8-K/A

SECURITIES AND EXCHANGE COMMISSION

Washington, DC 20549

FORM 8-K/A

CURRENT REPORT

Pursuant to Section 13 or 15(d)

of the Securities Exchange Act of 1934

Date of Report (Date of earliest event reported) May 4, 2018

Air T, Inc.

(Exact Name of Registrant as Specified in its Charter)

Delaware	001-35476	52-1206400
(State or Other Jurisdiction of Incorporation)	(Commission File Number)	(I.R.S. Employer Identification No.)

5930 Balsom Ridge Road

Denver, North Carolina 28037

(Address of Principal Executive Offices)

(Zip Code)

(828) 464-8741

(Registrant’s Telephone Number, Including Area Code)

Not Applicable

(Former name or former address, if changed from last report)

Check the appropriate box below if the Form 8-K filing is intended to simultaneously satisfy the filing obligation of the registrant under any of the following provisions (see General Instruction A.2. below):

☐ Written communication pursuant to Rule 425 under the Securities Act (17 CFR 230.425)

☐ Soliciting material pursuant to Rule 14a-12 under the Exchange Act (17 CFR 240.14a-12)

☐ Pre-commencement communications pursuant to Rule 14d-2(b) under the Exchange Act (17 CFR 240.14d-2(b))

☐ Pre-commencement communications pursuant to Rule 13e-4(c) under the Exchange Act (17 CFR 240.13e-4c))

Indicate by check mark whether the registrant is an emerging growth company as defined in as defined in Rule 405 of the Securities Act of 1933 (§230.405 of this chapter) or Rule 12b-2 of the Securities Exchange Act of 1934 (§240.12b-2 of this chapter).

Emerging growth company  ☐

If an emerging growth company, indicate by check mark if the registrant has elected not to use the extended transition period for complying with any new or revised financial accounting standards provided pursuant to Section 13(a) of the Exchange Act.  ☐

Explanatory Note

This Form 8-K/A is being filed as an amendment (“Amendment No. 1”) to the Current Report on Form 8-K filed by Air T, Inc. (the “Company”) on May 9, 2018 (the “Original Filing”). The Original Filing reported, among other things, the completion by the Company of its acquisition of substantially all of the assets and assumed certain liabilities of Worthington Aviation Parts, Inc. (“Worthington”) on May 4, 2018. This Amendment No. 1 amends the Original Filing to include the financial statements and pro forma financial information required under Item 9.01 of Form 8-K.

Item 9.01 Financial Statements and Exhibits

(a) Financial Statements of Businesses Acquired

The audited consolidated financial statements of Worthington Aviation Parts, Inc. as of and for the year ended December 31, 2017, and accompanying notes thereto, are filed as Exhibit 99.1 to this Amendment No. 1 and incorporated herein by reference.

(b) Pro Forma Financial Information

The unaudited pro forma condensed combined balance sheet as of March 31, 2018, and unaudited pro forma condensed combined statement of income (loss) for the fiscal year ended March 31, 2018, and the accompanying notes thereto, are filed as Exhibit 99.2 to this Amendment No. 1 and incorporated herein by reference.

(d) Exhibits

Exhibit No.	Description
23.1	Consent of Redpath and Company, Ltd.
99.1	Audited consolidated financial statements of Worthington Aviation and subsidiaries as of and for the year ended December 31, 2017
99.2	Unaudited pro forma condensed combined balance sheet as of March 31, 2018, and unaudited pro forma condensed combined statement of income (loss) for the fiscal year ended March  31, 2018, and the accompanying notes thereto

1

SIGNATURES

Pursuant to the requirements of the Securities Exchange Act of 1934, as amended, the registrant has duly caused this report to be signed on its behalf by the undersigned hereunto duly authorized.

Dated: July 18, 2018	AIR T, INC.
	By:	/s/ Brett Reynolds
		Name: Brett Reynolds
		Title:  Chief Financial Officer

2

EX-23.1

Exhibit 23.1

Consent of Independent Auditor

We hereby consent to the incorporation by reference, in this Form 8-K/A (Amendment No. 1) of Air T, Inc., of our report dated July 11, 2018 relating to the financial statements of Worthington Aviation Parts, Inc. as of and for the year ended December 31, 2017.

REDPATH AND COMPANY, LTD.

St. Paul, Minnesota

July 18, 2018

EX-99.1

Exhibit 99.1

WORTHINGTON AVIATION PARTS, INC.

CONSOLIDATED FINANCIAL STATEMENTS

December 31, 2017

WORTHINGTON AVIATION PARTS, INC.

TABLE OF CONTENTS

		Page Number
Independent Auditor’s Report			1
CONSOLIDATED FINANCIAL STATEMENTS
Consolidated Balance Sheet	Statement 1		4
Consolidated Statement of Operations	Statement 2		5
Consolidated Statement of Stockholder’s Equity	Statement 3		6
Consolidated Statement of Cash Flows	Statement 4		7
Notes to Consolidated Financial Statements			8
SUPPLEMENTARY INFORMATION
Independent Auditor’s Report on Supplementary Information			16
Consolidating Balance Sheet	Schedule 1		18
Consolidating Statement of Operations	Schedule 2		20

INDEPENDENT AUDITOR’S REPORT

To the Board of Directors and Stockholder

Worthington Aviation Parts, Inc.

Eagan, Minnesota

We have audited the accompanying consolidated financial statements of Worthington Aviation Parts, Inc., which comprise the consolidated balance sheet as of December 31, 2017, and the related consolidated statements of operations, stockholder’s equity, and cash flows for the year then ended, and the related notes to the consolidated financial statements.

Management’s Responsibility for the Consolidated Financial Statements

Management is responsible for the preparation and fair presentation of these consolidated financial statements in accordance with accounting principles generally accepted in the United States of America; this includes the design, implementation, and maintenance of internal control relevant to the preparation and fair presentation of consolidated financial statements that are free from material misstatement, whether due to fraud or error.

Auditor’s Responsibility

Our responsibility is to express an opinion on these consolidated financial statements based on our audit. We conducted our audit in accordance with auditing standards generally accepted in the United States of America. Those standards require that we plan and perform the audit to obtain reasonable assurance about whether the consolidated financial statements are free from material misstatement.

An audit involves performing procedures to obtain audit evidence about the amounts and disclosures in the consolidated financial statements. The procedures selected depend on the auditor’s judgment, including the assessment of the risks of material misstatement of the consolidated financial statements, whether due to fraud or error. In making those risk assessments, the auditor considers internal control relevant to the entity’s preparation and fair presentation of the consolidated financial statements in order to design audit procedures that are appropriate in the circumstances, but not for the purpose of expressing an opinion on the effectiveness of the entity’s internal control. Accordingly, we express no such opinion. An audit also includes evaluating the appropriateness of accounting policies used and the reasonableness of significant accounting estimates made by management, as well as evaluating the overall presentation of the consolidated financial statements.

