company was in compliance at September 30, 2012.  There is no requirement for the Company to maintain a lock-box arrangement under this agreement.  The amount of credit available to the Company under the agreement at any given time is determined by an availability calculation, based on the eligible borrowing base, as defined in the credit agreement, which includes the Company’s outstanding receivables, inventories and equipment, with certain exclusions.  At September 30, 2012, $7,000,000 was available under the terms of the credit facility and no amounts were outstanding.  Amounts advanced under the credit facility bear interest at the 30-day “LIBOR” rate (.21% at September 30, 2012) plus 150 basis points.

The Company assumes various financial obligations and commitments in the normal course of its operations and financing activities.  Financial obligations are considered to represent known future cash payments that the Company is required to make under existing contractual arrangements such as debt and lease agreements.

7.   Segment Information

The Company operates in three business segments.  The overnight air cargo segment, comprised of the Company’s Mountain Air Cargo, Inc. (“MAC”) and CSA Air, Inc. (“CSA”) subsidiaries, operates in the air express delivery services industry.  The ground equipment sales segment, comprised of the Company’s Global Ground Support, LLC (“GGS”) subsidiary, manufactures and provides mobile deicers and other specialized equipment products to passenger and cargo airlines, airports, the U.S. military and industrial customers.  The ground support services segment, comprised of the Company’s Global Aviation Services, LLC (“GAS”) subsidiary, provides ground support equipment maintenance and facilities maintenance services to domestic airlines and aviation service providers.  Each business segment has separate management teams and infrastructures that offer different products and services.  The Company evaluates the performance of its operating segments based on operating income.

Segment data is summarized as follows:

	Three Months Ended September 30,						Six Months Ended September 30,
	2012			2011			2012			2011
Operating Revenues:
Overnight Air Cargo	$	12,051,201		$	12,339,606		$	22,784,927		$	23,166,505
Ground Equipment Sales:
Domestic		4,386,908			9,872,322			13,551,325			12,152,782
International		1,698,708			1,302,226			3,277,852			3,192,244
Total Ground Equipment Sales		6,085,616			11,174,548			16,829,177			15,345,026
Ground Support Services		3,025,243			1,946,764			6,036,121			3,510,884
Total	$	21,162,060		$	25,460,918		$	45,650,225		$	42,022,415
Operating Income (Loss):
Overnight Air Cargo	$	863,893		$	981,071		$	1,618,734		$	1,913,378
Ground Equipment Sales		(163,765	)		218,442			140,743			(92,414	)
Ground Support Services		52,028			156,616			222,290			195,281
Corporate		(401,222	)		(437,315	)		(977,163	)		(846,439	)
Total	$	350,934		$	918,814		$	1,004,604		$	1,169,806
Capital Expenditures:
Overnight Air Cargo	$	16,593		$	57,281		$	49,495		$	430,117
Ground Equipment Sales		53,281			19,519			111,651			22,590
Ground Support Services		16,038			131,402			16,038			150,902
Corporate		4,200			2,100			43,422			2,100
Total	$	90,112		$	210,302		$	220,606		$	605,709
Depreciation and Amortization:
Overnight Air Cargo	$	38,444		$	14,207		$	75,890		$	28,490
Ground Equipment Sales		18,837			10,439			35,396			20,408
Ground Support Services		33,465			31,172			66,917			50,810
Corporate		12,961			6,977			29,511			17,003
Total	$	103,707		$	62,795		$	207,714		$	116,711

8.   Commitments and Contingencies

The Company is not currently involved in or aware of any pending or threatened lawsuits.

9.   Subsequent Events

Management has evaluated all events or transactions through the date of this filing.  During this period, the Company did not have any material subsequent events that impacted its consolidated financial statements.

Item 2.  Management's Discussion and Analysis of Financial Condition and Results of Operations.

Overview

The Company operates in three business segments.  The overnight air cargo segment, comprised of the Company’s Mountain Air Cargo, Inc. (“MAC”) and CSA Air, Inc. (“CSA”) subsidiaries, operates in the air express delivery services industry.  The ground equipment sales segment, comprised of the Company’s Global Ground Support, LLC (“GGS”) subsidiary, manufactures and provides mobile deicers and other specialized equipment products to passenger and cargo airlines, airports, the U.S. military and industrial customers.  The ground support services segment, comprised of the Company’s Global Aviation Services, LLC (“GAS”) subsidiary, provides ground support equipment maintenance and facilities maintenance services to domestic airlines and aviation service providers.  Each business segment has separate management teams and infrastructures that offer different products and services.  The Company evaluates the performance of its operating segments based on operating income.

Following is a table detailing revenues by segment and by major customer category:

(In thousands)
	Three Months Ended September 30,								Six Months Ended September 30,
	2012				2011				2012				2011
Overnight Air Cargo Segment:
FedEx	$	12,051	57	%	$	12,340	48	%	$	22,785	50	%	$	23,167	55	%
Ground Equipment Sales Segment:
Military		816	4	%		5,339	21	%		4,840	11	%		5,423	13	%
Commercial - Domestic		3,571	17	%		4,533	18	%		8,711	19	%		6,730	16	%
Commercial - International		1,699	8	%		1,302	5	%		3,278	7	%		3,192	8	%
		6,086	29	%		11,174	44	%		16,829	37	%		15,345	37	%
Ground Support Services Segment		3,025	14	%		1,947	8	%		6,036	13	%		3,511	8	%
	$	21,162	100	%	$	25,461	100	%	$	45,650	100	%	$	42,023	100	%

MAC and CSA are short-haul express airfreight carriers and provide air cargo services to one primary customer, FedEx Corporation (“FedEx”).  MAC will also on occasion provide maintenance services to other airline customers and the U.S. Military.  Under the terms of dry-lease service agreements, which currently cover all of the 81 revenue aircraft, the Company receives a monthly administrative fee based on the number of aircraft operated and passes through to its customer certain cost components of its operations without markup.  The cost of fuel, flight crews, landing fees, outside maintenance, parts and certain other direct operating costs are included in operating expenses and billed to the customer as cargo and maintenance revenue, at cost.  As a result, the fluctuating cost of fuel has not had any direct impact on our air cargo operating results.  Pursuant to such agreements, FedEx determines the type of aircraft and schedule of routes to be flown by MAC and CSA, with all other operational decisions made by the Company.  These agreements are renewable on two to five-year terms and may be terminated by FedEx at any time upon 30 days’ notice.  The Company believes that the short term and other provisions of its agreements with FedEx are standard within the airfreight contract delivery service industry.  FedEx has been a customer of the Company since 1980.  Loss of its contracts with FedEx would have a material adverse effect on the Company.  We are presently in the process of negotiating replacement agreements with FedEx.  The terms of the replacement agreements may differ from the terms of our current agreements, which may affect our results going forward.

MAC and CSA combined contributed approximately $22,785,000 and $23,167,000 to the Company’s revenues for the six-month periods ended September 30, 2012 and 2011, respectively, a current year decrease of $382,000 (2%).

