UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
FORM
For
the quarterly period ended:
or
For the transition period from ______ to_______
Commission
File No.
(Exact name of registrant as specified in its charter)
| (State or other jurisdiction of incorporation or organization) | (I.R.S. Employer Identification No.) |
(Address of principal executive offices)
(Registrant’s telephone number, including area code)
Securities Registered pursuant to Section 1(b) of the Act
| Title of Each Class | Trading Symbol(s) | Name of each Exchange on which Registered | ||
| NYSE-American |
Indicate
by check mark whether the registrant (1) has filed all reports required to be filed by Section 13 or 15(d) of the Securities Exchange
Act of 1934 during the past 12 months (or for such shorter period that the registrant was required to file such reports), and (2) has
been subject to such filing requirements for the past 90 days.
Indicate
by check mark whether the registrant has submitted every Interactive Data File required to be submitted pursuant to Rule 405 of Regulation
S-T (§232.405 of this chapter) during the preceding 12 months (or for such shorter period that the registrant was required to submit
and post such files).
Indicate by check mark whether the registrant is a large accelerated filer, an accelerated filer, a non-accelerated filer, or a smaller reporting company. See the definitions of “large accelerated filer,” “accelerated filer,” and “smaller reporting company” in Rule 12b-2 of the Exchange Act. (Check one):
| Large Accelerated Filer ☐ | |
| Accelerated Filer ☐ | Smaller Reporting Company |
| Emerging Growth Company |
If an emerging growth company, indicate by check mark if the registrant has elected not to use the extended transition period for complying with any new or revised financial accounting standards provided pursuant to Section 7(a)(2)(B) of the Securities Act. ☐
Indicate
by check mark whether registrant is a shell company (as defined in Rule 12b-2 of the Exchange Act). Yes ☐ No
There were
INDEX
i
SPECIAL NOTE REGARDING FORWARD-LOOKING STATEMENTS
This Quarterly Report on Form 10-Q contains “forward-looking statements” within the meaning of Section 27A of the Securities Act of 1933, as amended, or Securities Act, and Section 21E of the Securities Exchange Act of 1934, or Exchange Act. Forward-looking statements are predictive in nature and can be identified by the fact that they do not relate strictly to historical or current facts and generally include words such as “expects,” “anticipates,” “intends,” “plans,” “believes,” “estimates” and similar expressions. Certain of the matters discussed herein concerning, among other items, our operations, cash flows, financial position and economic performance including, in particular, future sales, product demand, competition and the effect of economic conditions, include forward-looking statements.
These statements and other projections contained herein expressing opinions about future outcomes and non-historical information, are subject to uncertainties and, therefore, there is no assurance that the outcomes expressed in these statements will be achieved. Investors are cautioned that forward-looking statements are not guarantees of future performance and actual results or developments may differ materially from the expectations expressed in forward-looking statements contained herein. Given these uncertainties, you should not place any reliance on these forward-looking statements which speak only as of the date hereof. Factors that could cause actual results to differ materially from those reflected in the forward-looking statements include, but are not limited to, those discussed under the heading “Risk Factors” in our Annual Report on Form 10-K for the year ended December 31, 2020, as amended, and elsewhere in this report and the risks discussed in our other filings with the SEC.
We undertake no obligation to publicly update any forward-looking statement, whether as a result of new information, future events or otherwise, except as may be required under the securities laws of the United States.
ii
PART I
FINANCIAL INFORMATION
1
AIR INDUSTRIES GROUP
Condensed Consolidated Balance Sheets
| June 30, | December 31, | |||||||
| 2021 | 2020 | |||||||
| (Unaudited) | ||||||||
| ASSETS | ||||||||
| Current Assets | ||||||||
| Cash and Cash Equivalents | $ | $ | ||||||
| Accounts Receivable, Net of Allowance for Doubtful Accounts of $ | ||||||||
| Inventory | ||||||||
| Prepaid Expenses and Other Current Assets | ||||||||
| Prepaid Taxes | ||||||||
| Total Current Assets | ||||||||
| Property and Equipment, Net | ||||||||
| Operating Lease Right-Of-Use-Asset | ||||||||
| Deferred Financing Costs, Net, Deposits and Other Assets | ||||||||
| Goodwill | ||||||||
| TOTAL ASSETS | $ | $ | ||||||
| LIABILITIES AND STOCKHOLDERS’ EQUITY | ||||||||
| Current Liabilities | ||||||||
| Notes Payable and Finance Lease Obligations - Current Portion | $ | $ | ||||||
| Accounts Payable and Accrued Expenses | ||||||||
| Operating Lease Liabilities - Current Portion | ||||||||
| Deferred Gain on Sale - Current Portion | ||||||||
| Deferred Revenue | ||||||||
| Liability Related to the Sale of Future Proceeds from Disposition of Subsidiary - Current Portion | ||||||||
| Deferred payroll tax liability - CARES Act - Current Portion | ||||||||
| Total Current Liabilities | ||||||||
| Long Term Liabilities | ||||||||
| Notes Payable and Finance Lease Obligations - Net of Current Portion | ||||||||
| Notes Payable - Related Party | ||||||||
| Operating Lease Liabilities - Net of Current Portion | ||||||||
| Deferred Gain on Sale - Net of Current Portion | ||||||||
| Liability Related to the Sale of Future Proceeds from | ||||||||
| Disposition of Subsidiary - Net of Current Portion | ||||||||
| Deferred payroll tax liability - CARES Act - Net of Current Portion | ||||||||
| TOTAL LIABILITIES | ||||||||
| Commitments and Contingencies | ||||||||
| Stockholders’ Equity | ||||||||
| Preferred Stock, par value $ | ||||||||
| Common Stock - Par Value $ | ||||||||
| Additional Paid-In Capital | ||||||||
| Accumulated Deficit | ( | ) | ( | ) | ||||
| TOTAL STOCKHOLDERS’ EQUITY | ||||||||
| TOTAL LIABILITIES AND STOCKHOLDERS’ EQUITY | $ | $ | ||||||
See Notes to Condensed Consolidated Financial Statements
2
AIR
INDUSTRIES GROUP
Condensed Consolidated Statements of Operations
(Unaudited)
| Three Months Ended | Six Months Ended | |||||||||||||||
| June 30, | June 30, | |||||||||||||||
| 2021 | 2020 | 2021 | 2020 | |||||||||||||
| Net Sales | $ | $ | $ | $ | ||||||||||||
| Cost of Sales | ||||||||||||||||
| Gross Profit | ||||||||||||||||
| Operating Expenses | ||||||||||||||||
| Income (loss) from Operations | ( | ) | ( | ) | ||||||||||||
| Interest and Financing Costs | ( | ) | ( | ) | ( | ) | ( | ) | ||||||||
| Interest Expense - Related Parties | ( | ) | ( | ) | ( | ) | ( | ) | ||||||||
| Other Income, Net | ||||||||||||||||
| Income (Loss) before Benefit From Income Taxes | ( | ) | ( | ) | ||||||||||||
| Benefit from Income Taxes | - | - | - | ( | ) | |||||||||||
| Net Income (Loss) | $ | $ | ( | ) | $ | $ | ( | ) | ||||||||
| Net Income (Loss) per share - Basic | $ | $ | ( | ) | $ | $ | ( | ) | ||||||||
| Net Income (Loss) per share - Diluted | $ | $ | ( | ) | $ | $ | ( | ) | ||||||||
| Weighted Average Shares Outstanding - basic | ||||||||||||||||
| Weighted Average Shares Outstanding - diluted | ||||||||||||||||
See Notes to Condensed Consolidated Financial Statements
3
AIR INDUSTRIES GROUP
Condensed Consolidated Statements of Stockholders’ Equity
For the Three and Six Months Ended June 30, 2021 and 2020
(Unaudited)
| Additional | Total | |||||||||||||||||||
| Common Stock | Paid-in | Accumulated | Stockholders’ | |||||||||||||||||
| Shares | Amount | Capital | Deficit | Equity | ||||||||||||||||
| Balance, January 1, 2021 | $ | $ | $ | ( | ) | $ | ||||||||||||||
| Common Stock issued for directors fees | ||||||||||||||||||||
| Stock Compensation Expense | - | |||||||||||||||||||
| Stock Options exercised | ||||||||||||||||||||
| Net Loss | - | ( | ) | ( | ) | |||||||||||||||
| Balance, March 31, 2021 | $ | $ | $ | ( | ) | $ | ||||||||||||||
| Common Stock issued for directors fees | $ | - | $ | $ | - | $ | ||||||||||||||
| Stock Compensation Expense | - | |||||||||||||||||||
| Net Income | - | |||||||||||||||||||
| Balance, June 30, 2021 | $ | $ | $ | ( | ) | $ | ||||||||||||||
| Balance, January 1, 2020 | $ | $ | $ | ( | ) | $ | ||||||||||||||
| Common Stock issued for directors fees | ||||||||||||||||||||
| Costs related to issuance of stock | - | ( | ) | ( | ) | |||||||||||||||
| Issuance of Common Stock | ||||||||||||||||||||
| Common Stock Issued for Convertible Notes | ||||||||||||||||||||
| Stock Compensation Expense | - | |||||||||||||||||||
| Net Income | - | |||||||||||||||||||
| Balance, March 31, 2020 | $ | $ | $ | ( | ) | $ | ||||||||||||||
| Common Stock issued for directors fees | $ | - | $ | $ | - | $ | ||||||||||||||
| Stock Compensation Expense | - | |||||||||||||||||||
| Net Loss | - | ( | ) | ( | ) | |||||||||||||||
| Balance, June 30, 2020 | $ | $ | $ | ( | ) | $ | ||||||||||||||
See Notes to Condensed Consolidated Financial Statements
4
AIR INDUSTRIES GROUP
Condensed
Consolidated Statements of Cash Flows For the Six Months Ended June 30,
(Unaudited)
| 2021 | 2020 | |||||||
| CASH FLOWS FROM OPERATING ACTIVITIES | ||||||||
| Net Income (Loss) | $ | $ | ( | ) | ||||
| Adjustments to reconcile net income (loss) to net cash used in operating activities | ||||||||
| Depreciation of property and equipment | ||||||||
| Non-cash employee compensation expense | ||||||||
| Non-cash directors compensation | ||||||||
| Non-cash other income recognized | ( | ) | ( | ) | ||||
| Non-cash interest expense | ||||||||
| Amortization of Right-of-Use Asset | ||||||||
| Deferred gain on sale of real estate | ( | ) | ( | ) | ||||
| Loss on sale of equipment | ||||||||
| Amortization of debt discount on convertible notes payable | ||||||||
| Bad debt expense | ||||||||
| Amortization of deferred financing costs | ||||||||
| Changes in Assets and Liabilities | ||||||||
| (Increase) Decrease in Operating Assets: | ||||||||
| Accounts receivable | ( | ) | ||||||
| Inventory | ( | ) | ||||||
| Prepaid expenses and other current assets | ( | ) | ||||||
| Deposits and other assets | ( | ) | ( | ) | ||||
| Increase (Decrease) in Operating Liabilities: | ||||||||
| Accounts payable and accrued expenses | ( | ) | ||||||
| Operating lease liabilities | ( | ) | ( | ) | ||||
| Income taxes payable | ( | ) | ||||||
| Deferred revenue | ||||||||
| Other Liability | - | |||||||
| NET CASH USED IN OPERATING ACTIVITIES | ( | ) | ( | ) | ||||
| CASH FLOWS FROM INVESTING ACTIVITIES | ||||||||
| Purchase of property and equipment | ( | ) | ( | ) | ||||
| NET CASH USED IN INVESTING ACTIVITIES | ( | ) | ( | ) | ||||
| CASH FLOWS FROM FINANCING ACTIVITIES | ||||||||
| Note payable - revolver - net – Sterling National Bank | ( | ) | ||||||
| Payments of note payable - term notes – Sterling National Bank | ( | ) | ( | ) | ||||
| SBA Loan Proceeds – Sterling National Bank | - | |||||||
| Payments of finance lease obligations | ( | ) | ( | ) | ||||
| Proceeds from issuance of common stock | ||||||||
| Share issuance costs | ( | ) | ||||||
| Payments of notes payable issuances- related party | ( | ) | ||||||
| Payments of notes payable - third party | ( | ) | ||||||
| Payments of loan payable - financed asset | ( | ) | ( | ) | ||||
| NET CASH (USED IN) PROVIDED BY FINANCING ACTIVITIES | ( | ) | ||||||
| NET (DECREASE) INCREASE IN CASH AND CASH EQUIVALENTS | ( | ) | ||||||
| CASH AND CASH EQUIVALENTS AT BEGINNING OF PERIOD | ||||||||
| CASH AND CASH EQUIVALENTS AT END OF PERIOD | $ | $ | ||||||
See Notes to Condensed Consolidated Financial Statements
5
AIR INDUSTRIES GROUP
Condensed
Consolidated Statements of Cash Flows For the Six Months Ended June 30, (Continued)
(Unaudited)
| 2021 | 2020 | |||||||
| Supplemental cash flow information | ||||||||
| Cash paid during the period for interest | $ | $ | ||||||
| Cash received for income taxes | $ | $ | ||||||
| Supplemental disclosure of non-cash | ||||||||
| investing and financing activities | ||||||||
| Right of Use Asset additions under ASC 842 | $ | $ | ||||||
| Operating Lease Liabilities under ASC 842 | $ | $ | ||||||
| Common Stock issued for conversion of notes payable and accrued interest | $ | $ | ||||||
See Notes to Condensed Consolidated Financial Statements
6
AIR INDUSTRIES GROUP
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
Note 1. FORMATION AND BASIS OF PRESENTATION
Organization
Air Industries Group is a Nevada corporation (“AIRI”). As of and for the three and six months ended June 30, 2021 and 2020, the accompanying condensed consolidated financial statements presented are those of AIRI, and its wholly-owned subsidiaries; Air Industries Machining Corp. (“AIM”), Nassau Tool Works, Inc. (“NTW”), and the Sterling Engineering Corporation (“Sterling”), (together, the “Company”).
Basis of Presentation
The accompanying unaudited condensed consolidated financial statements of the Company have been prepared in accordance with U.S. generally accepted accounting principles for interim financial information and with Rule 8-03 of Regulation S-X. Accordingly, they do not include all of the information and footnotes required by generally accepted accounting principles for complete financial statements. In the opinion of management, all adjustments (consisting of normal recurring accruals) considered necessary for a fair presentation have been included. Operating results for the three and six months ended June 30, 2021 are not necessarily indicative of the results that may be expected for the year ending December 31, 2021. These unaudited condensed consolidated financial statements should be read in conjunction with the audited consolidated financial statements and notes thereto included in the Company’s Annual Report on Form 10-K for the year ended December 31, 2020, as filed with the Securities and Exchange Commission, from which the accompanying condensed consolidated balance sheet dated December 31, 2020 was derived.
Reclassifications
Reclassification occurred to certain 2020 amounts to conform to the 2021 classification. These reclassifications had no impact on the statement of operations.