4810 White Bear Parkway, St. Paul, MN, 55110 651.426.7000 www.redpathcpas.com

1

We believe that the audit evidence we have obtained is sufficient and appropriate to provide a basis of our audit opinion.

Opinion

In our opinion, the consolidated financial statements referred to above present fairly, in all material respects, the financial position of Worthington Aviation Parts, Inc. as of December 31, 2017, and the results of their operations and their cash flows for the year then ended in accordance with accounting principles generally accepted in the United States of America.

REDPATH AND COMPANY, LTD.

St. Paul, Minnesota

July 11, 2018

2

CONSOLIDATED FINANCIAL STATEMENTS

3

WORTHINGTON AVIATION PARTS, INC.
CONSOLIDATED BALANCE SHEET	Statement 1
December 31, 2017

	2017
Assets
Current assets:
Cash ($136,469 held by VIE)	$	206,191
Accounts receivable—trade, net		2,026,154
Accounts receivable—other		66,677
Inventories ($327,589 held by VIE), net		10,417,754
Other current assets		137,186
Total current assets		12,853,962
Property and equipment, net accumulated depreciation		419,691
Other assets		29,066
Total assets	$	13,302,719
Liabilities and Stockholder’s Equity
Current liabilities:
Revolving term note	$	2,825,000
Payable to stockholder		2,768,238
Checks written in excess of cash		143,567
Accounts payable ($3,812 held by VIE)		2,317,042
Deferred revenue		101,241
Accrued expenses ($100,000 held by VIE)		237,874
Total current liabilities		8,392,962
Long-term liabilities
Subordinated debt—related party		2,960,000
Total liabilities		11,352,962
Stockholder’s equity:
Stockholder’s equity		1,781,583
Noncontrolling stockholder’s equity		168,174
Total stockholder’s equity		1,949,757
Total liabilities and stockholder’s equity	$	13,302,719

The accompanying notes are an integral part of these consolidated financial statements.

4

WORTHINGTON AVIATION PARTS, INC.
CONSOLIDATED STATEMENT OF OPERATIONS	Statement 2
For The Year Ended December 31, 2017

	2017
	Amount			Percent
Sales	$	15,059,975			100.00	%
Cost of sales		9,940,523			66.01	%
Gross profit		5,119,452			33.99	%
Operating expenses		5,853,003			38.86	%
Loss from operations		(733,551	)		(4.87	%)
Other expense:
Interest expense		(177,706	)		(1.18	%)
Other expense		(12,098	)		(0.08	%)
Total other expense		(189,804	)		(1.26	%)
Net loss		(923,355	)		(6.23	%)
Net income attributable to noncontrolling interest		17,861
Net loss attributable to Worthington Aviation Parts, Inc. and MRO Center	($	941,216	)

The accompanying notes are an integral part of these consolidated financial statements.

5

WORTHINGTON AVIATION PARTS, INC.
CONSOLIDATED STATEMENT OF STOCKHOLDER’S EQUITY	Statement 3
For The Year Ended December 31, 2017

	Number of Shares		Common Stock		Additional Paid-in Capital		Retained Earnings			Noncontrolling Interest			Receivable From Parent			Total Stockholder’s Equity
Balance—December 31, 2016		5,000	$	2,600,000	$	6,648,226	($	4,520,850	)	$	184,896		($	2,004,577	)	$	2,907,695
Distributions		—		—		—		—			(34,583	)		—			(34,583	)
Net income (loss)		—		—		—		(941,216	)		17,861			—			(923,355	)
Balance—December 31, 2017		5,000	$	2,600,000	$	6,648,226	($	5,462,066	)	$	168,174		($	2,004,577	)	$	1,949,757

Common stock has no par value, 5,000 shares authorized

The accompanying notes are an integral part of these consolidated financial statements.

6

WORTHINGTON AVIATION PARTS, INC.
CONSOLIDATED STATEMENT OF CASH FLOWS	Statement 4
For The Year Ended December 31, 2017

	2017
Cash flows from operating activities:
Net loss	($	923,355	)
Adjustments to reconcile net income to net cash provided by (used in) operating activities:
Depreciation		131,015
Bad debt expense		222,500
Changes in operating assets and liabilities:
Accounts receivable — trade, net		(287,504	)
Accounts receivable — other		216,438
Inventories, net		1,303,384
Other assets		31,507
Accounts payable		714,382
Accrued expenses		(86,876	)
Deferred revenue		(24,281	)
Payable to stockholders		233,828
Net cash provided by operating activities		1,531,038
Cash flows from investing activities:
Purchase of property and equipment		(45,870	)
Net cash used in investing activities		(45,870	)
Cash flows from financing activities:
Net change in revolving term note		(1,375,000	)
Distributions to noncontrolling interest		(34,583	)
Checks written in excess of cash		(32,423	)
Net cash used in financing activities		(1,442,006	)
Increase in cash		43,162
Cash and cash equivalents — beginning of year		163,029
Cash and cash equivalents — end of year	$	206,191
Supplemental cash flow information: Interest paid	$	178,403

The accompanying notes are an integral part of these consolidated financial statements.

7

WORTHINGTON AVIATION PARTS, INC.

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

December 31, 2017

Note 1 SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES

NATURE OF BUSINESS

Worthington Aviation Parts, Inc. (WAV) is a provider of aircraft parts, repair services, and technical publication updates supporting commercial, regional, and corporate aviation. Worthington MRO Center (MRO Center) is located in Tulsa, Oklahoma and concentrates on composite aircraft structures, repairs, and support services. WAV and MRO Center (the Company) is a wholly owned subsidiary of Churchill Industries, Inc. (Churchill).

The Company distributes parts domestically and internationally through sales offices in the United States, Europe, and Australia. The Company has customer concentrations in the United States, Europe, and Australia.

PRINCIPLES OF CONSOLIDATION

The consolidated financial statements include the accounts of Worthington Aviation Parts, Inc. (including Worthington Aviation MRO Center), Brickell Asset Management XII, LLC (BAM XII), Brickell Asset Management XIII, LLC (BAM XIII), Brickell Asset Management XVII, LLC (BAM XVII), and Brickell Asset Management XVIII, LLC (BAM XVIII), in accordance with the professional standards related to consolidation of variable interest entities.