GGS manufactures and supports aircraft deicers and other specialized industrial equipment on a worldwide basis.  GGS manufactures five basic models of mobile deicing equipment with capacities ranging from 700 to 2,800 gallons.  GGS also provides fixed-pedestal-mounted deicers.  Each model can be customized as requested by the customer, including single operator configuration, fire suppressant equipment, open basket or enclosed cab design, a patented forced-air deicing nozzle and on-board glycol blending system to substantially reduce glycol usage, color and style of the exterior finish.  GGS also manufactures five models of scissor-lift equipment, for catering, cabin service and maintenance service of aircraft, and has developed a line of decontamination equipment, flight-line tow tractors, glycol recovery vehicles and other special purpose mobile equipment.  GGS competes primarily on the basis of the quality, performance and reliability of its products, prompt delivery, customer service and price.

On July 15, 2009, the Company announced that GGS had been awarded a new contract to supply deicing trucks to the United States Air Force (“USAF”).  The contract award was for one year with four additional one-year extension options that may be exercised by the USAF.  In June 2012, the third option period under the contract was exercised, extending the contract to July 2013.

In September 2010, GGS was awarded a contract to supply flight line tow tractors to the USAF.  The contract award is for one year commencing September 28, 2010 with four additional one-year extension options that may be exercised by the USAF.  In August 2012, the second option period under the contract was exercised, extending the contract to September 2013.  The value of the contract, as well as the number of units to be delivered, will be determined based upon annual requirements and available funding of the USAF.  Margins on the flight line tow tractors are lower than deicing equipment margins.

GGS contributed approximately $16,829,000 and $15,345,000 to the Company’s revenues for the six-month periods ended September 30, 2012 and 2011, respectively, representing a $1,484,000 (10%) increase.  At September 30, 2012, GGS’s order backlog was $15.5 million compared to $20.0 million at September 30, 2011 and $15.3 million at March 31, 2012.

GAS was formed in September 2007 to operate the aircraft ground support equipment and airport facility maintenance services business of the Company.  GAS is providing aircraft ground support equipment and airport facility maintenance services to a wide variety of customers at a number of locations throughout the country.

GAS contributed approximately $6,036,000 and $3,511,000 to the Company’s revenues for the six-month periods ended September 30, 2012 and 2011, respectively, representing a $2,525,000 (72%) increase.  GAS has been successful in the past year in adding new customers and locations to build its revenue base.

Second Quarter Highlights

Revenues from the air cargo segment decreased 2% compared to the second quarter of the prior fiscal year, while operating income decreased 12%, continuing the trend that we experienced in the first quarter of this fiscal year.  The air cargo segment has added a number of key management personnel in both its flight and maintenance departments in the past year which is the principal cause for the decrease in operating income this quarter.  The segment continues to generate steady profits.

Revenues for GGS decreased by 46% compared to the second quarter of the prior fiscal year.  GGS generated an operating loss of approximately $164,000 for the quarter, compared to operating income of $218,000 in the prior year comparable quarter.  The principal factor in the decrease in revenues and operating profits was a $4,523,000 decrease in sales to the USAF in the second quarter compared to the prior year quarter.  GGS revenues from the USAF were high in the first quarter of the current fiscal year, but dropped off in the second quarter.  GGS backlog at September 30, 2012 includes $11.2 million of orders from the USAF which will be delivered over the remainder of this fiscal year.  In addition, during the second quarter, GGS observed general weakening in domestic market demand for commercial deicing units which it believes is attributable in part to mild weather conditions in the United States this past winter.  GGS continues to see increased pressure on margins in highly competitive domestic, international and military equipment markets, although gross margins did increase by approximately four percentage points this quarter over the prior year comparable quarter, partially attributable to a change in customer mix to a higher percentage of commercial deicing units and partially due to improving production efficiencies.

During the quarter ended September 30, 2012, revenues from our GAS subsidiary increased by $1,079,000 (55%) as a result of the company’s growth in new customers and locations.  GAS operating income was $52,000 this quarter, down from income of $157,000 in the prior year comparable quarter, as the company incurred higher than normal costs in the startup up of several new large stations and has added additional management staff to manage the growth.

Critical Accounting Policies and Estimates

The preparation of the Company’s 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 significant accounting policies:

Allowance for Doubtful Accounts.  An allowance for doubtful accounts receivable is established based on management’s estimates of the collectability of accounts receivable.  The required allowance is determined using information such as customer credit history, industry information, credit reports, customer financial condition and the collectability of outstanding accounts receivables.  The estimates can be affected by changes in the financial strength of the aviation industry, customer credit issues or general economic conditions.

Inventories.  The Company’s inventories are valued at the lower of cost or market.  Provisions for excess and obsolete inventories are based on assessment of the marketability of slow-moving and obsolete inventories.  Historical parts usage, current period sales, estimated future demand and anticipated transactions between willing buyers and sellers provide the basis for estimates.  Estimates are subject to volatility and can be affected by reduced equipment utilization, existing supplies of used inventory available for sale, the retirement of aircraft or ground equipment and changes in the financial strength of the aviation industry.

Warranty Reserves.  The Company warranties its ground equipment products for up to a three-year period from date of sale.  Product warranty reserves are recorded at time of sale based on the historical average warranty cost and are adjusted quarterly as actual warranty cost becomes known.

Income Taxes.  Income taxes have been provided using the liability method.  Deferred income taxes reflect the net affects of temporary differences between the carrying amounts of assets and liabilities for financial reporting purposes and the amounts used for income tax reporting purposes using enacted rates expected to be in effect during the year in which the basis differences reverse.

Revenue Recognition.  Cargo revenue is recognized upon completion of contract terms.  Maintenance and ground support services revenue is recognized when the service has been performed.  Revenue from product sales is recognized when contract terms are completed and ownership has passed to the customer.

Seasonality

The deicer industry that GGS operates in has historically been seasonal.  The Company has been able to reduce GGS’s seasonal fluctuation in revenues and earnings by broadening its product line to include military and international sales to increase revenues and earnings throughout the year. Although sales remain somewhat seasonal, particularly with regard to commercial deicers which typically are delivered prior to the winter season, this diversification has lessened the impact on the Company.  If sales to the USAF cease to be a significant component of GGS’s sales, seasonal patterns of revenues and earnings attributable to its commercial deicer business may resume, with revenues and operating income for the segment typically being lower in the first and fourth fiscal quarters.  The overnight air cargo and ground support services segments are not susceptible to seasonal trends.

Results of Operations

Second Quarter Fiscal 2013 Compared to Second Quarter Fiscal 2012

Consolidated revenue decreased $4,299,000 (17%) to $21,162,000 for the three-month period ended September 30, 2012 compared to its equivalent prior period.  The decrease in revenues can be principally attributed to decreases in business in our ground equipment sales segment.  Revenues in the ground equipment sales segment decreased $5,089,000 (46%), the principal component being a $4,523,000 decrease in revenues from the USAF in the current quarter compared to the prior year comparable quarter.  Offsetting that large decrease in revenues was a $1,079,000 (55%) increase in the ground support services segment revenues as a result of the company’s growth in new customers and locations.

Operating expenses decreased $3,731,000 (15%) for the three-month period ended September 30, 2012 compared to its equivalent prior period.  The principal component of the decrease was a $4,821,000 (48%) decrease in ground equipment sales segment operating costs, driven primarily by the current quarter’s decrease in revenues.  Ground support services segment operating expenses increased $994,000 (76%) principally relating to the increase in revenues for the segment but also as a result of increased startup costs and management staffing related to several large new stations in this quarter.  General and administrative expenses increased $322,000 (12%) for the three-month period ended September 30, 2012 compared to its equivalent prior period. The increase was incurred over a variety of categories with the principal components of this increase being salary costs including health insurance, travel expense, rents and professional fees, partially offset by a decrease in profit sharing expense.