Liquidity
At each reporting period, management evaluates whether there are conditions or events that raise substantial doubt about the Company’s ability to continue as a going concern within one year after the date that the financial statements are issued. The Company is required to make certain additional disclosures if management concludes that substantial doubt exists about the Company’s ability to continue as a going concern and such doubt is not alleviated by the Company’s plans or when the Company’s plans alleviate substantial doubt about its ability to continue as a going concern. The evaluation entails analyzing prospective operating budgets and forecasts for expectations regarding cash needs and comparing those needs to the current cash and cash equivalent balance and expectations regarding cash to be generated over the following year.
Although the global outbreak of COVID-19 negatively
impacted the Company’s revenues, earnings and operating cash flows in 2020, management believes the Company’s operations substantially
returned to normal in fiscal 2021. With the first half of fiscal 2021 now completed and the Company beginning to see the benefits from
its’ recent investments in new machinery and equipment, management believes the Company will continue to improve its liquidity.
As such, based on the Company generating operating income of $
7
Subsequent Events
Management has evaluated subsequent events through the date of this filing.
Note 2. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES
Inventory Valuation
For annual periods, the Company values inventory at the lower of cost on a first-in-first-out basis or estimated net realizable value. The Company does not take physical inventories at interim quarterly reporting periods. For interim periods, substantially all of the inventory value has been estimated using a gross profit percentage based on annual gross profit percentages of the immediately preceding year as applied to the net sales of the current period. During the three and six months ended June 30, 2021, the Company increased its estimate of its gross profit percentage for its Complex Machining segment based on increased sales and the better absorption of Manufacturing Overhead, and accordingly has adjusted margins to reflect such change. Adjustments to reconcile the annual physical inventory to the Company’s books are recorded in the fourth quarter.
Credit and Concentration Risks
There were
| Percentage of Sales | ||||||||
| Customer | June 30, 2021 | June 30, 2020 | ||||||
| (Unaudited) | (Unaudited) | |||||||
| 1 | % | % | ||||||
| 2 | % | % | ||||||
| 3 | % | |||||||
| * | Customer was less than |
There were
| Percentage of Sales | ||||||||
| Customer | June 30, 2021 | June 30, 2020 | ||||||
| (Unaudited) | (Unaudited) | |||||||
| 1 | % | % | ||||||
| 2 | % | % | ||||||
| 3 | % | |||||||
| * | Customer was less than |
8
There were
| Percentage of Receivables | ||||||||
| Customer | June 30, 2021 | December 31, 2020 | ||||||
| (Unaudited) | ||||||||
| 1 | % | % | ||||||
| 2 | % | |||||||
| 3 | % | % | ||||||
| 4 | % | |||||||
| * | Customer was less than |
| ** | Customer was less than |
Cash and Cash Equivalents
During the period, the Company had occasionally maintained balances in its bank accounts that were in excess of the FDIC limit. The Company has not experienced any losses on these accounts.
Major Suppliers
The Company has several key sole-source suppliers of various parts that are important for one or more of its products. These suppliers are its only source for such parts and, therefore, in the event any of them were to go out of business or be unable to provide parts for any reason, its business could be severely harmed.
Leases
The Company accounts for leases under ASC 842, “Leases.” All leases are required to be recorded on the balance sheet and are classified as either operating leases or finance leases. The lease classification affects the expense recognition in the income statement. Operating lease charges are recorded entirely in operating expenses. Finance lease charges are split, where amortization of the right-of- use asset is recorded in operating expenses and an implied interest component is recorded in interest expense. See Note 4.
Earnings (Loss) per share
Basic earnings (loss) per share (“EPS”) is computed by dividing the net income (loss) applicable to common stockholders by the weighted-average number of shares of common stock outstanding for the period.
For purposes of calculating diluted earnings per common share, the numerator includes net income plus interest on convertible notes payable assumed converted as of the first day of the period. The denominator includes both the weighted-average number of shares of common stock outstanding during the period and the number of common stock equivalents if the inclusion of such common stock equivalents is dilutive. Dilutive common stock equivalents potentially include stock options and warrants using the treasury stock method and convertible notes payable using the if-converted method.
9
The following is the calculation of net income (loss) applicable to common stockholders utilized to calculate EPS:
| Three Months Ended | Six Months Ended | |||||||||||||||
| June 30, 2021 | June 30, 2020 | June 30, 2021 | June 30, 2020 | |||||||||||||
| (Unaudited) | (Unaudited) | (Unaudited) | (Unaudited) | |||||||||||||
| Net income (Loss) per condensed consolidated statements of operations | $ | $ | ( | ) | $ | $ | ( | ) | ||||||||
| Add: Convertible Note Interest for Potential Note Conversion | ||||||||||||||||
| Income (loss) used to calculate diluted earnings per share | $ | $ | ( | ) | $ | $ | ( | ) | ||||||||
The following is a reconciliation of the denominators of basic and diluted earnings per share computations:
| Three Months Ended | Six Months Ended | |||||||||||||||
| June 30, 2021 | June 30, 2020 | June 30, 2021 | June 30, 2020 | |||||||||||||
| (Unaudited) | (Unaudited) | (Unaudited) | (Unaudited) | |||||||||||||
| Weighted average shares outstanding used to compute basic | ||||||||||||||||
| earnings per share | ||||||||||||||||
| Effect of dilutive stock options and warrants | ||||||||||||||||
| Effect of dilutive convertible notes payable | ||||||||||||||||
| Weighted average shares outstanding and dilutive securities | ||||||||||||||||
| used to compute dilutive earnings per share | ||||||||||||||||
The following securities have been excluded from the calculation as the exercise price was greater than the average market price of the common shares:
| Three Months Ended | Six Months Ended | |||||||||||||||
| June 30, 2021 | June 30, 2020 | June 30, 2021 | June 30, 2020 | |||||||||||||
| (Unaudited) | (Unaudited) | (Unaudited) | (Unaudited) | |||||||||||||
| Stock options | ||||||||||||||||
| Warrants | ||||||||||||||||
The following securities have been excluded from the calculation even though the exercise price was less than the average market price of the common shares because the effect of including these potential shares was anti-dilutive due to the net loss incurred during that period:
| Three and Six Months Ended | ||||||||
| June 30, 2021 | June 30, 2020 | |||||||
| (Unaudited) | (Unaudited) | |||||||
| Stock options | - | |||||||
| Warrants | - | |||||||
| Convertible notes payable | - | |||||||
| - | ||||||||
Stock-Based Compensation
The Company accounts for stock-based compensation
in accordance with FASB ASC 718, “Compensation – Stock Compensation.” Under the fair value recognition provision of
the ASC, stock-based compensation cost is estimated at the grant date based on the fair value of the award. The Company estimates the
fair value of stock options and warrants granted using the Black-Scholes-Merton option pricing model. Stock based compensation expense
for employees amounted to $
10
Goodwill
Goodwill represents the excess of the acquisition
cost of businesses over the fair value of the identifiable net assets acquired. The goodwill amount of $
Goodwill is not amortized, but is tested at least annually for impairment, or if circumstances occur that more likely than not reduce the fair value of the reporting unit below its carrying amount.
The Company has determined that there has been no impairment of goodwill at June 30, 2021 and December 31, 2020.
Recently Issued Accounting Pronouncements
In June 2016, the FASB issued ASU No. 2016-13, Financial Instruments-Credit Losses (Topic 326) (“ASU 2016- 13”), which significantly changes how entities will account for credit losses for most financial assets and certain other instruments that are not measured at fair value through net income. ASU 2016-13 replaces the existing incurred loss model with an expected credit loss model that requires entities to estimate an expected lifetime credit loss on most financial assets and certain other instruments. Under ASU 2016-13 credit impairment is recognized as an allowance for credit losses, rather than as a direct write-down of the amortized cost basis of a financial asset. The impairment allowance is a valuation account deducted from the amortized cost basis of financial assets to present the net amount expected to be collected on the financial asset. Once the new pronouncement is adopted by the Company, the allowance for credit losses must be adjusted for management’s current estimate at each reporting date. The new guidance provides no threshold for recognition of impairment allowance. Therefore, entities must also measure expected credit losses on assets that have a low risk of loss. For instance, trade receivables that are either current or not yet due may not require an allowance reserve under currently generally accepted accounting principles, but under the new standard, the Company will have to estimate an allowance for expected credit losses on trade receivables under ASU 2016-13. ASU 2016-13 is effective for annual periods, including interim periods within those annual periods, beginning after December 15, 2022 for smaller reporting companies. Early adoption is permitted. The Company will evaluate the impact of ASU 2016-13 on the Company’s consolidated financial statements in a future period closer to the date of adoption.
In August 2020, the FASB issued ASU No. 2020-06, Debt – Debt with Conversion and Other Options (Subtopic 470-20) and Derivatives and Hedging – Contracts in Entity’s Own Equity (Subtopic 815-40) (“ASU 2020-06), which is intended to address issues identified as a result of the complexity associated with applying GAAP for certain financial instruments with characteristics of liabilities and equity. For convertible instruments, ASU 2020-06 reduces the number of accounting models for convertible debt instruments and convertible preferred stock, and enhances information transparency by making targeted improvements to the disclosures for convertible instruments and earnings-per-share guidance on the basis of feedback from financial statement users. ASU 2020-06 is effective for fiscal years, and interim periods in those fiscal years, beginning after December 15, 2021. Early adoption is permitted, but no earlier than fiscal years beginning after December 15, 2020, including interim periods with those fiscal years. The Company is evaluating the effect of adopting this new accounting guidance on its financial statements.
On January 1, 2021, the Company adopted ASU No. 2019-12, Income Taxes (Topic 740): Simplifying the Accounting for Income Taxes (“ASU 2019-12”), which is intended to simplify various aspects related to accounting for income taxes. ASU 2019-12 removes certain exceptions to the general principles in Topic 740 and also clarifies and amends existing guidance to improve consistent application. The adoption of ASU 2019-12 did not have a material impact on the Company’s condensed consolidated financial statements.
On January 1, 2021, the Company adopted ASU 2020-04, Reference Rate Reform (Topic 848): Facilitation of the Effects of Reference Rate Reform on Financial Reporting, which provides optional guidance for a limited time to ease the potential burden in accounting for reference rate reform. In January 2021, the FASB issued ASU 2021-01, “Reference Rate Reform (Topic 848): Scope: which clarified the scope of ASU 2020-04. The new guidance provides optional expedients and exceptions for applying U.S. GAAP to contracts, hedging relationships and other transactions affected by reference rate reform if certain criteria are met. The amendments apply only to contracts and hedging relationships that reference LIBOR or another reference rate expected to be discontinued due to reference rate reform. These amendments may be applied prospectively to contract modifications made and hedging relationships entered into or evaluated on or before December 31, 2022. The adoption of these ASU’s did not have a material impact on the Company’s condensed consolidated financial statements.
11
In March 2021, the FASB issued ASU No. 2021-03, Intangibles—Goodwill and Other (Topic 350): Accounting Alternative for Evaluating Triggering Events, an amendment of the FASB Accounting Standards Codification. The amendments in this ASU allow companies to elect not to monitor for goodwill impairment triggering events during the reporting period and instead, to evaluate the facts and circumstances as of the end of the reporting period to determine whether it is more likely than not that goodwill is impaired. This aligns the triggering event evaluation date with the reporting date, whether that date is an interim or annual reporting date. This ASU is effective on a prospective basis for fiscal years beginning after December 15, 2019, with early adoption permitted for both interim and annual financial statements that have not yet been issued or made available for issuance as of March 30, 2021. The Company does not expect this guidance to have a material impact to its consolidated financial statements or related disclosures.
In May 2021, the FASB issued ASU No. 2021-04, Earnings Per Share (Topic 260), Debt – Modifications and Extinguishments (Subtopic 470-50), Compensation – Stock Compensation (Topic 718), and Derivatives and Hedging – Contracts in Entity’s Own Equity (Subtopic 815-40): Issuer’s Accounting for Certain Modification or Exchanges of Freestanding Equity-Classified Written Call Options (“ASU 2021-04”), which will clarify and reduce diversity in practice. Specifically, the new standard includes a recognition model comprising four categories of transactions and corresponding accounting treatment for each category. The category that would apply to a modification or an exchange of an equity-classified warrant would depend on the substance of the modification transaction (e.g. a financing transaction to raise equity versus one to raise debt). This recognition model is premised on the idea that the accounting for the transaction should not differ from what it would have been had the issuer of the warrants paid cash instead of modifying the warrants. ASU 2021-04 will be effective for fiscal years beginning after December 15, 2021 and interim periods within those fiscal years. Early adoption is permitted. This ASU will be applied prospectively to modifications or exchanges occurring on or after the effective date of the ASU. The Company is currently evaluating the impact this new guidance will have on its condensed consolidated financial statements.
The Company does not believe that any other recently issued, but not yet effective, accounting standards if currently adopted would have a material effect on the accompanying condensed consolidated financial statements.
Note 3. PROPERTY AND EQUIPMENT
The components of property and equipment at June 30, 2021 and December 31, 2020 consisted of the following:
| June 30, | December 31, | |||||||||
| 2021 | 2020 | |||||||||
| (unaudited) | ||||||||||
| Land | $ | $ | ||||||||
| Buildings and Improvements | ||||||||||
| Machinery and Equipment | ||||||||||
| Finance Lease Machinery and Equipment | ||||||||||
| Tools and Instruments | ||||||||||
| Automotive Equipment | ||||||||||
| Furniture and Fixtures | ||||||||||
| Leasehold Improvements | ||||||||||
| Computers and Software | ||||||||||
| Total Property and Equipment | ||||||||||
| Less: Accumulated Depreciation | ( | ) | ( | ) | ||||||
| Property and Equipment, net | $ | $ | ||||||||
Depreciation expense for the three months ended
June 30, 2021 and 2020 was $
Assets held under financed lease obligations are
depreciated over the shorter of their related lease terms or their estimated productive lives. Depreciation of assets under finance leases
is included in depreciation expense for 2021 and 2020. Accumulated depreciation on these assets was approximately $
12
Note 4. LEASES
The Company has operating and finance leases for
leased office and manufacturing facilities and equipment leases. The Company leases certain machinery and equipment under finance leases
and leases its offices and manufacturing facilities under operating leases.
| June 30, | December 31, | |||||||
| 2021 | 2020 | |||||||
| (unaudited) | ||||||||
| Weighted Average Remaining Lease Term - in years | ||||||||
| Weighted Average discount rate - % | % | % | ||||||
The aggregate undiscounted cash flows of operating lease payments for leases with remaining terms greater than one year are as follows:
| Amount | ||||
| December 31, 2021 (remainder of the year) | $ | |||
| December 31, 2022 | ||||
| December 31, 2023 | ||||
| December 31, 2024 | ||||
| December 31, 2025 | ||||
| Thereafter | ||||
| Total future minimum lease payments | ||||
| Less: discount | ( | ) | ||
| Total operating lease maturities | ||||
| Less: current portion of operating lease liabilities | ( | ) | ||
| Total long term portion of operating lease maturities | $ | |||
On April 29, 2021 the Company entered into an
agreement to surrender the possession of the premises of the former corporate office, located in Hauppauge, NY. The Company made a one-time
payment of
Note 5. NOTES PAYABLE, RELATED PARTY NOTES PAYABLE AND FINANCE LEASE OBLIGATIONS
Notes payable, related party notes payable and finance lease obligations consist of the following:
| June 30, | December 31, | |||||||
| 2021 | 2020 | |||||||
| (unaudited) | ||||||||
| Revolving credit note payable to Sterling National Bank (“SNB”) | $ | $ | ||||||
| Term loan, SNB | ||||||||
| Finance lease obligations | ||||||||
| Loan Payable - financed asset | ||||||||
| Related party notes payable | ||||||||
| Subtotal | ||||||||
| Less: Current portion of notes payable, related party notes payable and finance lease obligations | ( | ) | ( | ) | ||||
| Notes payable, related party notes payable and finance lease obligations, | ||||||||
| net of current portion | $ | $ | ||||||
Sterling National Bank (“SNB”)
On December 31, 2019, the Company entered into
a loan facility (“SNB Facility”) with SNB expiring on
In 2020,
13
On June 14, 2021, the Company entered into the Second Amendment to
the Loan and Security Agreement (“Second Amendment”). The purpose of the Second Amendment was to clarify the definition and
calculation of Excess Cash Flow, and to confirm the extension of the due date for the payment of the Excess Cash Flow payment. The amount
of the Excess Cash Flow payment for the year ended December 31, 2020 was calculated to be $558,750. Per the terms of the Second Amendment,
the Excess Cash Flow is payable in three installments of $
As of June 30, 2021 the future minimum principal payments for the SNB term loan are as follows:
| For the twelve months ending | Amount | |||
| December 31, 2021 (remainder of the year) | $ | |||
| December 31, 2022 | ||||
| SNB Term Loan payable | ||||
| Less: debt issuance costs | ( | ) | ||
| Total SNB Term loan payable, net of debt issuance costs | ||||
| Less: Current portion of SNB term loan payable | ( | ) | ||
| Total long-term portion of SNB term loan payable | $ | |||
Under the terms of the SNB Facility, both the SNB revolving line of credit and the SNB term loan will bear an interest rate equal to 30-day LIBOR, (with a 1% floor), plus 2.5%. The average interest rate charged during the period ended June 30, 2021 was 3.5%.
