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What changed in AIR INDUSTRIES GROUP's 10-K — 2023 vs 2024

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Paragraph-level year-over-year comparison of AIR INDUSTRIES GROUP's 2023 and 2024 10-K annual filings, covering the Business, Risk Factors, Legal Proceedings, Cybersecurity, MD&A and Market Risk sections. Every new, removed and edited paragraph is highlighted side-by-side so you can see exactly what management changed in the 2024 report.

+178 added−161 removedSource: 10-K (2025-04-15) vs 10-K (2024-04-15)

Top changes in AIR INDUSTRIES GROUP's 2024 10-K

178 paragraphs added · 161 removed · 133 edited across 7 sections

Item 1. Business

Business — how the company describes what it does

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Biggest changeOur marketing efforts bore fruit and we secured our first order with a new foreign-based defense and aerospace prime customer. Despite absorbing a sudden and unexpected increase of interest rates related to our outstanding indebtedness, we were able to make significant investments in capital equipment and related processes. On the bottom-line, we reported a net loss of $2.1 million.
Biggest changeOur backlog, which represents the value of all funded orders received, stood at $117.9 million an increase of 19.9% as compared to our backlog on December 31, 2023. Our marketing efforts bore fruit and we secured our first order with a new foreign-based defense and aerospace prime customer. We made significant investments in capital equipment and related processes.
Deployment of new helicopters is projected to continue through at least 2027, with ongoing sustainment activities anticipated for many years thereafter. ● Pratt & Whitney Geared Turbo-Fan Engine (“GTF”): Used in commercial aviation, the GTF represents a new generation of jet engines that offer improved fuel efficiency, reduced emissions, and lower noise levels compared to traditional turbofan engines.
Deployment of new helicopters is projected to continue through at least 2027, with ongoing sustainment activities anticipated for many years thereafter. 2 ● Pratt & Whitney Geared Turbo-Fan Engine (“GTF”): Used in commercial aviation, the GTF represents a new generation of jet engines that offer improved fuel efficiency, reduced emissions, and lower noise levels compared to traditional turbofan engines.
While prime contractors generally prefer multiple sources for new aircraft production lines to mitigate single points of failure, utilizing a single vendor can lead to higher production volumes, lower average unit costs, and opportunities for quality improvements. 3 Demand for both defense and commercial aviation components is based on new production and subsequent maintenance, repair and overhaul (“MRO”).
While prime contractors generally prefer multiple sources for new aircraft production lines to mitigate single points of failure, utilizing a single vendor can lead to higher production volumes, lower average unit costs, and opportunities for quality improvements. Demand for both defense and commercial aviation components is based on new production and subsequent maintenance, repair and overhaul (“MRO”).
All of our employees are covered under a co-employment agreement with Insperity Services, LLC, a professional employer organization. This arrangement allows us to provide employees with comprehensive benefits at a lower cost than we could provide. 5 Our AIM subsidiary has a collective bargaining agreement with the United Service Workers, IUJAT, Local 355 (the “Union”).
All of our employees are covered under a co-employment agreement with Insperity Services, LLC, a professional employer organization. This arrangement allows us to provide employees with comprehensive benefits at a lower cost than we could provide. Our AIM subsidiary has a collective bargaining agreement with the United Service Workers, IUJAT, Local 355 (the “Union”).
Our Market The aerospace and defense industry is dominated by a select few large prime contractors including Airbus, Boeing, General Electric, Lockheed Martin, Northrop Grumman, and RTX. These primes oversee large platforms and programs for ultimate end-user for the U.S. government, foreign governments or global aviation companies.
Our Market The aerospace and defense industry is dominated by a select few large prime contractors including Airbus, Boeing, General Electric, Lockheed Martin, Northrop Grumman, and RTX. These prime contractors oversee large platforms and programs for ultimate end-user, the U.S. government, foreign governments or global aviation companies.
Navy, a small number have been sold to U.S. allies, notably Japan. 2 ● UH-60 Black Hawk Helicopter : We supply flight critical components, such as the primary flight control assembly and the tail-rotor gearbox, for the UH-60 Black Hawk Helicopter. Serving as the primary helicopter for the U.S.
Navy, a small number have been sold to U.S. allies, notably Japan. ● UH-60 Black Hawk Helicopter : We supply flight critical components, such as the primary flight control assembly and the tail-rotor gearbox, for the UH-60 Black Hawk Helicopter. Serving as the primary helicopter for the U.S.
This agreement is effective until December 31, 2024 and covers the majority of AIM’s 125 personnel. We are required to make a monthly contribution to Union’s United Welfare Fund and the United Services Worker’s Security Fund, the sole pension benefit for covered employees. We are not obligated to provide any future defined benefits.
This agreement is effective until December 31, 2027 and covers the majority of AIM’s 125 personnel. We are required to make a monthly contribution to Union’s United Welfare Fund and the United Services Worker’s Security Fund, the sole pension benefit for covered employees. We are not obligated to provide any future defined benefits.
With total unfilled contract values amounting to $191.9 million (including our $98.3 million in backlog and all potential orders against LTA agreements previously awarded to us), as of December 31, 2023, we are confident in our ability to boost sales in 2024, attain profitability and improve our financial position. 1 Customer Profiles In 2023 and 2022, approximately 82.3% and 82.6% of our net sales were attributed to customers who use our products for end-use on military aircraft.
With total unfilled contract values amounting to $271.3 million (including our $117.9 million in funded backlog and all potential orders against LTA agreements previously awarded to us), as of December 31, 2024, we are confident in our ability to boost sales in 2025, attain profitability and improve our financial position. 1 Customer Profiles In 2024 and 2023, approximately 69.9% and 82.3% of our net sales were attributed to customers who use our products for end-use on military aircraft.
We also use our website to disseminate other material information to our investors. We also make announcements regarding company developments and financial and operating performance through social media channels such as at LinkedIn.com/company/air-industries-group to communicate with customers and the public about our Company, our products, services, and other issues.
We also make announcements regarding company developments and financial and operating performance through social media channels such as at LinkedIn.com/company/air-industries-group to communicate with customers and the public about our Company, our products, services, and other issues.
Although bookings are subject to wide variations in timing, resulting in period-to-period comparisons not necessarily being meaningful, we do use bookings and our book-to-bill as a gauge of future net sales. 4 Our backlog, which can be considered our “funded backlog,” stood at $98.3 million as of December 31, 2023, marking a 14.7% increase from the $85.7 million on December 31, 2022.
Although bookings are subject to wide variations in timing, resulting in period-to-period comparisons not necessarily being meaningful, we do use bookings and our book-to-bill as a gauge of future net sales. Our backlog, which can be considered our “funded backlog,” stood at $117.9 million as of December 31, 2024, marking a 19.9% increase from $98.3 million on December 31, 2023.
It represents the net sales we expect to realize from funded orders received and is equivalent to our remaining performance obligations pursuant to Accounting Standards Codification (“ASC”) 606, Revenue from Contracts with Customers, at the end of each period.
This represents the net sales we expect to realize from funded orders received and is equivalent to our remaining performance obligations pursuant to Accounting Standards Codification (“ASC”) 606, Revenue from Contracts with Customers.
We sell directly to one of its legal subsidiaries, Sikorsky Aircraft Corporation (“Sikorsky”). ● General Electric Aerospace (“GE”) – We supply GE Aerospace with high precision components that are used in jet turbine aircraft engines that are used on several commercial aircraft platforms. ● GE Verona – We supply GE Verona with precision components that are used in ground-based turbines for electrical power generation. ● The U.S.
We sell directly to one of its legal subsidiaries, Sikorsky Aircraft Corporation (“Sikorsky”). ● Northrop Grumman (“Northrop”) – We supply product used on the E2-D Hawkeye, airborne warning and control aircraft. ● General Electric Aerospace (“GE”) – We supply GE Aerospace with high precision components that are used in jet turbine aircraft engines that are used on several commercial aircraft platforms. ● GE Verona – We supply GE Verona with precision components that are used in ground-based turbines for electrical power generation. ● The U.S.
The total potential net sales under contracts actually awarded to us as of December 31, 2023, was $191.1 million, including the value of our existing funded backlog of $98.3 million. Competition Winning a new contract award is highly competitive.
The total potential net sales under contracts actually awarded to us as of December 31, 2024, was $271.3 million, including the value of our existing funded backlog of $117.9 million. 4 Competition Winning a new contract award is highly competitive.
However, many of our LTAs provide pricing protection when there is a large increase in the in the cost of raw materials. Employees As of March 31, 2024, we employed 180 people. Of these, 101 were involved in manufacturing and production activities, 25 were in quality control, 45 were in administration, and the remaining 9 were in sales and procurement.
However, many of our LTAs provide pricing protection when there is a large increase in the cost of raw materials. Employees As of March 31, 2025, we employed 184 people. Of these, 98 were involved in manufacturing and production activities, 26 were in quality control, 52 were in administration, and the remaining 8 were in sales and procurement.
In fiscal 2023, bookings were $62,262,000 or a 55% increase compared to $40,166,000 in 2022. Our “book-to-bill” ratio, which is our bookings divided by net sales, was 1.20x for 2023, a significant improvement over the 0.75x ratio of 2022.
In fiscal 2024, bookings were $71,000,000, a 14% increase compared to $62,262,000 in 2023. Our “book-to-bill” ratio, which is our bookings divided by net sales, was 1.29x for 2024, a significant improvement over the 1.20x ratio of 2023.
These funded orders, approved by customers, come from LTAs, spot-buys, or other contracts and are for essential machined components and assemblies used in the key platforms and programs we serve. Previously, we limited our backlog to items scheduled to ship within an 18-month period. Our new enhanced definition provides visibility into the value of all firm orders.
These funded orders, approved by customers, come from LTAs, spot-buys, or other contracts and are for essential machined components and assemblies used in the key platforms and programs we serve. Our definition provides visibility into the value of all firm orders.
When actual products are needed, the customer places a funded order against the LTA. The value of this funded order is included in our backlog until we ship it. Although cancellations of funded orders are possible, customers are usually subject to termination liability, necessitating payment to us for costs incurred up to the termination date.
The value of this funded order is included in our funded backlog until we ship it. Although cancellations of funded orders are possible, customers are usually subject to termination liability, necessitating payment to us for costs incurred up to the termination date. In certain termination cases, the customer is also required to pay us a reasonable profit.
As we enter fiscal 2024, we believe our future is looking brighter. Moving forward, our business strategy is geared towards competing and winning contracts that enable us to achieve sustainable and profitable business growth and delivering high quality reliable products to our customers.
On the bottom-line, we reported a net loss of $1.4 million. As we enter fiscal 2025, we believe our future is looking brighter. Moving forward, our business strategy is geared towards competing and winning contracts that enable us to achieve sustainable and profitable business growth and delivering high quality reliable products to our customers.
The bulk of our $98.3 million backlog is expected to ship over the next 24 months. but does not include possible or probable future orders pursuant to existing LTAs or probable contract renewals.
The bulk of our $117.9 million backlog is expected to ship over the next 24 months. but does not include possible or probable future orders pursuant to existing LTAs or probable contract renewals that would also contribute sales during such period.
It supports all five U.S. military services, federal, state, and local agencies, as well as partner and allied nations. The DLA procures items from us and provides them, as it deems fit, to other suppliers who assemble them into finished products.
It supports all five U.S. military services, federal, state, and local agencies, as well as partner and allied nations. The DLA procures items from us and provides them, as it deems fit, to other suppliers who assemble them into finished products. Platform and Program Profiles Most of our machined components and assemblies are integral to high-profile platforms and named programs.
Information and updates about our Annual Meetings will also be posted on our website including on the “Home Page” and in the “Investor Relations” section. None of the information on our website, blog or any other website identified herein is incorporated by reference in this annual report and such information should not be considered a part of this annual report.
None of the information on our website, blog or any other website identified herein is incorporated by reference in this annual report and such information should not be considered a part of this annual report. 6
We supply our Thrust Struts to Collins Aerostructures for integration into Geared Turbofan engines, utilized by smaller airlines such as those operating the Airbus A220 and Embraer E2 aircraft.
We supply our Thrust Struts to Collins Aerostructures for integration into Geared Turbofan engines, utilized by smaller airlines such as those operating the Airbus A220 and Embraer E2 aircraft. Demand for these engines increased in 2024, thus reducing the concentration in the net sales attributable to military end users.
Regulations We believe that we are in compliance with all federal, state and local laws and regulations governing our operations and have obtained all material licenses and permits required for the operation of our business.