Operating income for the quarter ended September 30, 2012 was $351,000, a $568,000 (62%) decrease from the same quarter of the prior year.  The ground equipment sales segment incurred an operating loss of $164,000 in the quarter ended September 30, 2012 compared to operating income of $218,000 in the prior year comparable quarter, a $382,000 reduction.  The reduction is the direct result of reduced revenues in the current quarter, principally from reduced sales to the USAF.  The ground support services segment saw a $105,000 decrease in its operating income in the current quarter.  Although revenues were up, the startup costs associated with opening new large stations resulted in reduced operating income this quarter. The overnight air cargo segment saw an $117,000 (12%) decrease in its operating income due to increased labor and other costs.

Non-operating income, net decreased $6,000 for the three-month period ended September 30, 2012.  The principal difference was a decrease in investment income.

Pretax earnings decreased $574,000 for the three-month period ended September 30, 2012 compared to the prior comparable period, relating to the decreased operating income of all three segments as detailed above.

During the three-month period ended September 30, 2012, the Company recorded $126,000 in income tax expense, which resulted in an estimated annual tax rate of 35.7%,  comparable to the rate of 36.1% for the comparable prior quarter.  The estimated annual effective tax rates for both periods differ from the U. S. federal statutory rate of 34% primarily due to the effect of state income taxes.

First Six Months of Fiscal 2013 Compared to First Six Months of Fiscal 2012

Consolidated revenue increased $3,628,000 (9%) to $45,650,000 for the six-month period ended September 30, 2012 compared to its equivalent prior period.  The increase in revenues can be attributed to increases in business in our ground equipment sales and ground support services segments.  Revenues in the ground equipment sales segment increased $1,484,000 (10%).   Revenues in the ground support services segment were up $2,525,000 (72%), resulting from the addition of new customers and locations over the past year, particularly several new large locations for one customer.

Operating expenses increased $3,793,000 (9%) for the six-month period ended September 30, 2012 compared to its equivalent prior period.  Ground equipment sales segment operating costs increased $1,105,000 (8%) driven primarily by the current period’s increase in revenues.  Ground support services segment operating expenses increased $2,108,000 (87%) following the increase in revenues for the segment but also as a result of increased startup costs and management staffing related to several large new stations in this quarter.  General and administrative expenses increased $731,000 (14%) for the six-month period ended September 30, 2012 compared to its equivalent prior period. The increase was incurred over a variety of categories with the principal components of this increase being salary costs including health insurance, travel, rents and professional fees offset by a decrease in office equipment and supplies.

Operating income for the six-month period ended September 30, 2012 was $1,005,000, a $165,000 (14%) decrease from the same period of the prior year.  The overnight air cargo segment saw a $295,000 (15%) decrease in its operating income due to increased labor, travel, insurance and other flight and maintenance costs.  The ground equipment sales segment experienced a $233,000 increase in its operating income in the six-month period ended September 30, 2012.  The increase is the result of increased revenues in the current period.  The ground support services segment saw a $27,000 (14%) increase in its operating income for the period.

 Non-operating income, net decreased $20,000 for the six-month period ended September 30, 2012.  The principal difference was a decrease in investment income, due to decreased returns on cash and investment balances in the current period.

Pretax earnings decreased $185,000 for the six-month period ended September 30, 2012 compared to the prior comparable period, primarily due to the decrease in the overnight air cargo segment operating income.

During the six-month period ended September 30, 2012, the Company recorded $361,000 in income tax expense, which resulted in an estimated annual tax rate of 35.9%,  comparable to the rate of 36.1% for the comparable prior period.  The estimated annual effective tax rates for both periods differ from the U. S. federal statutory rate of 34% primarily due to the effect of state income taxes.

Liquidity and Capital Resources

As of September 30, 2012 the Company's working capital amounted to $23,423,000, an increase of $184,000 compared to March 31, 2012.

The Company has a $7,000,000 secured long-term revolving credit line.  In August 2012, the expiration date of the credit line was extended from August 31, 2013 to August 31, 2014.  The revolving credit line contains customary events of default, a subjective acceleration clause and a fixed charge coverage requirement, with which the Company was in compliance at September 30, 2012.  There is no requirement for the Company to maintain a lock-box arrangement under this agreement.  The amount of credit available to the Company under the agreement at any given time is determined by an availability calculation, based on the eligible borrowing base, as defined in the credit agreement, which includes the Company’s outstanding receivables, inventories and equipment, with certain exclusions. At September 30, 2012, $7,000,000 was available for borrowing under the credit line and no amounts were outstanding.

Amounts advanced under the credit facility bear interest at the 30-day “LIBOR” rate plus 150 basis points.  The LIBOR rate at September 30, 2012 was .21%. The Company is exposed to changes in interest rates on its line of credit with respect to any borrowings outstanding under the line of credit.  However, because the Company’s outstanding balance under the line of credit was negligible during the quarter ended September 30, 2012, changes in the LIBOR rate during that period would have had a minimal affect on its interest expense for the quarter.

Following is a table of changes in cash flow for the respective periods ended September 30, 2012 and 2011:

	Six Months Ended September 30,
	2012			2011
Net Cash Provided by (Used in) Operating Activities	$	771,000		$	(1,176,000	)
Net Cash Used in Investing Activities		(217,000	)		(555,000	)
Net Cash Used in Financing Activities		(612,000	)		(494,000	)
Net Decrease in Cash and Cash Equivalents	$	(58,000	)	$	(2,225,000	)

During 2011, the Company used cash in operating activities primarily to support growth in receivables and inventories resulting from increases in sales and backlog for the 2011 period.  For 2012, decreases in receivables, inventories and other current assets were offset by the reduction in accounts payable and accrued expenses.

Cash used in investing activities for the six-month period ended September 30, 2012 was $338,000 less than the comparable prior year period due to the decrease in capital expenditures.

Cash used in financing activities was $118,000 more for the six-month period ended September 30, 2012, than in the corresponding prior year period due to proceeds from the exercise of stock options in the prior period totaling $124,000.

There are currently no commitments for significant capital expenditures. The Company’s Board of Directors on August 7, 1998 adopted the policy to pay an annual cash dividend, based on profitability and other factors, in the first quarter of each fiscal year, in an amount to be determined by the Board.  The Company paid a $0.25 per share cash dividend in June 2012.

Impact of Inflation

The Company believes that inflation has not had a material effect on its operations, because increased costs to date have been passed on to its customers. Under the terms of its air cargo business contracts the major cost components of its operations, consisting principally of fuel, crew and other direct operating costs, and certain maintenance costs are reimbursed, without markup by its customer.  Significant increases in inflation rates or a change in air cargo contracts, shifting the risk of these cost increases to the Company, could have a material impact on future revenue and operating income.

Item 3.  Quantitative and Qualitative Disclosures About Market Risk.

Not applicable.