As of June 30, 2021, our debt to SNB in the amount
of $
Interest expense related to the SNB Facility amounted
to approximately $
14
Loan Payable – Financed Asset
The Company financed the purchase of a delivery
vehicle in July 2020. The loan obligation totaled $
The future minimum loan payments are as follows:
| For the twelve months ending | Amount | |||
| December 31, 2021 (remainder of the year) | $ | |||
| December 31, 2022 | ||||
| December 31, 2023 | ||||
| December 31, 2024 | ||||
| December 31, 2025 | ||||
| Thereafter | ||||
| Loan Payable - financed asset | ||||
| Less: Current portion | ||||
| Long-term portion | $ | |||
Related Party Notes Payable
Taglich Brothers, Inc. is a corporation co-founded by two directors of the Company, Michael and Robert Taglich. In addition, a third director of the Company is a vice president of Taglich Brothers, Inc.
Taglich Brothers, Inc. has acted as placement agent for various debt and equity financing transactions and has received cash and equity compensation for their services.
From 2016 through 2020, the Company entered into various subordinated notes payable and convertible subordinated notes payable with Michael and Robert Taglich. These notes resulted in proceeds to the Company totaling $6,550,000. In connection with these notes, Michael and Robert were issued a total of 355,082 shares of common stock and Taglich Brothers Inc. was issued promissory notes totaling $554,000 for placement agency fees.
| Michael Taglich, | Robert Taglich, | Taglich Brothers, | ||||||||||||||
| Chairman | Director | Inc. | Total | |||||||||||||
| Convertible Subordinated Notes | $ | $ | $ | $ | ||||||||||||
| Subordinated Notes | ||||||||||||||||
| Total | $ | $ | $ | $ | ||||||||||||
For the three months and six months ended June
30, 2021, no principal payments have been made on these notes and the principal balances remain unchanged from the table above. Interest
expense for the three months ended June 30, 2021 and 2020 on all related party notes payable was $
Convertible Notes Payable – Third Parties
As of both June 30, 2021 and December 31, 2020,
the notes payable to third parties totaled $
15
NOTE 6. LIABILITY RELATED TO THE SALE OF FUTURE PROCEEDS FROM DISPOSITION OF SUBSIDIARY
In connection with the sale of the Company’s wholly-owned subsidiary, AMK Welding, Inc. (“AMK”) to Meyer Tool, Inc., (“Meyer”) in 2017, Meyer was obligated to pay the Company within 30 days after the end of each calendar quarter, commencing April 1, 2017, an amount equal to five (5%) percent of the net sales of AMK for that quarter until the aggregate payments made to the Company (the “Meyer Agreement”) equals $1,500,000 (the “Maximum Amount”).
In order to increase liquidity, on January 15,
2019,
The Company recognized $
The table below shows the activity within the liability account for:
| June 30, 2021 | December 31, | |||||||
| (Unaudited) | ||||||||
| Liabilities related to sale of future proceeds from disposition of | ||||||||
| subsidiaries - beginning balance | $ | $ | ||||||
| Non-Cash other income recognized | ( | ) | ( | ) | ||||
| Non-Cash interest expense recognized | ||||||||
| Liabilities related to sale of future proceeds from disposition of | ||||||||
| subsidiary - ending balance | ||||||||
| Less: unamortized transaction costs | ( | ) | ( | ) | ||||
| Liability related to sale of future proceeds from disposition of | ||||||||
| subsidiary, net | $ | $ | ||||||
Note 7. STOCKHOLDERS’ EQUITY
Common Stock – Sale and Other Issuances
The Company issued
In January 2020, we issued and sold
During the six months ended June 30, 2020, the
Company issued
During the third quarter of 2021, the Company issued
Issuance of Stock Options
On January 11, 2021, the Company granted to its directors,
stock options to purchase an aggregate of
On March 24, 2021, the Company granted to certain
members of management and certain employees, stock options to purchase an aggregate of
On July 30, 2021, the Company granted to certain members
of management and certain employees, stock options to purchase an aggregate of
16
Note 8. CONTINGENCIES
A number of actions have been commenced against the Company by vendors, landlords and former landlords, including a third party claim as a result of an injury suffered on a portion of a leased property not occupied by the Company. As certain of these claims represent amounts included in accounts payable they are not specifically discussed herein.
Contract Pharmacal Corp. (“Contact Pharmacal”)
commenced an action on October 2, 2018, relating to a Sublease entered into between the Company and Contract Pharmacal in May 2018 with
respect to the property at 110 Plant Avenue, Hauppauge, New York. In the action Contract Pharmacal originally sought damages in excess
of $
From time to time we also may be engaged in various lawsuits and legal proceedings in the ordinary course of our business. We are currently not aware of any legal proceedings the ultimate outcome of which, in our judgment based on information currently available, would have a material adverse effect on our business, financial condition or operating results. There are no proceedings in which any of our directors, officers or affiliates, or any registered or beneficial stockholder of our common stock, is an adverse party or has a material interest averse to our interest.
Note 9. INCOME TAXES
The Company recorded no income tax expense for
the three and six months ended June 30, 2021 and 2020 because the estimated annual effective tax rate was
As a result of the passage of the CARES Act, the
Company filed for a net operating loss carryback claim of $
As of June 30, 2021 and December 31, 2020, the Company provided a full valuation allowance against its net deferred tax assets since the Company believes it is more likely than not that its deferred tax assets will not be realized.
Note 10. SEGMENT REPORTING
In accordance with FASB ASC 280, “Segment Reporting” (“ASC 280”), the Company discloses financial and descriptive information about its reportable operating segments. Operating segments are components of an enterprise about which separate financial information is available and regularly evaluated by the chief operating decision maker in deciding how to allocate resources and in assessing performance.
The Company follows ASC 280, which establishes standards for reporting information about operating segments in annual and interim financial statements, and requires that companies report financial and descriptive information about their reportable segments based on a management approach. ASC 280 also establishes standards for related disclosures about products and services, geographic areas and major customers.
The Company currently divides its operations into two operating segments: Complex Machining, which consists of AIM and NTW; and Turbine Engine Components, which consists of Sterling. Along with its operating subsidiaries, the Company reports the results of its corporate division as an independent segment.
17
The accounting policies of each of the segments are the same as those described in the Summary of Significant Accounting Policies. Intersegment transfers are recorded at the transferor’s cost, and there is no intercompany profit or loss on intersegment transfers. We evaluate performance based on revenue, gross profit contribution and assets employed.
Financial information about the Company’s reporting segments for the three and six months ended June 30, 2021 and 2020 are as follows:
| For the Three Months | For the Six Months | |||||||||||||||
| Ended June 30, | Ended June 30, | |||||||||||||||
| 2021 | 2020 | 2021 | 2020 | |||||||||||||
| (unaudited) | (unaudited) | (unaudited) | (unaudited) | |||||||||||||
| COMPLEX MACHINING | ||||||||||||||||
| Net Sales | $ | $ | $ | $ | ||||||||||||
| Gross Profit | ||||||||||||||||
| Income (Loss) before benefit from income taxes | ( | ) | ||||||||||||||
| Assets | ||||||||||||||||
| TURBINE ENGINE COMPONENTS | ||||||||||||||||
| Net Sales | ||||||||||||||||
| Gross Profit (Loss) | ( | ) | ( | ) | ||||||||||||
| Income (Loss) before benefit from income taxes | ( | ) | ( | ) | ||||||||||||
| Assets | ||||||||||||||||
| CORPORATE | ||||||||||||||||
| Net Sales | ||||||||||||||||
| Gross Profit | ||||||||||||||||
| Loss before benefit from income taxes | ( | ) | ( | ) | ( | ) | ( | ) | ||||||||
| Assets | ||||||||||||||||
| CONSOLIDATED | ||||||||||||||||
| Net Sales | ||||||||||||||||
| Gross Profit | ||||||||||||||||
| Income (Loss) before benefit from income taxes | ( | ) | ( | ) | ||||||||||||
| Benefit from Income Taxes | ( | ) | ||||||||||||||
| Net Income (loss) | ( | ) | ( | ) | ||||||||||||
| Assets | $ | $ | $ | $ | ||||||||||||
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ITEM 2. MANAGEMENT’S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS
The following discussion of our financial condition and results of operations should be read in conjunction with the unaudited condensed consolidated financial statements and notes to those statements included elsewhere in this Form 10-Q and with the audited consolidated financial statements and the notes thereto included in our Annual Report on Form 10-K, for the year ended December 31, 2020 (the “2020 Form 10-K”). This discussion contains forward-looking statements that involve risks and uncertainties. You should specifically consider the various risk factors identified in this report that could cause actual results to differ materially from those anticipated in these forward-looking statements.
Business Overview
The financial statements contained in this report as well as the discussion below principally reflect the status of our business and the results of our operations as of June 30, 2021.
AIM became a public company in 2005 and we are an aerospace company operating primarily in the defense industry. Our Complex Machining segment manufactures structural parts and assemblies that focus on flight safety, including landing gear, arresting gear, engine mounts, flight controls, throttle quadrants, and other components. Our Turbine Engine Components segment makes components and provides services for jet engines and ground-power turbines. Our products are currently deployed on a wide range of high-profile military and commercial aircraft including the Sikorsky UH-60 Blackhawk, Lockheed Martin F-35 Joint Strike Fighter, Northrop Grumman E2D Hawkeye, the US Navy F-18 and USAF F-16 fighter aircraft, Boeing 777 commercial airliners. Our Turbine Engine segment makes components for jet engines that are used on the USAF F-15 and F-16, the Airbus A-330 and the Boeing 777, in addition to a number of ground-power turbine applications.
The aerospace market is highly competitive in both the defense and commercial sectors and we face intense competition in all areas of our business. Nearly all of our revenues are derived by producing products to customer specifications after being awarded a contract through a competitive bidding process. As the commercial aerospace and defense industries continue to consolidate and major contractors seek to streamline supply chains by buying more complete sub-assemblies from fewer suppliers, we have sought to remain competitive not only by providing cost-effective world class service but also by increasing our ability to produce more complex and complete assemblies for our customers.
We are currently focused on positioning our business to obtain profitability, achieve positive cash flow and we remain resolute on meeting customers’ needs. We believe that an unyielding focus on our customers will allow us to execute on our existing backlog in a timely fashion. In 2018 and 2019, we consolidated the operations of our Complex Machining segment in our main campus located in Bay Shore, New York. In 2020, in order to take advantage of the long-term growth opportunities we see in our markets, we made significant capital investments in new equipment. Additionally, we expanded our operations and manufacturing cells located in our Connecticut facility where our Turbine Engine segment is located. We believe these investments will increase the volume and efficiency of production, increase the size of product we can make and allow us to offer additional services to our customers. We are pleased with the positive responses received from our customers to date.
Our ability to operate profitably is determined by our ability to win new contracts and renewals of existing contracts, and then fulfill these contracts on a timely basis at costs that enable us to generate a profit based upon the agreed upon contract price. Winning a contract generally requires that we submit a bid containing a fixed price for the product or products covered by the contract for an agreed upon period of time. Thus, when submitting bids, we are required to estimate our future costs of production and, since we often rely upon subcontractors, the prices we can obtain from our subcontractors.
19
While our revenues are largely determined by the number of contracts we are awarded, the volume of product delivered and price of product under each contract, our costs are determined by a number of factors. The principal factors impacting our costs are the cost of materials and supplies, labor, financing and the efficiency at which we can produce our products. The cost of materials used in the aerospace industry is highly volatile. In addition, the market for the skilled labor we require to operate our plants is highly competitive. The profit margin of the various products we sell varies based upon a number of factors, including the complexity of the product, the intensity of the competition for such product and, in some cases, the ability to deliver replacement parts on short notice. Thus, in assessing our performance from one period to another, a reader must understand that changes in profit margin can be the result of shifts in the mix of products sold. Our operations have a large percentage of fixed factory overhead. As a result, our profit margins are also highly variable with sales volumes as under-absorption of factory overhead decreases profits.
A very large percentage of the products we produce are used on military as opposed to civilian aircraft. These products can be replacements for aircraft already in the fleet of the armed services or for the production of new aircraft. Recent increases in Defense Department spending have increased orders for our products. Reductions to the Defense Department budget or decreased usage of aircraft reduces the demand for both new production and replacement spares and could adversely impact our business and our revenues. We are focusing greater efforts on the civilian aircraft market though we still remain dependent upon the military for an overwhelming portion of our revenues.
Segment Data
We follow Financial Accounting Standards Board (“FASB”) ASC 280, “Segment Reporting” (“ASC 280”), which establishes standards for reporting information about operating segments in annual and interim financial statements, ASC 280 requires that companies report financial and descriptive information about their reportable segments based on a management approach. ASC 280 also establishes standards for related disclosures about products and services, geographic areas and major customers.
We currently divide our operations into two operating segments: Complex Machining and Turbine Engine Components. Along with our operating subsidiaries, we report the results of our corporate office as an independent segment.