All intercompany balances and transactions have been eliminated during consolidation. The noncontrolling interest amounts shown in the consolidated financial statements represent the remaining ownership in the LLCs.

VARIABLE INTEREST ENTITIES

Variable interest entities (VIEs) are primarily entities that lack sufficient equity to finance their activities without additional subordinated financial support from other parties or whose equity holders as a group lack certain power, obligations, or rights. The VIEs with which the Company is involved are evaluated to determine whether the Company has a controlling financial interest in the VIEs and is, therefore, the primary beneficiary of the VIEs. The primary beneficiary is required to consolidate the VIEs for financial reporting purposes.

ACCOUNTS RECEIVABLE

The Company sells its products primarily on an unsecured basis and performs regular credit evaluations of its customers. Accounts receivable are stated at net realizable value. The Company provides an allowance for bad debts using the allowance method, which is based on management’s judgment considering historical information and individual customer circumstances.

Accounts past due more than 60 days are individually analyzed for collectability and actively monitored by management. The Company charges off accounts to bad debt expense when it is likely that payment will not be received. An allowance for doubtful accounts of $256,599 has been provided at December 31, 2017.

Collection of other receivables is intended to be pursued in the next year; therefore, these are classified as current assets. These receivables are unsecured; however, no allowance is deemed necessary as collection is fully expected.

8

WORTHINGTON AVIATION PARTS, INC.

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

December 31, 2017

INVENTORIES

Inventories are stated at the lower of cost or net realizable value. Cost is determined on a first-in, first-out (FIFO) basis. Appropriate consideration is given to deterioration, obsolescence, and other factors in evaluating net realizable value.

PROPERTY AND EQUIPMENT

Property and equipment is reported at cost and depreciated using the straight-line method over the estimated useful lives of the assets as follows:

Leasehold Improvements	Life of the lease
Computer and Equipment	3 - 5 years
Furniture and Fixtures	10 years

Depreciation expense for the year December 31, 2017 was $131,015.

Major additions and improvements are capitalized, while maintenance and repairs, which do not improve or extend the life of the respective assets, are expensed as incurred.

REVENUE RECOGNITION

The Company recognized revenue at the time product is shipped or title passes pursuant to the terms of the agreement with the customer, the amount due from the customer is fixed, and collectability of the related receivable is reasonably assured.

In March 2007, the Company began supporting the Westwind fleet with technical publication updates. The revenue generated from the technical publications is recognized on a straight line basis over the course of the annual contract. The unearned portion of this revenue was $101,241 at December 31, 2017.

INCOME TAXES

Worthington Aviation Parts, Inc. has elected to be taxed as an S corporation for income tax purposes. Accordingly, no provision for income taxes is recognized because the Company’s earnings are included in the individual income of the stockholder.

ADVERTISING COSTS

Advertising costs are expensed as incurred. Advertising expense was $10,436 for the year ended December 31, 2017.

SHIPPING AND HANDLING COSTS

Shipping and handling costs are included in cost of sales and are expensed as incurred. Shipping and handling revenues are included in sales.

9

WORTHINGTON AVIATION PARTS, INC.

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

December 31, 2017

USE OF ESTIMATES

The preparation of consolidated financial statements in conformity with U.S. generally accepted accounting principles requires management to make estimates and assumptions that affect the reported amounts of assets and liabilities and disclosure of contingent assets and liabilities at the date of the consolidated financial statements and the reported amounts of revenues and expenses during the reporting period. Actual results could differ from those estimates.

FINANCIAL INSTRUMENTS

The Company’s financial instruments consist of cash, short-term receivables, and payables for which current carrying amounts approximate fair market value. Long-term debt approximated fair value at December 31, 2017.

RECENT ACCOUNTING PRONOUNCEMENTS

In May 2014, the FASB issued ASU 2014-09, Revenue from Contracts with Customers (Topic 606). This standard outlines a single comprehensive model for companies to use in accounting for revenue arising from contracts with customers and supersedes most current revenue recognition guidance, including industry-specific guidance. The core principle of the revenue model is that revenue is recognized when a customer obtains control of a good or service. A customer obtains control when it has the ability to direct the use of and obtain the benefits from the good or service. Transfer of control is not the same as transfer of risks and rewards, as it is considered in current guidance. The Company will also need to apply new guidance to determine whether revenue should be recognized over time or at a point in time. In August 2015, the FASB issued ASU 2015-14, which defers the effective date of ASU 2014-09 one year. ASU 2014-09, as deferred by ASU 2015-14, will be effective for annual reporting periods beginning after December 15, 2018, using either of two methods: (a) retrospective to each prior reporting period presented with the option to elect certain practical expedients as defined within ASU 2014-09 or (b) retrospective with the cumulative effect of initially applying ASU 2014-09 recognized at the date of initial application and providing certain additional disclosures as defined in ASU 2014-09. The Company has not yet selected a transition method and is currently evaluating the impact of the pending adoption of ASU 2014-09 on the consolidated financial statements.

In February 2016, the FASB issued ASU 2016-02, Leases (Topic 842). The guidance in this ASU supersedes the leasing guidance in Topic 840, Leases. Under the new guidance, lessees are required to recognize lease assets and lease liabilities on the balance sheet for all leases with terms longer than 12 months. Leases will be classified as either finance or operating, with classification affecting the pattern of expense recognition in the income statement. The new standard is effective for fiscal years beginning after December 15, 2019, including interim periods within those fiscal years. A modified retrospective transition approach is required for lessees for capital and operating leases existing at, or entered into after, the beginning of the earliest comparative period presented in the consolidated financial statements, with certain practical expedients available. The Company has not yet selected a transition method and is currently evaluating the impact of the pending adoption of ASU 2016-02 on the consolidated financial statements.

Effective January 1, 2017, the Company adopted FASB ASU 2015-11, Inventory: Simplifying the Measurement of Inventory. The new guidance provides that a Company should measure its inventory at the lower of cost or net realizable value. Net realizable value being the estimated selling price in the ordinary course of business, less reasonably predictable costs to complete, dispose or transport inventory. The adoption of this standard did not have a material impact on results of operations, cash flows or financial position.

10

WORTHINGTON AVIATION PARTS, INC.

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

December 31, 2017

RECLASSIFICATION

Certain accounts relating to the prior year have been reclassified to current year presentation with no effect on previously reported net income.

SUBSEQUENT EVENTS

Subsequent to year end, the Company sold substantially all of its assets and liabilities to an unrelated party for $3,350,000.

Subsequent to year end, the Company will be given debt forgiveness for its payable to stockholder and subordinated debt – related party (see Note 7) and the agreements will be terminated.