Item 4.  Controls and Procedures

Our management carried out an evaluation, with the participation of our Chief Executive Officer and Chief Financial Officer, of the effectiveness of our disclosure controls and procedures (as defined in Rule 13a-15(e) under the Securities Exchange Act of 1934, as amended (the “Exchange Act”)) as of September 30, 2012. Based upon that evaluation, our Chief Executive Officer and Chief Financial Officer concluded that our disclosure controls and procedures, including the accumulation and communication of information to the Company’s Chief Executive Officer and Chief Financial Officer, as appropriate to allow timely decisions regarding required disclosure, were effective to provide reasonable assurance that information required to be disclosed by us in reports that we file or submit under the Exchange Act are recorded, processed, summarized and reported, within the time periods specified in the rules and forms of the SEC. It should be noted that the design of any system of controls is based in part upon certain assumptions about the likelihood of future events, and there can be no assurance that any design will succeed in achieving the stated goals under all potential future conditions, regardless of how remote.

There has not been any change in our internal control over financial reporting in connection with the evaluation required by Rule 13a-15(d) under the Exchange Act that occurred during the quarter ended September 30, 2012 that has materially affected, or is reasonably likely to materially affect, our internal control over financial reporting.

PART II -- OTHER INFORMATION

Item 6.  Exhibits

(a)	Exhibits
	No.		Description
		3.1	Restated Certificate of Incorporation and Certificate of Amendment to Certificate of Incorporation dated September 25, 2008 and Certificate of Designation dated March 26, 2012, incorporated by reference to Exhibit 3.1 of the Company’s Annual Report on Form 10-K for the fiscal year ended March 31, 2012 (Commission file No. 0-11720)
		3.2	Amended and Restated Bylaws of Air T, Inc., incorporated by reference to Exhibit 3.2 of the Company’s Annual Report on Form 10-K for the fiscal year ended March 31, 2012 (Commission file No. 0-11720)
		10.1	Amendment No. 3 to Loan Agreement dated August 29, 2012 between Bank of America, N.A. and Air T, Inc., Mountain Air Cargo, Inc., Global Ground Support LLC, CSA Air, Inc. and Global Aviation Services, LLC, incorporated by reference to Exhibit 10.1 to the Company's Current Report on Form 8-K dated September 4, 2012 (Commission file No. 0-11720)
		31.1	Section 302 Certification of Chief Executive Officer
		31.2	Section 302 Certification of Chief Financial Officer
		32.1	Section 1350 Certifications
		101	The following financial information from the Quarterly Report on Form 10-Q for the quarter ended September 30, 2012, formatted in XBRL (Extensible Business Reporting Language): (i) the Condensed Consolidated Statements of Income, (ii) the Condensed Consolidated Balance Sheets, (iii) the Condensed Consolidated Statements of Cash Flows, (iv) the Condensed Consolidated Statements of Stockholders Equity, and (v) the Notes to the Condensed Consolidated Financial Statements.

SIGNATURES

Pursuant to the requirements of Section 13 or 15(d) of the Securities Exchange Act of 1934, the registrant has duly caused this report to be signed on its behalf by the undersigned, thereunto duly authorized.

AIR T, INC.

Date:  November 2, 2012

/s/ Walter Clark                                                                           

Walter Clark, Chief Executive Officer

(Principal Executive Officer)

/s/ John Parry

John Parry, Chief Financial Officer

(Principal Financial and Accounting Officer)

AIR T, INC.

EXHIBIT INDEX

(a)	Exhibits
	No.		Description
		3.1	Restated Certificate of Incorporation and Certificate of Amendment to Certificate of Incorporation dated September 25, 2008 and Certificate of Designation dated March 26, 2012, incorporated by reference to Exhibit 3.1 of the Company’s Annual Report on Form 10-K for the fiscal year ended March 31, 2012 (Commission file No. 0-11720)
		3.2	Amended and Restated Bylaws of Air T, Inc., incorporated by reference to Exhibit 3.2 of the Company’s Annual Report on Form 10-K for the fiscal year ended March 31, 2012 (Commission file No. 0-11720)
		10.1	Amendment No. 3 to Loan Agreement dated August 29, 2012 between Bank of America, N.A. and Air T, Inc., Mountain Air Cargo, Inc., Global Ground Support LLC, CSA Air, Inc. and Global Aviation Services, LLC, incorporated by reference to Exhibit 10.1 to the Company's Current Report on Form 8-K dated September 4, 2012 (Commission file No. 0-11720)
		31.1	Section 302 Certification of Chief Executive Officer
		31.2	Section 302 Certification of Chief Financial Officer
		32.1	Section 1350 Certifications
		101	The following financial information from the Quarterly Report on Form 10-Q for the quarter ended September 30, 2012, formatted in XBRL (Extensible Business Reporting Language): (i) the Condensed Consolidated Statements of Income, (ii) the Condensed Consolidated Balance Sheets, (iii) the Condensed Consolidated Statements of Cash Flows, (iv) the Condensed Consolidated Statements of Stockholders Equity, and (v) the Notes to the Condensed Consolidated Financial Statements.

EX-31.1

SECTION 302 CERTIFICATION

I, Walter Clark, certify that:

1. I have reviewed this Form 10-Q of Air T, Inc.;

2. Based on my knowledge, this report does not contain any untrue statement of a material fact or omit to state a material fact necessary to make the statements made, in light of the circumstances under which such statements were made, not misleading with respect to the period covered by this report;

3. Based on my knowledge, the financial statements, and other financial information included in this report, fairly present in all material respects the financial condition, results of operations and cash flows of the registrant as of, and for, the periods presented in this report;

4. The registrant’s other certifying officer and I are responsible for establishing and maintaining disclosure controls and procedures (as defined in Exchange Act Rules 13a-15(e) and 15d-15(e)) and internal control over financial reporting (as defined in Exchange Act Rules 13a-15(f) and 15d-15(f)) for the registrant and have:

(a)   Designed such disclosure controls and procedures, or caused such disclosure controls and procedures to be designed under our supervision, to ensure that material information relating to the registrant, including its consolidated subsidiaries, is made known to us by others within those entities, particularly during the period in which this report is being prepared;

(b)   Designed such internal controls over financial reporting, or caused such internal control over financial reporting to be designed under our supervision, to provide reasonable assurance regarding the reliability of financial reporting and the preparation of financial statements for external purposes in accordance with generally accepted accounting principles;

(c)   Evaluated the effectiveness of the registrant’s disclosure controls and procedures and presented in this report our conclusions about the effectiveness of the disclosure controls and procedures, as of the end of the period covered by this report based on such evaluation; and

(d)   Disclosed in this report any change in the registrant’s internal control over financial reporting that occurred during the registrant’s most recent fiscal quarter that has materially affected, or is reasonably likely to materially affect, the registrant’s internal control over financial reporting; and

5. The registrant’s other certifying officer and I have disclosed, based on our most recent evaluation of internal control over financial reporting, to the registrant’s auditors and the audit committee of the registrant’s board of directors (or persons performing the equivalent functions):

(a) All significant deficiencies and material weaknesses in the design or operation of internal control over financial reporting which are reasonably likely to adversely affect the registrant’s ability to record, process, summarize and report financial information; and

(b) Any fraud, whether or not material, that involves management or other employees who have a significant role in the registrant’s internal control over financial reporting.