The accounting policies of our segments are the same as those described in the Summary of Significant Accounting Policies. We evaluate performance based on revenue, gross profit contribution and assets employed.
RESULTS OF OPERATIONS
Selected Financial Information:
| For the Three Months Ended | For the Six Months Ended | |||||||||||||||
| June 30, | June 30, | June 30, | June 30, | |||||||||||||
| 2021 | 2020 | 2021 | 2020 | |||||||||||||
| (unaudited) | (unaudited) | (unaudited) | (unaudited) | |||||||||||||
| Net sales | $ | 15,453,000 | $ | 8,494,000 | $ | 29,165,000 | $ | 21,941,000 | ||||||||
| Cost of sales | 12,850,000 | 7,880,000 | 24,765,000 | 19,146,000 | ||||||||||||
| Gross profit | 2,603,000 | 614,000 | 4,400,000 | 2,795,000 | ||||||||||||
| Operating expenses and interest and financing costs | 2,496,000 | 2,334,000 | 4,563,000 | 4,976,000 | ||||||||||||
| Other income, net | 132,000 | 136,000 | 250,000 | 241,000 | ||||||||||||
| Benefit from income taxes | - | - | - | (1,414,000 | ) | |||||||||||
| Net Income (loss) | $ | 239,000 | $ | (1,584,000 | ) | $ | 87,000 | $ | (526,000 | ) | ||||||
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Balance Sheet Data:
| June 30, | December 31, | |||||||
| 2021 | 2020 | |||||||
| (unaudited) | ||||||||
| Cash and cash equivalents | $ | 515,000 | $ | 2,505,000 | ||||
| Working capital | $ | 16,747,000 | $ | 16,284,000 | ||||
| Total assets | $ | 56,250,000 | $ | 57,777,000 | ||||
| Total stockholders’ equity | $ | 15,514,000 | $ | 15,109,000 | ||||
The following sets forth the results of operations for each of our segments individually and on a consolidated basis for the periods indicated:
| For the Three Months | For the Six Months | |||||||||||||||
| Ended June 30, | Ended June 30, | |||||||||||||||
| 2021 | 2020 | 2021 | 2020 | |||||||||||||
| (unaudited) | (unaudited) | (unaudited) | (unaudited) | |||||||||||||
| COMPLEX MACHINING | ||||||||||||||||
| Net Sales | $ | 13,783,000 | $ | 7,308,000 | $ | 25,949,000 | $ | 19,372,000 | ||||||||
| Gross Profit | 2,325,000 | 681,000 | 3,944,000 | 2,849,000 | ||||||||||||
| Income (loss) before benefit from income taxes | 1,573,000 | (10,000 | ) | 2,553,000 | 1,160,000 | |||||||||||
| Assets | 51,956,000 | 48,490,000 | 51,956,000 | 48,490,000 | ||||||||||||
| TURBINE ENGINE COMPONENTS | ||||||||||||||||
| Net Sales | 1,670,000 | 1,186,000 | 3,216,000 | 2,569,000 | ||||||||||||
| Gross Profit (loss) | 278,000 | (67,000 | ) | 456,000 | (54,000 | ) | ||||||||||
| Income (loss) before benefit from income taxes | 114,000 | (217,000 | ) | 99,000 | (343,000 | ) | ||||||||||
| Assets | 3,471,000 | 4,430,000 | 3,471,000 | 4,430,000 | ||||||||||||
| CORPORATE | ||||||||||||||||
| Net Sales | - | - | - | - | ||||||||||||
| Gross Profit | - | - | - | - | ||||||||||||
| Loss before benefit from income taxes | (1,448,000 | ) | (1,357,000 | ) | (2,565,000 | ) | (2,757,000 | ) | ||||||||
| Assets | 823,000 | 1,808,000 | 823,000 | 1,808,000 | ||||||||||||
| CONSOLIDATED | ||||||||||||||||
| Net Sales | 15,453,000 | 8,494,000 | 29,165,000 | 21,941,000 | ||||||||||||
| Gross Profit | 2,603,000 | 614,000 | 4,400,000 | 2,795,000 | ||||||||||||
| Income (loss) before benefit from income taxes | 239,000 | (1,584,000 | ) | 87,000 | (1,940,000 | ) | ||||||||||
| Benefit from Income Taxes | - | - | - | (1,414,000 | ) | |||||||||||
| Net Income (loss) | 239,000 | (1,584,000 | ) | 87,000 | (526,000 | ) | ||||||||||
| Assets | $ | 56,250,000 | $ | 54,728,000 | $ | 56,250,000 | $ | 54,728,000 | ||||||||
Results of Operations for the three months ended June 30, 2021
Net Sales:
Consolidated net sales for the three months ended June 30, 2021 were $15,453,000, an increase of $6,959,000, or 81.9%, compared with $8,494,000 for the three months ended June 30, 2020. Net sales of our Complex Machining segment were $13,783,000 in the three months ended June 30, 2021, an increase of $6,475,000, or 88.6%, from $7,308,000 in the three months ended June 30, 2020. Net sales in our Turbine Engine Components segment for the three months ended June 30, 2021 were $1,670,000, an increase of $484,000, or 40.8%, compared with $1,186,000 for the three months ended June 30, 2020.
21
As indicated in the table below, three customers represented 76.2% and two customers represented 71.9% of total sales for the three months ended June 30, 2021 and June 30, 2020, respectively.
| Percentage of Sales | ||||||||
| Customer | 2021 | 2020 | ||||||
| (unaudited) | (unaudited) | |||||||
| Goodrich Landing Gear Systems | 41.3 | % | 33.30 | % | ||||
| Sikorsky Aircraft | 20.8 | % | 38.60 | % | ||||
| United States Department of Defense | 14.1 | % | * | |||||
| * | Customer was less than 10% of net sales for the three months ended June 30, 2020. |
Gross Profit:
Consolidated gross profit from operations for the three months ended June 30, 2021 was $2,603,000, an increase of $1,989,000, or 323.9%, as compared to gross profit of $614,000 for the three months ended June 30, 2020. Consolidated gross profit as a percentage of sales was 16.8% and 7.2% for the three months ended June 30, 2021 and 2020, respectively.
Operating Expenses:
Consolidated operating expenses for the three months ended June 30, 2021 totaled $2,163,000 and increased by $257,000 or 13.5% compared to $1,906,000 for the three months ended June 30, 2020.
Interest and Financing Costs:
Interest and financing costs for the three months ended June 30, 2021 were $333,000 a decrease of $95,000 or 22.2% compared to $428,000 for the three months ended June 30, 2020. This decrease is attributable to the conversion of our third party Convertible Debt during fiscal 2020.
Net Income (Loss):
Net income for the three months ended June 30, 2021 was $239,000, an increase of $1,823,000, compared to a net loss of $1,584,000 for the three months ended June 30, 2020, reflecting our ability to generate revenues consistent with our revenues before the onset of Covid-19 while continuing to focus on limiting the increases in operating expenses and reducing interest costs.
Results of Operations for the six months ended June 30, 2021
Net Sales:
Consolidated net sales for the six months ended June 30, 2021 were $29,165,000, an increase of $7,224,000, or 32.9%, compared with $21,941,000 for the six months ended June 30, 2020. Net sales of our Complex Machining segment were $25,949,000 in the six months ended June 30, 2021, an increase of $6,577,000, or 34.0%, from $19,372,000 in the six months ended June 30, 2020. Net sales in our Turbine Engine Components segment were $3,216,000 for the six months ended June 30, 2021, an increase of $647,000, or 25.2% compared with $2,569,000 for the six months ended June 30, 2020.
22
As indicated in the table below, three customers represented 77.0% and two customers represented 69.3% of total sales for the six months ended June 30, 2021 and June 30, 2020, respectively.
| Percentage of Sales | ||||||||
| Customer | 2021 | 2020 | ||||||
| (unaudited) | (unaudited) | |||||||
| Goodrich Landing Gear Systems | 34.4 | % | 32.2 | % | ||||
| Sikorsky Aircraft | 26.9 | % | 37.1 | % | ||||
| United States Department of Defense | 15.7 | % | * | |||||
| * | Customer was less than 10% of net sales for the six months June 30, 2020. |
Gross Profit:
Consolidated gross profit from operations for the six months ended June 30, 2021 was $4,400,000, an increase of $1,605,000, or 57.4%, as compared to gross profit of $2,795,000 for the six months ended June 30, 2020. Consolidated gross profit as a percentage of sales was 15.1% and 12.7% for the six months ended June 30, 2021 and 2020, respectively.
Operating Expenses:
Consolidated operating expenses for the six months ended June 30, 2021 totaled $3,933,000 and decreased by $235,000 or 5.6% compared to $4,168,000 for the six months ended June 30, 2020.
Interest and Financing Costs:
Interest and financing costs for the six months ended June 30, 2021 were $630,000 a decrease of $178,000 or 22.0% compared to $808,000 for the six months ended June 30, 2020. This decrease is attributable to the conversion of our third party Convertible Debt during fiscal 2020.
Net Income (Loss):
Net income for the six months ended June 30, 2021 was $87,000, an increase of $613,000 compared to a net loss of $526,000 for the six months ended June 30, 2020, due to the reasons discussed above. In addition, the Company recorded a benefit from income taxes of $1,414,000 for the six months ended June 30, 2020 pursuant to the filing of a net operating loss claim (see below).
LIQUIDITY AND CAPITAL RESOURCES
During fiscal 2020, we took advantage of a number of U.S. government programs to improve our liquidity to offset the negative impact to our business from COVID-19. These steps included:
| 1) | Received Low Interest Loans from the SBA – In May 2020, our three operating subsidiaries entered into government subsidized loans with Sterling National Bank (“SNB”) in an aggregate principal amount of $2.4 million (“SBA Loans”). |
| 2) | Applied for and Received Forgiveness of the SBA Loans – In accordance with U.S. government regulations we applied to SNB for forgiveness of each Loan in full and in December 2020 we received final approval from the SBA that the entire principal amount of our SBA Loans plus accrued interest had been forgiven. |
| 3) | Deferred Certain Tax Payments – In accordance with Section 2302 of the CARES Act, we elected to defer the deposit and payment of the employer’s portion of Social Security taxes. These deferred amounts must be repaid 50% on December 31, 2021 with the remaining 50% on December 31, 2022. As of December 31, 2020, we deferred $627,000, which is included in Deferred payroll tax liability – CARES Act on the accompanying Condensed Consolidated Balance Sheet. |
23
| 4) | Received a Net Operating Loss Refund – Pursuant to the CARES Act, we filed a net operating loss carryback claim for $1,416,000, which was received during the second quarter 2020. |
Also, the U.S. Department of Defense has, to date, taken steps to increase the rate for certain progress payments from 80 percent to 90 percent for costs incurred and work performed on certain contracts.
In addition to taking advantage of U.S. government programs, during fiscal 2020 we took additional significant steps to improve our liquidity and operating performance, including:
| 1) | Entered into a Lower Cost Financing Facility – On December 31, 2019, we entered into a new loan facility (“SNB Facility”) with Sterling National Bank, (“SNB”) which expires on December 30, 2022. The SNB Facility provides for a $16,000,000 revolving loan (“SNB revolving line of credit”) and a term loan (“SNB term loan”). The interest on the SNB Facility is more advantageous than that of our previous lending facility which we paid off with the proceeds from the SNB Facility. | |
| 2) | Increased Term Loan to Modernize Equipment – On November 6, 2020, we amended the SNB Facility, increasing the Term Loan to $5,685,000. This allowed us to finance the acquisition of the new equipment at what we believe to be a reasonable interest rate. |
The repayment terms of the term loan were amended to provide monthly principal installments in the amount of $67,679 beginning on December 1, 2020, with a final payment of any unpaid balance of principal and interest payable on December 30, 2022. We paid an amendment fee of $20,000. Additionally, the date by which certain subordinated third-party notes were to be extended by was changed from September 30, 2020 to November 30, 2020. We caused all of these notes to be converted into common stock prior to December 31, 2020.
The formula to determine the amounts of revolving advances permitted to be borrowed under the SNB revolving line of credit is based on a percentage of eligible receivables and inventory (as defined in the SNB Facility).
For so long as the SNB term loan remains outstanding, if Excess Cash Flow (as defined) is a positive number for any fiscal year, beginning with the year ending December 31, 2020, we shall pay to SNB an amount equal to the lesser of (i) twenty-five percent (25%) of the Excess Cash Flow for such Fiscal Year and (ii) the outstanding principal balance of the term loan. Such payment shall be made to SNB and applied to the outstanding principal balance of the term loan, on or prior to the April 15 immediately following such Fiscal Year.
On June 14, 2021, we entered into the Second Amendment to the Loan and Security Agreement (“Second Amendment”). The purpose of the Second Amendment was to clarify the definition and calculation of Excess Cash Flow, and to confirm the extension of the due date for the payment of the Excess Cash Flow. The amount of the Excess Cash Flow payment for the year ended December 31, 2020 was calculated to be $558,750. Per the terms of the Second Amendment, the Excess Cash Flow is payable in three installments of $186,250 on each of June 15, 2021, June 30, 2021, and September 15, 2021. As of June 30, 2021, we paid the first two installments totaling $372,500. Additionally, we paid an amendment fee of $10,000.
The terms of the SNB Facility require that, among other things, we maintain a specified Fixed Charge Coverage Ratio of 1.25 to 1.00 at the end of each Fiscal Quarter beginning with the Fiscal Quarter ending March 31, 2020. In addition, we are limited in the amount of Capital Expenditures we can make. As of June 30, 2021, we were in compliance with all loan covenants. The SNB Facility also restricts the amount of dividends we may pay to our stockholders. Substantially all of our assets are pledged as collateral under the SNB Facility.
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As of June 30, 2021, our debt to SNB in the amount of $20,049,000 consisted of the SNB revolving line of credit note in the amount of $15,256,000 and the SNB term loan in the amount of $4,793,000.
| 3) | Conversion and Extension of Subordinated Notes – During 2020, third party holders of convertible subordinated notes of the remaining principal balance plus accrued interest, converted these notes into common stock. In addition, the maturity date of related party convertible subordinated notes and subordinated notes payable in the aggregate amount of $6,012,000 plus $400,000 of accrued interest was extended until July 1, 2023, and we were relieved of the obligation to make any principal payments on these notes prior to maturity. |
Because we continue to believe our fiscal 2021 sales will be higher than the amount achieved in fiscal 2020, we believe our liquidity for the remainder of 2021 will continue to improve.
Cash Flow
The following table summarizes our net cash flow from operating, investing and financing activities for the periods indicated below:
| Six Months Ended | ||||||||
| June 30, | ||||||||
| 2021 | 2020 | |||||||
| (unaudited) | (unaudited) | |||||||
| Cash (used in) provided by | ||||||||
| Operating activities | $ | (181,000 | ) | $ | (1,043,000 | ) | ||
| Investing activities | (631,000 | ) | (309,000 | ) | ||||
| Financing activities | (1,178,000 | ) | 2,126,000 | |||||
| Net (decrease) increase in cash and cash equivalents | $ | (1,990,000 | ) | $ | 774,000 | |||
Cash Used in Operating Activities
Cash used in operating activities primarily consists of our net income of $87,000 adjusted for certain non-cash items and changes to working capital items.
