1.	Financial Statement Presentation

The condensed consolidated financial statements of Air T, Inc. (

“AirT”, the “Company”, “we”, “us” or “our”) have been prepared, without audit (except as it relates to the condensed consolidated balance sheet as of

March 31, 2017

which have been derived from audited financial statements), 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.

hese condensed consolidated financial statements should be read in conjunction with the consolidated financial statements and notes thereto included in the Company's Annual Report on Form

-K for the year ended

March 31, 2017.

The results of operations for the

three

and

nine

-month periods ended

December 31

are

not

necessarily indicative of the operating results for the full year.

New Accounting Pronouncement

May 2014,

the Financial Accounting Standards Board ("FASB") issued Accounting Standards Update ("ASU")

2014

09,

Revenue from Contracts with Customers (Topic

606

)

. ASU

2014

is a comprehensive new revenue recognition model that requires a company to recognize revenue to depict the transfer of goods or services to a customer at an amount that reflects the consideration it expects to receive in exchange for those goods or services. ASU

2014

also requires additional disclosure about the nature, amount, timing and uncertainty of revenue and cash flows arising from customer contracts, including significant judgments and changes in judgments and assets recognized from costs incurred to obtain or fulfill a contract. ASU

2014

is effective for annual reporting periods beginning after

December 15, 2017 (

our fiscal year

2019

), including interim reporting periods within that reporting year, with earlier adoption permitted for reporting periods beginning after

December 15, 2016.

ASU

2014

may

be applied using either a full retrospective approach, under which all years included in the financial statements will be presented under the revised guidance, or a modified retrospective approach, under which financial statements will be prepared under the revised guidance for the year of adoption, but

not

for prior years. Under the latter method, entities would recognize a cumulative catch-up adjustment to the opening balance of retained earnings at the effective date for contracts that still require performance by the entity, and disclose all line items in the year of adoption as if they were prepared under the old revenue guidance.

We expect to adopt this guidance when effective using the modified retrospective transition method. Our implementation approach included performing a detailed study of the various types of

revenue streams and agreements that we have with our customers and assessing conformance of our current accounting practices with the new standard. We are in the process of completing our assessment and contract review under the new guidance and are in the final stages of determining the impact of the new guidance which should be completed by

March 31, 2018.

July 2015,

the FASB issued ASU

2015

11,

Simplifying the Measurement of Inventory (Topic

330

)

. This standard amends existing guidance to simplify the measurement of inventory by requiring certain inventory to be measured at the lower of cost or net realizable value. The amendment in ASU

2015

is for fiscal years beginning after

December 15, 2016,

and interim periods within fiscal years beginning after

December 15, 2017.

The amendment should be applied prospectively with earlier application permitted as of the beginning of an interim or annual reporting period. The Company does

not

expect the impact of adopting ASU

2015

to be material to the Company's consolidated financial statements and related disclosures.

November 2015,

the FASB issued ASU

2015

17,

Balance Sheet Classification of Deferred Taxes (Topic

740

)

. This standard eliminates the current requirement to present deferred tax liabilities and assets as current and noncurrent in a classified balance sheet. Under this new guidance, entities will be required to classify all deferred tax assets and liabilities as noncurrent. This guidance is effective for interim and annual reporting periods beginning after

December 15, 2016

with earlier adoption permitted. We adopted this amendment with the quarter ended

June 30, 2017.

January 2016,

the FASB issued ASU

2016

01,

Recognition and Measurement of Financial Assets and Financial Liabilities

, that amends the guidance on the classification and measurement of financial instruments (Subtopic

825

). ASU

2016

becomes effective in fiscal years beginning after

December 15, 2017,

including interim periods therein. ASU

2016

removes equity securities from the scope of Accounting Standards Codification (“ASC”) Topic

320

and creates ASC Topic

321,

Investments – Equity Securities

. Under the new guidance, all equity securities with readily determinable fair values are measured at fair value on the statement of financial position, with changes in fair value recorded through earnings. The update eliminates the option to record changes in the fair value of equity securities through other comprehensive income. The Company is evaluating the impact of the adoption of the standard on its consolidated financial statements. The Company currently has investments in available for sale securities and the fair value changes of such securities are, other than in the case of possible other-than-temporary impairments, currently reflected in other comprehensive income. Provided that the Company continues to hold available for sale securities after adoption of the amended guidance, earnings are likely to become more volatile.

February 2016,

the FASB issued ASU

2016

02,

Leases (Topic

842

)

. The new standard establishes a right-of-use (“ROU”) model that requires a lessee to record a ROU asset and a lease liability on the balance sheet for all leases with terms longer than

months. Leases will be classified as either finance or operating, with classification affecting the pattern of expense recognition. Similarly, lessors will be required to classify leases as either sales-type, finance or operating, with classification affecting the pattern of income recognition. Classification for both lessees and lessors will be based on an assessment of whether risks and rewards as well as substantive control have been transferred through a lease contract. The new standard is effective for fiscal years beginning after

December 15, 2018,

including interim periods within those fiscal years, with early adoption permitted. A modified retrospective transition approach is required for 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 is evaluating the impact of the adoption of the standard on its consolidated financial statements.

March 2016,

the FASB issued ASU

2016

09,

Compensation – Stock Compensation (Topic

718

): Improvements to Employee Share-Based Payment Accounting

, which addresses several aspects of the accounting for employee share-based payment transactions, including the accounting for income taxes, forfeitures, and statutory tax withholding requirements, as well as classification in the statement of cash flows. ASU

2016

is effective for annual reporting periods beginning after

December 15, 2016

and earlier adoption is permitted. The new standard requires that an entity recognize all excess tax benefits and tax deficiencies as income tax expense or benefit in the income statement as discrete items in the reporting period in which they occur. Under the previous standard, excess tax benefits are recognized in additional paid-in capital and tax deficiencies are recognized either as an offset to accumulated excess tax benefits, or in the income statement. This accounting guidance became effective for the Company beginning with the

June 30, 2017

quarter.