Date:  November 2, 2012

/s/ Walter Clark                                                                           

Walter Clark

Chief Executive Officer

EX-31.2

SECTION 302 CERTIFICATION

I, John Parry, certify that:

1. I have reviewed this Form 10-Q of Air T, Inc.;

2. Based on my knowledge, this report does not contain any untrue statement of a material fact or omit to state a material fact necessary to make the statements made, in light of the circumstances under which such statements were made, not misleading with respect to the period covered by this report;

3. Based on my knowledge, the financial statements, and other financial information included in this report, fairly present in all material respects the financial condition, results of operations and cash flows of the registrant as of, and for, the periods presented in this report;

4. The registrant’s other certifying officer and I are responsible for establishing and maintaining disclosure controls and procedures (as defined in Exchange Act Rules 13a-15(e) and 15d-15(e)) and internal control over financial reporting (as defined in Exchange Act Rules 13a-15(f) and 15d-15(f)) for the registrant and have:

(a)   Designed such disclosure controls and procedures, or caused such disclosure controls and procedures to be designed under our supervision, to ensure that material information relating to the registrant, including its consolidated subsidiaries, is made known to us by others within those entities, particularly during the period in which this report is being prepared;

(b)   Designed such internal controls over financial reporting, or caused such internal control over financial reporting to be designed under our supervision, to provide reasonable assurance regarding the reliability of financial reporting and the preparation of financial statements for external purposes in accordance with generally accepted accounting principles;

(c)   Evaluated the effectiveness of the registrant’s disclosure controls and procedures and presented in this report our conclusions about the effectiveness of the disclosure controls and procedures, as of the end of the period covered by this report based on such evaluation; and

(d)   Disclosed in this report any change in the registrant’s internal control over financial reporting that occurred during the registrant’s most recent fiscal quarter that has materially affected, or is reasonably likely to materially affect, the registrant’s internal control over financial reporting; and

5. The registrant’s other certifying officer and I have disclosed, based on our most recent evaluation of internal control over financial reporting, to the registrant’s auditors and the audit committee of the registrant’s board of directors (or persons performing the equivalent functions):

(a) All significant deficiencies and material weaknesses in the design or operation of internal control over financial reporting which are reasonably likely to adversely affect the registrant’s ability to record, process, summarize and report financial information; and

(b) Any fraud, whether or not material, that involves management or other employees who have a significant role in the registrant’s internal control over financial reporting.

Date:  November 2, 2012

/s/ John Parry

John Parry

Chief Financial Officer

EX-32.1

CERTIFICATION PURSUANT TO 18 U.S.C. SECTION 1350,

AS ADOPTED PURSUANT TO SECTION 906 OF THE SARBANES-OXLEY ACT OF 2002

In connection with the Air T, Inc. (the "Company") Quarterly Report on Form 10-Q for the period ended June 30, 2012 as filed with the United States Securities and Exchange Commission on the date hereof (the "Report"), I, Walter Clark, Chief Executive Officer, and John Parry, Chief Financial Officer of the Company, each certify, pursuant to 18 U.S.C. 1350, as adopted pursuant to Section 906 of the Sarbanes-Oxley Act of 2002, that:

(1)   The Report fully complies with the requirements of Section 13(a) or 15(d) of the Securities Exchange Act of 1934, as amended; and

(2)   The information contained in the Report fairly presents, in all material respects, the financial condition and result of operations of the Company.

Date:  November 2, 2012

/s/ Walter Clark                                                                           

Walter Clark

Chief Executive Officer

/s/ John Parry

John Parry

Chief Financial Officer

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Note 7 - Segment Information (Detail) - Segment Data is Summarized as Follows: (USD $)	3 Months Ended		6 Months Ended
	Sep. 30, 2012	Sep. 30, 2011	Sep. 30, 2012	Sep. 30, 2011
Operating Revenues:
Overnight Air Cargo	$ 12,051,201	$ 12,339,606	$ 22,784,927	$ 23,166,505
Ground Equipment Sales:
Ground Equipment Sales	6,085,616	11,174,548	16,829,177	15,345,026
Ground Support Services	3,025,243	1,946,764	6,036,121	3,510,884
Total	21,162,060	25,460,918	45,650,225	42,022,415
Operating Income (Loss):
Operating Income/Loss	350,934	918,814	1,004,604	1,169,806
Capital Expenditures:
Overnight Air Cargo	4,939,237	4,838,168	9,399,631	9,422,514
Ground Equipment Sales	5,132,797	9,953,745	14,564,753	13,459,595
Ground Support Services	2,294,367	1,299,996	4,523,799	2,416,064
Total	90,112	210,302	220,606	605,709
Depreciation and Amortization:
Depreciation and Amortization	103,707	62,795	207,714	116,711
Domestic [Member]
Ground Equipment Sales:
Ground Equipment Sales	4,386,908	9,872,322	13,551,325	12,152,782
International [Member]
Ground Equipment Sales:
Ground Equipment Sales	1,698,708	1,302,226	3,277,852	3,192,244
Overnight Air Cargo [Member]
Operating Income (Loss):
Operating Income/Loss	863,893	981,071	1,618,734	1,913,378
Capital Expenditures:
Overnight Air Cargo	16,593	57,281	49,495	430,117
Depreciation and Amortization:
Depreciation and Amortization	38,444	14,207	75,890	28,490
Ground Equipment Sales [Member]
Operating Income (Loss):
Operating Income/Loss	(163,765)	218,442	140,743	(92,414)
Capital Expenditures:
Ground Equipment Sales	53,281	19,519	111,651	22,590
Depreciation and Amortization:
Depreciation and Amortization	18,837	10,439	35,396	20,408
Ground Support Services [Member]
Operating Income (Loss):
Operating Income/Loss	52,028	156,616	222,290	195,281
Capital Expenditures:
Ground Support Services	16,038	131,402	16,038	150,902
Depreciation and Amortization:
Depreciation and Amortization	33,465	31,172	66,917	50,810
Corporate Division [Member]
Operating Income (Loss):
Operating Income/Loss	(401,222)	(437,315)	(977,163)	(846,439)
Capital Expenditures:
Corporate	4,200	2,100	43,422	2,100
Depreciation and Amortization:
Depreciation and Amortization	$ 12,961	$ 6,977	$ 29,511	$ 17,003

XML

Note 2 - Income Taxes

3 Months Ended

Sep. 30, 2012

Income Tax Disclosure [Text Block]

2.     Income Taxes

The tax effect of temporary differences, primarily asset reserves, stock-based compensation and accrued liabilities, gave rise to the Company's deferred tax asset in the accompanying September 30, 2012 and March 31, 2012 consolidated balance sheets. Deferred income taxes are recognized for the tax consequence of such temporary differences at the enacted tax rate expected to be in effect when the differences reverse.

The income tax provisions for the respective three-month and six-month periods ended September 30, 2012 and 2011 differ from the federal statutory rate primarily as a result of state income taxes offset by permanent tax differences.

XML

Note 1 - Financial Statement Presentation

3 Months Ended

Sep. 30, 2012

Significant Accounting Policies [Text Block]

1.     Financial Statement Presentation

The condensed consolidated financial statements of Air T, Inc. (the “Company”) have been prepared, without audit, pursuant to the rules and regulations of the Securities and Exchange Commission.  Certain information and disclosures normally included in financial statements prepared in accordance with accounting principles generally accepted in the United States of America have been condensed or omitted pursuant to such rules and regulations, although the Company believes that the following disclosures are adequate to make the information presented not misleading.  In the opinion of management, all adjustments (consisting only of normal recurring adjustments) considered necessary for a fair presentation of the results for the periods presented have been made.