In preparing these consolidated financial statements, the Company has evaluated events and transactions for potential recognition or disclosure through July 11, 2018, the date the consolidated financial statements were available to be issued.

Note 2 VARIABLE INTEREST ENTITIES

The consolidated financial statements include the activity of BAM XII, BAM XIII, BAM XVII, and BAM XVIII whose purpose is to market and sell inventory that is held on consignment by the Company. Management has concluded that the Company is the primary beneficiary of BAM XII, BAM XIII, BAM XVII, and BAM XVIII, and all qualify as a variable interest entity.

Prior to eliminating entries, BAM XII, BAM XIII, BAM XVII, and BAM XVIII held $472,069 of assets (primarily inventory) with associated liabilities of $103,812 (primarily accounts payable) as of December 31, 2017. Total equity as of December 31, 2017 was $368,257, which includes net income of $34,591, and distributions to noncontrolling interest of $34,583.

The determination to qualify BAM XII, BAM XIII, BAM XVII, and BAM XVIII as a VIE was made based on the fact that the Company has the power to direct the activities of the entities that most significantly impact its economic performance and the Company bears more risk of loss.

The assets, liabilities, revenues, and expenses of BAM XII, BAM XIII, BAM XVII, and BAM XVIII have been included in the accompanying consolidated financial statements.

11

WORTHINGTON AVIATION PARTS, INC.

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

December 31, 2017

Note 3 INVENTORIES

Inventories at December 31 consist of the following:

	2017
Finished Goods	$	10,597,259
Work In Process		39,587
Less: Allowance for Excess and Obsolete Inventory		(219,092	)
Total	$	10,417,754

Note 4 PROPERTY AND EQUIPMENT

Property and equipment, recorded at cost, consisted of the following at December 31:

	2017
Leasehold Improvements	$	146,754
Computer Hardware and Software		887,053
Furniture and Office Equipment		581,762
Vehicles		19,743
		1,635,312
Less: Accumulated Depreciation		(1,215,621	)
Total	$	419,691

Note 5 LINE OF CREDIT

The Company has a credit and security agreement with BMO Harris Bank. The agreement covers a credit facility with a revolving note with a maximum outstanding balance of $5,000,000.

The line provides for advances up to the borrowing base consisting of eligible inventory and receivables. The line matures May 7, 2018 and carries interest at 3.00% over LIBOR (4.38% at December 31, 2017). The outstanding balance on this line of credit was $2,825,000 at December 31, 2017.

Subsequent to year end, the remaining outstanding principal and interest balance was paid off and the agreement was terminated.

12

WORTHINGTON AVIATION PARTS, INC.

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

December 31, 2017

Note 6 OPERATING LEASE

The Company is committed under long-term operating leases for the rental of its warehouse and office facilities. Future minimum lease payments due under these noncancelable operating leases are as follows:

Year Ending December 31,
2018	$	342,188
2019		226,657
2020		61,598
Total	$	630,443

Total rent expense for the year ended December 31, 2017 was $505,624.

Note 7 RELATED PARTY TRANSACTIONS

The Company recorded various related party transactions included in payable to stockholder for the year ended December 31, 2017 as follows:

	2017
Total Beginning Balance	$	2,534,410
Change in Other Allocated Expenses		233,828
Total Ending Balance	$	2,768,238

In 2011, the Company entered into a subordinated debt agreement with the stockholder for $1,960,000. In 2012, the Company entered into an additional agreement for $1,000,000. Interest is accrued and payable quarterly at 8%. The note is subordinated to the debt with BMO Harris Bank. The interest was forgiven during 2017. The outstanding balance on the subordinated debt was $2,960,000 at December 31, 2017.

As of December 31, 2014, the Company recorded $2,694,691 as capital contributions from Churchill for tax sharing. This resulted in a reduction of previously accrued distributions payable of $1,167,610 and a receivable from parent of $1,527,083 at December 31, 2014. The Company had distributions receivable of $0 and $553,535 for tax sharing which resulted in a receivable from parent balance of $2,004,577 at December 31, 2017.

Subsequent to year end, the related party agreed to provide debt forgiveness for the payable to stockholder and subordinated debt balances and the agreements will be terminated.

Note 8 EMPLOYEE RETIREMENT PLAN

The Company has a 401(k) savings plan which is available to employees who have attained certain age and service requirements. Employees are allowed to defer specified percentages of their pretax earnings. The Company has a discretionary match of up to 3% of employee contributions. The Company made matching contributions of $84,344 during the year ended December 31, 2017.

13

WORTHINGTON AVIATION PARTS, INC.

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

December 31, 2017

Note 9 CONCENTRATIONS

CASH

Substantially all cash is deposited in one financial institution. At times, amounts on deposit may be in excess of the FDIC insurance limit.

Note 10 COMMITMENTS AND CONTINGENCIES

The Company self-insures health and dental insurance for employees, subject to a stop-loss limit of $50,000 per year, per employee. The Company estimates its liabilities for unpaid claims and claims incurred, but not reported, for employees based on management’s knowledge and experience about past and current claims, and assumptions about future claims. At December 31, 2017 the Company established a reserve for future payout of past claims of $15,000.

14

SUPPLEMENTARY INFORMATION

15

INDEPENDENT AUDITOR’S REPORT ON SUPPLEMENTARY INFORMATION

To the Board of Directors and Stockholder

Worthington Aviation Parts, Inc.

Eagan, Minnesota

We have audited the consolidated financial statements of Worthington Aviation Parts, Inc. as of and for the year ended December 31, 2017, and our report thereon dated July 11, 2018, which expressed an unmodified opinion on those consolidated financial statements. Our audit was conducted for the purpose of forming an opinion on the consolidated financial statements as a whole. The 2017 supplementary information included in Schedules 1 and 3 are presented for purposes of additional analysis and are not a required part of the consolidated financial statements. Such information is the responsibility of management and was derived from and relates directly to the underlying accounting and other records used to prepare the consolidated financial statements. The information has been subjected to the auditing procedures applied in the audit of the consolidated financial statements and certain additional procedures, including comparing and reconciling such information directly to the underlying accounting and other records used to prepare the consolidated financial statements or to the consolidated financial statements themselves, and other additional procedures in accordance with auditing standards generally accepted in the United States of America. In our opinion, the information is fairly stated in all material respects in relation to the consolidated financial statements taken as a whole.

REDPATH AND COMPANY, LTD.

St. Paul, Minnesota

July 11, 2018

4810 White Bear Parkway, St. Paul, MN, 55110 651.426.7000 www.redpathcpas.com

16

WORTHINGTON AVIATION PARTS, INC.