June 2016,

the FASB issued ASU

2016

13,

Financial Instruments—Credit Losses (Topic

326

): Measurement of Credit Losses on Financial Instruments

. This standard significantly changes how entities will measure credit losses for most financial assets and certain other instruments that are

not

measured at fair value through net income, including trade receivables. The standard requires an entity to estimate its lifetime “expected credit loss” for such assets at inception, and record an allowance that, when deducted from the amortized cost basis of the financial asset, presents the net amount expected to be collected on the financial asset. Early adoption is permitted for annual periods beginning after

December 15, 2018,

and interim periods therein. The Company is currently evaluating the impact of the adoption of the standard on its consolidated financial statements and disclosures.

August 2016,

the FASB issued ASU

2016

15,

Statement of Cash Flows (Topic

230

): Classification of Certain Cash Receipts and Cash Payments

. ASU

2016

clarifies how cash receipts and cash payments in certain transactions are presented and classified in the statement of cash flows. The effective date of this update is for fiscal years, and interim periods within those fiscal years, beginning after

December 15, 2017,

with early adoption permitted. The update requires retrospective application to all periods presented but

may

be applied prospectively if retrospective application is impracticable. The Company is currently evaluating the impact of the adoption of the standard on its consolidated financial statements and disclosures.

November 2016,

the FASB issued ASU

2016

18,

Statement of Cash Flows (Topic

230

): Restricted Cash

. ASU

2016

requires that the statement of cash flows explain the changes in the combined total of restricted and unrestricted cash balance. Amounts generally described as restricted cash or restricted cash equivalents will be combined with unrestricted cash and cash equivalents when reconciling the beginning and end of period balances on the statement of cash flows. Further, the ASU requires a reconciliation of balances from the statement of cash flows to the balance sheet in situations in which the balance sheet includes more than

one

line item of cash, cash equivalents, and restricted cash. Companies will also be disclosing the nature of the restrictions. ASU

2016

is effective for financial statements issued for fiscal years beginning after

December 15, 2017.

The Company is currently evaluating the impact of the standard on its consolidated financial statements and disclosures.

January 2017,

the FASB issued ASU

2017

01,

Clarifying the Definition of a Business (Topic

805

)

. This ASU clarifies the definition of a business with the objective of adding guidance to assist entities with evaluating whether transactions should be accounted for as acquisitions (or disposals) of assets or businesses. The guidance is effective for fiscal years that begin after

December 15, 2017

and is to be applied prospectively. The adoption of this standard is

not

expected to have a material impact on the Company’s consolidated financial statements.

January 2017,

the FASB issued ASU

2017

04,

Intangibles – Goodwill and Other (Topic

350

): Simplifying the Test for Goodwill Impairment

. This ASU simplifies how an entity is required to test goodwill for impairment by eliminating Step Two from the goodwill impairment test. Step Two measures a goodwill impairment loss by comparing the implied fair value of a reporting unit’s goodwill with the carrying amount of that goodwill. Under this standard, an entity will recognize an impairment charge for the amount by which the carrying value of a reporting unit exceeds its fair value. The standard is effective for any interim goodwill impairment tests in fiscal years beginning after

December 15, 2019

and is to be applied prospectively. Early adoption is permitted for interim or annual goodwill impairment tests performed on testing dates after

January 1, 2017.

The Company is currently evaluating the effects that the adoption of this ASU will have on its consolidated financial statements.

May 2017,

the FASB issued ASU

2017

09,

Compensation – Stock Compensation (Topic

718

): Scope of Modification Accounting

, which provides guidance on determining which changes to the terms and conditions of share-based payment awards require an entity to apply modification accounting. This update is effective for all entities for fiscal years beginning after

December 15, 2017,

and interim periods within those years. Early adoption is permitted. The Company is currently evaluating the effects that the adoption of this ASU will have on its consolidated financial statements. The Company has

not

yet concluded how the new standard will impact the consolidated financial statements.

August 2017,

the FASB issued ASU

2017

–

Derivatives and Hedging (Topic

815

): Targeted Improvements to Accounting for Hedging Activities

, which provides guidance on hedge accounting for both financial and commodity risks. The provisions in this standard create more transparency around how economic results are presented, both on the face of the financial statements and in the footnotes, for investors and analysts. The standard is effective for public companies for fiscal years beginning after

December 15, 2018.

Early adoption is permitted in any interim period or fiscal years before the effective date of the standard. The adoption of this standard is

not

expected to have a material impact on the Company’s consolidated financial statements.

January 2018,

the FASB released guidance relating to the reclassification of Certain Tax Effects from Accumulated Other Comprehensive Income, which requires companies to reclassify the stranded effects in other comprehensive income to retained earnings

as a result of the change in the tax rates under the Tax Cuts and Jobs Act. The Company has opted to early adopt this pronouncement by retrospective application to each period (or periods) in which the effect of the change in the tax rate under the Tax Cuts and Jobs Act is recognized. The impact of the reclassification from other comprehensive income to retained earnings is approximately

$42,000

and was recorded as of

December 31, 2017.

Other accounting standards that have been issued or proposed by the FASB or other standards-setting bodies are

not

pected to have a material impact on the Company’s financial position, results of operations or cash flows.