It is suggested that these financial statements be read in conjunction with the consolidated financial statements and notes thereto included in the Company's Annual Report on Form 10-K for the year ended March 31, 2012.  The results of operations for the periods ended September 30 are not necessarily indicative of the operating results for the full year.

XML

Condensed Consolidated Statements of Income (Unaudited) (USD $)	3 Months Ended		6 Months Ended
	Sep. 30, 2012	Sep. 30, 2011	Sep. 30, 2012	Sep. 30, 2011
Operating Revenues:
Overnight air cargo	$ 12,051,201	$ 12,339,606	$ 22,784,927	$ 23,166,505
Ground equipment sales	6,085,616	11,174,548	16,829,177	15,345,026
Ground support services	3,025,243	1,946,764	6,036,121	3,510,884
	21,162,060	25,460,918	45,650,225	42,022,415
Operating Expenses:
Flight-air cargo	4,939,237	4,838,168	9,399,631	9,422,514
Maintenance-air cargo	5,365,093	5,733,099	10,028,882	10,248,117
Ground equipment sales	5,132,797	9,953,745	14,564,753	13,459,595
Ground support services	2,294,367	1,299,996	4,523,799	2,416,064
General and administrative	2,975,925	2,654,301	5,920,842	5,189,608
Depreciation and amortization	103,707	62,795	207,714	116,711
	20,811,126	24,542,104	44,645,621	40,852,609
Operating Income	350,934	918,814	1,004,604	1,169,806
Non-operating Income (Expense):
Investment income	3,463	10,351	8,028	22,735
Interest expense and Other	(965)	(1,442)	(7,187)	(1,669)
	2,498	8,909	841	21,066
Income Before Income Taxes	353,432	927,723	1,005,445	1,190,872
Income Taxes	126,000	335,000	361,000	430,000
Net Income	$ 227,432	$ 592,723	$ 644,445	$ 760,872
Earnings Per Share:
Basic (in Dollars per share)	$ 0.09	$ 0.24	$ 0.26	$ 0.31
Diluted (in Dollars per share)	$ 0.09	$ 0.24	$ 0.26	$ 0.31
Dividends Declared Per Share (in Dollars per share)			$ 0.25	$ 0.25
Weighted Average Shares Outstanding:
Basic (in Shares)	2,446,286	2,446,286	2,446,286	2,441,286
Diluted (in Shares)	2,450,165	2,446,286	2,454,162	2,449,583

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Condensed Consolidated Statement of Stockholders' Equity (Unaudited) (USD $)	Common Stock [Member]	Additional Paid-in Capital [Member]	Retained Earnings [Member]	Total
Balance Beginning at Mar. 31, 2011	$ 607,821	$ 6,238,498	$ 19,394,295	$ 26,240,614
Balance Beginning (in Shares) at Mar. 31, 2011	2,431,286
Net income			760,872	760,872
Cash dividend			(611,571)	(611,571)
Exercise of stock options	3,750	120,600		124,350
Exercise of stock options (in Shares)	15,000
Compensation expense related to stock options		1,469		1,469
Balance Ending at Sep. 30, 2011	611,571	6,360,567	19,543,596	26,515,734
Balance Ending (in Shares) at Sep. 30, 2011	2,446,286
Balance Beginning at Mar. 31, 2012	611,571	6,308,411	20,132,948	27,052,930
Balance Beginning (in Shares) at Mar. 31, 2012	2,446,286
Net income			644,445	644,445
Cash dividend			(611,571)	(611,571)
Compensation expense related to stock options		1,000		1,000
Balance Ending at Sep. 30, 2012	$ 611,571	$ 6,309,411	$ 20,165,822	$ 27,086,804
Balance Ending (in Shares) at Sep. 30, 2012	2,446,286

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Note 4 - Inventories (Detail) - Inventories Consisted of the Following: (USD $)	Sep. 30, 2012	Mar. 31, 2012
Aircraft parts and supplies	$ 119,637	$ 119,638
Ground equipment manufacturing:
Raw materials	8,433,365	9,127,113
Work in process	4,630,758	4,363,789
Finished goods	1,531,371	1,705,268
Total inventories	14,715,131	15,315,808
Reserves	(790,853)	(772,918)
Total, net of reserves	$ 13,924,278	$ 14,542,890

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Note 6 - Financing Arrangements (Detail) (USD $)	Sep. 30, 2012	Aug. 30, 2012
Secured Long-term Debt, Noncurrent (in Dollars)	$ 7,000,000	$ 7,000,000
Debt Instrument, Interest Rate, Stated Percentage	21.00%
Debt Instrument, Basis Spread on Variable Rate	150.00%

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Condensed Consolidated Statement of Stockholders' Equity (Unaudited) (Parentheticals) (USD $)	6 Months Ended
	Sep. 30, 2012	Sep. 30, 2011
Cash dividend per share	$ 0.25	$ 0.25

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Condensed Consolidated Balance Sheets (USD $)	Sep. 30, 2012	Mar. 31, 2012
Current Assets:
Cash and cash equivalents	$ 5,756,492	$ 5,814,184
Accounts receivable, less allowance for doubtful accounts of $107,000 and $108,000	8,308,670	8,952,007
Notes and other receivables-current	43,083	64,254
Income tax receivable	327,000	642,000
Inventories	13,924,278	14,542,890
Deferred income taxes	430,000	430,000
Prepaid expenses and other	457,592	761,025
Total Current Assets	29,247,115	31,206,360
Property and Equipment, net	1,898,509	1,889,658
Cash Surrender Value of Life Insurance Policies	1,717,674	1,683,672
Notes and Other Receivables-Long Term		191,505
Other Assets	111,145	112,172
Total Assets	32,974,443	35,083,367
Current Liabilities:
Accounts payable	4,120,838	5,999,598
Accrued expenses	1,702,801	1,966,839
Total Current Liabilities	5,823,639	7,966,437
Deferred Income Taxes	64,000	64,000
Stockholders' Equity:
Common stock, $.25 par value; 4,000,000 shares authorized, 2,446,286 shares issued and outstanding	611,571	611,571
Additional paid-in capital	6,309,411	6,308,411
Retained earnings	20,165,822	20,132,948
Total Stockholders' Equity	27,086,804	27,052,930
Total Liabilities and Stockholders’ Equity	$ 32,974,443	$ 35,083,367

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Note 3 - Net Earnings Per Share (Tables)

3 Months Ended

Sep. 30, 2012

Schedule of Stock by Class [Table Text Block]

	Three Months Ended September 30,				Six Months Ended September 30,
	2012		2011		2012		2011
Net earnings	$	227,432	$	592,723	$	644,445	$	760,872
Earnings Per Share:
Basic	$	0.09	$	0.24	$	0.26	$	0.31
Diluted	$	0.09	$	0.24	$	0.26	$	0.31
Weighted Average Shares Outstanding:
Basic		2,446,286		2,446,286		2,446,286		2,441,286
Diluted		2,450,165		2,446,286		2,454,162		2,449,583