CONSOLIDATING BALANCE SHEET

December 31, 2017

	Worthington Aviation Parts, Inc.		Worthington Aviation MRO Center		Total Worthington Aviation Parts, Inc. and MRO Center*
Assets
Current assets:
Cash	$	69,673	$	49	$	69,722
Accounts receivable—trade, net		1,703,691		322,463		2,026,154
Accounts receivable—other		66,677		—		66,677
Inventories, net		6,817,084		3,273,062		10,090,146
Other current assets		111,362		25,824		137,186
Total current assets		8,768,487		3,621,398		12,389,885
Property and equipment		225,322		194,369		419,691
Other assets:
Other long-term assets		12,931		16,135		29,066
Investment in affiliates		200,083		—		200,083
Total other assets		213,014		16,135		229,149
Interdivision receivables		2,933,977		—		2,933,977
Total assets	$	12,140,800	$	3,831,902	$	15,972,702
Liabilities and Stockholder’s Equity
Current liabilities:
Revolving term note	$	2,825,000	$	—	$	2,825,000
Payable to stockholder		2,768,238		—		2,768,238
Checks written in excess of cash		99,368		44,199		143,567
Accounts payable		2,202,679		118,543		2,321,222
Deferred revenue		101,241		—		101,241
Accrued expenses		124,575		13,299		137,874
Total current liabilities		8,121,101		176,041		8,297,142
Long-term liabilities
Subordinated debt—related party		2,960,000		—		2,960,000
Interdivision payables		—		2,933,977		2,933,977
Total liabilities		11,081,101		3,110,018		14,191,119
Stockholder’s equity		1,059,699		721,884		1,781,583
Total liabilities and stockholder’s equity	$	12,140,800	$	3,831,902	$	15,972,702

* Total Worthington Aviation Parts, Inc. and MRO Center does not reflect the Intercompany eliminations. Such amounts are reflected in the Eliminations column above.

17

Schedule 1

Brickell Asset Management XII, LLC		Brickell Asset Management XIII, LLC		Brickell Asset Management XVII, LLC		Brickell Asset Management XVIII, LLC		Eliminations			Total
	$780	$	862	$	109,102	$	25,725	$	—		$	206,191
	—		368		7,624		—		(7,992	)		2,026,154
	—		—		—		—		—			66,677
	—		142,668		184,940		—		—			10,417,754
	—		—		—		—		—			137,186
	780		143,898		301,666		25,725		(7,992	)		12,853,962
	—		—		—		—		—			419,691
	—		—		—		—		—			29,066
	—		—		—		—		(200,083	)		—
	0		0		0		0		(200,083	)		29,066
	—		—		—		—		(2,933,977	)		—
	$780	$	143,898	$	301,666	$	25,725		($3,142,052	)	$	13,302,719
	$—	$	—	$	—	$	—	$	—		$	2,825,000
	—		—		—		—		—			2,768,238
	—		—		—		—		—			143,567
	—		—		—		3,812		(7,992	)		2,317,042
	—		—		—		—		—			101,241
	—		—		100,000		—		—			237,874
	0		0		100,000		3,812		(7,992	)		8,392,962
	—		—		—		—		—			2,960,000
	—		—		—				(2,933,977	)		—
	0		0		100,000		3,812		(2,941,969	)		11,352,962
	780		143,898		201,666		21,913		(200,083	)		1,949,757
	$780	$	143,898	$	301,666	$	25,725		($3,142,052	)	$	13,302,719

18

WORTHINGTON AVIATION PARTS, INC.

CONSOLIDATING STATEMENT OF OPERATIONS

For The Year Ended December 31, 2017

	Worthington Aviation Parts, Inc.			Worthington Aviation MRO Center			Total Worthington Aviation Parts, Inc. and MRO Center
Sales	$	10,751,059		$	4,197,056		$	14,948,115
Cost of sales		6,758,009			3,097,975			9,855,984
Gross Profit		3,993,050			1,099,081			5,092,131
Operating expenses		4,194,769			1,648,774			5,843,543
Income (loss) from operations		(201,719	)		(549,693	)		(751,412	)
Other income (expense):
Interest expense		(177,706	)		—			(177,706	)
Other expense		(12,098	)		—			(12,098	)
Total other income (expense)		(189,804	)		0			(189,804	)
Net income		($391,523	)		($549,693	)		($941,216	)

19

Schedule 2

Brickell Asset Management XII, LLC		Brickell Asset Management XIII, LLC			Brickell Asset Management XVII, LLC		Brickell Asset Management XVIII, LLC		Eliminations			Total
$	11,050	$	6,550		$	123,540	$	8,300	($	37,580	)	$	15,059,975
	910		2,763			75,554		5,312		—			9,940,523
	10,140		3,787			47,986		2,988		(37,580	)		5,119,452
	6,501		5,131			17,018		1,660		(20,850	)		5,853,003
	3,639		(1,344	)		30,968		1,328		(16,730	)		(733,551	)
	—		—			—		—		—			(177,706	)
	—		—			—		—		—			(12,098	)
	0		0			0		0		0			(189,804	)
$	3,639		($1,344	)	$	30,968	$	1,328		($16,730	)		($923,355	)

20

EX-99.2

Exhibit 99.2

UNAUDITED PRO FORMA CONDENSED COMBINED FINANCIAL INFORMATION

The following unaudited pro forma condensed combined financial information is based upon the historical financial statements of Air T, Inc. (“Air T” or “the Company”) and Worthington Aviation Parts, Inc. (“Worthington”), as adjusted to give effect to the acquisition of Worthington by Air T, and the related financing transaction, collectively referred to herein as the “Transaction”.

On April 6, 2018, we entered into an Asset Purchase Agreement (the “Purchase Agreement”) with Worthington and on May 4, 2018, we completed our acquisition of Worthington.

The unaudited pro forma condensed combined balance sheet as of March 31, 2018 gives effect to the Transaction as if it had been consummated on March 31, 2018 and includes pro forma adjustments based on Air T management’s preliminary valuations of certain acquired tangible and intangible assets. Air T’s fiscal year ends March 31, 2018; while Worthington employed a calendar year-end, which ended on December 31, 2017. The unaudited pro forma condensed combined balance sheet as of March 31, 2018 was derived from Air T’s audited consolidated balance sheet as of March 31, 2018 and Worthington’s audited consolidated balance sheet as of December 31, 2017.