We believe we maintain good relationships with the Union and expect to renew the collective bargaining agreement before it expires. 5 Regulations We believe that we are in compliance with all federal, state and local laws and regulations governing our operations and have obtained all material licenses and permits required for the operation of our business.
This underscores the importance of efficient subcontract management in meeting customer delivery deadlines. In some cases, customers may provide us with these raw materials as they may be able to obtain better processing or delivery schedules from other suppliers.
In some cases, customers may provide us with these raw materials as they may be able to obtain better processing or delivery schedules from other suppliers and in other cases the customer chooses to rely on us to manage suppliers.
At a high level, we are able to monitor the DoD budget for both new production and operations and maintenance components as well as industry reports to gauge overall industry spending. While large U.S.
The demand for MRO and after-market products can continue for many years, even decades, after the production line for new aircraft is shut down. 3 At a high level, we are able to monitor the DoD budget for both new production and operations and maintenance components as well as industry reports to gauge overall industry spending. While large U.S.
Spanning over 150,000 square feet, our manufacturing centers serve as the operational hubs for our three legal subsidiaries, Air Industries Machining, (“AIM”) Nassau Tool Works (“NTW”) and Sterling Engineering Company (“STE”).
Spanning over 150,000 square feet, our manufacturing centers serve as the operational hubs for our three legal subsidiaries, Air Industries Machining, (“AIM”) Nassau Tool Works (“NTW”) and Sterling Engineering Company (“STE”). For the past several years we have strategically invested substantial amounts in new capital equipment, tooling, and processes to bolster our competitive position.
We primarily rely upon a small team of highly skilled sales and business development professionals with extensive industry experience. Our goal is to cultivate customer relationships akin to partnerships and the concept of customer alignment. For example, our customers heavily rely on suppliers to deliver high-quality parts that meet specifications in a timely and cost-effective manner.
We primarily rely upon a small team of highly skilled sales and business development professionals with extensive industry experience with hands on support from management. Our goal is to cultivate customer relationships akin to partnerships and the concept of customer alignment.
In certain termination cases, the customer is also required to pay us a reasonable profit. We secure new or follow-on LTAs through competitive bidding in response to a customer’s Request for Quotation (“RFQ”). These proposals detail prices based on quantities, which may vary annually, for shipments over multiple years.
We secure new or follow-on LTAs through competitive bidding in response to a customer’s Request for Quotation (“RFQ”). These proposals detail prices based on quantities, which may vary annually, for shipments over multiple years. The bidding process typically entails several rounds of submissions and negotiations before an award is granted.
The bidding process typically entails several rounds of submissions and negotiations before an award is granted. For defense products, in certain cases, LTAs may be awarded or extended without an RFQ, competitive bidding. In such cases, pricing may be determined through cost analysis or audit with ultimate approval by the customer or the U.S. government.
For defense products, in certain cases, LTAs may be awarded or extended without an RFQ or competitive bidding. In such cases, pricing may be determined through cost analysis or audit with ultimate approval by the customer or the U.S. government. Bookings and Backlog Bookings represent funded orders secured during a given financial period.
In recent years, we have strategically made significant investments to enhance our competitiveness and market position. For example, in fiscal 2023 and 2022, we invested $2,119,000 and $2,361,000 in new property and equipment to support our goals. These investments have increased production efficiency and speed, while maintaining closer tolerances, and have expanded the size of products we can manufacture.
In recent years, we have strategically made significant investments to enhance our competitiveness and market position. For example, in fiscal 2024 and 2023, we invested $2,301,000 and $2,119,000 in new property and equipment to support our goals.
Any inquiry or investigation can result in fines or limitations on our ability to continue to bid for government contracts and fulfill existing contracts. 6 More Information About Our Business and Where to Find It Our Internet website is AirIndustriesGroup.com, at which you can find our filings with the SEC, including press releases, annual reports, quarterly reports, current reports, and any amendments to those filings.
More Information About Our Business and Where to Find It Our Internet website is AirIndustriesGroup.com, at which you can find our filings with the SEC, including press releases, annual reports, quarterly reports, current reports, and any amendments to those filings. We also use our website to disseminate other material information to our investors.
They regularly assess suppliers based on various quantitative criteria such as on-time delivery performance, defect rates, adherence to specifications, cost performance, lead times, order processing time, stockout rates, and similar metrics. Therefore, one of our primary objectives is to maintain high ratings and leverage these metrics in our sales and marketing activities.
For example, our customers heavily rely on suppliers to deliver high-quality parts that meet specifications in a timely and cost-effective manner. They regularly assess suppliers based on various quantitative criteria such as on-time delivery performance, defect rates, adherence to specifications, cost performance, lead times, order processing time, stockout rates, and similar metrics.
We manufacture complete landing gear components for several variants, supplying these to the U.S. government or Tier 1 or other suppliers for spares that go on the aircraft that where originally produced by Boeing. ● The E-2D Hawkeye: We provide the main and nose landing gear, as well as the arresting gear for the E-2D Hawkeye, a twin-engine, tactical aircraft utilized for providing advanced airborne warning and control for carrier-based operations.
We manufacture complete landing gear components for several variants, supplying these to the U.S. government or Tier 1 or other suppliers for spares that go on the aircraft that were originally produced by Boeing. ● The F-15 Eagle Tactical Fighter: We provide landing gear components for the F-15 Eagle Tactical Fighter. Originally designed for the U.S.
The production of this aircraft is expected to continue for many years, with the DoD’s aiming for an inventory objective of 2,456 aircraft, in addition to expected demand from other countries. ● The F-15 Eagle Tactical Fighter: We provide landing gear components for the F-15 Eagle Tactical Fighter. Originally designed for the U.S.
The production of this aircraft is expected to continue for many years, with the DoD aiming for an inventory objective of 2,456 aircraft, in addition to expected demand from other countries. ● F-18 Hornet: The F-18 Hornet, the U.S. Navy’s primary fighter aircraft, principally operates from aircraft carriers and enjoys international use, notably in Finland and Australia.
Our sales cycle varies significantly, ranging from a few weeks to several years, depending on the complexity of the product and manufacturing steps involved. While customers may occasionally engage in spot buys, most of our orders (also known as bookings) stem from LTAs. LTAs outline the quantity and price of products the customer may order within a specified timeframe.
While customers may occasionally engage in spot buys, most of our orders (also known as bookings) stem from LTAs. LTAs outline the quantity and price of products the customer may order within a specified time frame. When actual products are needed, the customer places a funded order against the LTA.
Additionally, the collective bargaining agreement contains a “no-strike” clause, and a “no-lock-out” clause. We believe we maintain good relationships with the Union and expect to renew the collective bargaining agreement before it expires.
Additionally, the collective bargaining agreement contains a “no-strike” clause, and a “no-lock-out” clause.
Manufacturing, Raw Materials and Replacement Parts Our production cycle spanning from ordering raw materials to delivering finished products, can vary from several weeks to over a year. Consequently, for certain products, especially those involving finished assemblies, we must procure significant amounts of raw materials and begin processing well ahead of actual ship dates.
Consequently, for certain products, especially those involving finished assemblies, we must procure significant amounts of raw materials and begin processing well ahead of actual ship dates. This underscores the importance of efficient subcontract management in meeting customer delivery deadlines.
Flight critical components are frequently replaced on aircraft on a flight time, or flight cycle basis. The demand for MRO and after-market products can continue for many years, even decades, after the production line for new aircraft is shut down.
Flight critical components are frequently replaced on aircraft on a flight time, or flight cycle basis.
We plan to continue this strategy and anticipate investing approximately $2,000,000 in 2024 for new or upgraded equipment. Our competitors include: Monitor Aerospace, a division of GKN Aerospace; Hydromil, a division of Triumph Aerospace Group; Heroux Devetek and Ellanef Manufacturing, a division of Magellan Corporation.
Our competitors include: Monitor Aerospace, a division of GKN Aerospace; Hydromil, a division of Triumph Aerospace Group; Heroux Devetek and Ellanef Manufacturing, a division of Magellan Corporation. Manufacturing, Raw Materials and Replacement Parts Our production cycle spanning from ordering raw materials to delivering finished products, can vary from several weeks to over a year.
For the past several years, despite facing significant financial and operational challenges, we have strategically invested substantial amounts in new capital equipment, tooling, and processes to bolster our competitive position. Additionally, we expanded our sales and marketing efforts, with a sharp focus on expanding relationships with customers and cultivating new ones.
Additionally, we expanded our sales and marketing efforts, with a sharp focus on expanding relationships with customers and cultivating new ones. Fiscal 2024 marked a year of progress and positioning for growth. We finished 2024 with $55.1 million of net sales.
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Fiscal 2023 marked a year of progress and positioning for growth. We finished 2023 with $51.5 million of net sales. Our backlog, which represents the value of all funded orders received, stood at $98.3 million an increase of 14.7% as compared to our backlog on December 31, 2022.
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The following platforms and programs (ranked in descending order by their 2024 net sales), accounted for 79.3% and 85.2% of our net sales in 2024 and 2023, respectfully: ● The E-2D Hawkeye: We provide the main and nose landing gear, as well as the arresting gear for the E-2D Hawkeye, a twin-engine, tactical aircraft utilized for providing advanced airborne warning and control for carrier-based operations.
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In 2023, our sales and marketing strategy to expand our customer base yielded significant results, as we secured an initial $700,000 order from a foreign-based defense and aerospace prime ranked among the world’s leading suppliers of finished landing gears. Our initial order from them was for specialized components with initial deliveries slated to commence in the fourth quarter of 2024.
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Sales and Marketing Sales and marketing activities during 2024 were robust, resulting in a book-to-bill ratio of 1.29x, growth in our funded backlog to $117.9 million and total unfilled contract values amounting to $271.3 million (including our $117.9 million funded backlog and all potential orders against LTA agreements).
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As we continue to develop and strengthen this relationship, we are optimistic about securing additional orders over time. Platform and Program Profiles Most of our machined components and assemblies are integral to high-profile platforms and named programs.
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Therefore, one of our primary objectives is to maintain high ratings and leverage these metrics in our sales and marketing activities. Our sales cycle varies significantly, ranging from a few weeks to over a year, depending on the complexity of the product and manufacturing steps involved.
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The following platforms and programs (ranked in descending order by their 2023 net sales), accounted for 85.2% and 81.0% of our net sales in 2023 and 2022, respectfully: ● F-18 Hornet: The F-18 Hornet, the U.S. Navy’s primary fighter aircraft, primarily operates from aircraft carriers and enjoys international use, notably in Finland and Australia.
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These investments have increased production efficiency and speed, while maintaining closer tolerances, have expanded the size of products we can manufacture and have been appreciated by our customers. While we plan to continue this strategy in 2025 it will likely be on a much smaller level.
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Sales and Marketing Sales and marketing activities in 2023 indicate a return to normalcy compared to the disruptions caused by COVID-19 in 2022 and 2021. Travel restrictions no longer hinder our ability to visit customers, and employees are more willing to attend trade shows, facilitating our communication efforts.
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Any inquiry or investigation can result in fines or limitations on our ability to continue to bid for government contracts and fulfill existing contracts.
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We believe our sales and marketing strategy received significant validation in 2023 when we secured an initial $700,000 order from a foreign-based defense and aerospace prime ranked among the world’s leading suppliers of finished landing gears.
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Information and updates about our Annual Meetings will also be posted on our website including on the “Home Page” and in the “Investor Relations” section.
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While this new customer relationship is in its early stages, we are dedicating substantial efforts to further develop and strengthen this partnership, with the aim of receiving significant orders in the future. Bookings and Backlog Bookings represent funded orders we have secured during a given financial period.

