1A.	Restatement of Previously Issued Consolidated Financial Statements

Pursuant to a Securities Purchase Agreement dated as of

October 2, 2015 (

the “Securities Purchase Agreement”) among the Company, Delphax Technologies Inc. (“Delphax”) and its subsidiary, Delphax Technologies Canada Limited (“Delphax Canada”), on

November 24, 2015 (

the “Closing Date”), the Company purchased (i) at face value a

$2,500,000

principal amount Five-Year Senior Subordinated Promissory Note (the “Senior Subordinated Note”) issued by Delphax Canada for a combination of cash and the outstanding principal of

$500,000

and accrued and unpaid interest under a

-Day Senior Subordinated Note purchased at face value by the Company from Delphax Canada on

October 2, 2015

pursuant to the Securities Purchase Agreement and (ii) for

$1,050,000

in cash a total of

43,000

shares of Delphax

’s Series B Preferred Stock (the “Series B Preferred Stock”) and a Stock Purchase Warrant (the “Warrant”) to acquire an additional

95,600

shares of Series B Preferred Stock at a price of

$33.4728

per share (subject to adjustment for specified dilutive events). Each share of Series B Preferred Stock is convertible into

100

shares of common stock of Delphax, subject to anti-dilution adjustments, and has

liquidation preference over shares of common stock of Delphax.

dividends are required to be paid with respect to the shares of Series B Preferred Stock, except that ratable dividends (on an as-converted basis) are to be paid in the event that dividends are paid on the common stock of Delphax. Based on the number of shares of Delphax common stock outstanding at the Closing Date, the number of shares of common stock underlying the Series B Preferred Stock purchased by the Company represented approximately

38%

of the shares of Delphax common stock that would be outstanding assuming conversion of Series B Preferred Stock held by the Company. Holders of the Series B Preferred Stock, voting as a separate class, were initially entitled to elect (and exercise rights of removal and replacement with respect to)

three

-sevenths of the board of directors of Delphax, and after

June 1, 2016

the holders of the Series B Preferred Stock, voting as a separate class, were entitled to elect (and to exercise rights of removal and replacement with respect to)

four

-sevenths of the members of the board of directors of Delphax. The Warrant expires on

November 24, 2021

and provides that in the event that dividends are paid on the common stock of Delphax, the holder of the Warrant is entitled to participate in such dividends on a ratable basis as if the Warrant had been fully exercised and the shares of Series B Preferred Stock acquired upon such exercise had been converted into shares of Delphax common stock.

The condensed consolidated financial statements included in the Company

’s Quarterly Report on Form

-Q for the period ended

December 31, 2016,

originally filed with the Securities and Exchange Commission (the “SEC”) on

February 13, 2017 (

“Original Filing”), reflect the consolidation of Delphax with the Company and its subsidiaries from the

November 24, 2015

Closing Date. Such condensed consolidated financial statements also reflect an attribution of

62%

of Delphax’s loss for periods commencing as of the Closing Date to non-controlling interests in the determination of consolidated net income attributable to Air T, Inc. stockholders. Such attribution was based on the Company’s ownership of the Series B Preferred Stock, which represented approximately

38%

of the shares of Delphax common stock that would be outstanding assuming conversion of Series B Preferred Stock held by the Company.

We have concluded that it was

not

appropriate to base attribution solely on our ownership of the Series B Preferred Stock and that our attribution methodology should be based on consideration of all of Air T

’s investments in Delphax and Delphax Canada. As disclosed above, the Warrant provides that in the event that dividends are paid on the common stock of Delphax, the holder of the Warrant is entitled to participate in such dividends on a ratable basis as if the Warrant had been fully exercised and the shares of Series B Preferred Stock acquired upon such exercise had been converted into shares of Delphax common stock. This provision would have entitled Air T, Inc. to approximately

67%

of any Delphax dividends paid, with the remaining

33%

paid to the non-controlling interests. We concluded that this was a substantive distribution right which should be considered in the attribution of Delphax net income or loss to non-controlling interests.

