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Note 24 - Subsequent Events | 12 Months Ended
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Mar. 31, 2017
Notes to Financial Statements |
Subsequent Events [Text Block] |
24. | SUBSEQUENT EVENTS
Management performs an evaluation of events that occur after a balance sheet date but before financial statements are issued or available to be issued for potential recognition or disclosure of such events in its financial statements. The Company evaluated subsequent events through the date that these consolidated financial statements were issued. On May 2, 2017 and May 31, 2017, 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. 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 assets was approximately $2,400,000. Following the acquisition, AirCo is included in the commercial jet engines and parts segment of the Company’s operations. On May 2, 2017, the Company and certain of its subsidiaries entered into an amendment to the agreement governing the Company’s $25.0 million Revolving Credit Facility to establish a separate $2,400,000 term loan facility under that agreement (the “Term Loan”). Each of the Company and such subsidiaries are obligors with respect to the Term Loan, which matures on May 1, 2018, with equal $200,000 installments of principal due monthly, commencing June 1, 2017. Interest on the Term Loan is payable monthly at a per annum rate equal to 25 basis points above the interest rate applicable to the Revolving Credit Facility. The proceeds of the Term Loan were used to fund the acquisition of the AirCo business. The Term Loan is secured by the existing collateral securing borrowings under the Revolving Credit Facility, including such acquired assets. The amendment also provided that the consolidated asset coverage ratio covenant will not be measured for the fiscal quarters ending June 30, 2017, September 30, 2017 and December 31, 2017. On May 5, 2017, Contrail Aviation entered into a loan agreement (the “Contrail Loan Agreement”) with a bank lender to replace the Contrail Credit Agreement described in Note 10. The Contrail Loan Agreement provides for revolving credit borrowings by Contrail Aviation in an amount up to $15,000,000, with the available borrowing amount not limited by a borrowing base, though the Contrail Loan Agreement provides that the lender is not obligated to advance loans under the Contrail Loan Agreement if there occurs a material adverse change in Contrail Aviation’s or the Company’s financial condition or in the value of any collateral securing the loans made thereunder and an annual appraisal of inventory is required. Borrowings under the Contrail Loan Agreement bear interest at an annual rate equal to one -month LIBOR plus 3.00%. The obligations of Contrail Aviation under the Contrail Loan Agreement are secured by a first -priority security interest in substantially all of the assets of Contrail Aviation and are also guaranteed by the Company, with such guaranty limited in amount to a maximum of $1,600,000, plus interest on such amount at the rate of interest in effect under the Contrail Loan Agreement, plus costs of collection. The Contrail Loan Agreement contains affirmative and negative covenants, including covenants that restrict Contrail Aviation’s ability to make acquisitions or investments, make certain changes to its capital structure, and engage in any business substantially different that it presently conducts. The Contrail Loan Agreement also contains financial covenants applicable to Contrail Aviation, including maintenance of a Cash Flow Coverage Ratio of 2.0 to 1.0, a Tangible Net Worth of not less than $3,500,000, and a Debt Service Coverage Ratio of 1.1 to 1.0, as such terms are defined in the Contrail Loan Agreement. The Contrail Loan Agreement contains events of default including, without limitation, nonpayment of principal, interest or other obligations, violation of covenants, if both Contrail Aviation ’s current chief executive officer and chief financial officer cease to oversee day-to-day operations of Contrail Aviation, cross-default to other debt, bankruptcy and other insolvency events, actual or asserted invalidity of loan documentation, or material adverse changes in Contrail Aviation’s financial condition. The Contrail Loan Agreement provides that all loan proceeds are to be used solely for Contrail Aviation’s business operations, unless specifically consented to the contrary by lender in writing. On June 7, 2017, the Company ’s SAIC subsidiary 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. Pursuant to a Fifth Amendment and Waiver Agreement effective as of June 28, 2017 among Air T, MAC, GGS, CSA, GAS, ATGL, Stratus Aero Partners LLC, Jet Yard, AirCo and the lender under the Revolving Credit Facility, the agreement governing the Revolving Credit Facility was amended to provide that the interest rates on the revolving loans made under the Revolving Credit Facility and on the Term Loan would each be increased by an additional 0.25% per annum from the date of the amendment until the second business day after delivery of a compliance certificate for the quarter ending March 31, 2017 or any subsequent fiscal quarter end showing compliance with the financial covenants required under the Revolving Credit Facility. Pursuant to the amendment, the lender waived compliance with the maximum consolidated leverage ratio covenant under the Revolving Credit Facility at the March 31, 2017 measurement date and agreed that such covenant will not be tested at the June 30, 2017 