2.	Acquisitions

Acquisition of Interests in Contrail Aviation

July 18, 2016 (

the “Contrail Closing Date”), pursuant to an asset purchase agreement (the “Asset Purchase Agreement”) between Contrail Aviation Support, LLC (“Contrail Aviation”), a subsidiary of the Company, Contrail Aviation Support, Inc. (the “Seller” or “Contrail”) and Joseph Kuhn, the sole shareholder of the Seller, Contrail Aviation completed the purchase of all of the assets owned, used or usable by the Seller, other than cash, equity in the Seller

’s IC-DISC subsidiary and certain other specified excluded assets. Pursuant to the Asset Purchase Agreement, Contrail Aviation also assumed certain liabilities of the Seller. Prior to this acquisition, the Seller, based in Verona, Wisconsin, engaged in the business of acquiring surplus commercial jet engines and components and supplying surplus and aftermarket commercial jet engine components. In connection with the acquisition, Contrail Aviation offered employment to all of the Seller’s employees and Mr. Kuhn was appointed Chief Executive Officer of Contrail Aviation.

The acquisition consideration consisted of (i)

$4,033,36

in cash, (ii) equity membership units in Contrail Aviation representing

21%

of the total equity membership units in Contrail Aviation, and (iii) and contingent additional deferred consideration payments which are more fully described below. In addition to the net assets of the Seller, beginning equity of Contrail included cash of approximately

$904,000.

Pursuant to the Asset Purchase Agreement, Contrail Aviation agreed to pay as contingent additional deferred consideration up to a maximum of

$1,500,000

per year and

$3,000,000

in the aggregate (collectively, the “Earnout Payments” and each, an “Earnout Payment”), calculated as follows:

(i) if Contrail Aviation generates EBITDA (as defined in the Asset Purchase Agreement) in any Earnout Period (as defined below) less than

$1,500,000,

Earnout Payment will be payable with respect to such Earnout Period;

(ii) if Contrail Aviation generates EBITDA in any Earnout Period equal to or in excess of

$1,500,000,

but less than

$2,000,000,

the Earnout Payment for each such Earnout Period will be an amount equal to the product of (

) the EBITDA generated with respect to such Earnout Period minus

$1,500,000,

and (y)

two

(

);

(iii) if Contrail Aviation generates EBITDA in any Earnout Period equal to or in excess of

$2,000,000,

but less than

$4,000,000,

the Earnout Payment for each such Earnout Period will be equal to

$1,000,000;

(iv) if Contrail Aviation generates EBITDA in any Earnout Period equal to or in excess of

$4,000,000,

the Earnout Payment for each such Earnout Period will be equal to

$1,500,000;

and

(v) if, following the

fifth

Earnout Period, Contrail Aviation has generated EBITDA equal to or in excess of

$15,000,000

in the aggregate during all Earnout Periods, but the Seller has received or is owed less than

$3,000,000

in aggregate Earnout Payments pursuant to clauses (i) through (iv), above, Contrail Aviation will make an additional Earnout Payment to the Seller in an amount equal to the difference between

$3,000,000

and the aggregate Earnout Payments already received or payable pursuant to clauses (i) through (iv), above.

As used in the Asset Purchase

Agreement, “Earnout Period” means each of the

first

five twelve

-full-calendar-month periods following the closing of the acquisition. The Company has estimated its liability with respect to the Earnout Payment of

$2,900,000,

which amount was included in the “Other non-current liabilities” in the consolidated balance sheet at

March 31, 2017.

As a result of the EBITDA of Contrail Aviation being approximately

$2.1

million for the

first

Earnout Period, the Earnout Payment with respect to that Earnout Period is

$1,000,000,

which amount was paid in

October 2017.

The remaining liability of

$1,900,000

is included in the “Other non-current liabilities” in the consolidated balance sheet at

December 31, 2017.

On the Contrail Closing Date, Contrail Aviation and the Seller entered into an Operating Agreement (the “Operating Agreement”) providing for the governance of and the terms of membership interests in Contrail Aviation and including put and call options (“Put/Call Option”) permitting, at any time after the

fifth

anniversary of the Contrail Closing Date, Contrail Aviation at its election to purchase from the Seller, and permitting the Seller at its election to require Contrail Aviation to purchase from the Seller, all of the Seller

’s equity membership interests in Contrail Aviation at a price to be agreed upon, or failing such an agreement to be determined pursuant to

third

-party appraisals in a process specified in the Operating Agreement.