Item 1A. Risk Factors

Risk Factors — what could go wrong, per management

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Biggest changeThis ratio is a financial metric that we use to measure our ability to cover fixed charges such as interest and leases expenses as divided by EBITDA (as defined in the Current Credit Facility) which represents net income (or loss) before interest, taxes, depreciation, and amortization.
Biggest changeBeginning in with the fiscal quarter ending March 31, 2025 on a rolling twelve-month basis and continuing for the fiscal quarter ending June 30, 2025 on a rolling twelve-month basis we are required to achieve a Fixed Charge Coverage Ratio (as defined) of 1.05x which is a financial metric that is used to measure our ability to cover fixed charges such as interest and lease expenses as divided by EBITDA.
We must devote substantial time and resources to prepare bids and proposals and may not have contracts awarded to us. Even if we win contracts, there can be no assurance that the prices that we have bid will be sufficient to allow us to generate a profit from any particular contract.
We must devote substantial time and resources to prepare bids and proposals and may not have contracts awarded to us. Even if we win contracts, there can be no assurance that the prices that we bid will be sufficient to allow us to generate a profit from any particular contract.
Some LTA agreement with customers allow us to increase our prices due to increases in the price of raw materials. However, these LTA agreements generally require that we first absorb all or a portion of the price increases before being able to pass on the increase the customer.
Some LTA agreement with customers allow us to increase our prices due to increases in the price of raw materials. However, these LTA agreements generally require that we first absorb all or a portion of the price increases before being able to pass on the increase to the customer.
There are risks associated with offering these services and even if performed timely and correctly, it is likely that our margins for these new services will be relatively low, or even negative, in the initial phases when volume is low.
There are risks associated with offering new services and even if performed timely and correctly, it is likely that our margins for these new services will be relatively low, or even negative, in the initial phases when volume is low.
We have never been subject to such fines or disqualification. 11 Cyber security attacks, internal system or service failures, and any unauthorized access to our customer data will have an adverse effect on our business and reputation. Most of our products are used by large aerospace and prime contractors who ultimately provide them to the U.S.
We have never been subject to such fines or disqualification. Cyber security attacks, internal system or service failures, and any unauthorized access to our customer data will have an adverse effect on our business and reputation. Most of our products are used by large aerospace and prime contractors who ultimately provide them to the U.S.
If the U.S. economy continues to experience inflation, our labor costs may further increase which could have a material adverse effect on our business, financial condition and results of operations. We are subject to strict governmental regulations relating to the environment, which could result in fines and remediation expense in the event of non-compliance.
If the U.S. economy continues to experience inflation, our labor costs may further increase which could have a material adverse effect on our business, financial condition and results of operations. 10 We are subject to strict governmental regulations relating to the environment, which could result in fines and remediation expense in the event of non-compliance.
Government, other countries and the public to such events, and the resulting macroeconomic disruption to the financial markets could lead to increased volume and price volatility for publicly traded securities which could adversely impact the price of our common stock. We can provide no assurance that our common stock will continue to be listed on the NYSE American.
Government, other countries and the public to such events, and the resulting macroeconomic disruption to the financial markets could lead to increased volume and price volatility for publicly traded securities which could adversely impact the price of our common stock. 15 We can provide no assurance that our common stock will continue to be listed on the NYSE American.
Any requirement to write down the value of our inventory due to obsolescence, excess and slow moving, or a drop in the price of materials could have a material adverse effect on our consolidated financial position and results of operations. We do not own the intellectual property rights to products we produce.
Any requirement to write down the value of our inventory due to obsolescence, excess and slow moving, or a drop in the price of materials could have a material adverse effect on our consolidated financial position and results of operations. 9 We do not own the intellectual property rights to products we produce.
If we were unable to perform under new programs to the customers’ satisfaction or if a new program in which we had made a significant investment was terminated or experienced weak demand, delays or other problems, then our business, financial condition and results of operations could be materially adversely affected.
If we were unable to perform under new programs to the customers’ satisfaction or if a new program in which we made a significant investment was terminated or experienced weak demand, delays or other problems, then our business, financial condition and results of operations could be materially adversely affected.
Increased competition could result in reduced revenue, lower margins or loss of market share, any of which could significantly harm our business, our operating results and financial condition. 8 We may lose sales if we fail to timely meet the specifications and requirements of our customers.
Increased competition could result in reduced revenue, lower margins or loss of market share, any of which could significantly harm our business, our operating results and financial condition. We may lose sales if we fail to timely meet the specifications and requirements of our customers.
In addition, we may in the future incur additional indebtedness or otherwise become subject to agreements whose terms restrict our ability to pay dividends in the future. Risks Related to our status as a public company and our common stock There is only a limited public market for our common stock.
In addition, we may in the future incur additional indebtedness or otherwise become subject to agreements whose terms restrict our ability to pay dividends in the future. 14 Risks Related to our status as a public company and our common stock There is only a limited public market for our common stock.
Government or other nations, or the perception among our customers regarding the likelihood of such shifts. Although we have cultivated long-standing relationships with many of our customers, the aerospace and defense industry is characterized by a smaller number of large and well-known prime customers.
Government or other nations, or the perception among our customers regarding the likelihood of such shifts. 7 Although we have cultivated long-standing relationships with many of our customers, the aerospace and defense industry is characterized by a smaller number of large and well-known prime customers.
A significant change in costs from those on which we based our estimates on one or more programs could have a material effect on our consolidated financial position or results of operations. 9 The prices of raw materials we use are volatile. The prices of raw materials used in our manufacturing processes are volatile.
A significant change in costs from those on which we based our estimates on one or more programs could have a material effect on our consolidated financial position or results of operations. The prices of raw materials we use are volatile. The prices of raw materials used in our manufacturing processes are volatile.
If we were required to make immediate repayment, we may not be able to obtain financing to do so and would become insolvent. 14 We currently do not pay dividends and the terms of our Current Credit Facility limit our ability to pay dividends. We currently do not pay dividends and have no foreseeable plans to do so.
If we were required to make immediate repayment, we may not be able to obtain financing to do so and would become insolvent. We currently do not pay dividends and the terms of our Current Credit Facility limit our ability to pay dividends. We currently do not pay dividends and have no foreseeable plans to do so.
Any system or service disruptions caused by hackers or even those caused by projects to improve our information technology capabilities, if not mitigated, could significantly disrupt our production assembly could have an immediate material adverse effect on our business.
Any system or service disruptions caused by hackers or even those caused by projects to improve our information technology capabilities, if not mitigated, could significantly disrupt our production and assembly could have an immediate material adverse effect on our business.
We may not be successful in achieving positive gross margins for these new services or be able to ultimately meet our customer requirements. If we are unsuccessful, it could hurt our relationship with our customers. 10 Attracting and retaining executive talent and other key personnel is an essential element of our future success.
We may not be successful in achieving positive gross margins for new services or be able to ultimately meet our customer requirements. If we are unsuccessful, it could hurt our relationship with our customers. Attracting and retaining executive talent and other key personnel is an essential element of our future success.
Our management determined that as of December 31, 2023, our disclosure controls and procedures and internal control over financial reporting were not effective due to a material weakness regarding appropriate segregation of duties with respect to and validation of data produced by certain modules of our financial IT systems. We first determined this weakness in fiscal 2022.
Our management determined that as of December 31, 2024, our disclosure controls and procedures and internal control over financial reporting were not effective due to a material weakness regarding appropriate segregation of duties with respect to and validation of data produced by certain modules of our financial IT systems. We first determined this weakness in fiscal 2022.
To perform on new programs, we may be required to incur material up-front costs which may not have been separately negotiated and may not be recoverable. Such charges and the loss of up-front costs could have a material impact on our liquidity. The need to control our expenses will place a significant strain on our management and operational resources.
To perform on new programs, we may be required to incur material up-front costs which may not have been separately negotiated and may not be recoverable. Such charges and the loss of up-front costs could have a material impact on our liquidity. The need to control our expenses places a significant strain on our management and operational resources.
Although the Related Party Notes are subordinate to the $15,849,000 of debt outstanding pursuant to the Current Credit Facility, we may require additional concessions from the holders of the Related Party Notes when we seek to refinance the Current Credit Facility. These related parties have significant influence over the outcome of corporate actions, including those requiring stockholder approval.
Although the Related Party Notes are subordinate to the $18,130,000 of debt outstanding pursuant to the Current Credit Facility, we may require additional concessions from the holders of the Related Party Notes when we seek to refinance the Current Credit Facility. These related parties have significant influence over the outcome of corporate actions, including those requiring stockholder approval.
Some of the products we produce require months to produce and we sometimes produce products in excess of the number ordered intending to sell the excess as spares when orders arise. As a result, our inventory turns slowly and ties up our working capital. Our inventory represented approximately 59% of our assets as of December 31, 2023.
Some of the products we produce require months to produce and we sometimes produce products in excess of the number ordered intending to sell the excess as spares when orders arise. As a result, our inventory turns slowly and ties up our working capital. Our inventory represented approximately 56% of our assets as of December 31, 2024.
Russia’s invasion of Ukraine, the conflict in the Middle East, continued tensions between the US and the European Union with China and Russia, and tension between the US and the European Union with respect to funding Ukraine’s war effort, may alter countries’ willingness to rely on others as the source of certain products and material.
Russia’s ongoing war with Ukraine, the conflict in the Middle East, continued tensions between the US and the European Union with China and Russia, and tension between the US and the European Union with respect to funding Ukraine’s war effort, tariffs and other issues, may alter countries’ willingness to rely on others as the source of certain products and material.
From time-to-time in order to reduce our dependence on subcontractors or increase our gross margins we offer new services to our customers, such as painting and finishing products we already manufacture for them.
From time-to-time in order to reduce our dependence on subcontractors, increase our customers’ reliance upon us or increase our gross margins we offer new services to our customers, such as painting and finishing products we already manufacture for them.
Consequently, we have a high degree of sales concentration among specific customers making it challenging to diversify our customer base. In fiscal years 2023 and 2022, four and three customers, respectively, accounted for approximately 64.2% and 76.5% of net sales, respectively. Our future success relies heavily on nurturing expanding and effectively managing these relationships.
Consequently, we have a high degree of sales concentration among specific customers making it challenging to diversify our customer base. In fiscal years 2024 and 2023, four customers, accounted for approximately 73.4% and 64.2% of net sales, respectively. Our future success relies heavily on nurturing expanding and effectively managing these relationships.
Conflicts between nations (such as the ongoing Russia-Ukraine conflict), or between nations and terrorist organizations (such as the ongoing conflict between terrorist groups and Israel), as well as terrorist attacks, natural disasters (such as hurricanes, fires, floods and earthquakes), unusually adverse weather conditions, pandemic outbreaks or a banking crisis could adversely affect our operations and financial performance.
Conflicts between nations (such as the ongoing Russia-Ukraine conflict), or between nations and terrorist organizations (such as the ongoing conflict between terrorist groups and Israel), as well as terrorist attacks, natural disasters (such as hurricanes, fires, floods and earthquakes), unusually adverse weather conditions, pandemic outbreaks or a banking crisis, the imposition of tariffs, shifts in government alliances, could adversely affect our operations and financial performance.
Government contracting and budget cycles, introduction of new government regulations and standards, contract closeouts, variations in manufacturing efficiencies, our ability to obtain components and subassemblies from contract manufacturers and suppliers, general economic conditions and economic conditions specific to the defense market and disruptions caused by global events such as COVID-19 and Russia’s invasion of Ukraine.
Government contracting and budget cycles, introduction of new government regulations and standards, contract closeouts, variations in manufacturing efficiencies, our ability to obtain components and subassemblies from contract manufacturers and suppliers, general economic conditions and economic conditions specific to the defense market and disruptions caused by global events.
The weighted average interest rate we paid in 2023 on borrowings outstanding on the Current Credit Facility was 7.55% and this interest rate may increase in the future.
The weighted average interest rate we paid in 2024 on borrowings outstanding on the Current Credit Facility was 7.66% and this interest rate may increase in the future.
Risks Related to Our Indebtedness As of December 31, 2023, we have total indebtedness of approximately $23,311,000, large portions of which must be redeemed or refinanced prior to December 30, 2025 and July 1, 2026.
Risks Related to Our Indebtedness As of December 31, 2024, we have total indebtedness of approximately $26,283,000, large portions of which must be redeemed or refinanced prior to December 30, 2025 and July 1, 2026.
A significant increase in costs in 2024 or any failure to maintain our controls or operation of these controls, could harm our operations, decrease the reliability of our financial reporting, and cause us to fail to meet our financial reporting obligations, which could adversely affect our business and reduce our stock price. 17
A significant increase in costs in 2025 or any failure to maintain our controls or operation of these controls, could harm our operations, decrease the reliability of our financial reporting, and cause us to fail to meet our financial reporting obligations, which could adversely affect our business and reduce our stock price. 17 ITEM 1B. UNRESOLVED STAFF COMMENTS None.
Two of our directors, Michael N. Taglich and Robert F. Taglich, and their affiliates own a significant portion of our outstanding shares of common stock. They also hold $6,162,000 of Related Party Notes, some of which are convertible into our common stock.
Two of our directors, Michael N. Taglich and Robert F. Taglich, and their affiliates own a significant portion of our outstanding shares of common stock. They also hold $4,871,000 of Related Party Notes as of March 31, 2025, some of which are convertible into our common stock.
The weighted average interest rate paid during the year-ended December 31, 2023 on borrowings outstanding on the Current Credit Facility was 7.55% as compared to 4.50% for the year-ended December 31, 2022, the increase primarily the result of the increase in the target rates set by the Federal Reserve.
The weighted average interest rate paid during the year-ended December 31, 2024 on borrowings outstanding on the Current Credit Facility was 7.66% as compared to 7.55% for the year-ended December 31, 2023, the increase reflects the increase in the target rates set by the Federal Reserve.