measurement date . Pursuant to a 2017 Amendment to Security Agreement and Consent and Waiver effective as of August 3, 2017 among the Company, certain of its subsidiaries and the lender under the Revolving Credit Facility, the lender agreed to waive the default under the agreement governing the Revolving Credit Facility arising from the failure of the Company to deliver to such lender audited consolidated financial statements for the fiscal year ended March 31, 2017 within 120 days after the end of such fiscal year and the requirement that a subsidiary newly organized in Ontario, Canada (the “Ontario Subsidiary”) join the agreement governing the Revolving Credit Facility as a borrower, to consent to Air T guarantying obligations of the Ontario Subsidiary under a lease for facilities in Ontario and to amend the security agreement securing obligations under the Revolving Credit Facility to, among other things, require a pledge of only 65% of the outstanding equity of foreign subsidiaries. On August 29, 2017, the Company and certain of its subsidiaries entered into a Sixth Amendment and Waiver Agreement effective as of August 29, 2017 ( the “Sixth Amendment”) with the lender under the Revolving Credit Facility. The Sixth Amendment amended the agreement governing the Revolving Credit facility to extend the maturity of the Revolving Credit Facility from April 1, 2018 to April 1, 2019, to adjust the definition of “Consolidated EBITDA” to exclude from the calculation of Consolidated EBITDA, during the period from January 1, 2016 through June 30, 2017, any unrealized gains or losses attributable to the ownership of equity interests in Insignia Systems, Inc., and to waive the default arising under the agreement governing the Revolving Credit Facility from the failure of the Company to deliver (i) consolidated financial statements for the fiscal quarter that ended June 30, 2017 within the time period required under such agreement and (ii) the covenant compliance certificates for the fiscal quarters that ended March 31, 2017 and June 30, 2017 within the time periods required under such agreement. Pursuant to a Seventh Amendment and Waiver Agreement effective as of October 6, 2017 ( the “Seventh Amendment”) among Air T, MAC, GGS, CSA, GAS, ATGL, Stratus Aero Partners LLC, Jet Yard, AirCo and the lender under the Revolving Credit Facility, the lender waived the requirement that a newly formed limited purpose subsidiary of the Company join the agreement governing the Revolving Credit Facility as a borrower and, in connection with the restatement of the Company’s consolidated financial statements for certain periods within the fiscal year ended March 31, 2017, the lender also waived compliance with the minimum tangible net worth covenant under the Revolving Credit Facility at the December 31, 2016 and March 31, 2017 measurement dates. In light of persisting events of default under the Delphax Senior Credit Agreement, on July 13, 2017, the Company delivered a demand for payment and Notice of Intention to Enforce Security to Delphax Canada. On August 10, 2017, the Company foreclosed on all personal property and rights to undertakings of Delphax Canada. The Company foreclosed as a secured creditor with respect to amounts owed to it by Delphax Canada under the Delphax Senior Credit Agreement. The Company provided notice of its intent to foreclose to Delphax Canada and its secured creditors and shareholder on July 26, 2017. The outstanding amount owed to the Company by Delphax Canada under the Delphax Senior Credit Agreement on July 26, 2017 was approximately $1,510,000. The Company also submitted an application to the Ontario Superior Court of Justice in Bankruptcy and Insolvency (the "Ontario Court") seeking that Delphax Canada be adjudged bankrupt. On August 8, 2017, the Ontario Court issued an order adjudging Delphax Canada to be bankrupt. The recipients of the foreclosure notice did not object to the foreclosure or redeem. As a result, the foreclosure was completed on August 10, 2017, and the Company accepted the personal property and rights to undertakings of Delphax Canada in satisfaction of the amount secured by the Delphax Senior Credit Agreement. A newly organized subsidiary of Air T leases 12,206 square feet of space in a building located in Mississauga, Ontario. The lease commenced on August 1, 2017 and terminates on July 31, 2020. Annual rent under the lease escalates annually, with annual rent of approximately $94,600 (CDN) for the first year and approximately $97,000 (CDN) in the third year. The subsidiary’s obligations under the lease have been guaranteed by Air T. The lease of production facilities in Mississauga, Ontario by Delphax Canada has been terminated effective upon removal of the property foreclosed upon by Air T.

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- Definition The entire disclosure for significant events or transactions that occurred after the balance sheet date through the date the financial statements were issued or the date the financial statements were available to be issued. Examples include: the sale of a capital stock issue, purchase of a business, settlement of litigation, catastrophic loss, significant foreign exchange rate changes, loans to insiders or affiliates, and transactions not in the ordinary course of business. + References Reference 1: http://www.xbrl.org/2003/role/presentationRef -Publisher FASB -Name Accounting Standards Codification -Topic 855 -URI http://asc.fasb.org/topic&trid=2122774 + Details
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