The following table summarizes the fair values of assets acquired and liabilities assumed by Contrail Aviation as of the Contrail Closing Date:

	July 18, 2016

ASSETS
Accounts receivable	$	1,357,499
Inventories		2,118,475
Prepaid expenses		30,121
Property and equipment		33,095
Intangible assets - non-compete		69,700
Intangible assets - tradename		322,000
Intangible assets - certification		47,000
Intangible assets - customer relationship		451,000
Goodwill		4,227,205
Total assets	$	8,656,095

LIABILITIES
Accounts payable	$	366,575
Accrued expenses		43,652
Earnout liability		2,900,000
Total liabilities	$	3,310,227


Net Assets	$	5,345,868

The Company

’s purchase accounting reflects the estimated net fair value of the Seller’s assets acquired and liabilities assumed as of the Contrail Closing Date. Purchase accounting also reflects the Company’s current estimate that the Earnout Payments will be due at the above-specified maximum level. The Contrail Closing Date balance sheet information disclosed above reflects the present value of such estimated Earnout Payments.

The Company has finalized its Contrail Aviation acquisition accounting.

The Put/Call Option specifies a fair value strike price as of the exercise date. As such, the Company assigned

value to the Put/Call Option for purposes of purchase accounting. Because the Put/Call Option permits the Seller to require Contrail Aviation

to purchase all of the Seller’s equity membership interests in Contrail Aviation, the Company has presented this redeemable non-controlling interest in Contrail Aviation between the liabilities and equity sections of the accompanying condensed consolidated balance sheets. For the

nine

-month period ended

December 31, 2017,

the redeemable non-controlling interest balance was increased by the Seller’s proportionate share of Contrail Aviation’s net earnings. The redeemable non-controlling interest balance was also increased by a portion of the estimated change in Contrail Aviation’s fair value between

March 31, 2017

and

December 31, 2017

and the additional capital contribution of

$252,000

made by the non-controlling member in the

third

quarter (the Company funded an additional

$948,000

as well to maintain the current ownership percentages). The total increase in the redeemable non-controlling interest balance was approximately

$554,000

from

March 31, 2017

December 31, 2017.

Pro forma financial information is

not

presented as the results are

not

material to the Company

’s condensed consolidated financial statements.

Acquisition of

AirCo Assets

May 2, 2017

and

May 31, 2017,

our newly formed subsidiaries, AirCo, LLC and AirCo Services, LLC (collectively, “AirCo”) acquired the inventory and principal business assets, and assumed specified liabilities, of Aircraft Instrument and Radio Company, Incorporated, and Aircraft Instrument and Radio Services, Inc. (collectively, the “AirCo Sellers”). The acquired business, which is based in Wichita, Kansas, distributes and sells airplane and aviation parts and maintains a license under Part

145

of the regulations of the Federal Aviation Administration. The consideration paid for the acquired business was

$2,400,000.

The following table summarizes the

provisional fair values of assets acquired and liabilities assumed by AirCo as of

May 2, 2017,

the date of the completion of the acquisition (the “AirCo Closing Date”):

	May 2, 2017

Assets acquired and liabilities assumed at fair value:
Accounts receivables	$	748,936
Inventories		3,100,000
Property and equipment		26,748
Accounts payable		(313,117	)
Accrued expenses		(382,687	)
Net assets acquired	$	3,179,880

Net assets acquired		3,179,880
Consideration paid		2,400,000
Bargain purchase gain	$	779,880

The Company

’s purchase price accounting reflects the estimated net fair value of the AirCo Sellers assets acquired and liabilities assumed as of the AirCo Closing Date. The Company’s initial accounting for this acquisition is incomplete as of the date of this report. Therefore, as permitted by applicable accounting guidance, the foregoing amounts are provisional.

The tax impact related to the bargain purchase gain was to record a deferred tax liability

and record tax expense against the bargain purchase gain of approximately

$278,000.