The Solar Facility requires borrowings for completed projects to be repaid over a 20-year level payment term. If we are unable to pay our indebtedness when due, our operations may be materially and adversely affected. We must pay or refinance large portions of this indebtedness prior to December 30, 2025, and July 1, 2026.
On October 1, 2024, the Solar Facility converted to a 20-year level payment term loan. If we are unable to pay or refinance our indebtedness when due, our operations may be materially and adversely affected. We must pay or refinance large portions of this indebtedness prior to December 30, 2025, and July 1, 2026.
We are subject to an extensive and highly-evolving regulatory landscape, and requirements imposed by our customers to secure our communications, and any adverse changes to, or our failure to comply with, any laws and regulations or requirements of our clients could adversely affect our brand, reputation, business, operating results, and financial condition.
Moreover, expenditures incurred in implementing cyber security and other procedures and controls could adversely affect our results of operations and financial condition. 11 We are subject to an extensive and highly-evolving regulatory landscape, and requirements imposed by our customers to secure our communications, and any adverse changes to, or our failure to comply with, any laws and regulations or requirements of our clients could adversely affect our brand, reputation, business, operating results, and financial condition.
Even if we obtain a waiver for the failure to meet the fixed charge coverage ratio as of March 31, 2024, if we do not achieve our fiscal 2024 plan and successfully execute our business strategy, we may not be able to comply with future quarterly covenant requirements.
Even if we obtain a waiver for the failure to meet a financial covenant, if we do not achieve our fiscal 2025 plan and successfully execute our business strategy, we may not be able to comply with future quarterly covenant requirements.
We expect to conclude our testing of effectiveness in fiscal 2024 but we may find that fiscal 2023 remediations were not effective and have to incur additional costs to adopt new controls.
Although new controls have been implemented during fiscal 2023 and 2024, we will need to enhance and further formalize these controls during fiscal 2025. We expect to conclude our testing of effectiveness in fiscal 2025 but we may find that fiscal 2023 and 2024 remediations were not effective and have to incur additional costs to adopt new controls.
While we believe that, in many cases, alternative supplies, components, assemblies, or subcontractors could be secured, sourcing substitutes may necessitate the development of new suppliers or require product re-engineering and qualification, potentially leading to shipment delays. Any interruptions in raw material shipments or subcontracted service performance could significantly harm our business, our operating results and our financial condition.
While we believe that, in many cases, alternative supplies, components, assemblies, or subcontractors could be secured, sourcing substitutes may necessitate the development of new suppliers or require product re-engineering and qualification, potentially leading to shipment delays.
As of December 31, 2023, we had approximately $15,849,000 of indebtedness outstanding pursuant to a loan facility that matures on December 30, 2025 with Webster Bank (“Current Credit Facility”). The average interest rate on this indebtedness during fiscal 2023 was 7.55%.
As of December 31, 2024, we had approximately $18,130,000 of indebtedness outstanding pursuant to a loan facility that matures on December 30, 2025 with Webster Bank (“Current Credit Facility”). The average interest rate on this indebtedness during fiscal 2024 was 7.66%. This indebtedness is secured by a lien on substantially all our assets.
Additionally, any material changes to the current aerospace and defense supplier structure resulting from geo-political tensions or otherwise could disrupt the markets for raw materials and supplies and our ability and the ability of our suppliers to obtain raw materials, may be significantly impacted.
Supply chain disruptions resulting from escalating political tensions and the economic disruption resulting from retaliatory measures between any countries could result in production delays and cancellations of programs. 12 Additionally, any material changes to the current aerospace and defense supplier structure resulting from geo-political tensions or otherwise could disrupt the markets for raw materials and supplies and our ability and the ability of our suppliers to obtain raw materials, may be significantly impacted.
To the extent we have not complied with such laws, rules, and regulations, or requirements imposed by our LTAs, we could be subject to significant fines, limitations the products and services we provide, reputational harm, and other regulatory consequences, each of which may be significant and could adversely affect our business, operating results, and financial condition. 12 Any disruptive national or international events, such as potential future public health crises, ongoing or new conflicts, domestic or foreign terrorist activities, banking crises, and responses from the U.S.
To the extent we have not complied with such laws, rules, and regulations, or requirements imposed by our LTAs, we could be subject to significant fines, limitations the products and services we provide, reputational harm, and other regulatory consequences, each of which may be significant and could adversely affect our business, operating results, and financial condition.
Further, any reduction in future sales volume would likely causes us to absorb the fixed overhead costs over a smaller base of sales, causing our gross profit as a percentage of sales to decline from current levels.
Although we have plans to improve operating efficiencies at our current sales levels, we may not be able to do so. Further, any reduction in sales volume would likely cause us to absorb the fixed overhead costs over a smaller base of sales, causing our gross profit as a percentage of sales to decline from current levels.
Disruptive national and international events, such as the outbreak of a public health crisis, conflicts between nations or between nations and terrorist organizations, terrorists acts, natural disasters, a banking crisis, the possibility of default by the U.S. Government on its obligations due to its debt ceiling or the actuality of such an event, and the response of the U.S.
Disruptive national and international events, such as the outbreak of a public health crisis, conflicts between nations or between nations and terrorist organizations, terrorists acts, natural disasters, a banking crisis, the imposition of tariffs, shifts in international alliances, the possibility of default by the U.S.
In addition, the market price of our common stock may be affected by factors unrelated to our operations, such as general economic factors, government budgeting decisions affecting our industry and developments in the financial markets and availability of credit. 15 Disruptive national and international events and the response of the United States, other countries and the public to such events, and the resulting macroeconomic disruption to the financial markets could lead to increased volume and price volatility for publicly traded securities which could adversely impact the price of our common stock.
Disruptive national and international events and the response of the United States, other countries and the public to such events, and the resulting macroeconomic disruption to the financial markets could lead to increased volume and price volatility for publicly traded securities which could adversely impact the price of our common stock.
Any issuances of our common stock, preferred stock, or securities such as warrants or notes that are convertible into, exercisable or exchangeable for, our capital stock, would have a dilutive effect on the voting and economic interest of our existing stockholders. 7 A reduction in budgeted or actual U.S. government spending for defense or changes in the mix of defense products could materially adversely impact our business strategy, revenues, operating results and financial condition.
Any issuances of our common stock, preferred stock, or securities such as warrants or notes that are convertible into, exercisable or exchangeable for, our capital stock, would have a dilutive effect on the voting and economic interest of our existing stockholders.
Although we expect to generate net sales from all of our key aerospace and defense platforms and programs for many years, they are subject to significant risk. Congressional appropriation and presidential approval are required for funding leaving our platforms and programs vulnerable to potential budget reductions at any point.
Congressional appropriation and presidential approval are required for funding, leaving our platforms and programs vulnerable to potential budget reductions at any point.
Consequently, our gross profit as a percentage of new sales is highly linked with sales volume. If we do not increase our sales volume, it will be difficult to materially improve our gross profit margin. Although we have plans to improve operating efficiencies at our current sales levels, we may not be able to do so.
Our state-of-the-art manufacturing facilities currently have a large percentage of fixed factory overhead relative to our overall expenses. Consequently, our gross profit as a percentage of sales is highly linked with sales volume. If we do not increase our sales volume, it will be difficult to materially improve our gross profit margin.
This indebtedness is secured by a lien on substantially all our assets. 13 Additionally, we have approximately $6,162,000 of subordinated notes payables (“Related Party Notes”) that mature on July 1, 2026 and which are held by two directors Michael N. Taglich and Robert F. Taglich, and their affiliates.
Additionally, as of December 31, 2024, we had approximately $6,162,000 of subordinated notes payables (“Related Party Notes”) that mature on July 1, 2026 and which are held by two directors Michael N. Taglich and Robert F. Taglich, and their affiliates. The Related Party Notes payable carry interest rate ranging between 7% and 12% per year.
Historically, prime contractors and the entire U.S. aerospace and defense supply chain have relied upon parts, components, and raw materials from foreign suppliers including those located in Russia and China. Geo-political tensions have increased during the past several years and we expect them to continue.
Historically, prime contractors and the entire U.S. aerospace and defense supply chain have relied upon parts, components, and raw materials from foreign suppliers including those located in Russia and China. Conversely, many nations chose to rely upon U.S. manufacturers as their primary source for defense products, such as helicopters and fighter aircraft.
We may not be able to improve our gross margin and a reduction in future sales levels could have a disproportionate effect on our gross profit as a percentage of our net sales. Our state-of-the-art manufacturing facilities currently has a large percentage of fixed factory overhead relative to our overall expenses.
Any interruptions in raw material shipments or subcontracted service performance could significantly harm our business, our operating results and our financial condition. 8 We may not be able to improve our gross margin and a reduction in future sales levels could have a disproportionate effect on our gross profit as a percentage of our net sales.
The Related Party Notes payable carry an interest rate ranging between 7% and 12% per year. In addition to $884,000 of finance lease obligations and a $22,000 vehicle loan, we also had $393,000 of borrowings for solar energy systems pursuant to a financing agreement (“Solar Facility”) with CT Green Bank.
Subsequent to December 31, 2024, we repaid approximately $1,291,000 of this debt. In addition to $1,007,000 of finance lease obligations and a $14,000 vehicle loan, we also had $970,000 of borrowings for the solar energy systems installed at our Barkhamsted facility pursuant to a financing agreement (“Solar Facility”) with CT Green Bank.
Consequently, we may be susceptible to future increased rates if the Federal Reserve chooses to increase its target rate of interest. We may not be able to comply with the covenants of the Current Credit Facility and our debt could be called.
Consequently, we may be susceptible to future increased rates if the Federal Reserve chooses to increase its target rate of interest. 13 We have a history of net losses, need to refinance our bank debt and the opinion of our auditor contains an explanatory paragraph as to our ability to continue as a going concern.
The ultimate end-user for most of our products is the U.S. Government, with significant use on military aircraft. In certain instances, our products may be exported to allied foreign governments by the U.S. Government.
In certain instances, our products may be exported to allied foreign governments by the U.S. Government. Although we expect to generate net sales from all of our key aerospace and defense platforms and programs for many years, they are subject to significant risk.
Removed
Moreover, expenditures incurred in implementing cyber security and other procedures and controls could adversely affect our results of operations and financial condition.
Added
A reduction in budgeted or actual U.S. government spending for defense or changes in the mix of defense products could materially adversely impact our business strategy, revenues, operating results and financial condition. The ultimate end-user for most of our products is the U.S. Government, with significant emphasis on military aircraft.
Removed
Supply chain disruptions resulting from escalating political tensions and the economic disruption resulting from retaliatory measures between any countries could result in production delays and cancellations of programs.
Added
Complying with the requirements imposed by the U.S. Government and our customers with respect to privacy, data governance, data protection and cybersecurity is costly and requires a significant amount of attention form management.
Removed
During fiscal 2024, we initiated steps to refinance this debt.
Added
Any disruptive national or international events, such as potential future public health crises, ongoing or new conflicts, domestic or foreign terrorist activities, banking crises, the imposition of tariffs, shifts in government alliances, and responses from the U.S.
Removed
Under the terms of the Current Credit Facility, we are required to maintain certain business and financial covenants including a Fixed Charge Coverage Ratio (as defined) that is determined at the end of each fiscal quarter.
Added
Geo-political tensions have increased during the past several years and we expect them to continue.
Removed
For the year ended December 31, 2023, we achieved a Fixed Charge Coverage Ratio of 1.31x as compared to the required ratio of 0.95x and were in full compliance with all other covenants. As of March 31, 2024, we were not in compliance with the required ratio of 1.10x.
Added
Since it is unlikely that we will be able to pay this debt, we have initiated steps to satisfy portions and refinance the balance.
Removed
We are currently in discussions with our lender to obtain waivers, but may not be able to do so.
Added
We incurred net losses for the years ended December 31, 2024, 2023 and 2022 of $1,366,000, $2,131,000 and $1,076,000, respectively.
Removed
During our first and third quarters of fiscal 2023, primarily because of the unexpected and dramatic increase in interest rates and the failure to receive certain raw materials from a supplier, we were unable to comply with the Fixed Charge Coverage Ratio.
Added
As of December 31, 2024, we had approximately $18,130,000 of indebtedness outstanding pursuant to our Current Credit Facility that matures on December 30, 2025 with Webster Bank (“Current Credit Facility”) and approximately $6,162,000 of subordinated notes payables (“Related Party Notes”) that mature on July 1, 2026 and which are held by two directors Michael N. Taglich and Robert F.
Removed
In 2023, our lender provided waivers for these quarters and provided for more relaxed Fixed Charge Coverage ratios for future periods, including the 0.95x as of December 31, 2023.
Added
Taglich, and their affiliates. We must pay or refinance large portions of this indebtedness prior to its respective due dates.
Removed
Although new controls have been implemented during fiscal 2023, they were put in place late in the year which did not allow sufficient time for testing of the effectiveness of such controls.
Added
Further, as a condition to refinancing our Current Credit Facility prior to December 31, 2025, Webster may require that the holders of our Related Party Notes extend or otherwise modify the subordination agreements they have given in favor of the lender.
Added
Since it is not likely that we will be able to pay this debt, we have initiated steps to satisfy portions and refinance the balance. These steps included the sale of shares of our common stock pursuant to our Registration Statement on Form S-3 that was declared effective on December 19, 2024.
Added
As of March 31, 2025, we have sold 326,791 shares of our common stock for gross proceeds of $1,412,000 of which $1,291,000 has been used to satisfy portions of the Related Party Notes.
Added
Because of the uncertainty regarding our ability to refinance our indebtedness, our auditors have included an explanatory paragraph in their opinion as to our ability to continue as a going concern.
Added
Refinancing our indebtedness may require us to pay higher interest rates than we currently pay, agree to more restrictive business or financial covenants or involve the issuance of debt, equity and/or new securities convertible into or exercisable or exchangeable for our common stock.
Added
Any failure to refinance our existing debt or obtain additional working capital when required would have a material adverse effect on our business and financial condition. We may not be able to comply with the covenants of the Current Credit Facility and our debt could be called.
Added
Under the terms of the Current Credit Facility, we are required to maintain certain business and financial covenants. As of December 31, 2024, we were in compliance with the minimum EBITDA (as defined in the Current Credit Facility) which represents net income (or loss) before interest, taxes, depreciation and amortization of $2,800,000 on a rolling twelve-month basis.
Added
This metric increase for future fiscal quarter on a rolling twelve-month basis to 1.25x. If we were not in compliance with the required covenant we would have to seek a waiver with our lender, but we may not be able to do so.
Added
In addition, the market price of our common stock may be affected by factors unrelated to our operations, such as general economic factors, government budgeting decisions affecting our industry and developments in the financial markets and availability of credit.
Added
Government on its obligations due to its debt ceiling or the actuality of such an event, and the response of the U.S.