For the six months ended June 30, 2021 non-cash items of $1,920,000 consisted primarily of depreciation of property and equipment of $1,417,000, non-cash employee stock compensation expense of $214,000, amortization of right-of-use assets of $240,000 and non-cash directors’ compensation expense of $104,000 offset by $195,000 of non-cash income. The remaining non-cash items totaled $140,000.
Operating assets and liabilities used cash in the net amount of $2,188,000 consisting primarily of the net increases in accounts receivable, prepaid expenses and other current assets in the amounts of $3,435,000, $49,000 and $4,000, respectively and decreases in accounts payable and operating lease liabilities of $894,000, and $390,000, respectively, partially offset by a decrease in inventory in the amount of $1,911,000 and an increase in deferred revenue in the amount of $673,000.
Cash Used in Investing Activities
Cash used in investing activities consists of capital expenditures for property and equipment.
For the six months ended June 30, 2021, cash used in investing activities was $631,000. This was for the purchase of property and equipment.
Cash Used In Financing Activities
For the six months ended June 30, 2021, cash used in financing activities consisted of net payments on our SNB revolving loan and term note in the amounts of $393,000 and $778,000, respectively and payments of $3,000 and $4,000 on our financing lease obligations and loan payable – financed asset.
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OFF-BALANCE SHEET ARRANGEMENTS
We did not have any off-balance sheet arrangements as of June 30, 2021.
Critical Accounting Policies and Estimates
A critical accounting policy 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 judgments, often as a result of the need to make estimates about the effect of matters that are inherently uncertain.
Our condensed consolidated financial statements are presented in accordance with U.S. GAAP, and all applicable U.S. GAAP accounting standards effective as of June 30, 2021 have been taken into consideration in preparing the condensed consolidated financial statements. The preparation of condensed consolidated financial statements requires estimates and assumptions that affect the reported amounts of assets, liabilities, revenues, expenses and related disclosures. Some of those estimates are subjective and complex, and, consequently, actual results could differ from those estimates. The following accounting policies and estimates have been highlighted as significant because changes to certain judgments and assumptions inherent in these policies could affect our condensed consolidated financial statements:
| ● | Liquidity; |
| ● | Inventory valuation |
| ● | Revenue recognition; |
| ● | Income taxes; |
| ● | Stock-based compensation; and |
| ● | Goodwill. |
We base our estimates, to the extent possible, on historical experience. Historical information is modified as appropriate based on current business factors and various assumptions that we believe are necessary to form a basis for making judgments about the carrying value of assets and liabilities. We evaluate our estimates on an on-going basis and make changes when necessary. Actual results could differ from our estimates.
Recently Issued Accounting Pronouncements
See Note 2 of the Condensed Consolidated Financial Statements for a discussion of recently issued accounting pronouncements.
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Item 4. Controls and Procedures
Evaluation of Disclosure Controls and Procedures
Our senior management is responsible for establishing and maintaining a system of disclosure controls and procedures, as defined in Rules 13a-15(e) and 15d-15(e) under the Securities Exchange Act of 1934, (the “Exchange Act”) designed to ensure that the information required to be disclosed by us in the reports we file or submit under the Exchange Act is recorded, processed, summarized and reported within the time periods specified in the Securities and Exchange Commission’s rules and forms. Disclosure controls and procedures include, without limitation, controls and procedures designed to ensure that information required to be disclosed by an issuer in the reports that it files or submits under the Exchange Act is accumulated and communicated to the issuer’s management, including its principal executive officer or officers and principal financial officer or officers, or persons performing similar functions, as appropriate to allow timely decisions regarding required disclosure.
We have evaluated the effectiveness of the design and operation of our disclosure controls and procedures as of the end of the period covered by this Report under the supervision of and with the participation of management, including our Chief Executive Officer and our Chief Financial Officer. Based on that evaluation, our Chief Executive Officer and our Chief Financial Officer have concluded that as of the end of the period covered by this report, our disclosure controls and procedures were effective.
Changes in Internal Control over Financial Reporting
There have not been any changes in our internal control over financial reporting, as such term is defined in Rules 13a-15(f) and 15d-15(f) under the Exchange Act, during our most recently completed fiscal quarter which is the subject of this report that have materially affected, or are reasonably likely to materially affect, our internal control over financial reporting.
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PART II
OTHER INFORMATION
Item 1A. Risk Factors.
Prospective investors are encouraged to consider the risks described in our 2020 Form 10-K, our Management’s Discussion and Analysis of Financial Condition and Results of Operations contained in this Report and other information publicly disclosed or contained in documents we file with the Securities and Exchange Commission before purchasing our securities. The following risk factor supplements the risk factors described in our 2020 Form 10-K, and should be read in conjunction with the other risk factors presented in our Annual Report which are incorporated herein by reference.
COVID -19
The COVID-19 pandemic and the resulting macroeconomic disruptions have affected how we, our customers and our suppliers are operating our businesses and disrupted supply chains in various industries. The duration and extent to which this will impact our future results of operations and overall financial performance remains uncertain. Our operations have substantially returned to normal, nevertheless, any future disruption from COVID-19 or any other event which depresses macroeconomic results or disrupts supply chains, may materially impact our business and our consolidated financial position, results of operations, and cash flows.
Item 2. Unregistered Sales of Equity Securities and Use of Proceeds
Except as previously disclosed on our Exchange Act reports, we did not issue or sell any unregistered equity securities during the period covered by this Report.
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Item 6. Exhibits
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SIGNATURES
Pursuant to the requirements of Section 13 or 15(d) of the Securities Exchange Act of 1934, the registrant has duly caused this report to be signed on its behalf by the undersigned, thereunto duly authorized.
Dated: August 5, 2021
| AIR INDUSTRIES GROUP | ||
| By: | /s/ Michael Recca | |
|
Michael Recca Chief Financial Officer (principal financial and accounting officer) | ||
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Exhibit 10.1
SECOND AMENDMENT TO LOAN AND SECURITY AGREEMENT
THIS SECOND AMENDMENT TO LOAN AND SECURITY AGREEMENT (the “Amendment”), is dated June 14, 2021, effective as of April 15, 2021, and is made by and among (a) AIR INDUSTRIES MACHINING, CORP., a New York corporation (“AIM”), NASSAU TOOL WORKS, INC., a New York corporation (“NTW”), THE STERLING ENGINEERING CORPORATION, a Connecticut corporation (“Engineering”; and together with AIM and NTW, “Borrowers”), (b) AIR INDUSTRIES GROUP, a Nevada corporation (“Parent”) and AIR REALTY GROUP, LLC, a Connecticut limited liability company (“Realty”; and together with Parent, the “Guarantors”) and (b) STERLING NATIONAL BANK, a national banking association (together with its successors and permitted assigns, the “Lender”).
RECITALS
Pursuant to that certain Loan and Security Agreement, dated as of December 31, 2019 (the “Loan Agreement”) by and among Borrowers, Guarantors, the other Credit Parties party thereto, and Lender, Lender has agreed to make certain financial accommodations available to Borrowers from time to time pursuant to the terms and conditions thereof (capitalized terms used herein and not otherwise defined herein shall have the meanings assigned to such terms in the Loan Agreement, as amended hereby).
Borrowers and Lender desire to confirm Lender’s agreement to extend the due date for payment of the portion of Parent’s Excess Cash Flow for the Fiscal Year ending December 31, 2020, as required by Section 4.2(b) of the Loan Agreement, as described in this Amendment.
NOW, THEREFORE, in consideration of the premises and of the mutual covenants and agreements herein contained, it is agreed as follows:
1. Amendment to Loan Agreement. As of the effective date of this Amendment, the Loan Agreement is amended as follows:
(a) Section 1.1. The definition of “Excess Cash Flow” set forth in Section 1.1 of the Loan Agreement is amended by the addition of the following proviso at the end of such definition:
; provided, however, the “Loss from Discontinued Operations” reported on Parent’s financial statements for the Fiscal Year ending December 31, 2020 in the amount of $230,000, shall be deducted from EBITDA for purposes of calculating Excess Cash Flow for the Fiscal Year ending December 31, 2020 only. The foregoing proviso is a one-time accommodation to Borrowers by Lender.
(b) Section 4.2. Section 4.2(b) of the Loan Agreement is amended by the addition of the following proviso at the end of such section:
; provided, however, and notwithstanding the foregoing, the prepayment due under this Section 4.2(b) from Excess Cash Flow for Parent’s Fiscal Year ending December 31, 2020, shall be payable as follows: (a) $186,250 shall be due and payable on June 15, 2021, (b) $186,250 shall be due and payable on June 30, 2021, and (c) $186,250 on September 15, 2021.
2. No Other Changes; Affirmation of Obligations and Liens. Except as explicitly amended by this Amendment, all of the terms and conditions of the Loan Agreement shall remain in full force and effect and shall apply to any Loan made thereunder. Each Credit Party hereby approves and consents to the amendments contemplated by this Amendment and agrees that its obligations under the Loan Agreement and the other Loan Documents to which it is a party shall not be diminished as a result of the execution of this Amendment. This acknowledgement by the Credit Parties is made and delivered to induce the Lender to enter into this Amendment, and the Credit Parties acknowledge that the Lender would not enter into this Amendment in the absence of the acknowledgements contained herein. Each Credit Party hereby ratifies and confirms the grant of a security interest in and Lien on the Collateral contained in the Loan Documents to which it is a party, which security interest and Lien shall continue in full force and effect without interruption, and shall constitute the single grant of a security interest and Lien.
3. Conditions Precedent. This Amendment shall be effective when Lender shall have received the following:
(a) Fully executed counterparts of this Amendment properly executed by Borrowers and each Guarantor, with originals delivered to the Lender within two (2) Business Days of the date hereof.
(b) Payment of the amendment fee described in paragraph 5 below.
(c) Such other matters as Lender may require.
4. Representations and Warranties. Each Credit Party hereby represents and warrants to Lender as follows:
(a) Each Credit Party has all requisite power and authority to execute this Amendment and to perform all of its obligations hereunder.
(b) The execution, delivery and performance by each Credit Party of this Amendment has been duly authorized by all necessary action on the part of such Credit Party.
(c) Each Credit Party’s execution, delivery, and performance of this Amendment do not and will not conflict with, violate or constitute a violation of or breach or default under, as applicable, (i) its organizational documents, (ii) any agreement or instrument to which it or any of its Subsidiaries is a party or which is otherwise binding upon it or any of its Subsidiaries or (iii) any Applicable Law applicable to it or any of its Subsidiaries.
(d) No approval, consent, exemption, authorization or other action by, or notice to, or filing with, any Governmental Authority is necessary or required in connection with the execution, delivery or performance by, or enforcement against, any Credit Party of this Amendment.
2
(e) This Amendment has been duly executed and delivered by each Credit Party that is a party hereto and is the legally valid and binding obligation of such Credit Party, enforceable against such Credit Party in accordance with its terms, except as may be limited by bankruptcy, insolvency, reorganization, moratorium or similar laws relating to enforcement of creditors’ rights.
(f) After giving effect to this Amendment and the transactions contemplated hereby, no Default or Event of Default has occurred and is continuing.
(g) Both immediately before and immediately after giving effect to this Amendment and the transactions contemplated hereby, all of the representations and warranties contained in Article VII of the Loan Agreement are true, complete and correct in all respects as of the date of this Amendment as though made on and as of the date hereof (except to the extent such representations or warranties relate solely to an earlier date, in which case such representations and warranties shall be true and correct in all respects as of such earlier date).
5. Amendment Fee. In consideration of Lender’s agreement to enter into this Amendment, Borrowers shall pay to Lender a non-refundable amendment fee in an amount equal to $10,000, which amendment fee has been fully earned as of the effective date of this Amendment, and which shall be charged as a Loan upon execution and delivery of this Amendment.
6. References. All references in the Loan Agreement to “this Agreement” shall be deemed to refer to the Loan Agreement as amended hereby; and any and all references in the Loan Documents to the Loan Agreement shall be deemed to refer to the Loan Agreement as amended hereby.
7. No Waiver. The execution of this Amendment shall not be deemed to be a waiver of any Default or Event of Default under the Loan Agreement or breach, default or event of default under any Loan Documents or other document held by Lender, whether or not known to Lender and whether or not existing on the date of this Amendment.
8. Release. Each Credit Party hereby absolutely and unconditionally releases and forever discharges Lender, and any and all participants, parent corporations, subsidiary corporations, affiliated corporations, insurers, indemnitors, successors and assigns thereof, together with all of the present and former directors, officers, agents and employees of any of the foregoing, from any and all claims, demands or causes of action of any kind, nature or description, whether arising in law or equity or upon contract or tort or under any state or federal law or otherwise, which such Credit Party has had, now has or has made claim to have against any such person for or by reason of any act, omission, matter, cause or thing whatsoever relating to any Loan Document arising from the beginning of time to and including the date of this Amendment, whether such claims, demands and causes of action are matured or unmatured or known or unknown.
9. Costs and Expenses. Borrowers hereby reaffirm their agreement under the Loan Agreement to pay or reimburse Lender on demand for all costs and expenses relating to this Amendment. Without limiting the generality of the foregoing, Borrowers specifically agree to pay Lender’s reasonable costs and expenses (including reasonable attorneys’ fees and costs) incurred in in connection with the preparation of this Amendment and the documents and instruments incidental hereto. Borrowers hereby agree that Lender may, at any time or from time to time in its sole discretion and without further authorization by Borrowers, make a Loan to Borrowers under the Loan Agreement, or apply the proceeds of any Loan, for the purpose of paying any such fees, disbursements, costs and expenses.
3
10. Execution in Counterparts. This Amendment may be executed in any number of counterparts and by different parties hereto in separate counterparts, each of which when so executed and delivered shall be deemed to be an original and all of which taken together shall constitute but one and the same agreement. Delivery of an executed counterpart of a signature page to this Amendment by facsimile or other electronic transmission (i.e., “pdf’’ or “tif’’) shall be effective as delivery of a manually executed counterpart of this Amendment. Notwithstanding the foregoing, the Loan Parties shall promptly deliver original signatures of this Amendment to Lender.
11. Headings. Section Headings are for convenience of reference only, and are not part of, and are not to be taken into consideration in interpreting this Amendment.
12. Governing Law. This Amendment shall be governed by, and construed in accordance with, the laws of the State of New York.