The unaudited pro forma condensed combined statement of income (loss) for the fiscal year ended March 31, 2018 gives effect to the Transaction as if it had been consummated on April 1, 2017. The unaudited pro forma condensed combined statement of income (loss) for the fiscal year ended March 31, 2018 was derived from Air T’s audited consolidated statement of income (loss) for the fiscal year ended March 31, 2018 and Worthington’s audited consolidated statement of operations for the year ended December 31, 2017. As Worthington’s fiscal year end is within 93 days of Air T’s fiscal year end, the unaudited pro forma condensed combined statement of income (loss) information for the fiscal year ended March 31, 2018 includes Worthington’s annual operating results for its respective fiscal year ended December 31, 2017.

The unaudited pro forma condensed combined financial statements were prepared using the acquisition method of accounting for business combinations under the guidance of Accounting Standards Codification Topic 805, Business Combinations (“ASC 805”). Under ASC 805, assets acquired and liabilities assumed are recorded at fair value, with any excess purchase price allocated to goodwill. The fair value of identifiable tangible and intangible assets acquired and liabilities assumed are preliminary and are based upon available information and certain assumptions described in the accompanying notes to the unaudited pro forma condensed combined financial statements that Air T’s management believes are reasonable under the circumstances. The result of the final purchase price allocation could be materially different from the preliminary allocation set forth herein.

The unaudited pro forma condensed combined financial information is provided for informational and illustrative purposes only and is not intended to represent or be indicative of the consolidated results of income (loss) or financial position of Air T that would have been reported had the Transaction been completed as of the dates presented, and should not be taken as representative of the future consolidated results of operations or financial position of Air T following the consummation of the Transaction. We therefore caution you not to place undue reliance on the unaudited pro forma condensed combined financial information.

The unaudited pro forma condensed combined financial information should be read in conjunction with:

• the accompanying notes to the unaudited pro forma condensed combined financial statements included herein;

• the audited consolidated financial statements and the notes thereto of Air T for the fiscal year ended March 31, 2018, included with Air T’s Annual Report on Form 10-K for the fiscal year ended March 31, 2018 filed with the United States Securities and Exchange Commission (the “SEC”) on June 29, 2018;

• Air T’s Current Report on Form 8-K filed with the SEC on May 31, 2018, which includes material information regarding a term loan and a revolving credit facility;

1

• the audited consolidated financial statements and the notes thereto of Worthington as of and for the fiscal year ended December 31, 2017 which are included in Exhibit 99.1 to this Form 8-K/A.

The unaudited pro forma condensed combined financial information does not reflect the costs of any integration activities or benefits that may result from realization of future cost savings from operating efficiencies or revenue synergies that could result from the acquisition of Worthington by Air T.

2

AIR T, INC. AND SUBSIDIARIES

UNAUDITED PRO FORMA CONDENSED COMBINED STATEMENT OF INCOME (LOSS)

	Air T Year Ended March 31, 2018			Worthington Year Ended December 31, 2017			Pro-forma Adjustments				Total
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
Commercial jet engines and parts		29,506,873			14,948,115			(103,029	)	A		44,351,959
Printing equipment and maintenance		6,144,403			—			—				6,144,403
Corporate		182,722			—			—				182,722
Leasing		137,316			—			—				137,316
		194,519,345			14,948,115			(103,029	)			209,364,431
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
Printing equipment and maintenance		2,975,999			—			—				2,975,999
Commercial jet engines and parts		20,502,205			15,699,527			(29,770	)	A		36,171,962
Leasing		—			—			—				—
Research and development		195,653			—			—				195,653
General and administrative		29,168,766			—			—				29,168,766
Depreciation, amortization and impairment		2,678,858			—			—				2,678,858
		190,273,822			15,699,527			(29,770	)			205,943,579
Operating Income (Loss)		4,245,523			(751,412	)		(73,259	)			3,420,852
Non-operating Income (Loss):
Gain on sale of marketable securities		93,066			—			—				93,066
Foreign currency gain (loss)		(228,714	)		—			—				(228,714	)
Other-than-temporary impairment losses on investments		(1,559,972	)		—			—				(1,559,972	)
Other investment income, net		121,860			—			—				121,860
Interest expense and other		(1,724,771	)		(189,804	)		27,519		B		(1,887,056	)
Gain on asset retirement obligation		562,500			—			—				562,500
Bargain purchase acquisition gain, net of tax		501,880			—			—				501,880
Unrealized loss on interest rate swap		(66,706	)		—			—				(66,706	)
Unrealized gain on transition to equity method		721,585			—			—				721,585
Equity in income of associated company		(14,644	)		—			—				(14,644	)
		(1,593,916	)		(189,804	)		27,519				(1,756,201	)
Income (Loss) Before Income Taxes		2,651,607			(941,216	)		(45,740	)			1,664,651
Income Taxes (benefit)		195,000			—			(319,685	)	C		(124,685	)
Net Income (Loss)		2,456,607			(941,216	)		273,944				1,789,335
Net (Income) Loss Attributable to Non-controlling Interests		(179,498	)		—			—				(179,498	)
Net Income (Loss) Attributable to Air T, Inc. Stockholders	$	2,277,109		$	(941,216	)	$	273,944			$	1,609,837
Earnings (Loss) Per Share:
Basic	$	1.11									$	0.79
Diluted	$	1.11									$	0.79
Weighted Average Shares Outstanding:
Basic		2,042,806										2,042,806
Diluted		2,047,685										2,047,685

See notes to the unaudited pro forma combined financial statements.