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Document And Entity Information	6 Months Ended
	Sep. 30, 2012	Oct. 26, 2012
Document and Entity Information [Abstract]
Entity Registrant Name	AIR T INC
Document Type	10-Q
Current Fiscal Year End Date	--03-31
Entity Common Stock, Shares Outstanding		2,446,286
Amendment Flag	false
Entity Central Index Key	0000353184
Entity Current Reporting Status	Yes
Entity Voluntary Filers	No
Entity Filer Category	Smaller Reporting Company
Entity Well-known Seasoned Issuer	No
Document Period End Date	Sep. 30, 2012
Document Fiscal Year Focus	2013
Document Fiscal Period Focus	Q2

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Note 4 - Inventories (Tables)

3 Months Ended

Sep. 30, 2012

Schedule of Inventory, Current [Table Text Block]

	September 30, 2012			March 31, 2012
Aircraft parts and supplies	$	119,637		$	119,638
Ground equipment manufacturing:
Raw materials		8,433,365			9,127,113
Work in process		4,630,758			4,363,789
Finished goods		1,531,371			1,705,268
Total inventories		14,715,131			15,315,808
Reserves		(790,853	)		(772,918	)
Total, net of reserves	$	13,924,278		$	14,542,890

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Condensed Consolidated Balance Sheets (Parentheticals) (USD $)	Sep. 30, 2012	Mar. 31, 2012
Allowance for doubtful accounts (in Dollars)	$ 107,000	$ 108,000
Preferred stock par value (in Dollars per share)	$ 1.00	$ 1.00
Preferred stock, shares authorized	50,000	50,000
Common stock, par value (in Dollars per share)	$ 0.25	$ 0.25
Common stock, shares authorized	4,000,000	4,000,000
Common stock, shares issued	2,446,286	2,446,286
Common stock, shares outstanding	2,446,286	2,446,286

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Note 5 - Stock-Based Compensation

3 Months Ended

Sep. 30, 2012

Disclosure of Compensation Related Costs, Share-based Payments [Text Block]

5.     Stock-Based Compensation

The Company maintains stock-based compensation plans which allow for the issuance of stock options to officers, other key employees of the Company, and to members of the Board of Directors.  The Company accounts for stock compensation using fair value recognition provisions.

During the three months ended September 30, 2012, options for 2,500 shares were granted to a director.  During the three months ended June 30, 2011, options were exercised for the issuance of 15,000 shares.  No other options were granted or exercised during the six-month periods ended September 30, 2012 and 2011.  Stock-based compensation expense in the amount of $1,000 and $1,469 was recognized for the six-month periods ended September 30, 2012 and 2011, respectively.  At September 30, 2012, there was $2,700 in unrecognized compensation expense related to the stock options.

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Note 4 - Inventories

3 Months Ended

Sep. 30, 2012

Inventory Disclosure [Text Block]

4.     Inventories

Inventories consisted of the following:

	September 30, 2012			March 31, 2012
Aircraft parts and supplies	$	119,637		$	119,638
Ground equipment manufacturing:
Raw materials		8,433,365			9,127,113
Work in process		4,630,758			4,363,789
Finished goods		1,531,371			1,705,268
Total inventories		14,715,131			15,315,808
Reserves		(790,853	)		(772,918	)
Total, net of reserves	$	13,924,278		$	14,542,890

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Note 5 - Stock-Based Compensation (Detail) (USD $)	3 Months Ended		6 Months Ended
	Sep. 30, 2012	Jun. 30, 2011	Sep. 30, 2012	Sep. 30, 2011
Share-based Compensation Arrangement by Share-based Payment Award, Options, Grants in Period, Gross (in Shares)	2,500
Share-based Compensation Arrangement by Share-based Payment Award, Options, Exercises in Period (in Shares)		15,000
Share-based Compensation			$ 1,000	$ 1,469
Employee Service Share-based Compensation, Nonvested Awards, Total Compensation Cost Not yet Recognized, Stock Options	$ 2,700		$ 2,700

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Note 7 - Segment Information (Tables)

3 Months Ended

Sep. 30, 2012

Schedule of Segment Reporting Information, by Segment [Table Text Block]

	Three Months Ended September 30,						Six Months Ended September 30,
	2012			2011			2012			2011
Operating Revenues:
Overnight Air Cargo	$	12,051,201		$	12,339,606		$	22,784,927		$	23,166,505
Ground Equipment Sales:
Domestic		4,386,908			9,872,322			13,551,325			12,152,782
International		1,698,708			1,302,226			3,277,852			3,192,244
Total Ground Equipment Sales		6,085,616			11,174,548			16,829,177			15,345,026
Ground Support Services		3,025,243			1,946,764			6,036,121			3,510,884
Total	$	21,162,060		$	25,460,918		$	45,650,225		$	42,022,415
Operating Income (Loss):
Overnight Air Cargo	$	863,893		$	981,071		$	1,618,734		$	1,913,378
Ground Equipment Sales		(163,765	)		218,442			140,743			(92,414	)
Ground Support Services		52,028			156,616			222,290			195,281
Corporate		(401,222	)		(437,315	)		(977,163	)		(846,439	)
Total	$	350,934		$	918,814		$	1,004,604		$	1,169,806
Capital Expenditures:
Overnight Air Cargo	$	16,593		$	57,281		$	49,495		$	430,117
Ground Equipment Sales		53,281			19,519			111,651			22,590
Ground Support Services		16,038			131,402			16,038			150,902
Corporate		4,200			2,100			43,422			2,100
Total	$	90,112		$	210,302		$	220,606		$	605,709
Depreciation and Amortization:
Overnight Air Cargo	$	38,444		$	14,207		$	75,890		$	28,490
Ground Equipment Sales		18,837			10,439			35,396			20,408
Ground Support Services		33,465			31,172			66,917			50,810
Corporate		12,961			6,977			29,511			17,003
Total	$	103,707		$	62,795		$	207,714		$	116,711

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Note 8 - Commitments and Contingencies

3 Months Ended

Sep. 30, 2012

Commitments and Contingencies Disclosure [Text Block]

8.     Commitments and Contingencies

The Company is not currently involved in or aware of any pending or threatened lawsuits.

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Note 6 - Financing Arrangements

3 Months Ended

Sep. 30, 2012

Debt Disclosure [Text Block]

6.     Financing Arrangements

The Company has a $7,000,000 secured long-term revolving credit line.  In August 2012, the expiration date of the credit line was extended from August 31, 2013 to August 31, 2014.  The revolving credit line contains customary events of default, a subjective acceleration clause and a fixed charge coverage requirement, with which the Company was in compliance at September 30, 2012.  There is no requirement for the Company to maintain a lock-box arrangement under this agreement.  The amount of credit available to the Company under the agreement at any given time is determined by an availability calculation, based on the eligible borrowing base, as defined in the credit agreement, which includes the Company’s outstanding receivables, inventories and equipment, with certain exclusions.  At September 30, 2012, $7,000,000 was available under the terms of the credit facility and no amounts were outstanding.  Amounts advanced under the credit facility bear interest at the 30-day “LIBOR” rate (.21% at September 30, 2012) plus 150 basis points.

The Company assumes various financial obligations and commitments in the normal course of its operations and financing activities.  Financial obligations are considered to represent known future cash payments that the Company is required to make under existing contractual arrangements such as debt and lease agreements.