[Signature pages follow]
4
IN WITNESS WHEREOF, the parties hereto have caused this Amendment to be duly executed as of the date first written above.
| AIR INDUSTRIES MACHINING, CORP., | ||
| as a Borrower | ||
| By: | /s/ Michael Recca | |
| Michael Recca | ||
| Chief Financial Officer | ||
| NASSAU TOOL WORKS, INC., as a Borrower | ||
| By: | /s/ Michael Recca | |
| Michael Recca | ||
| Chief Financial Officer | ||
| THE STERLING ENGINEERING | ||
| CORPORATION, as a Borrower | ||
| By: | /s/ Michael Recca | |
| Michael Recca | ||
| Chief Financial Officer | ||
| AIR INDUSTRIES GROUP, as a Guarantor | ||
| By: | /s/ Michael Recca | |
| Michael Recca | ||
| Chief Financial Officer | ||
| AIR REALTY GROUP, LLC, as a Guarantor | ||
| By: | /s/ Michael Recca | |
| Michael Recca | ||
| Managing Member | ||
Second Amendment to Loan and Security Agreement
| STERLING NATIONAL BANK | ||
| By: | /s/ Mark J. Long | |
| Name: | Mark J. Long | |
| Title: | Managing Director | |
Second Amendment to Loan and Security Agreement
Exhibit 31.1
CERTIFICATION OF PRINCIPAL EXECUTIVE OFFICER
PURSUANT TO RULE 13a-14(a) UNDER THE EXCHANGE ACT
I, Luciano Melluzzo, certify that:
1. I have reviewed this quarterly report on Form 10-Q of Air Industries Group;
2. Based on my knowledge, this report does not contain any untrue statement of a material fact or omit to state a material fact necessary to make the statements made, in light of the circumstances under which such statements were made, not misleading with respect to the period covered by this report;
3. Based on my knowledge, the financial statements, and other financial information included in this report, fairly present in all material respects the financial condition, results of operations and cash flows of the registrant as of, and for, the periods presented in this report;
4. The registrant’s other certifying officer and I are responsible for establishing and maintaining disclosure controls and procedures (as defined in Exchange Act Rules 13a-15(e) and 15d-15(e)) and internal control over financial reporting (as defined in Exchange Act Rules 13a-15(f) and 15d-15(f)) for the registrant and have:
a) Designed such disclosure controls and procedures, or caused such disclosure controls and procedures to be designed under our supervision, to ensure that material information relating to the registrant, including its consolidated subsidiaries, is made known to us by others within those entities, particularly during the period in which this report is being prepared;
b) Designed such internal control over financial reporting, or caused such internal control over financial reporting to be designed under our supervision, to provide reasonable assurance regarding the reliability of financial reporting and the preparation of financial statements for external purposes in accordance with generally accepted accounting principles;
c) Evaluated the effectiveness of the registrant’s disclosure controls and procedures and presented in this report our conclusions about the effectiveness of the disclosure controls and procedures, as of the end of the period covered by this report based on such evaluation; and
d) Disclosed in this report any change in the registrant’s internal control over financial reporting that occurred during the registrant’s most recent fiscal quarter (the registrant’s fourth fiscal quarter in the case of an annual report) that has materially affected, or is reasonably likely to materially affect, the registrant’s internal control over financial reporting.
5. The registrant’s other certifying officer and I have disclosed, based on our most recent evaluation of internal control over financial reporting, to the registrant’s auditors and the audit committee of registrant’s board of directors (or persons performing the equivalent functions):
a) All significant deficiencies and material weaknesses in the design or operation of internal control over financial reporting which are reasonably likely to adversely affect the registrant’s ability to record, process, summarize and report financial information; and
b) Any fraud, whether or not material, that involves management or other employees who have a significant role in the registrant’s internal control over financial reporting.
| Dated: August 5, 2021 | |
| /s/ Luciano Melluzzo | |
| Luciano Melluzzo | |
| Chief Executive Officer (Principal Executive Officer) |
Exhibit 31.2
CERTIFICATION OF PRINCIPAL FINANCIAL OFFICER
PURSUANT TO RULE 13a-14(a) UNDER THE EXCHANGE ACT
I, Michael E. Recca, certify that:
1. I have reviewed this quarterly report on Form 10-Q of Air Industries Group;
2. Based on my knowledge, this report does not contain any untrue statement of a material fact or omit to state a material fact necessary to make the statements made, in light of the circumstances under which such statements were made, not misleading with respect to the period covered by this report;
3. Based on my knowledge, the financial statements, and other financial information included in this report, fairly present in all material respects the financial condition, results of operations and cash flows of the registrant as of, and for, the periods presented in this report;
4. The registrant’s other certifying officer and I are responsible for establishing and maintaining disclosure controls and procedures (as defined in Exchange Act Rules 13a-15(e) and 15d-15(e)) and internal control over financial reporting (as defined in Exchange Act Rules 13a-15(f) and 15d-15(f)) for the registrant and have:
a) Designed such disclosure controls and procedures, or caused such disclosure controls and procedures to be designed under our supervision, to ensure that material information relating to the registrant, including its consolidated subsidiaries, is made known to us by others within those entities, particularly during the period in which this report is being prepared;
b) Designed such internal control over financial reporting, or caused such internal control over financial reporting to be designed under our supervision, to provide reasonable assurance regarding the reliability of financial reporting and the preparation of financial statements for external purposes in accordance with generally accepted accounting principles;
c) Evaluated the effectiveness of the registrant’s disclosure controls and procedures and presented in this report our conclusions about the effectiveness of the disclosure controls and procedures, as of the end of the period covered by this report based on such evaluation; and
d) Disclosed in this report any change in the registrant’s internal control over financial reporting that occurred during the registrant’s most recent fiscal quarter (the registrant’s fourth fiscal quarter in the case of an annual report) that has materially affected, or is reasonably likely to materially affect, the registrant’s internal control over financial reporting.
5. The registrant’s other certifying officer and I have disclosed, based on our most recent evaluation of internal control over financial reporting, to the registrant’s auditors and the audit committee of registrant’s board of directors (or persons performing the equivalent functions):
a) All significant deficiencies and material weaknesses in the design or operation of internal control over financial reporting which are reasonably likely to adversely affect the registrant’s ability to record, process, summarize and report financial information; and
b) Any fraud, whether or not material, that involves management or other employees who have a significant role in the registrant’s internal control over financial reporting.
| Dated: August 5, 2021 | |
| /s/ Michael E. Recca | |
| Michael E. Recca | |
| Chief Financial Officer (Principal Financial Officer) |
Exhibit 32.1
CERTIFICATION OF PRINCIPAL EXECUTIVE OFFICER
PURSUANT TO
SECTION 906 OF THE SARBANES-OXLEY ACT OF 2002
(18 U.S.C. SECTION 1350)
In connection with the Quarterly Report of Air Industries Group, a Nevada corporation (the “Company”), on Form 10-Q for the period ended June 30, 2021 as filed with the Securities and Exchange Commission (the “Report”), Luciano Melluzzo, Chief Executive Officer of the Company, does hereby certify, pursuant to Section 906 of the Sarbanes-Oxley Act of 2002 (18 U.S.C. ss. 1350), that:
(1) The Report fully complies with the requirements of section 13(a) or 15(d) of the Securities Exchange Act of 1934; and
(2) The information contained in the Report fairly presents, in all material respects, the financial condition and result of operations of the Company.
| Dated: August 5, 2021 | |
| /s/ Luciano Melluzzo | |
| Luciano Melluzzo | |
| Chief Executive Officer (Principal Executive Officer) |
[A signed original of this written statement required by Section 906 has been provided to Air Industries Group and will be retained by Air Industries Group and furnished to the Securities and Exchange Commission or its staff upon request.]
Exhibit 32.2
CERTIFICATION OF PRINCIPAL FINANCIAL OFFICER
PURSUANT TO
SECTION 906 OF THE SARBANES-OXLEY ACT OF 2002
(18 U.S.C. SECTION 1350)
In connection with the Quarterly Report of Air Industries Group, a Nevada corporation (the “Company”), on Form 10-Q for the period ended June 30, 2021, as filed with the Securities and Exchange Commission (the “Report”), Michael E. Recca, Chief Financial Officer of the Company, does hereby certify, pursuant to Section 906 of the Sarbanes-Oxley Act of 2002 (18 U.S.C. ss. 1350), that:
(1) The Report fully complies with the requirements of section 13(a) or 15(d) of the Securities Exchange Act of 1934; and
(2) The information contained in the Report fairly presents, in all material respects, the financial condition and result of operations of the Company.
| Dated: August 5, 2021 | |
| /s/ Michael E. Recca | |
| Michael E. Recca | |
| Chief Financial Officer (Principal Financial Officer) |
[A signed original of this written statement required by Section 906 has been provided to Air Industries Group and will be retained by Air Industries Group and furnished to the Securities and Exchange Commission or its staff upon request.]
Condensed Consolidated Balance Sheets (Parentheticals) - USD ($) |
Jun. 30, 2021 |
Dec. 31, 2020 |
|---|---|---|
| Statement of Financial Position [Abstract] | ||
| Allowance for doubtful accounts (in Dollars) | $ 698,000 | $ 964,000 |
| Preferred stock, par value (in Dollars per share) | $ 0.001 | $ 0.001 |
| Preferred stock, shares authorized | 3,000,000 | 3,000,000 |
| Preferred stock, shares outstanding | 0 | 0 |
| Common stock, par value (in Dollars per share) | $ 0.001 | $ 0.001 |
| Common stock, shares authorized | 60,000,000 | 60,000,000 |
| Common stock, shares issued | 32,037,547 | 31,906,971 |
| Common stock, shares outstanding | 32,037,547 | 31,906,971 |
Condensed Consolidated Statements of Operations (Unaudited) - USD ($) |
3 Months Ended | 6 Months Ended | ||
|---|---|---|---|---|
Jun. 30, 2021 |
Jun. 30, 2020 |
Jun. 30, 2021 |
Jun. 30, 2020 |
|
| Statement of Comprehensive Income [Abstract] | ||||
| Net Sales | $ 15,453,000 | $ 8,494,000 | $ 29,165,000 | $ 21,941,000 |
| Cost of Sales | 12,850,000 | 7,880,000 | 24,765,000 | 19,146,000 |
| Gross Profit | 2,603,000 | 614,000 | 4,400,000 | 2,795,000 |
| Operating Expenses | 2,163,000 | 1,906,000 | 3,933,000 | 4,168,000 |
| Income (loss) from Operations | 440,000 | (1,292,000) | 467,000 | (1,373,000) |
| Interest and Financing Costs | (208,000) | (303,000) | (380,000) | (555,000) |
| Interest Expense - Related Parties | (125,000) | (125,000) | (250,000) | (253,000) |
| Other Income, Net | 132,000 | 136,000 | 250,000 | 241,000 |
| Income (Loss) before Benefit From Income Taxes | 239,000 | (1,584,000) | 87,000 | (1,940,000) |
| Benefit from Income Taxes | (1,414,000) | |||
| Net Income (Loss) | $ 239,000 | $ (1,584,000) | $ 87,000 | $ (526,000) |
| Net Income (Loss) per share - Basic (in Dollars per share) | $ 0.01 | $ (0.05) | $ 0.00 | $ (0.02) |
| Net Income (Loss) per share - Diluted (in Dollars per share) | $ 0.01 | $ (0.05) | $ 0.01 | $ (0.02) |
| Weighted Average Shares Outstanding - basic (in Shares) | 32,021,522 | 30,552,147 | 31,996,859 | 30,476,289 |
| Weighted Average Shares Outstanding - diluted (in Shares) | 37,991,914 | 30,552,147 | 38,805,251 | 30,476,289 |
Formation and Basis of Presentation |
6 Months Ended |
|---|---|
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| Accounting Policies [Abstract] | |
| FORMATION AND BASIS OF PRESENTATION | Note 1. FORMATION AND BASIS OF PRESENTATION
Organization
Air Industries Group is a Nevada corporation (“AIRI”). As of and for the three and six months ended June 30, 2021 and 2020, the accompanying condensed consolidated financial statements presented are those of AIRI, and its wholly-owned subsidiaries; Air Industries Machining Corp. (“AIM”), Nassau Tool Works, Inc. (“NTW”), and the Sterling Engineering Corporation (“Sterling”), (together, the “Company”).
Basis of Presentation
The accompanying unaudited condensed consolidated financial statements of the Company have been prepared in accordance with U.S. generally accepted accounting principles for interim financial information and with Rule 8-03 of Regulation S-X. Accordingly, they do not include all of the information and footnotes required by generally accepted accounting principles for complete financial statements. In the opinion of management, all adjustments (consisting of normal recurring accruals) considered necessary for a fair presentation have been included. Operating results for the three and six months ended June 30, 2021 are not necessarily indicative of the results that may be expected for the year ending December 31, 2021. These unaudited condensed consolidated financial statements should be read in conjunction with the audited consolidated financial statements and notes thereto included in the Company’s Annual Report on Form 10-K for the year ended December 31, 2020, as filed with the Securities and Exchange Commission, from which the accompanying condensed consolidated balance sheet dated December 31, 2020 was derived.
Reclassifications
Reclassification occurred to certain 2020 amounts to conform to the 2021 classification. These reclassifications had no impact on the statement of operations.
Liquidity
At each reporting period, management evaluates whether there are conditions or events that raise substantial doubt about the Company’s ability to continue as a going concern within one year after the date that the financial statements are issued. The Company is required to make certain additional disclosures if management concludes that substantial doubt exists about the Company’s ability to continue as a going concern and such doubt is not alleviated by the Company’s plans or when the Company’s plans alleviate substantial doubt about its ability to continue as a going concern. The evaluation entails analyzing prospective operating budgets and forecasts for expectations regarding cash needs and comparing those needs to the current cash and cash equivalent balance and expectations regarding cash to be generated over the following year.
Although the global outbreak of COVID-19 negatively impacted the Company’s revenues, earnings and operating cash flows in 2020, management believes the Company’s operations substantially returned to normal in fiscal 2021. With the first half of fiscal 2021 now completed and the Company beginning to see the benefits from its’ recent investments in new machinery and equipment, management believes the Company will continue to improve its liquidity. As such, based on the Company generating operating income of $239,000 and $87,000 for the three and six months ended June 30, 2021, respectively, its current best estimates of fiscal 2021 sales, confirmed and expected orders, the strength of existing backlog, overall market demand, expected timing of future cash receipts and expenditures and the Company’s ability to access additional liquidity, if needed, the Company believes it will have adequate cash to support operations through at least August 31, 2022.
Subsequent Events
Management has evaluated subsequent events through the date of this filing. |
Summary of Significant Accounting Policies |
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| Accounting Policies [Abstract] | |||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
| SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES | Note 2. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES
Inventory Valuation
For annual periods, the Company values inventory at the lower of cost on a first-in-first-out basis or estimated net realizable value. The Company does not take physical inventories at interim quarterly reporting periods. For interim periods, substantially all of the inventory value has been estimated using a gross profit percentage based on annual gross profit percentages of the immediately preceding year as applied to the net sales of the current period. During the three and six months ended June 30, 2021, the Company increased its estimate of its gross profit percentage for its Complex Machining segment based on increased sales and the better absorption of Manufacturing Overhead, and accordingly has adjusted margins to reflect such change. Adjustments to reconcile the annual physical inventory to the Company’s books are recorded in the fourth quarter.
Credit and Concentration Risks
There were three customers that represented 76.2% and two customers that represented 71.9% of total net sales for the three months ended June 30, 2021 and 2020, respectively. This is set forth in the table below.
There were three customers that represented 77.0% and two customers that represented 69.3% of total net sales for the six months ended June 30, 2021 and 2020, respectively. This is set forth in the table below.