3

AIR T, INC. AND SUBSIDIARIES

UNAUDITED PRO FORMA CONDENSED COMBINED BALANCE SHEET

	Air T March 31, 2018			Worthington December 31, 2017			Pro-forma Adjustments				Total
ASSETS
Current Assets:
Cash and cash equivalents (Delphax $241,430)*	$	4,803,238		$	69,722		$	(45,422	)	H	$	4,827,538
Marketable securities		290,449			—			—				290,449
Restricted cash		269,659			—			—				269,659
Restricted investments		1,235,405			—			—				1,235,405
Accounts receivable, less allowance for doubtful accounts of $801,000 (Delphax $317,000)*		15,157,855			2,092,831			(21,231	)	H		17,229,455
Costs and estimated earnings in excess of billings on uncompleted projects		2,012,121			—			—				2,012,121
Notes and other receivables-current		658,630			—			—				658,630
Income tax receivable		1,557,180			—			—				1,557,180
Inventories, net (Delphax $0)*		34,231,005			10,090,146			(5,525,746	)	D		38,795,405
Prepaid expenses and other (Delphax $72,269)*		1,455,566			137,186			12,614		H		1,605,366
Total Current Assets		61,671,108			12,389,885			(5,579,785	)			68,481,208
Investments in available-for-sale securities		1,026,920			—			—				1,026,920
Property and equipment, net (Delphax $0)*		20,273,171			419,691			(31,891	)	H		20,660,971
Cash surrender value of life insurance policies		2,356,507			—			—				2,356,507
Notes and other tax receivables-long-term		311,000			—			—				311,000
Deferred income taxes		—			—			—				—
Investments in funds		324,854			—			—				324,854
Equity method investments		5,032,268			200,083			(10,483	)	H		5,221,868
Other assets		420,981			29,066			(29,066	)	H		420,981
Intangible assets, net		1,312,472			—			138,000		E		1,450,472
Goodwill		4,417,605			—			—				4,417,605
Total Assets	$	97,146,886			13,038,725			(5,513,225	)			104,672,386
LIABILITIES AND STOCKHOLDERS’ EQUITY
Current Liabilities:
Accounts payable (Delphax $2,145,847)*	$	10,181,143			2,464,789			(1,083,089	)	H		11,562,843
Income tax payable (Delphax $11,312)*		23,000			—			—				23,000
Accrued expenses (Delphax $3,244,514)*		11,743,973			239,115			(63,915	)	H		11,919,173
Payable to stockholder		—			2,768,238			(2,768,238	)	F		—
Short-term debt		9,229,690			2,825,000			(2,234,853	)	F		9,819,837
Total Current Liabilities		31,177,806			8,297,142			(6,150,095	)			33,324,853
Long-term debt (Delphax $0 and $0)*		38,855,260			2,960,000			(200,147	)	F		41,615,113
Deferred income taxes		92,000			—			678,217		I		770,217
Other non-current liabilities		785,797			—			—				785,797
Total Liabilities		70,910,863			11,257,142			(6,350,242	)			75,817,763
Redeemable non-controlling interest		1,992,939			—			—				1,992,939
Equity:
Air T, Inc. Stockholders’ Equity:
Preferred stock, $1.00 par value, 50,000 shares authorized		—			—			—				—
Common stock, $.25 par value; 4,000,000 shares authorized, 2,043,607 shares issued and outstanding at March 31, 2018, 2,042,789 shares issued and outstanding at March 31, 2017		510,901			2,600,000			(2,600,000	)	G		510,901
Additional paid-in capital		4,171,869			6,648,226			(6,648,226	)	G		4,171,869
Retained earnings		20,695,981			(5,462,066	)		7,402,449		G		22,636,364
Receivable from parent		—			(2,004,577	)		2,004,577		G		—
Accumulated other comprehensive loss		(260,900	)		—			—				(260,900	)
Total Air T, Inc. Stockholders’ Equity		25,117,851			1,781,583			837,017				27,736,451
Non-controlling Interests		(874,767	)									(874,767	)
Total Equity		24,243,084			1,781,583			837,017				26,861,684
Total Liabilities and Equity	$	97,146,886		$	13,038,725		$	(5,513,225	)		$	104,672,386

See notes to the unaudited pro forma combined financial statements.

* Amounts related to Delphax as of March 31, 2018.

4

NOTES TO UNAUDITED PRO FORMA

CONDENSED COMBINED FINANCIAL INFORMATION

1. Description of Transaction

On May 4, 2018, Air T completed the acquisition of substantially all of the assets and assumed certain liabilities of Worthington (the “Transaction”), in each case pursuant to the Asset Purchase Agreement (the “Purchase Agreement”), dated as of April 6, 2018, by and among the Company, Worthington, and Churchill Industries, Inc., as guarantor of Worthington’s obligations as disclosed in the Purchase Agreement.

Worthington is primarily engaged in the business of operating, distributing and selling airplane and aviation parts along with repair services. The Company agreed to acquire the assets and liabilities in exchange for payment to Worthington of $50,000 as earnest money upon execution of the Agreement and a cash payment of $3,400,000 (the “Cash Purchase Price”) upon closing, subject to adjustment for Worthington’s net working capital as of the closing date. In connection with Amendment No. 2 to the Asset Purchase Agreement, dated May 2, 2018, the Cash Purchase Price was reduced by $100,000 to $3,300,000.

On May 25, 2018, Air T’s wholly-owned subsidiaries Worthington Acquisition, LLC, Worthington Aviation, LLC and Worthington MRO, LLC, as Borrowers, completed a loan transaction with Minnesota Bank & Trust (“MBT”) pursuant to which Borrowers obtained from MBT a new revolving loan in the amount of up to $1,500,000 (the “Revolving Loan”) and new term loan in the amount of $3,400,000 (the “Term Loan” and together with the Revolving Loan, the “Loans”). The entire loan proceeds were disbursed by MBT on May 25, 2018 and were used to reduce amounts previously advanced on Air T’s line of credit financing with MBT. Until the Term Loan is paid in full and certain other conditions met, Air T guaranteed up to $3,000,000 of the Loans. The guaranty is thereafter reduced to $1,500,000. The interest rate on Term Loan floats at a rate equal to the one-month LIBOR rate plus 2.5% and the interest rate on the Revolving Loan floats at a rate equal to the one-month LIBOR rate plus 2.0%. The Loans mature on November 30, 2019, at which time the entire unpaid balance of the Loans will be due and payable in full. In addition, the loan agreement contains affirmative and negative covenants and the loans are secured by a first lien on all of the assets of the Borrowers and a pledge of certain assets held by Stratus Aero Partners, LLC, a subsidiary of Air T.

2. Basis of Presentation

The unaudited pro forma condensed combined balance sheet as of March 31, 2018 gives effect to the Transaction as if it had occurred on the balance sheet date. The unaudited pro forma condensed combined statement of income (loss) for the year ended March 31, 2018 gives effect to the Transaction as if it had occurred at the beginning of the period. This information is only a summary, and should be read in conjunction with Air T’s historical financial statements and related notes, and management’s discussion and analysis of financial condition and results of operations contained in the Company’s annual reports, quarterly reports, and other information on file with the SEC. As a result, the acquisition by the Company of Worthington pursuant to the Purchase Agreement will be accounted for using purchase method accounting, upon completion of the final valuation, which is preliminary.

The Company has prepared the unaudited pro forma condensed combined financial statements based on available information, using preliminary assumptions that it believes are reasonable. These unaudited pro forma combined financial statements are being provided for informational purposes only. They do not purport to represent the Company’s actual financial position or results of operations had the Transaction occurred on the dates specified, nor do they project the Company’s results of operations or financial position for any future period or date.

