Business Combinations

Acquisition of Worthington Aviation Parts, Inc.

On May 4, 2018, Air T, Inc. completed the acquisition (the “Transaction”) of substantially all of the assets and assumed certain liabilities of Worthington Aviation Parts, Inc. (“Worthington”), 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 $3,300,000 upon closing. Total consideration is summarized in the table below:



Earnest money	$	50,000
Cash consideration	3,300,000
Cash acquired	(24,301		)
Total consideration	$	3,325,699

The Transaction was accounted for as a business combination in accordance with ASC Topic 805 "Business Combinations." Assets acquired and liabilities assumed were recorded in the accompanying consolidated balance sheet at their estimated fair values as of May 4, 2018, with the excess of fair value of net assets acquired recorded as a bargain purchase gain. The most significant asset acquired was Worthington’s inventory. The following table outlines the consideration transferred and purchase price allocation at the respective estimated fair values as of May 4, 2018:



	May 4, 2018

ASSETS
Accounts receivable	$	1,929,120
Inventories	4,564,437
Other current assets	149,792
Property and equipment	391,892
Other assets	189,607
Intangible assets - tradename	138,000
Total assets	7,362,848

LIABILITIES
Accounts payable	1,289,150
Accrued expenses	175,222
Deferred tax liability	589,000
Total liabilities	2,053,372


Net assets acquired	$	5,309,476

Consideration paid	$	3,350,000
Less: Cash acquired	(24,301		)
Bargain purchase gain	$	1,983,777

The transaction resulted in a bargain purchase gain because Worthington was a non-marketed transaction and in financial distress at the time of the acquisition. The seller engaged in a formal bidding process and 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 record tax expense against the bargain purchase gain of approximately $589,000. The resulting net bargain purchase gain after taxes was approximately $1,983,000. Total transaction costs incurred in connection with this acquisition were approximately $83,000.

Pro forma financial information is not presented as the results are not material to the Company’s consolidated financial statements.