Item 1C. Cybersecurity

Cybersecurity — threats and controls disclosure

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Biggest changeWe are not aware of any weakness in our systems or malware embedded in our systems that are likely to would materially affect, or are reasonably likely to materially affect, our operations.
Biggest changeWe are not aware of any vulnerability inherent in our systems or malware embedded in our systems that are likely to would materially affect, or are reasonably likely to materially affect, our operations. The Company is in the process of implementing additional training and is in the process of engaging third parties to perform various testing as indicated above.
Board Oversight The Audit Committee of our Board of Directors, which is composed of all non-employee directors, is responsible for oversight of our efforts to eliminate cybersecurity risks. The Audit Committee meets regularly with our Chief Executive Officer and Chief Financial Officer and, in turn, reports its finding to the Board of Directors. 18
Board Oversight The Audit Committee of our Board of Directors, which is composed of all non-employee directors, is responsible for oversight of our efforts to eliminate cybersecurity risks. The Audit Committee meets regularly with our Chief Executive Officer and Chief Financial Officer and, in turn, reports its finding to the Board of Directors.

Item 2. Properties

Properties — owned and leased real estate

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Biggest changeThat lease term expires in May 2025. We own a second 74,923 square foot state-of the-art manufacturing facility located in Barkhamsted, Connecticut.
Biggest changeThat lease term expires in May 2025 and the property will be vacated at such time. We own a second 74,923 square foot state-of the-art manufacturing facility located in Barkhamsted, Connecticut. 18
ITEM 2. PROPERTIES We have strategically located our properties in the U.S. We lease and maintain an approximately 81,0000 square foot state-of-the-art manufacturing facility located in Bay Shore, New York. We maintain our corporate headquarter at this facility whose lease expires in September 2026. We also lease a small warehouse lease nearby in Bohemia, New York.
ITEM 2. PROPERTIES We have strategically located our properties in the U.S. We lease and maintain an approximately 81,000 square foot state-of-the-art manufacturing facility located in Bay Shore, New York. We maintain our corporate headquarter at this facility whose lease expires in September 2026. We also lease a small warehouse nearby in Bohemia, New York.

Item 3. Legal Proceedings

Legal Proceedings — active lawsuits and investigations

2 edited+1 added−0 removed5 unchanged
Biggest changeOn March 29, 2023, Contract Pharmacal filed a motion to reargue the appeal previously denied by the Appellate Division. We dispute the validity of the claims asserted by Contract Pharmacal, continue to believe we have a meritorious defense to those claims and intend to dispute the validity of the claim asserted by Contract Pharmacal.
Biggest changeWe have consistently disputed the validity of the claims asserted by Contract Pharmacal and continue to believe we have a meritorious defense to those claims based on, among other items, language in the Sublease. We intend to continue to dispute the validity of the claim asserted by Contract Pharmacal.
In the action, Contract Pharmacal sought damages for an amount in excess of $1,000,000 for our failure to make the entire premises available by what it claims was the Sublease commencement date. On July 8, 2021, the Court denied Contract Pharmacal’s motion for summary judgement.
Contract Pharmacal sought damages for an amount in excess of $1,000,000 for our failure to make the entire premises available by what it claims was the Sublease commencement date. On July 8, 2021, the Court denied Contract Pharmacal’s motion for summary judgement.
Added
On March 28, 2024, Contract Pharmacal filed a motion to reargue the appeal previously denied by the Appellate Division. Pending a decision by the Appellate Division the Trial Court has adjourned the case. Regardless of the decision by the Appellate Division, Contract Pharmacal will be required to file an amended complaint.

