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Note 1A - Restatement of Previously Issued Consolidated Financial Statements | 6 Months Ended
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Sep. 30, 2016
Notes to Financial Statements |
Accounting Changes and Error Corrections [Text Block] |
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 90 -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 no liquidation preference over shares of common stock of Delphax. No 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 10 -Q for the period ended September 30, 2016, originally filed with the Securities and Exchange Commission (the “SEC”) on November 14, 2016 ( “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 met hodology, for the three and six months ended September 30, 2016 the attribution of Delphax losses 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 10 -Q/A is being filed to restate our unaudited condensed consolidated financial statements at September 30, 2016 and March 31, 2016 and for the three and six months ended September 30, 2016 to so correct the treatment of Air T’s interests in Delphax with respect to the attribution of Delphax losses and the elimination of intercompany interest 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 1 . Financial Statement Presentation (As Restated)
| ● | Note 2. Acquisition s of Interests in Delphax (As Amended)
| ● | Note 5 . Net Earnings Per Share (As Restated)
| ● | Note 11 . Variable Interest Entities (As Restated)
In addition , we have amended Note 3. Acquisition of Interests in Contrail (As Amended) to reflect that determinations with respect to purchase accounting were made as of the date of the Original Filing. 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 September 30, 2016 and March 31, 2016 and for the three and six months ended September 30, 2016:
|  | As Previously Reported |  |  | As Restated |
Consolidated Balance Sheet Information (at September 30, 2016): |  |  |  |  |  |  |  |
Additional paid-in capital |  | $ | 4,260,030 |  |  | $ | 4,268,536 |
Retained earnings |  |  | 19,596,287 |  |  |  | 17,007,516 |
Accumulated other comprehensive income (loss), net |  |  | 119,234 |  |  |  | 41,531 |
Total Air T, Inc. stockholders' equity |  |  | 24,486,247 |  |  |  | 21,828,279 |
Non-controlling interests |  |  | (3,929,535 | ) |  |  | (1,271,567 | )
Total equity |  |  | 20,556,712 |  |  |  | 20,556,712 |
Total liabilities and equity |  |  | 65,931,550 |  |  |  | 65,931,550 |
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 September 30, 2016): |  |  |  |  |  |  |  |
Net (income) loss attributable to non-controlling interests |  | $ | (11,265 | ) |  | $ | 4,288 |
Net income (loss) attributable to Air T, Inc. stockholders |  |  | 1,068,549 |  |  |  | 1,084,102 |
Earnings (loss) per share - basic |  |  | 0.52 |  |  |  | 0.53 |
Earnings (loss) per share - diluted |  |  | 0.52 |  |  |  | 0.53 |
Consolidated Statement of Comprehensive Income (for the three months ended September 30, 2016): |  |  |  |  |  |  |  |
Comprehensive (income) loss attributable to non-controlling interests |  | $ | 13,260 |  |  | $ | 17,365 |
Comprehensive income (loss) attributable to Air T, Inc. stockholders |  |  | 1,121,474 |  |  |  | 1,125,580 |
Consolidated Statement of Income (Loss) (for the six months ended September 30, 2016): |  |  |  |  |  |  |  |
Net (income) loss attributable to non-controlling interests |  | $ | 4,301,813 |  |  | $ | 2,242,197 |
Net income (loss) attributable to Air T, Inc. stockholders |  |  | (2,607,753 | ) |  |  | (4,667,369 | )
Loss per share - basic |  |  | (1.18 | ) |  |  | (2.11 | )
Loss per share - diluted |  |  | (1.18 | ) |  |  | (2.11 | )
Consolidated Statement of Comprehensive Income (for the six months ended September 30, 2016): |  |  |  |  |  |  |  |
Comprehensive (income) loss attributable to non-controlling interests |  | $ | 4,419,576 |  |  | $ | 2,304,878 |
Comprehensive income (loss) attributable to Air T, Inc. stockholders |  |  | (2,370,621 | ) |  |  | (4,485,319 | )

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- Definition The entire disclosure for reporting accounting changes and error corrections. It includes the conveyance of information necessary for a user of the Company's financial information to understand all aspects and required disclosure information concerning all changes and error corrections reported in the Company's financial statements for the period. + References Reference 1: http://www.xbrl.org/2003/role/presentationRef -Publisher FASB -Name Accounting Standards Codification -Topic 250 -URI http://asc.fasb.org/topic&trid=2122394 + Details
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