There were three customers that represented 85.0% of gross accounts receivable at June 30, 2021 and three customers that represented 80.3% of gross accounts receivable at December 31, 2020, respectively. This is set forth in the table below.
Cash and Cash Equivalents
During the period, the Company had occasionally maintained balances in its bank accounts that were in excess of the FDIC limit. The Company has not experienced any losses on these accounts.
Major Suppliers
The Company has several key sole-source suppliers of various parts that are important for one or more of its products. These suppliers are its only source for such parts and, therefore, in the event any of them were to go out of business or be unable to provide parts for any reason, its business could be severely harmed.
Leases
The Company accounts for leases under ASC 842, “Leases.” All leases are required to be recorded on the balance sheet and are classified as either operating leases or finance leases. The lease classification affects the expense recognition in the income statement. Operating lease charges are recorded entirely in operating expenses. Finance lease charges are split, where amortization of the right-of- use asset is recorded in operating expenses and an implied interest component is recorded in interest expense. See Note 4.
Earnings (Loss) per share
Basic earnings (loss) per share (“EPS”) is computed by dividing the net income (loss) applicable to common stockholders by the weighted-average number of shares of common stock outstanding for the period.
For purposes of calculating diluted earnings per common share, the numerator includes net income plus interest on convertible notes payable assumed converted as of the first day of the period. The denominator includes both the weighted-average number of shares of common stock outstanding during the period and the number of common stock equivalents if the inclusion of such common stock equivalents is dilutive. Dilutive common stock equivalents potentially include stock options and warrants using the treasury stock method and convertible notes payable using the if-converted method.
The following is the calculation of net income (loss) applicable to common stockholders utilized to calculate EPS:
The following is a reconciliation of the denominators of basic and diluted earnings per share computations:
The following securities have been excluded from the calculation as the exercise price was greater than the average market price of the common shares:
The following securities have been excluded from the calculation even though the exercise price was less than the average market price of the common shares because the effect of including these potential shares was anti-dilutive due to the net loss incurred during that period:
Stock-Based Compensation
The Company accounts for stock-based compensation in accordance with FASB ASC 718, “Compensation – Stock Compensation.” Under the fair value recognition provision of the ASC, stock-based compensation cost is estimated at the grant date based on the fair value of the award. The Company estimates the fair value of stock options and warrants granted using the Black-Scholes-Merton option pricing model. Stock based compensation expense for employees amounted to $57,000 and $74,000 for the three months ended June 30, 2021 and 2020, respectively, and $214,000 for both the six months ended June 30, 2021 and 2020. Stock compensation expense for directors amounted to $52,000 and $46,000 for the three months ended June 30, 2021 and 2020, respectively and $104,000 and $101,000 for the six months ended June 30, 2021 and 2020, respectively. Stock compensation expense for employees and directors was included in operating expenses on the accompanying Condensed Consolidated Statements of Operations.
Goodwill
Goodwill represents the excess of the acquisition cost of businesses over the fair value of the identifiable net assets acquired. The goodwill amount of $163,000 at both June 30, 2021 and December 31, 2020 relates to the acquisition of NTW.
Goodwill is not amortized, but is tested at least annually for impairment, or if circumstances occur that more likely than not reduce the fair value of the reporting unit below its carrying amount.
The Company has determined that there has been no impairment of goodwill at June 30, 2021 and December 31, 2020.
Recently Issued Accounting Pronouncements
In June 2016, the FASB issued ASU No. 2016-13, Financial Instruments-Credit Losses (Topic 326) (“ASU 2016- 13”), which significantly changes how entities will account for credit losses for most financial assets and certain other instruments that are not measured at fair value through net income. ASU 2016-13 replaces the existing incurred loss model with an expected credit loss model that requires entities to estimate an expected lifetime credit loss on most financial assets and certain other instruments. Under ASU 2016-13 credit impairment is recognized as an allowance for credit losses, rather than as a direct write-down of the amortized cost basis of a financial asset. The impairment allowance is a valuation account deducted from the amortized cost basis of financial assets to present the net amount expected to be collected on the financial asset. Once the new pronouncement is adopted by the Company, the allowance for credit losses must be adjusted for management’s current estimate at each reporting date. The new guidance provides no threshold for recognition of impairment allowance. Therefore, entities must also measure expected credit losses on assets that have a low risk of loss. For instance, trade receivables that are either current or not yet due may not require an allowance reserve under currently generally accepted accounting principles, but under the new standard, the Company will have to estimate an allowance for expected credit losses on trade receivables under ASU 2016-13. ASU 2016-13 is effective for annual periods, including interim periods within those annual periods, beginning after December 15, 2022 for smaller reporting companies. Early adoption is permitted. The Company will evaluate the impact of ASU 2016-13 on the Company’s consolidated financial statements in a future period closer to the date of adoption.
In August 2020, the FASB issued ASU No. 2020-06, Debt – Debt with Conversion and Other Options (Subtopic 470-20) and Derivatives and Hedging – Contracts in Entity’s Own Equity (Subtopic 815-40) (“ASU 2020-06), which is intended to address issues identified as a result of the complexity associated with applying GAAP for certain financial instruments with characteristics of liabilities and equity. For convertible instruments, ASU 2020-06 reduces the number of accounting models for convertible debt instruments and convertible preferred stock, and enhances information transparency by making targeted improvements to the disclosures for convertible instruments and earnings-per-share guidance on the basis of feedback from financial statement users. ASU 2020-06 is effective for fiscal years, and interim periods in those fiscal years, beginning after December 15, 2021. Early adoption is permitted, but no earlier than fiscal years beginning after December 15, 2020, including interim periods with those fiscal years. The Company is evaluating the effect of adopting this new accounting guidance on its financial statements.
On January 1, 2021, the Company adopted ASU No. 2019-12, Income Taxes (Topic 740): Simplifying the Accounting for Income Taxes (“ASU 2019-12”), which is intended to simplify various aspects related to accounting for income taxes. ASU 2019-12 removes certain exceptions to the general principles in Topic 740 and also clarifies and amends existing guidance to improve consistent application. The adoption of ASU 2019-12 did not have a material impact on the Company’s condensed consolidated financial statements.
On January 1, 2021, the Company adopted ASU 2020-04, Reference Rate Reform (Topic 848): Facilitation of the Effects of Reference Rate Reform on Financial Reporting, which provides optional guidance for a limited time to ease the potential burden in accounting for reference rate reform. In January 2021, the FASB issued ASU 2021-01, “Reference Rate Reform (Topic 848): Scope: which clarified the scope of ASU 2020-04. The new guidance provides optional expedients and exceptions for applying U.S. GAAP to contracts, hedging relationships and other transactions affected by reference rate reform if certain criteria are met. The amendments apply only to contracts and hedging relationships that reference LIBOR or another reference rate expected to be discontinued due to reference rate reform. These amendments may be applied prospectively to contract modifications made and hedging relationships entered into or evaluated on or before December 31, 2022. The adoption of these ASU’s did not have a material impact on the Company’s condensed consolidated financial statements.
In March 2021, the FASB issued ASU No. 2021-03, Intangibles—Goodwill and Other (Topic 350): Accounting Alternative for Evaluating Triggering Events, an amendment of the FASB Accounting Standards Codification. The amendments in this ASU allow companies to elect not to monitor for goodwill impairment triggering events during the reporting period and instead, to evaluate the facts and circumstances as of the end of the reporting period to determine whether it is more likely than not that goodwill is impaired. This aligns the triggering event evaluation date with the reporting date, whether that date is an interim or annual reporting date. This ASU is effective on a prospective basis for fiscal years beginning after December 15, 2019, with early adoption permitted for both interim and annual financial statements that have not yet been issued or made available for issuance as of March 30, 2021. The Company does not expect this guidance to have a material impact to its consolidated financial statements or related disclosures.
In May 2021, the FASB issued ASU No. 2021-04, Earnings Per Share (Topic 260), Debt – Modifications and Extinguishments (Subtopic 470-50), Compensation – Stock Compensation (Topic 718), and Derivatives and Hedging – Contracts in Entity’s Own Equity (Subtopic 815-40): Issuer’s Accounting for Certain Modification or Exchanges of Freestanding Equity-Classified Written Call Options (“ASU 2021-04”), which will clarify and reduce diversity in practice. Specifically, the new standard includes a recognition model comprising four categories of transactions and corresponding accounting treatment for each category. The category that would apply to a modification or an exchange of an equity-classified warrant would depend on the substance of the modification transaction (e.g. a financing transaction to raise equity versus one to raise debt). This recognition model is premised on the idea that the accounting for the transaction should not differ from what it would have been had the issuer of the warrants paid cash instead of modifying the warrants. ASU 2021-04 will be effective for fiscal years beginning after December 15, 2021 and interim periods within those fiscal years. Early adoption is permitted. This ASU will be applied prospectively to modifications or exchanges occurring on or after the effective date of the ASU. The Company is currently evaluating the impact this new guidance will have on its condensed consolidated financial statements.
The Company does not believe that any other recently issued, but not yet effective, accounting standards if currently adopted would have a material effect on the accompanying condensed consolidated financial statements. |
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Property and Equipment |
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| PROPERTY AND EQUIPMENT | Note 3. PROPERTY AND EQUIPMENT
The components of property and equipment at June 30, 2021 and December 31, 2020 consisted of the following:
Depreciation expense for the three months ended June 30, 2021 and 2020 was $704,000 and $688,000, respectively. Depreciation expense for the six months ended June 30, 2021 and 2020 was $1,417,000 and $1,344,000, respectively.
Assets held under financed lease obligations are depreciated over the shorter of their related lease terms or their estimated productive lives. Depreciation of assets under finance leases is included in depreciation expense for 2021 and 2020. Accumulated depreciation on these assets was approximately $31,000 and $28,000 as of June 30, 2021 and December 31, 2020, respectively. |
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Leases |
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| LEASES | Note 4. LEASES
The Company has operating and finance leases for leased office and manufacturing facilities and equipment leases. The Company leases certain machinery and equipment under finance leases and leases its offices and manufacturing facilities under operating leases. The leases have remaining lease terms of one to five years, some of which include options to extend or terminate the leases.
The aggregate undiscounted cash flows of operating lease payments for leases with remaining terms greater than one year are as follows:
On April 29, 2021 the Company entered into an agreement to surrender the possession of the premises of the former corporate office, located in Hauppauge, NY. The Company made a one-time payment of 40% of the remaining balance due to the landlord as of May 1, 2021, of approximately $37,000. The Company had previously recognized a lease impairment of $275,000 to its Operating Lease Right-of-Use-Asset for the year-ended December 31, 2019. |
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Notes Payable, Related Party Notes Payable and Finance Lease Obligations |
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| NOTES PAYABLE, RELATED PARTY NOTES PAYABLE AND FINANCE LEASE OBLIGATIONS | Note 5. NOTES PAYABLE, RELATED PARTY NOTES PAYABLE AND FINANCE LEASE OBLIGATIONS
Notes payable, related party notes payable and finance lease obligations consist of the following:
Sterling National Bank (“SNB”)
On December 31, 2019, the Company entered into a loan facility (“SNB Facility”) with SNB expiring on December 30, 2022. The loan facility provides for a $16,000,000 revolving loan (“SNB revolving line of credit”) and a term loan (“SNB term loan”).
In 2020, the Company entered into the First Amendment to Loan and Security Agreement (“First Amendment”). The terms of the amendment increase the Term Loan to $5,685,000. The repayment terms of the term loan were amended to provide monthly principal installments in the amount of $67,679 beginning on December 1, 2020, with a final payment of any unpaid balance of principal and interest payable on December 30, 2022. Additionally, the date by which certain subordinated third-party notes need to be extended was changed from September 30, 2020 to November 30, 2020. The Company paid an amendment fee of $20,000.
On June 14, 2021, the Company entered into the Second Amendment to the Loan and Security Agreement (“Second Amendment”). The purpose of the Second Amendment was to clarify the definition and calculation of Excess Cash Flow, and to confirm the extension of the due date for the payment of the Excess Cash Flow payment. The amount of the Excess Cash Flow payment for the year ended December 31, 2020 was calculated to be $558,750. Per the terms of the Second Amendment, the Excess Cash Flow is payable in three installments of $186,250 on each of June 15, 2021, June 30, 2021, and September 15, 2021. As of June 30, 2021, the Company paid the first two installments totaling $372,500. Additionally, the Company paid an amendment fee of $10,000.
The terms of the SNB Facility require that, among other things, the Company maintain a specified Fixed Charge Coverage Ratio of 1.25 to 1.00 at the end of each Fiscal Quarter beginning with the Fiscal Quarter ending March 31, 2020. In addition, the Company is limited in the amount of Capital Expenditures it can make. As of June 30, 2021, the Company was in compliance with all loan covenants. The SNB Facility also restricts the amount of dividends the Company may pay to its stockholders. Substantially all of the Company’s assets are pledged as collateral under the SNB Facility.
As of June 30, 2021 the future minimum principal payments for the SNB term loan are as follows:
Under the terms of the SNB Facility, both the SNB revolving line of credit and the SNB term loan will bear an interest rate equal to 30-day LIBOR, (with a 1% floor), plus 2.5%. The average interest rate charged during the period ended June 30, 2021 was 3.5%.
As of June 30, 2021, our debt to SNB in the amount of $20,049,000 consisted of the SNB revolving line of credit note in the amount of $15,256,000 and the SNB term loan in the amount of $4,793,000. As of December 31, 2020, our debt to SNB in the amount of $21,207,000 consisted of the SNB revolving line of credit note in the amount of $15,649,000 and the SNB term loan in the amount of $5,558,000.
Interest expense related to the SNB Facility amounted to approximately $180,000 and $154,000 for the three months ended June 30, 2021 and 2020, respectively, and $361,000 and $274,000 for the six months ended June 30, 2021 and 2020, respectively.
Loan Payable – Financed Asset
The Company financed the purchase of a delivery vehicle in July 2020. The loan obligation totaled $44,000 and $48,000 as of June 30, 2021 and December 31, 2020, respectively. The loan bears no interest and a final payment is due and payable for all unpaid principal on July 20, 2026.
The future minimum loan payments are as follows:
Related Party Notes Payable
Taglich Brothers, Inc. is a corporation co-founded by two directors of the Company, Michael and Robert Taglich. In addition, a third director of the Company is a vice president of Taglich Brothers, Inc.
Taglich Brothers, Inc. has acted as placement agent for various debt and equity financing transactions and has received cash and equity compensation for their services.
From 2016 through 2020, the Company entered into various subordinated notes payable and convertible subordinated notes payable with Michael and Robert Taglich. These notes resulted in proceeds to the Company totaling $6,550,000. In connection with these notes, Michael and Robert were issued a total of 355,082 shares of common stock and Taglich Brothers Inc. was issued promissory notes totaling $554,000 for placement agency fees.