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Note 7 - Segment Information

3 Months Ended

Sep. 30, 2012

Segment Reporting Disclosure [Text Block]

7.     Segment Information

The Company operates in three business segments.  The overnight air cargo segment, comprised of the Company’s Mountain Air Cargo, Inc. (“MAC”) and CSA Air, Inc. (“CSA”) subsidiaries, operates in the air express delivery services industry.  The ground equipment sales segment, comprised of the Company’s Global Ground Support, LLC (“GGS”) subsidiary, manufactures and provides mobile deicers and other specialized equipment products to passenger and cargo airlines, airports, the U.S. military and industrial customers.  The ground support services segment, comprised of the Company’s Global Aviation Services, LLC (“GAS”) subsidiary, provides ground support equipment maintenance and facilities maintenance services to domestic airlines and aviation service providers.  Each business segment has separate management teams and infrastructures that offer different products and services.  The Company evaluates the performance of its operating segments based on operating income.

Segment data is summarized as follows:

	Three Months Ended September 30,						Six Months Ended September 30,
	2012			2011			2012			2011
Operating Revenues:
Overnight Air Cargo	$	12,051,201		$	12,339,606		$	22,784,927		$	23,166,505
Ground Equipment Sales:
Domestic		4,386,908			9,872,322			13,551,325			12,152,782
International		1,698,708			1,302,226			3,277,852			3,192,244
Total Ground Equipment Sales		6,085,616			11,174,548			16,829,177			15,345,026
Ground Support Services		3,025,243			1,946,764			6,036,121			3,510,884
Total	$	21,162,060		$	25,460,918		$	45,650,225		$	42,022,415
Operating Income (Loss):
Overnight Air Cargo	$	863,893		$	981,071		$	1,618,734		$	1,913,378
Ground Equipment Sales		(163,765	)		218,442			140,743			(92,414	)
Ground Support Services		52,028			156,616			222,290			195,281
Corporate		(401,222	)		(437,315	)		(977,163	)		(846,439	)
Total	$	350,934		$	918,814		$	1,004,604		$	1,169,806
Capital Expenditures:
Overnight Air Cargo	$	16,593		$	57,281		$	49,495		$	430,117
Ground Equipment Sales		53,281			19,519			111,651			22,590
Ground Support Services		16,038			131,402			16,038			150,902
Corporate		4,200			2,100			43,422			2,100
Total	$	90,112		$	210,302		$	220,606		$	605,709
Depreciation and Amortization:
Overnight Air Cargo	$	38,444		$	14,207		$	75,890		$	28,490
Ground Equipment Sales		18,837			10,439			35,396			20,408
Ground Support Services		33,465			31,172			66,917			50,810
Corporate		12,961			6,977			29,511			17,003
Total	$	103,707		$	62,795		$	207,714		$	116,711

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Note 9 - Subsequent Events

3 Months Ended

Sep. 30, 2012

Subsequent Events [Text Block]

9.     Subsequent Events

Management has evaluated all events or transactions through the date of this filing.  During this period, the Company did not have any material subsequent events that impacted its consolidated financial statements.

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Note 3 - Net Earnings Per Share (Detail) - The Computation of Basic and Diluted Earnings per Common Share is as Follows: (USD $)	3 Months Ended		6 Months Ended
	Sep. 30, 2012	Sep. 30, 2011	Sep. 30, 2012	Sep. 30, 2011
Net earnings (in Dollars)	$ 227,432	$ 592,723	$ 644,445	$ 760,872
Earnings Per Share:
Basic (in Dollars per share)	$ 0.09	$ 0.24	$ 0.26	$ 0.31
Diluted (in Dollars per share)	$ 0.09	$ 0.24	$ 0.26	$ 0.31
Weighted Average Shares Outstanding:
Basic	2,446,286	2,446,286	2,446,286	2,441,286
Diluted	2,450,165	2,446,286	2,454,162	2,449,583

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Condensed Consolidated Statements of Cash Flows (Unaudited) (USD $)	6 Months Ended
	Sep. 30, 2012	Sep. 30, 2011
CASH FLOWS FROM OPERATING ACTIVITIES:
Net income	$ 644,445	$ 760,872
Adjustments to reconcile net income to net cash provided by (used in) operating activities:
Loss on disposal of equipment	541	875
Change in accounts receivable and inventory reserves	16,457	35,760
Depreciation and amortization	207,714	116,711
Change in cash surrender value of life insurance	(34,002)	(34,002)
Warranty reserve	99,186	200,245
Compensation expense related to stock options	1,000	1,469
Change in operating assets and liabilities:
Accounts receivable	644,815	(519,568)
Notes receivable and other non-trade receivables	212,676	128,340
Inventories	600,677	(1,204,781)
Prepaid expenses and other	304,460	(113,093)
Accounts payable	(1,878,760)	460,839
Accrued expenses	(363,224)	(412,785)
Income taxes receivable/ payable	315,000	(596,890)
Total adjustments	126,540	(1,936,880)
Net cash provided by (used in) operating activities	770,985	(1,176,008)
CASH FLOWS FROM INVESTING ACTIVITIES:
Proceeds from sale of investments		51,035
Capital expenditures	(220,606)	(605,709)
Proceeds from sale of assets	3,500
Net cash used in investing activities	(217,106)	(554,674)
CASH FLOWS FROM FINANCING ACTIVITIES:
Payment of cash dividend	(611,571)	(611,571)
Payment on capital leases		(6,496)
Proceeds from exercise of stock options		124,350
Net cash used in financing activities	(611,571)	(493,717)
NET DECREASE IN CASH AND CASH EQUIVALENTS	(57,692)	(2,224,399)
CASH AND CASH EQUIVALENTS AT BEGINNING OF PERIOD	5,814,184	6,515,067
CASH AND CASH EQUIVALENTS AT END OF PERIOD	5,756,492	4,290,668
Cash paid during the period for:
Interest	17,000	2,000
Income taxes	$ 46,000	$ 1,027,000

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Note 3 - Net Earnings Per Share

3 Months Ended

Sep. 30, 2012

Earnings Per Share [Text Block]

3.     Net Earnings Per Share

Basic earnings per share have been calculated by dividing net earnings by the weighted average number of common shares outstanding during each period.  For purposes of calculating diluted earnings per share, shares issuable under employee stock options were considered potential common shares and were included in the weighted average common shares unless they were anti-dilutive.

The computation of basic and diluted earnings per common share is as follows:

	Three Months Ended September 30,				Six Months Ended September 30,
	2012		2011		2012		2011
Net earnings	$	227,432	$	592,723	$	644,445	$	760,872
Earnings Per Share:
Basic	$	0.09	$	0.24	$	0.26	$	0.31
Diluted	$	0.09	$	0.24	$	0.26	$	0.31
Weighted Average Shares Outstanding:
Basic		2,446,286		2,446,286		2,446,286		2,441,286
Diluted		2,450,165		2,446,286		2,454,162		2,449,583

For the three months ended September 30, 2012 and 2011, respectively, options to acquire 33,500 and 200,000 shares of common stock, and for the six months ended September 30, 2012 and 2011, respectively, options to acquire 31,000 shares of common stock, were not included in computing diluted earnings per common share because their effects were anti-dilutive.

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Note 3 - Net Earnings Per Share (Detail)	6 Months Ended
	Sep. 30, 2012	Sep. 30, 2011
Incremental Common Shares Attributable to Call Options and Warrants	33,500	200,000
Stock Options [Member]
Incremental Common Shares Attributable to Call Options and Warrants	31,000