Item 5. Market for Registrant's Common Equity

Market for Common Equity — stock, dividends, buybacks

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Biggest changeSecurities Authorized for Issuance Under Equity Compensation Plans The following table summarizes shares of our Common Stock to be issued upon exercise of options and warrants, the weighted-average exercise price of outstanding options and warrants and options available for future issuance pursuant to our equity compensation plans as of December 31, 2023: Plan Category Number of Securities to Be Issued Upon Exercise of Outstanding Options, Warrants and Rights Weighted Average Exercise Price Of Outstanding Options, Warrants and Rights Number of Remaining Shares Available for Future Securities Issuance Under Equity Compensation Plans Equity compensation plans approved by security holders 461,870 $ 8.94 78,130 Equity compensation plans not approved by security holders None 0.00 None Total 461,870 78,130 The provisions of each of our equity compensation plans provide that shares covered by an award that is forfeited, expires or is settled in cash, and shares that are retained by us upon exercise of an award to satisfy the exercise price of such award or withholding taxes due in respect of such award, are available for future issuance under such plan provided the plan has not been terminated or expired.
Biggest changeSecurities Authorized for Issuance Under Equity Compensation Plans The following table summarizes shares of our Common Stock to be issued upon exercise of options and warrants, the weighted-average exercise price of outstanding options and warrants and options available for future issuance pursuant to our equity compensation plans as of December 31, 2024: Plan Category Number of Securities to Be Issued Upon Exercise of Outstanding Options, Warrants and Rights Weighted Average Exercise Price of Outstanding Options, Warrants and Rights Number of Remaining Shares Available for Future Securities Issuance Under Equity Compensation Plans Equity compensation plans approved by security holders 541,870 $ 7.41 150,425 Equity compensation plans not approved by security holders None 0.00 None Total 541,870 150,425 The provisions of each of our equity compensation plans provide that shares covered by an award that is forfeited, expires or is settled in cash, and shares that are retained by us upon exercise of an award to satisfy the exercise price of such award or withholding taxes due in respect of such award, are available for future issuance under such plan, provided the plan has not been terminated or expired.
Recent Sales of Unregistered Equity Securities Except as previously reported in our periodic reports filed under the Exchange Act, we did not issue any unregistered equity securities during the fiscal year ended December 31, 2023. Purchases of Our Equity Securities No repurchases of our common stock were made during the fiscal year ended December 31, 2023.
Recent Sales of Unregistered Equity Securities Except as previously reported in our periodic reports filed under the Exchange Act, we did not issue any unregistered equity securities during the fiscal year ended December 31, 2024. Purchases of Our Equity Securities No repurchases of our common stock were made during the fiscal year ended December 31, 2024.
ITEM 5. MARKET FOR REGISTRANT’S COMMON EQUITY, RELATED STOCKHOLDER MATTERS AND ISSUER PURCHASES OF EQUITY SECURITIES Market for Our Common Stock Our common stock is listed on the NYSE American under the symbol “AIRI.” Holders On April 11, 2024, there were 70 stockholders of record of our common stock.
ITEM 5. MARKET FOR REGISTRANT’S COMMON EQUITY, RELATED STOCKHOLDER MATTERS AND ISSUER PURCHASES OF EQUITY SECURITIES Market for Our Common Stock Our common stock is listed on the NYSE American under the symbol “AIRI.” Holders On April 11, 2025, there were 78 stockholders of record of our common stock.