The resulting net bargain purchase gain after taxes was approximately

$502,000.

Pro forma financial information is

not

presented as the results are

not

material to the Company

’s condensed consolidated financial statements.

Other Acquisitions

and Business I

nvestments

October 3, 2016,

a newly formed s

ubsidiary of the Company, Stratus Aero Partners LLC, acquired

100%

of the outstanding equity interests of Jet Yard, LLC (“Jet Yard”) from the holder thereof. The cash purchase price was

$15,000

and there are

contractual provisions, such as an earn-out, which could result in an increase to this price. Jet Yard is registered to operate a repair station under Part

145

of the regulations of the Federal Aviation Administration and its principal asset on the acquisition date was a contract with Pinal County, Arizona to lease approximately

48.5

acres of land at the Pinal Air Park in Marana, Arizona. Jet Yard was organized in

2014,

entered into the lease in

June 2016

and had maintained de minimus operations from formation through the acquisition date. The lease expires in

May 2046

with an option to renew for an additional

-year period (though the lease to a

2.6

-acre parcel of the leased premises

may

be terminated by Pinal County upon

days’ notice). The lease provides for an initial annual rent of

$27,000,

which rental rate escalates based on a schedule in annual increments during the

first

seven

years of the lease (at which time the annual rental rate would be

$152,000

), and increases by an additional

five

percent for each

three

-year period thereafter. Because the rental expense will be accounted for on a straight-line basis over the term of the lease, the rental expense in the initial years will exceed the corresponding cash payments. The lease agreement permits Pinal County to terminate the lease if Jet Yard fails to make substantial progress toward the construction of facilities on the leased premises in phases in accordance with a specified timetable, which includes, as the initial phase, the construction of a demolition pad to be completed by

March 31, 2017

and, as the final and most significant phase, the construction of an aircraft maintenance hangar large enough to house a Boeing

B777

300

by the

first

quarter of

2021.

The construction of the demolition pad required by

March 31, 2017

under the lease has

not

been completed and Jet Yard and Pinal County are in discussions with respect to improvements on the leased premises.

The acquired Jet Yard business is included in the Company

’s commercial jet engine segment. The Company has finalized its Jet Yard acquisition accounting.

Pursuant to an Asset Purchase Agreement signed on

October 31, 2016,

GAS acquired, effective as of

October 1, 2016,

substantially all of the assets of D&D which was in the business of marketing, selling and providing aviation repair, equipment, parts, and maintenance sales services and products at the Fort Lauderdale airport. The total amount paid at closing in connection with this acquisition was

$400,000.

Additionally,

$100,000

was due within

days after closing and an additional

$100,000

is payable in equal monthly installments of

$16,667

commencing on

November 1, 2016

. Earn-out payments of

$100,000

were payable based on specified performance for the

twelve

-month period ending

September 30, 2017.

For purposes of purchase accounting, the Company estimated that the above-mentioned earn-out will be paid in full. Therefore, the Company estimated the total purchase consideration at approximately

$700,000.

The Company allocated the purchase consideration to identifiable tangible and intangible assets.

liabilities were assumed in the acquisition. The estimated fair value of identifiable tangible and intangibles assets was approximately

$200,000

and

$300,000,

respectively. The

$200,000

excess of the purchase consideration over the estimated fair value of identifiable assets was recorded as goodwill. The basis of the acquired assets will be “stepped up” for income tax purposes. As such,

deferred taxes were recognized in purchase accounting.

The acquired D&D business is operated by GAS and included in the Company

’s ground support services segment. The Company has finalized its D&D acquisition accounting. Based on actual revenue earned by D&D through

September 30, 2017,

the earnout payment with respect to the purchase agreement was

$100,000,

which amount was paid in

October 2017.