The unaudited pro forma condensed combined statements of income (loss) do not reflect any adjustments for non-recurring items or anticipated synergies resulting from the combination. Pro forma adjustments are preliminary and are based on certain assumptions and other information that are subject to change as additional information becomes available. Accordingly, the adjustments included in the Company’s financial statements published after the completion of the Transaction may vary from the adjustments included in these unaudited pro forma condensed combined financial statements below.

5

NOTES TO UNAUDITED PRO FORMA

CONDENSED COMBINED FINANCIAL INFORMATION

3. Accounting Policies

The Company is currently conducting a review of accounting policies of Worthington in an effort to determine if differences in accounting policies require reclassification of results of operations or reclassification of assets or liabilities to conform to the Company’s accounting policies and classifications.

Based on the Company’s review, the Company did not identify any significant or material differences in accounting policies that might require adjustment.

4. Estimated Preliminary Purchase Price Allocation

The following table summarizes the fair values of assets acquired and liabilities assumed by Air T as of the closing date:

	May 4, 2018
Cash	$	24,300
Accounts receivable		2,071,600
Inventory		4,564,400
Other current assets		149,800
Property, plant, and equipment		387,800
Investment in joint venture		189,600
Other non-current assets		—
Trade name		138,000
Accounts Payable		(1,381,700	)
Accrued Expenses		(175,200	)
Net assets acquired	$	5,968,600
Net assets acquired	$	5,968,600
Consideration paid		3,350,000
Bargain Purchase Gain	$	2,618,600

The transaction resulted in a bargain purchase because Worthington needed access to additional capital to maintain its operations. Through a formal bidding process, the seller determined Air T was the best option for Worthington.

The tax impact related to the bargain purchase gain was to record a deferred tax liability and tax expense against the bargain purchase gain of approximately $678,000. The resulting net bargain purchase gain after taxes was approximately $1,940,000.

5. Unaudited Pro Forma Condensed Combined Statement of Income (Loss) Adjustments

A – Operating Revenues and Operating Expenses

The unaudited pro forma condensed combined statement of income (loss) has been adjusted accordingly for the intercompany eliminations related to the profit recognized on sales during the year from AirCo Services, which is a subsidiary of Air T, to Worthington. Total sales from AirCo Services to Worthington were approximately $103,000 during the fiscal year ended March 31, 2018. In addition, the unaudited pro forma condensed combined statement of income (loss) has been adjusted accordingly for the full year of pro forma accumulated amortization effect of the acquired tradename.

6

NOTES TO UNAUDITED PRO FORMA

CONDENSED COMBINED FINANCIAL INFORMATION

The following pro forma adjustment to operating expenses in the unaudited pro forma condensed combined statement of income (loss) is shown below:

Add amortization expense associated with the acquired trade name	$	27,600
Remove cost of goods sold in connection with intercompany sales		(57,370	)
Pro forma adjustment	$	(29,770	)

B – Interest expense

Borrowings made in connection with the acquisition reflect the rates of interest on the term loan facility, which was entered into as a part of the acquisition, as if the acquisition had taken place on April 1, 2017. The pro forma interest on the term loan facility was calculated using a rate of 4.5903% which is the current rate charged on the facility.

The following pro forma adjustment to the unaudited pro forma condensed combined statement of income (loss) is shown below:

Removal of historical interest expense on Worthington line of credit	$	(177,706	)
Add estimated interest expense on the new term loan facility		150,187
Pro forma adjustment	$	(27,519	)

C – Income tax expense

The unaudited pro forma condensed combined statement of income (loss) has been adjusted accordingly for the income tax effect of pro forma adjustments based on the estimated combined statutory tax rate of 35.7%.

6. Unaudited Pro Forma Condensed Combined Balance Sheet Adjustments

D – Inventory Valuation

Worthington’s inventory, as of the valuation date of May 4, 2018, was adjusted to a preliminary fair value of approximately $4.6 million, a decrease of $5.4 million from the carrying value at that date. Using the historical Worthington balance sheet at December 31, 2017, the decrease in inventory would be $5.5 million from the carrying value as shown in the condensed combined balance sheet. The preliminary fair value calculation is subject to change. The preliminary fair value was determined based on the estimated selling price of the inventory, less any remaining fabrication and selling costs and a normal profit margin on those fabrication and selling efforts. After the acquisition, the step-down in inventory fair value of $5.4 million will decrease cost of sales as the inventory is sold. This decrease is not reflected in the unaudited pro forma condensed combined statement of income (loss) because it does not have a continuing impact; however, it is reflected in the unaudited pro forma condensed combined balance sheet.

E – Intangible Assets

Pro forma adjustments have been made to reflect the estimated fair value of the identified intangible asset acquired based on the estimated purchase price allocation, in accordance with the discounted cash flow method. The unaudited pro forma condensed combined statement of income (loss) has also been adjusted to reflect the amortization of the intangible asset. The fair value of the trade name was determined using the “relief from royalty” method and is preliminarily valued at approximately $138,000. The useful life of the trade name is estimated at 5 years.

F – Current Liabilities and Debt

To finance the acquisition of Worthington, Air T’s wholly-owned subsidiaries Worthington Acquisition, LLC, Worthington Aviation, LLC and Worthington MRO, LLC entered into a new $3.4 million term loan facility.

7

NOTES TO UNAUDITED PRO FORMA

CONDENSED COMBINED FINANCIAL INFORMATION

In connection with the payable to stockholder and the related party subordinated debt on the historical balance sheet of Worthington, the related party forgave those amounts due and the agreements were terminated. Air T did not assume any of these liabilities as part of the purchase agreement.

The following table presents the total pro forma debt as of March 31, 2018:

Existing Air T debt	$	48,084,950
Historical Worthington debt		5,785,000
Total existing and historical debt before payoff and additional borrowings		53,869,950
Payoff of historical Worthington line of credit		(2,825,000	)
Forgiveness of subordinated debt		(2,960,000	)
Add additional borrowing on Term Loan		3,350,000
Total debt	$	51,434,950

G – Stockholders’ Equity

Pro-forma adjustments have been made to remove the historical equity of Worthington. In addition, an adjustment was made to reflect the bargain purchase gain, net of taxes recognized in connection with the acquisition of Worthington.

H – Cash, Accounts Receivable, Other Current Assets, Property and Equipment, Other Non-Current Assets, Accounts Payable and Accrued Expenses

Pro-forma adjustments have been made to reflect the working capital adjustments based on the purchase price allocation as of the acquisition date as shown in Note 4.

I – Deferred Income Taxes

Pro-forma adjustment has been made to reflect the deferred tax liability in connection with the bargain purchase gain based on the estimated combined statutory tax rate of 25.9% as of the acquisition date.

8