Item 7. Management's Discussion & Analysis

Management's Discussion & Analysis (MD&A) — revenue / margin commentary

34 edited+20 added−12 removed24 unchanged
Biggest changeWith total unfilled contract values amounting to $191.9 million (including our $98.3 million in backlog and all potential orders against LTA agreements previously awarded to us), as of December 31, 2023, we are confident in our ability to boost sales in 2024, attain profitability and improve our financial position. 21 RESULTS OF OPERATIONS Years ended December 31, 2023 and 2022: Selected Financial Information: 2023 2023 Percentage of Net Sales 2022 2022 Percentage of Net Sales Change 2023 vs 2022 Percent Change 2023 vs 2022 Net sales $ 51,516,000 100.0 % $ 53,238,000 100.0 % $ (1,722,000 ) -3.23 % Cost of sales 44,088,000 85.6 % 45,786,000 86.0 % (1,698,000 ) -3.71 % Gross profit 7,428,000 14.4 % 7,452,000 14.0 % (24,000 ) -0.32 % Operating expenses 7,723,000 15.0 % 7,646,000 14.4 % 77,000 1.01 % Interest expense 1,920,000 3.7 % 1,338,000 2.5 % 582,000 43.50 % Other income, net 84,000 0.2 % 139,000 0.3 % (55,000 ) -39.57 % Gain on write-off of accounts payable - 0.0 % 317,000 0.6 % (317,000 ) -100.00 % Provision for income taxes - 0.0 % - 0.0 % - - Net loss $ (2,131,000 ) -4.1 % $ (1,076,000 ) -2.0 % $ (1,055,000 ) 98.05 % Balance Sheet Data: December 31, December 31, Percent 2023 2022 Change Change Cash $ 346,000 $ 281,000 65,000 23.13 % Working capital $ 12,117,000 $ 18,600,000 (6,483,000 ) -12.81 % Total assets $ 50,715,000 $ 53,814,000 (3,098,000 ) -5.76 % Total stockholders’ equity $ 15,190,000 $ 16,839,000 (1,649,000 ) -9.79 % Comparison of Fiscal 2023 to 2022 Net Sales: Net sales in 2023 were $51,516,000, a decrease of $1,722,000, or 3.2%, compared with $53,238,000 that we achieved in 2022.
Biggest changeWith total unfilled contract values amounting to $271.3 million (including our $117.9 million in backlog and all potential orders against LTA agreements previously awarded to us), as of December 31, 2024, we are confident in our ability to boost sales in 2025, attain profitability and improve our financial position. 21 RESULTS OF OPERATIONS Years ended December 31, 2024 and 2023: Selected Financial Information: 2024 2024 Percentage of Net Sales 2023 2023 Percentage of Net Sales Change 2024 vs 2023 Percent Change 2024 vs 2023 Net sales $ 55,108,000 100.0 % $ 51,516,000 100.0 % $ 3,592,000 6.97 % Cost of sales 46,176,000 83.8 % 44,088,000 85.6 % 2,088,000 4.74 % Gross profit 8,932,000 16.2 % 7,428,000 14.4 % 1,504,000 20.25 % Operating expenses 8,473,000 15.4 % 7,723,000 15.0 % 750,000 9.71 % Interest expense 1,893,000 3.4 % 1,920,000 3.7 % (27,000 ) -1.41 % Other income, net 68,000 0.1 % 84,000 0.2 % (16,000 ) -19.05 % Provision for income taxes - 0.0 % - 0.0 % - Net loss $ (1,366,000 ) -2.5 % $ (2,131,000 ) -4.1 % $ 765,000 -35.90 % Balance Sheet Data: December 31, 2024 December 31, 2023 Change Percent Change Cash $ 753,000 $ 346,000 407,000 117.63 % Working capital $ 11,776,000 $ 12,117,000 (341,000 ) -2.81 % Total assets $ 51,011,000 $ 50,715,000 296,000 0.58 % Total stockholders’ equity $ 14,948,000 $ 15,190,000 (242,000 ) -1.59 % Comparison of Fiscal 2024 to 2023 Net Sales: Net sales in 2024 were $55,108,000, an increase of $3,592,000 or 7.0%, compared with $51,516,000 that we achieved in 2023.
This allows for rigorous oversight of production and the adherence to stringent quality standards. Although there is currently a shortage of skilled workers, we maintain a highly trained and close- knit team of over 180 professionals committed to driving excellence and precision in every aspect of our operations. Our period-to-period net sales and operating results are significantly impacted by timing.
This allows for rigorous oversight of production and the adherence to stringent quality standards. Although there is currently a shortage of skilled workers, we maintain a highly trained and close- knit team of over 184 professionals committed to driving excellence and precision in every aspect of our operations. Our period-to-period net sales and operating results are significantly impacted by timing.
Additionally, we expanded our sales and marketing efforts, with a sharp focus on expanding relationships with existing customers and cultivating new ones. Fiscal 2023 marked a year of overall progress and positioning for growth. Looking forward to fiscal 2024, our business strategy is geared towards achieving sustainable and profitable business growth.
Additionally, we expanded our sales and marketing efforts, with a sharp focus on expanding relationships with existing customers and cultivating new ones. Fiscal 2024 marked a year of overall progress and positioning for growth. Looking forward to fiscal 2025, our business strategy is geared towards achieving sustainable and profitable business growth.
This ratio is a financial metric that we use to measure our ability to cover fixed charges such as interest and leases expenses as divided by EBITDA (as defined in the Current Credit Facility) which represents net income (loss) before interest, taxes, depreciation and amortization.
This ratio is a financial metric that we use to measure our ability to cover fixed charges such as interest and lease expenses as divided by EBITDA (as defined in the Current Credit Facility) which represents net income (loss) before interest, taxes, depreciation and amortization.
ITEM 7. MANAGEMENT’S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATION The following discussion of our financial condition and results of operations should be read in conjunction with our audited consolidated financial statements for the years ended December 31, 2023 and 2022 and the notes to those statements included elsewhere in this report.
ITEM 7. MANAGEMENT’S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATION The following discussion of our financial condition and results of operations should be read in conjunction with our audited consolidated financial statements for the years ended December 31, 2024 and 2023 and the notes to those statements included elsewhere in this report.
We have historically met these requirements with funds provided by a combination of cash generated from operating activities and cash generated from equity and debt financing transactions. Based on our current revenue visibility and strength of our backlog, we believe that we have sufficient liquidity to meet our cash requirements.
We have historically met these requirements with funds provided by a combination of cash generated from operating activities and cash generated from equity and debt financing transactions. Based on our current revenue visibility and strength of our backlog, we believe that we have sufficient liquidity to meet our cash requirements for our operations.
Cash used in investing activities of $2,112,000 and $2,361,000, in 2023 and 2022, respectively, was for new property and equipment. We continue to make strategic investments in capital equipment to enhance our competitiveness. The investments in 2023 and 2022 increased production efficiency and speed, while maintaining closer tolerances. They also expanded the size of products we can manufacture.
Cash used in investing activities of $2,285,000 and $2,112,000, in 2024 and 2023, respectively, was for new property and equipment. We continue to make strategic investments in capital equipment to enhance our competitiveness. The investments in 2024 and 2023 increased production efficiency and speed, while maintaining closer tolerances. They also expanded the size of products we can manufacture.
This debt matures on December 30, 2025, and requires us to make monthly payments of approximately $79,000 in 2024. 2) Related Party Notes of approximately $6,162,000. This debt matures on July 1, 2026.
This debt matures on December 30, 2025, and requires us to make monthly payments of approximately $68,000 in 2025. 2) Related Party Notes of approximately $6,162,000. This debt matures on July 1, 2026.
The Company periodically evaluates inventory items not secured by backlog and establishes write-downs to estimated net realizable value for excess quantities, slow-moving goods (defined as goods which do not have an open order and have not had movement for two years), obsolescence and for other impairments of value. ● Impairment of Long-Lived Assets.
The Company periodically evaluates inventory items not secured by backlog and establishes write-downs to estimated net realizable value for excess quantities, slow-moving goods (defined as goods which do not have an open order and have not had movement for two years), obsolescence and for other impairments of value. ● Income Taxes.
Net Loss: Net loss for the year ended December 31, 2023 was $2,131,000, compared to a net loss of $1,076,000 for the year ended December 31, 2022, for the reasons discussed above.
Net Loss: Net loss for the year ended December 31, 2024 was $1,366,000, compared to a net loss of $2,131,000 for the year ended December 31, 2023, for the reasons discussed above.
We expect to invest approximately $2,000,000 in 2024 for new or upgraded equipment. Cash Provided by Financing Activities For the year ended December 31, 2023, cash used in financing activities was $2,685,000.
We expect to invest approximately $1,600,000 in 2025 for new or upgraded equipment. Cash Provided by (Used In) Financing Activities For the year ended December 31, 2024, cash provided by financing activities was $2,368,000.
Such payment shall be applied to the outstanding principal balance of the Term loan, on or prior to the April 15 immediately following such fiscal year. For the fiscal year ended December 31, 2023, based on the calculation there was no Excess Cash Flow payment required.
Such payment shall be applied to the outstanding principal balance of the Term loan, on or prior to the April 15 immediately following such fiscal year. For the fiscal year ended December 31, 2024, based on the calculation there is a $43,500 Excess Cash Flow payment required.
If we were to default under our Current Credit Facility, our lender could choose to increase the rate of interest we pay or refuse to make loans under the revolving portion of the Facility and keep the funds remitted to the collection account.
If we were to default under the Current Credit Facility, our lender could choose to increase the rate of interest or refuse to make loans under the revolving portion of the Current Credit Facility and keep the funds remitted to the collection account. If the lender were to raise the rate of interest, it would adversely impact our operating results.
This amendment also increased our ability to make additional capital expenditures up to a limit of $2,500,000 in any fiscal year. In connection with this amendment, we paid a fee of $20,000.
This amendment also increased our ability to make additional capital expenditures up to a limit of $2,500,000 in any fiscal year.
During fiscal 2022, we paid $20,000 of amendment fees. 25 Critical Accounting Estimates A critical accounting estimate is one that is both important to the portrayal of a company’s financial condition and results of operations and requires management’s most difficult, subjective or complex judgements, often as a result of the need to make estimates about the effect of matters that are inherently uncertain.
During fiscal 2023, we also took advances of $393,000 against the Solar Facility including origination fees of $25,000. 26 Critical Accounting Estimates A critical accounting estimate is one that is both important to the portrayal of a company’s financial condition and results of operations and requires management’s most difficult, subjective or complex judgements, often as a result of the need to make estimates about the effect of matters that are inherently uncertain.
The financial statements include estimates based on currently available information and our judgment as to the outcome of future conditions and circumstances. Significant estimates in these financial statements include, inventory valuation, useful lives and impairment of long-lived assets, income tax provision, and allowance for credit losses.
The financial statements include estimates based on currently available information and our judgment as to the outcome of future conditions and circumstances. Significant estimates in these financial statements include, inventory valuation and income tax provision.
LIQUIDITY AND CAPITAL RESOURCES As of December 31, 2023, we have debt service requirements related to: 1) Outstanding indebtedness under our Current Credit Facility of $15,849,000 (consisting of a Revolving Loan of $10,804,000 and a Term Loan in the amount of $5,045,000).
LIQUIDITY AND CAPITAL RESOURCES As of December 31, 2024, we have debt service requirements related to: 1) Outstanding indebtedness under our Current Credit Facility of $18,130,000 (consisting of a Revolving Loan of $12,905,000 and a Term Loan in the amount of $5,225,000).
During fiscal 2022, we increased borrowings under our Current Credit Facility by $2,130,000 (consisting of a net increase in Revolving Loan borrowings of $916,000 and a net increase of $1,214,000 against the Term loan). We also made payments of $284,000 pursuant to financing lease obligations. $250,000 of Related Loan principal repayments, and $9,000 on a loan payable.
During fiscal 2024, we increased borrowings under our Current Credit Facility by $2,238,000 (consisting of a net increase in Revolving Loan borrowings of $2,101,000 and a net increase of $137,000 against the Term Loan) and received advances of $533,000 against the Solar Facility. We also made payments of $196,000 pursuant to financing lease obligations and $9,000 on a loan payable.
Our judgments and tax strategies are subject to audit by various taxing authorities. ● Allowance for Credit Loss on Accounts Receivable.
Our judgments and tax strategies are subject to audit by various taxing authorities.
If the lender were to raise the rate of interest we pay, it would adversely impact our operating results. If the lender were to cease making new loans under our revolving facility, we would lack the funds to continue our operations.
If the lender were to cease making new loans under the revolving facility, we would lack the funds to continue operations.
We also benefited from increased customer deposits primarily due to an advance payment by a customer to be used for the procurement of long lead time raw materials expected to be utilized during 2024. Cash Used In Investing Activities We continue to make significant investments to enhance our competitiveness and market position.
The decrease in cash flows was primarily due to the use of a portion, $2,442,000, of customer deposits which had been advanced prior to 2024 for the procurement of long lead time raw materials expected to be utilized in 2024. Cash Used In Investing Activities We continue to make significant investments to enhance our competitiveness and market position.
In connection with this amendment, we paid a fee of $20,000. ● On August 4, 2023, we entered into a Fifth Amendment that waived a default caused by our failure to meet the required Fixed Coverage Charge Ratio for the fiscal quarter ended March 31, 2023.
In connection with this amendment, we paid a fee of $20,000. ● On May 31, 2024, we entered into a Seventh Amendment that waived the default caused by our failure to achieve the required Fixed Charge Coverage Ratio of the Sixth Amendment. This amendment further revised our Financial Covenants.
We are required to maintain a collection account with our lender into which substantially all of our cash receipts are remitted.
The Current Credit Facility expires on December 30, 2025. In addition, we are required to maintain a collection account with our lender into which substantially all cash receipts are remitted.
During fiscal 2023, we reduced borrowings under our Current Credit Facility by $2,921,000 (consisting of net reduction in Revolving Loan borrowings of $2,548,000 and a net decrease of $373,000 against the Term Loan). We also made payments of $123,000 pursuant to financing lease obligations and $9,000 on a loan payable.
For the year ended December 31, 2023, cash used in financing activities was $2,685,000. During fiscal 2023, we reduced borrowings under our Current Credit Facility by $2,921,000 (consisting of net reduction in Revolving Loan borrowings of $2,548,000 and a net decrease of $373,000 against the Term Loan).
The composition of customers that exceeded 10% of our net sales in either 2023 or 2022 are shown below: Percentage of Net Sales Customer 2023 2022 RTX (a) 27.3 % 40.6 % Lockheed Martin 24.7 % 21.4 % Boeing 12.2 % 0.0 % United States Government 3.6 % 14.3 % (A) RTX includes Collins Landing Systems and Collins Aerostructures 22 The composition of our net sales by platform or program profiles for the years ended December 31, 2023 and 2022 are shown below: Percentage of Net Sales Platform or Program 2023 2022 F-18 Hornet 24.3 % 13.3 % E2-D Hawkeye 18.9 % 15.6 % UH-60 Blank Hawk Helicopter 18.1 % 16.5 % GTF 10.5 % 9.5 % CH-53 Helicopter 7.4 % 6.3 % F-35 Lightning II 4.0 % 18.6 % F-15 Eagle Tactical Fighter 2.1 % 3.8 % All other platforms 14.7 % 16.4 % Total 100.0 % 100.0 % Based on the significant easing of the 2023 supply chain issue discussed above and expected delivery dates for products used in all our other platforms and programs, we expect fiscal 2024 sales to increase as compared to the level we achieved in 2023.