June 7, 2017,

the Company

’s Space Age Insurance Company subsidiary (“SAIC”) invested

$500,000

for a

40%

interest in TFS Partners LLC (“TFS Partners”), a single-purpose investment entity organized by SAIC and other investors for the purpose of making an investment in a limited liability company, The Fence Store LLC (“Fence Store LLC”), organized for the purpose of acquiring substantially all of the assets of The Fence Store, Inc. (“Fence Store Inc.”). TFS Partners acquired a

60%

interest in Fence Store LLC, which has completed the purchase of substantially all of the assets of Fence Store Inc. Prior to this transaction, Fence Store Inc. operated a business under the tradename “Town and Country Fence” selling and installing residential and commercial fencing in the greater Twin Cities, Minnesota area. Fence Store LLC intends to continue this business. The Company accounts for its investment in TFS Partners using the equity method of accounting.

December 15, 2017,

BCCM, Inc. (“

BCCM”), a newly-formed, wholly-owned subsidiary of the Company, completed the acquisition of Blue Clay Capital Management, LLC (“Blue Clay Capital”), an investment management firm based in Minneapolis, Minnesota. In connection with the transaction, BCCM acquired the assets of, and assumed certain liabilities of, Blue Clay Capital in return for payment to Blue Clay Capital of

$1.00,

subject to adjustment for Blue Clay Capital’s net working capital as of the closing date. The fair value of the assets acquired and liabilities assumed in connection with the transaction are provisional. Gary S. Kohler, a director of the Company, was the sole owner of Blue Clay Capital. In connection with the transaction, (i) BCCM replaced Blue Clay Capital as the managing general partner of certain investment funds managed by Blue Clay Capital (Blue Clay Capital Partners, LP, Blue Clay Capital Partners CO I, LP, Blue Clay Capital Partners CO III, LP and Blue Clay Capital SMid-Cap LO, LP); (ii) Mr. Kohler entered into an employment agreement with BCCM to serve as its Chief Investment Officer in return for an annual salary of

$50,000

plus variable compensation based on the management and incentive fees to be paid to the subsidiary by certain of these investment funds and eligibility to participate in discretionary annual bonuses; and (iii) David Woodis, President of Blue Clay Capital, entered into an employment agreement with BCCM to serve as its Chief Operating Officer and Chief Financial Officer in return for an annual salary of

$125,000

plus revenue sharing and eligibility to participate in discretionary annual bonuses.

In connection with the Blue Clay Capital acquisition, a Partnership Interest Conversion and General Partner Admittance Agreement (“

Conversion Agreement”) was entered into effective

December 31, 2017

between Blue Clay Capital, BCCM, BCCM Advisors, LLC (“BCCM Advisors”), a wholly-owned subsidiary of BCCM, and various Blue Clay Capital investment funds. Per the Conversion Agreement, Blue Clay Capital sold to BCCM Advisors, and BCCM Advisors purchased from Blue Clay, the general partnership interests in certain investment funds previously managed by Blue Clay Capital (as specified above) for a purchase price equal to, with respect to each general partnership, of (i)

one

percent (

) of the aggregate capital accounts of each fund as valued on

December 31, 2017

and (ii)

$100,000

(or

$10,000

in the case of Blue Clay Capital SMid-Cap LO, LP). Upon acquisition of each of the general partnership interests, BCCM Advisors was admitted as the general partner of each fund. Blue Clay Capital retained the incentive allocations associated with Blue Clay Capital Partners CO I, LP and Blue Clay Capital Partners CO III. BCCM Advisors will receive all future incentive allocations accruing as of

January 1, 2018

and thereafter associated with Blue Clay Capital Partners, LP which is the onshore feeder fund to the Blue Clay Capital Master Fund Ltd. Management determined that the price paid of

$227,000

for the combined general partnership interests approximates the fair value of those interests. The portion of the purchase price paid for the general partnership interest in Blue Clay Capital Partners, LP is allocated as an equity interest in the Blue Clay Capital Master Fund, Ltd

Additionally, effective

December 31, 2017,

BCCM Advisors entered into an Investment M

anagement Agreement in which it agreed to manage the investments of the following funds: Blue Clay Capital Master Fund Ltd., Blue Clay Capital Fund Ltd. and Blue Clay Capital Partners LP. In connection with the effective date of the Investment Management Agreement, BCCM Advisors became the Incentive Allocation Shareholder of the Blue Clay Capital Master Fund Ltd.

Pro forma financial information is

not

presented for the above acquisitions as the results are

not

material to the Company

’s condensed consolidated financial statements.