We furthermore concluded that our investment in the debt of Delphax should be considered in attribution. Specifically, Delphax

’s net losses are attributed

first

to our Series B Preferred Stock and Warrant investments and to the non-controlling interest (

67%

/33%

) until such amounts are reduced to zero. Additional losses are then fully attributed to our debt investments until they too are reduced to zero. This sequencing reflects the relative priority of debt to equity. Any further losses are then attributed to Air T and the non-controlling interests based on the initial

67%

33%

share. Delphax net income is attributed using a backwards-tracing approach with respect to previous losses. The effect of interest expense arising under the Senior Subordinated Note and of other intercompany transactions are reflected in the attribution of Delphax net income or

losses to non-controlling interests because Delphax is a variable interest entity.

As a result of the application of such methodology, for the

three

and nin

e months ended

December 31, 2016

and

2015

the attribution of Delphax net income (loss) to non-controlling interests should have been

33%.

In addition, we are also correcting otherwise immaterial errors associated with our elimination of intercompany transactions between Air T, Inc. and Delphax.

This Form

-Q/A is being filed to restate our unaudited condensed consolida

ted financial statements at

December

31,

2016

and

March 31, 2016

and for the

three

and

nine

months ended

December 31, 2016

and

2015

to so correct the treatment of Air T’s interests in Delphax with respect to the attribution of Delphax net income (loss) and the elimination of intercompany transactions and to correct and expand related disclosures.

The combined impacts of all the adjustments to the applicable line items in our unaudited condensed consolidated financial statements for the periods covered by this Form

10Q/A

are provided in the tables below.

Financial Statement Presentation

In addition to the restatement of our consolidated financial statements, we have also restated the following Notes for the effects of the errors above

or,

as indicated, amended Notes to include additional relevant disclosure.

●

Note

Financial Statement Presentation (As Restated)

●

Note

Acquisition

(As Amended)

●

Note

Net Earnings Per Share (As Restated)

●

Note

. Variable Interest Entities (As Restated)

The following tables present the effect of the correction of the error on selected line items of our previously reported unaudited condensed consolidated financial

statements at

December 31, 2016

and

March 31, 2016

and for the

three

and

nine

months ended

December 31, 2016

and

2015:

	As Previously Reported			As Restated

Consolidated Balance Sheet Information (at December 31, 2016):
Additional paid-in capital	$	4,260,030		$	4,268,536
Retained earnings		20,452,393			18,227,554
Accumulated other comprehensive income (loss), net		134,130			4,513
Total Air T, Inc. stockholders' equity		25,357,249			23,011,299
Non-controlling interests		(3,278,584	)		(932,634	)
Total equity		22,078,665			22,078,665
Total liabilities and equity		62,028,049			62,028,049
Consolidated Balance Sheet Information (at March 31, 2016):
Additional paid-in capital	$	4,947,665		$	4,956,171
Retained earnings		29,350,980			28,821,825
Accumulated other comprehensive income (loss), net		(117,898	)		(140,519	)
Total Air T, Inc. stockholders' equity		34,773,878			34,230,608
Non-controlling interests		497,652			1,040,922
Total equity		35,271,530			35,271,530
Total liabilities and equity		52,154,752			52,154,752
Consolidated Statement of Income (Loss) (for the three months ended December 31, 2016):
Net (income) loss attributable to non-controlling interests	$	(809,187	)	$	(445,255	)
Net income (loss) attributable to Air T, Inc. stockholders		856,105			1,220,037
Earnings (loss) per share - basic		0.42			0.60
Earnings (loss) per share - diluted		0.42			0.60
Consolidated Statement of Comprehensive Income (for the three months ended December 31, 2016):
Comprehensive (income) loss attributable to non-controlling interests	$	(698,198	)	$	(386,177	)
Comprehensive income (loss) attributable to Air T, Inc. stockholders		871,001			1,183,022
Consolidated Statement of Income (Loss) (for the nine months ended December 31, 2016):
Net (income) loss attributable to non-controlling interests	$	3,492,626		$	1,796,942
Net income (loss) attributable to Air T, Inc. stockholders		(1,751,648	)		(3,447,332	)
Earnings (loss) per share - basic		(0.81	)		(1.60	)
Earnings (loss) per share - diluted		(0.81	)		(1.60	)
Consolidated Statement of Comprehensive Income (for the nine months ended December 31, 2016):
Comprehensive (income) loss attributable to non-controlling interests	$	3,721,380		$	1,918,700
Comprehensive income (loss) attributable to Air T, Inc. stockholders		(1,499,619	)		(3,302,301	)