The composition of customers that exceeded 10% of our net sales in either 2024 or 2023 are shown below: Percentage of Net Sales Customer 2024 2023 RTX (A) 29.3 % 29.3 % Lockheed Martin 25.1 % 24.7 % Northrop 18.3 % 3.6 % Boeing 0.7 % 12.2 % (A) RTX includes Collins Landing Systems and Collins Aerostructures 22 The composition of our net sales by platform or program profiles for the years ended December 31, 2024 and 2023 are shown below: Percentage of Net Sales Platform or Program 2024 2023 E2-D Hawkeye 24.0 % 18.9 % UH-60 Black Hawk Helicopter 23.1 % 18.1 % GTF 22.0 % 10.5 % F-35 Lightning II 3.7 % 4.0 % CH-53 Helicopter 3.4 % 7.4 % F-18 Hornet 2.9 % 24.3 % All other platforms 20.9 % 16.8 % Total 100.0 % 100.0 % Period-to-period changes in customer mix and related platforms and programs are largely attributable to customer requirements, availability of parts, production capacity and timing.
The increase in both dollars and percentage was primarily driven by higher professional fees and costs associated with the improvement of our information technology system and hardening our cyber-security protection. We continue to look for ways to reduce our costs and improve our operating performance and financial results.
As a percentage of consolidated net sales, operating expenses rose to 15.4%, compared to the 15.0% achieved in fiscal 2023. The increase in both dollars and percentage was primarily driven by higher professional fees and costs associated with the improvement of our information technology system and hardening our cyber-security protection.
Therefore, we have classified the term loan that expires on December 30, 2025 as current as of December 31, 2023, in accordance with the guidance in ASC 470-10-45, “Debt – Other Presentation Matters”, related to the classification of callable debt.
In the past, we have not met our financial and business covenants, most recently as of March 31, 2024, and therefore historically classified the term loan at December 31, 2023 in accordance with the guidance in Accounting Standards Codification (“ASC”) 470-10-45. “Debt – Other Presentation Matters”, related to the classification of callable debt.
Pursuant to the Current Credit Facility we are permitted to make principal payments against this debt in the amount of $250,000 per quarter, as long as certain conditions are met. 3) Various equipment leases and contractual obligations related to our normal business, including advances under our Solar Facility for the installation of solar energy systems including the replacement of the existing roof at our Sterling Facility Under the terms of the Current Credit Facility, we are required to meet a Fixed Charge Coverage Ratio (as defined) that is determined at the end of each fiscal quarter.
Subsequent to December 31, 2024 we repaid approximately $1,291,000 of this debt out of proceeds of such sales. 3) Various equipment leases and contractual obligations related to our normal business, including advances under our Solar Facility for the installation of solar energy systems including the replacement of the existing roof at our Sterling Facility. 23 Under the terms of the Current Credit Facility, as amended, we are required to achieve prescribed levels of EBITDA (as defined in the Current Credit Facility) at the end of each Fiscal Quarter on a rolling basis, for the Fiscal Quarters ending September 30, 2024 and December 31, 2024.
Although navigating the current business landscape remains challenging and it is difficult to predict period-to-period financial performance, we believe we will be able to meet our financial obligations for the foreseeable future. However, if we are unable to obtain a waiver from our lender and they were to cease lending, we would not be able meet our financial obligations.
In connection with these changes, the Company paid an amendment fee of $20,000. 24 Although navigating the current business landscape remains challenging and it is difficult to predict period-to-period financial performance, we believe we will be able to meet our financial obligations for the foreseeable future.
The rights granted to our lender under the Current Credit Facility combined with the possibility that we might fail to meet covenants in the future raise substantial doubt about our ability to continue as a going concern for the one year commencing as of the issuance of the opinion of our auditors contained in this report. 23 The following is a brief discussion of recent amendments to the Current Credit Facility (all of which have been filed with the SEC): ● On May 17, 2022, we entered into a Fourth Amendment that increased the Term Loan to $5,000,000 and reduced our monthly principal repayments requirements.
The Current Credit Facility expiration date and the rights granted to the lender, combined with the reasonable possibility that the we might fail to meet covenants in the future, raise substantial doubt about our ability to continue as a going concern for the one year commencing as of the date of filing this report.
Gross Profit: Gross profit for the year ended December 31, 2023, amounted to $7,428,000, comparable to the $7,452,000 achieved in 2022. Our gross profit percentage in fiscal 2023 increased to 14.4% from the 14.0% we achieved in 2022. This improvement can be attributable to changes in the sales across our major platforms, shifts in product mix, and overall operating efficiencies.
Gross Profit: Gross profit for the year ended December 31, 2024, amounted to $8,932,000, an increase from the $7,428,000 achieved in 2023. Our gross profit percentage in fiscal 2024 increased to 16.2% from the 14.4% we achieved in 2023.
However, if we are unable to obtain a waiver from our lender and they were to cease lending we may not have sufficient liquidity to meet our cash requirements for the next twelve months from the date of issuance of our consolidated financial statements included in this Report. 24 Cash Flow The following table summarizes our net cash flow from operating, investing and financing activities for the periods indicated (in thousands): Year Ended December 31, 2023 2022 Cash provided by (used in) Operating activities $ 4,862 $ 448 Investing activities (2,112 ) (2,361 ) Financing activities (2,685 ) 1,567 Net increase (decrease) in cash $ 65 $ (346 ) Cash Provided By Operating Activities For the year ended December 31, 2023, we generated cash flows from operations of $4,862,000 as compared to only $448,000 for fiscal 2022.
Any failure to refinance our existing debt or obtain additional working capital when required would have a material adverse effect on our business and financial condition. 25 Cash Flow The following table summarizes our net cash flow from operating, investing and financing activities for the periods indicated (in thousands): Year Ended December 31, 2024 2023 Cash provided by (used in) Operating activities $ 324 $ 4,862 Investing activities (2,285 ) (2,112 ) Financing activities 2,368 (2,685 ) Net increase (decrease) in cash $ 407 $ 65 Cash Provided By Operating Activities For the year ended December 31, 2024, we generated cash flows from operations of $324,000 as compared to $4,862,000 for fiscal 2023.
As of December 31, 2023, we have borrowing capacity of approximately $9,830,000 under the Revolving Loan (including $383,000 pursuant to the Capital Expenditure Line). In addition to required Term Loan payments of approximately $948,000 in fiscal 2024, we may have to make additional payments.
In addition to required Term Loan payments of approximately $1,011,000 in fiscal 2025, we may have to make additional payments.
Interest Expense: Interest expense (which includes amortization of deferred financing costs) was $1,920,000 in fiscal 2023, an increase of $582,000 or 43.5% from $1,338,000 in 2022. The increase is primarily attributable to an increase in the average interest rate on outstanding debt pursuant to our Current Credit Facility which increased to 7.55% in 2023 as compared to 4.50% in 2022.
The decrease is primarily attributable to a decrease in the average amount outstanding under our Current Credit Facility. The average interest rate on our Current Credit Facility increased to 7.66% in 2024 as compared to 7.55% in 2023.
Removed
The year-over-year decrease in net sales was primarily due to delays in production associated with supply chain issues caused by one supplier failing to deliver raw materials for a key program as well as overall changes in customer mix and production requirements for other key platforms and programs.
Added
The year-over-year increase in net sales was primarily driven by the impact of the Company’s enhanced sales and marketing initiatives which contributed to higher shipment volumes against our expanding backlog. Additionally, there have been changes in customer mix and production requirements for other key platforms and programs.
Removed
Operating Expenses : In fiscal 2023, operating expenses totaled $7,723,000, slightly higher than the $7,646,000 recorded in 2022. As a percentage of consolidated net sales, operating expenses rose to 15.0%, compared to the 14.4% achieved in fiscal 2022.
Added
This improvement can be attributed to our increase in sales, changes in sales across our major platforms, shifts in product mix, and overall operating efficiencies. Operating Expenses : In fiscal 2024, operating expenses totaled $8,473,000, higher than the $7,723,000 recorded in 2023.
Removed
As of December 31, 2023, we achieved a Fixed Charge Coverage Ratio of 1.31x as compared to the required ratio of 0.95x and were in full compliance with all other covenants. However, as of March 31, 2024, we were not in compliance with the required ratio of 1.10x.
Added
We continue to look for ways to reduce our costs and improve our operating performance and financial results. Interest Expense: Interest expense (which includes amortization of deferred financing costs) was $1,893,000 in fiscal 2024, a decrease of $27,000 or 1.4% from $1,920,000 in 2023.
Removed
Although we have started discussions with our lender to receive a waiver with respect to our failure to meet the Fixed Charge Coverage Ratio at March 31, 2024, it is reasonably possible such waiver will not be granted.
Added
Pursuant to the Current Credit Facility we are permitted to make principal payments against this debt with money raised pursuant to the sale of our securities under our Registration Statement on Form S-3 declared effective December 19, 2024.
Removed
Even if such waiver is granted, we may fail to achieve the Fixed Charge Coverage Ratio in the future or otherwise fail to meet covenants in the Current Credit Facility.
Added
Beginning with the Fiscal Quarter ending March 31, 2025 we are required to meet a prescribed Fixed Charge Coverage Ratio (as defined) that is determined at the end of each fiscal quarter.
Removed
It also provided for the establishment of a Capital Expenditure Line in the amount of $2,000,000 on which we can draw upon to purchase machinery and equipment. In 2022, we borrowed $878,000, and in 2023, we borrowed $739,500 against this Capital Expenditure Line.
Added
For the twelve months cumulative period ending December 31, 2024, we achieved an EBITDA of $3,640,000 as compared to the required $2,800,000. As of December 31, 2024, we met all the financial and business covenants required under the terms of the Current Credit Facility which included a minimum EBITDA on a twelve-month basis of $2.8 million.
Removed
The substantial increase in cash flows was driven by a significant reduction in working capital required during fiscal 2023, primarily the reduction of both accounts receivable and inventory levels.
Added
The following is a brief discussion of recent amendments to the Current Credit Facility (all of which have been filed with the SEC): ● On August 4, 2023, we entered into a Fifth Amendment that waived a default caused by our failure to meet the required Fixed Coverage Charge Ratio for the fiscal quarter ended March 31, 2023.
Removed
During fiscal 2023, we also took advances of $393,000 against the Solar Facility including originations fees of $25,000. For the year ended December 31, 2022, cash provided by financing activities was $1,567,000.
Added
For the six months ending June 30, 2024 our EBITDA shall not be less than $740,000; for the nine months ending September 30, 2024 our EBITDA shall not be less than $1,500,000; for the twelve months ending December 31, 2024 our EBITDA shall not be less than $2,800,000.
Removed
We review long-lived assets for impairment whenever events or changes in circumstances indicate that the carrying value of the corresponding asset group may not be realizable. If an evaluation is required, the estimated future undiscounted cash flows associated with the asset group are compared to the asset group’s carrying amount to determine if an impairment of such asset is necessary.
Added
For the rolling twelve-month period ending March 31, 2025, we are required to achieve a Fixed Charge Coverage Ratio of 1.05x. Beginning with the rolling twelve-month period ending June 30, 2025 and going forward the Company is required to achieve a Fixed Charge Coverage Ratio of 1.25x. All other covenants remain unchanged.
Removed
This requires us to make long-term forecasts of the future revenues and costs related to the asset groups subject to review. Forecasts require assumptions about demand for our products and future market conditions. Estimating future cash flows requires significant judgment, and our projections may vary from cash flows eventually realized.
Added
Additionally, this amendment increased the Term Loan by approximately $1,000,000 to $5,700,000, with monthly principal installments in the amount of $68,000.
Removed
Future events and unanticipated changes to assumptions could require a provision for impairment in a future period. The effect of any impairment would be reflected in operating income in the Consolidated Statements of Operations. In addition, we estimate the useful lives of our long-lived assets periodically review these estimates to determine whether these lives are appropriate. ● Income Taxes.
Added
In connection with these changes, the Company paid an amendment fee of $20,000. ● On January 30, 2025, we entered into an Eighth Amendment to provide for an additional Term Loan in the amount of $1,640,000 for the acquisition of additional equipment. The monthly principal installments on this additional Term Loan are $19,524 This amendment further revised our Financial Covenants.
Removed
We account for Credit Losses on Accounts Receivable using ASU No 2016-13, “Financial Instruments – Credit Losses (Topic326): Measurement of Credit Loss on Financial Instruments.” Under this ASU, accounts receivable must be evaluated on a forward-looking “expected loss” model, which will generally result in the earlier recognition of allowances for credit losses. 26
Added
For the rolling twelve-month period ending March 31, 2025 and June 30, 2035, we are required to achieve a Fixed Charge Coverage Ratio of 1.05x. Beginning with the rolling twelve-month period ending September 30, 2025 and going forward the Company is required to achieve a Fixed Charge Coverage Ratio of 1.25x. All other covenants remain unchanged.
Added
However, if we are unable to obtain a waiver from our lender and they were to cease lending, we would not be able meet our financial obligations. As of December 31, 2024, we have borrowing capacity of approximately $7,095,000 under the Revolving Loan.
Added
However, we must pay or refinance large portions of our indebtedness prior to December 30, 2025, and July 1, 2026.
Added
Further, as a condition to refinancing our Current Credit Facility prior to December 31, 2025, our lender may require that the holders of our Related Party Notes extend or otherwise modify the subordination agreements they have given in favor of the lender.
Added
Since it is not likely that we will be able to pay this debt, we have initiated steps to satisfy portions and refinance the balance.
Added
These steps included entering an At The Market Offering Agreement dated December 13, 2024, with Craig-Hallum Capital Group LLC pursuant to which, as of March 31, 2025, we have sold 326,791 shares of our common stock for gross proceeds of $1,412,000 of which $1,291,000 has been used to satisfy portions of the Related Party Notes.
Added
We expect to engage in discussions during 2025 with our lender under the Current Credit Facility and related party note holders to explore potential extensions or refinancing of our obligations.
Added
Refinancing our indebtedness may require us to pay higher interest rates than we currently pay, agree to more restrictive business or financial covenants or involve the issuance of debt, equity and/or new securities convertible into or exercisable or exchangeable for our common stock.
Added
We also made payments of $123,000 pursuant to financing lease obligations and $9,000 on a loan payable.

Other AIRI 10-K year-over-year comparisons