On January 1, 2021, the related party subordinated notes due to Michael and Robert Taglich and Taglich Brothers, Inc., were amended to include all accrued interest through December 31, 2020 in the principal balance of the notes. Per the terms of the SNB Facility, these notes remain subordinate to the SNB Facility and are due on July 1, 2023. There are no principal payments due on these notes until such time. The note holders and the principal balance of the notes as amended on January 1, 2021 are shown below:
For the three months and six months ended June 30, 2021, no principal payments have been made on these notes and the principal balances remain unchanged from the table above. Interest expense for the three months ended June 30, 2021 and 2020 on all related party notes payable was $125,000 and $125,000, respectively, and $250,000 and $253,000 for the six months ended June 30, 2021 and 2020, respectively.
Convertible Notes Payable – Third Parties
As of both June 30, 2021 and December 31, 2020, the notes payable to third parties totaled $0 as the notes were converted into shares of common stock in 2020. Interest incurred on these notes amounted to approximately $38,000 and $80,000 for the three and six months ended June 30, 2020, respectively. Amortization of debt discount on these notes amounted to approximately $3,000 and $7,000 for the three and six months ended June 30, 2020, respectively. These costs are included in interest and financing costs in the Condensed Consolidated Statement of Operations. |
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Liability Related to the Sale of Future Proceeds from Disposition of Subsidiary |
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| Liability Related To Sale Of Future Proceeds From Disposition Of Subsidiary [Abstract] | ||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
| LIABILITY RELATED TO THE SALE OF FUTURE PROCEEDS FROM DISPOSITION OF SUBSIDIARY | NOTE 6. LIABILITY RELATED TO THE SALE OF FUTURE PROCEEDS FROM DISPOSITION OF SUBSIDIARY
In connection with the sale of the Company’s wholly-owned subsidiary, AMK Welding, Inc. (“AMK”) to Meyer Tool, Inc., (“Meyer”) in 2017, Meyer was obligated to pay the Company within 30 days after the end of each calendar quarter, commencing April 1, 2017, an amount equal to five (5%) percent of the net sales of AMK for that quarter until the aggregate payments made to the Company (the “Meyer Agreement”) equals $1,500,000 (the “Maximum Amount”).
In order to increase liquidity, on January 15, 2019, the Company entered into a “Purchase Agreement” with 15 accredited investors (the “Purchasers”), including Michael and Robert Taglich, pursuant to which the Company assigned to the Purchasers all of its rights, title and interest to the remaining $1,137,000 of the $1,500,000 in payments due from Meyer for the sale of AMK (the “Remaining Amount”) for an immediate payment of $800,000, including $100,000 from each of Michael and Robert Taglich, and $75,000 for the benefit of the children of Michael Taglich. The timing of the payments is based upon the net sales of AMK. If the Purchasers have not received the entire Remaining Amount by March 31, 2023, they have the right to demand payment of their pro rata portion of the unpaid Remaining Amount from the Company (“Put Right”). To the extent the Purchasers exercise their Put Right, the remaining payments from Meyer will be retained by the Company.
The Company recognized $91,000 and $119,000 of non-cash income for the three months ended June 30, 2021 and 2020, respectively, and $195,000 and $211,000 of non-cash income for the six months ended June 30, 2021 and 2020, respectively, reflected in “other income, net” on the condensed consolidated statements of operations and recorded $27,000 and $36,000 of related non-cash interest expense related to the Purchase Agreement for the three months ended June 30, 2021 and 2020, respectively, and $58,000 and $64,000 for the six months ended June 30, 2021 and 2020, respectively.
The table below shows the activity within the liability account for:
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Stockholders' Equity |
6 Months Ended |
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Jun. 30, 2021 | |
| Stockholders' Equity Note [Abstract] | |
| STOCKHOLDERS' EQUITY | Note 7. STOCKHOLDERS’ EQUITY
Common Stock – Sale and Other Issuances
The Company issued 37,392 and 47,126 shares of common stock in payment of director fees totaling $52,000 and $46,000 for the three months ended June 30, 2021 and 2020, respectively, and 79,352 and 90,897 shares totaling $104,000 and $101,000 for the six months ended June 30, 2021 and 2020, respectively. Additionally, the Company issued 51,224 shares of common stock upon the cashless exercise of stock options during the six months ended June 30, 2021.
In January 2020, we issued and sold 419,597 shares of our common stock for gross proceeds of $984,000 pursuant to our Form S-3 filed on October 10, 2019 as updated on January 15, 2020. Costs of the sale amounted to $145,000.
During the six months ended June 30, 2020, the Company issued 590,243 shares of common stock to convert third party subordinated debt totaling $885,000 to equity.
During the third quarter of 2021, the Company issued 39,983 shares of common stock in payment of directors’ fees totaling $52,000.
Issuance of Stock Options
On January 11, 2021, the Company granted to its directors, stock options to purchase an aggregate of 70,000 shares of the Company’s common stock at a price of $1.32 per share. The options expire on the seventh anniversary of the grant date and vest over a term of one year.
On March 24, 2021, the Company granted to certain members of management and certain employees, stock options to purchase an aggregate of 327,500 shares of the Company’s common stock at a price of $1.39 per share. The options expire on the fifth anniversary of the grant date and vest over a term of three years.
On July 30, 2021, the Company granted to certain members of management and certain employees, stock options to purchase an aggregate of 415,000 shares of the Company’s common stock at a price of $1.22 per share. The options expire on the fifth anniversary of the grant date and vest over a term of one to three years. |
Contingencies |
6 Months Ended |
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Jun. 30, 2021 | |
| Loss Contingency [Abstract] | |
| CONTINGENCIES | Note 8. CONTINGENCIES
A number of actions have been commenced against the Company by vendors, landlords and former landlords, including a third party claim as a result of an injury suffered on a portion of a leased property not occupied by the Company. As certain of these claims represent amounts included in accounts payable they are not specifically discussed herein.
Contract Pharmacal Corp. (“Contact Pharmacal”) commenced an action on October 2, 2018, relating to a Sublease entered into between the Company and Contract Pharmacal in May 2018 with respect to the property at 110 Plant Avenue, Hauppauge, New York. In the action Contract Pharmacal originally sought damages in excess of $1,000,000 for the Company’s failure to make the entire premises available by the Sublease commencement date. On July 8, 2021, the Court denied Contract Pharmacal’s Motion for Summary Judgement. In the Order, the Court granted Contract Pharmacal’s Motions to drop its claim for specific performance and to amend its Complaint to reduce its claim for damages to $700,000. The Company continues to dispute the validity of the claims asserted by Contract Pharmacal and believes it has meritorious defenses to those claims. As of June 30, 2021, it is not possible to estimate if a loss will be incurred, as such there has been no accrual.
From time to time we also may be engaged in various lawsuits and legal proceedings in the ordinary course of our business. We are currently not aware of any legal proceedings the ultimate outcome of which, in our judgment based on information currently available, would have a material adverse effect on our business, financial condition or operating results. There are no proceedings in which any of our directors, officers or affiliates, or any registered or beneficial stockholder of our common stock, is an adverse party or has a material interest averse to our interest. |
Income Taxes |
6 Months Ended |
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Jun. 30, 2021 | |
| Income Tax Disclosure [Abstract] | |
| INCOME TAXES | Note 9. INCOME TAXES
The Company recorded no income tax expense for the three and six months ended June 30, 2021 and 2020 because the estimated annual effective tax rate was zero. In determining the estimated annual effective income tax rate, the Company analyzes various factors, including projections of the Company’s annual earnings and taxing jurisdictions in which the earnings will be generated, the impact of state and local income taxes, the ability to use tax credits and net operating loss carry forwards, and available tax planning alternatives.
As a result of the passage of the CARES Act, the Company filed for a net operating loss carryback claim of $1,416,000 in March 2020. The refund was received in April 2020.
As of June 30, 2021 and December 31, 2020, the Company provided a full valuation allowance against its net deferred tax assets since the Company believes it is more likely than not that its deferred tax assets will not be realized. |
Segment Reporting |
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| Segment Reporting [Abstract] | ||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
| SEGMENT REPORTING | Note 10. SEGMENT REPORTING
In accordance with FASB ASC 280, “Segment Reporting” (“ASC 280”), the Company discloses financial and descriptive information about its reportable operating segments. Operating segments are components of an enterprise about which separate financial information is available and regularly evaluated by the chief operating decision maker in deciding how to allocate resources and in assessing performance.
The Company follows ASC 280, which establishes standards for reporting information about operating segments in annual and interim financial statements, and requires that companies report financial and descriptive information about their reportable segments based on a management approach. ASC 280 also establishes standards for related disclosures about products and services, geographic areas and major customers.
The Company currently divides its operations into two operating segments: Complex Machining, which consists of AIM and NTW; and Turbine Engine Components, which consists of Sterling. Along with its operating subsidiaries, the Company reports the results of its corporate division as an independent segment.
The accounting policies of each of the segments are the same as those described in the Summary of Significant Accounting Policies. Intersegment transfers are recorded at the transferor’s cost, and there is no intercompany profit or loss on intersegment transfers. We evaluate performance based on revenue, gross profit contribution and assets employed.
Financial information about the Company’s reporting segments for the three and six months ended June 30, 2021 and 2020 are as follows:
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Accounting Policies, by Policy (Policies) |
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| Accounting Policies [Abstract] | ||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
| Inventory Valuation | Inventory Valuation
For annual periods, the Company values inventory at the lower of cost on a first-in-first-out basis or estimated net realizable value. The Company does not take physical inventories at interim quarterly reporting periods. For interim periods, substantially all of the inventory value has been estimated using a gross profit percentage based on annual gross profit percentages of the immediately preceding year as applied to the net sales of the current period. During the three and six months ended June 30, 2021, the Company increased its estimate of its gross profit percentage for its Complex Machining segment based on increased sales and the better absorption of Manufacturing Overhead, and accordingly has adjusted margins to reflect such change. Adjustments to reconcile the annual physical inventory to the Company’s books are recorded in the fourth quarter.
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| Credit and Concentration Risks | Credit and Concentration Risks
There were three customers that represented 76.2% and two customers that represented 71.9% of total net sales for the three months ended June 30, 2021 and 2020, respectively. This is set forth in the table below.
There were three customers that represented 77.0% and two customers that represented 69.3% of total net sales for the six months ended June 30, 2021 and 2020, respectively. This is set forth in the table below.
There were three customers that represented 85.0% of gross accounts receivable at June 30, 2021 and three customers that represented 80.3% of gross accounts receivable at December 31, 2020, respectively. This is set forth in the table below.
Cash and Cash Equivalents
During the period, the Company had occasionally maintained balances in its bank accounts that were in excess of the FDIC limit. The Company has not experienced any losses on these accounts.
Major Suppliers
The Company has several key sole-source suppliers of various parts that are important for one or more of its products. These suppliers are its only source for such parts and, therefore, in the event any of them were to go out of business or be unable to provide parts for any reason, its business could be severely harmed.
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| Leases | Leases
The Company accounts for leases under ASC 842, “Leases.” All leases are required to be recorded on the balance sheet and are classified as either operating leases or finance leases. The lease classification affects the expense recognition in the income statement. Operating lease charges are recorded entirely in operating expenses. Finance lease charges are split, where amortization of the right-of- use asset is recorded in operating expenses and an implied interest component is recorded in interest expense. See Note 4.
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| Earnings (Loss) per share | Earnings (Loss) per share
Basic earnings (loss) per share (“EPS”) is computed by dividing the net income (loss) applicable to common stockholders by the weighted-average number of shares of common stock outstanding for the period.
For purposes of calculating diluted earnings per common share, the numerator includes net income plus interest on convertible notes payable assumed converted as of the first day of the period. The denominator includes both the weighted-average number of shares of common stock outstanding during the period and the number of common stock equivalents if the inclusion of such common stock equivalents is dilutive. Dilutive common stock equivalents potentially include stock options and warrants using the treasury stock method and convertible notes payable using the if-converted method.
The following is the calculation of net income (loss) applicable to common stockholders utilized to calculate EPS:
The following is a reconciliation of the denominators of basic and diluted earnings per share computations:
The following securities have been excluded from the calculation as the exercise price was greater than the average market price of the common shares:
The following securities have been excluded from the calculation even though the exercise price was less than the average market price of the common shares because the effect of including these potential shares was anti-dilutive due to the net loss incurred during that period:
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| Stock-Based Compensation | Stock-Based Compensation
The Company accounts for stock-based compensation in accordance with FASB ASC 718, “Compensation – Stock Compensation.” Under the fair value recognition provision of the ASC, stock-based compensation cost is estimated at the grant date based on the fair value of the award. The Company estimates the fair value of stock options and warrants granted using the Black-Scholes-Merton option pricing model. Stock based compensation expense for employees amounted to $57,000 and $74,000 for the three months ended June 30, 2021 and 2020, respectively, and $214,000 for both the six months ended June 30, 2021 and 2020. Stock compensation expense for directors amounted to $52,000 and $46,000 for the three months ended June 30, 2021 and 2020, respectively and $104,000 and $101,000 for the six months ended June 30, 2021 and 2020, respectively. Stock compensation expense for employees and directors was included in operating expenses on the accompanying Condensed Consolidated Statements of Operations.
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| Goodwill | Goodwill
Goodwill represents the excess of the acquisition cost of businesses over the fair value of the identifiable net assets acquired. The goodwill amount of $163,000 at both June 30, 2021 and December 31, 2020 relates to the acquisition of NTW.
Goodwill is not amortized, but is tested at least annually for impairment, or if circumstances occur that more likely than not reduce the fair value of the reporting unit below its carrying amount.
The Company has determined that there has been no impairment of goodwill at June 30, 2021 and December 31, 2020.
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| Recently Issued Accounting Pronouncements | Recently Issued Accounting Pronouncements
In June 2016, the FASB issued ASU No. 2016-13, Financial Instruments-Credit Losses (Topic 326) (“ASU 2016- 13”), which significantly changes how entities will account for credit losses for most financial assets and certain other instruments that are not measured at fair value through net income. ASU 2016-13 replaces the existing incurred loss model with an expected credit loss model that requires entities to estimate an expected lifetime credit loss on most financial assets and certain other instruments. Under ASU 2016-13 credit impairment is recognized as an allowance for credit losses, rather than as a direct write-down of the amortized cost basis of a financial asset. The impairment allowance is a valuation account deducted from the amortized cost basis of financial assets to present the net amount expected to be collected on the financial asset. Once the new pronouncement is adopted by the Company, the allowance for credit losses must be adjusted for management’s current estimate at each reporting date. The new guidance provides no threshold for recognition of impairment allowance. Therefore, entities must also measure expected credit losses on assets that have a low risk of loss. For instance, trade receivables that are either current or not yet due may not require an allowance reserve under currently generally accepted accounting principles, but under the new standard, the Company will have to estimate an allowance for expected credit losses on trade receivables under ASU 2016-13. ASU 2016-13 is effective for annual periods, including interim periods within those annual periods, beginning after December 15, 2022 for smaller reporting companies. Early adoption is permitted. The Company will evaluate the impact of ASU 2016-13 on the Company’s consolidated financial statements in a future period closer to the date of adoption.
In August 2020, the FASB issued ASU No. 2020-06, Debt – Debt with Conversion and Other Options (Subtopic 470-20) and Derivatives and Hedging – Contracts in Entity’s Own Equity (Subtopic 815-40) (“ASU 2020-06), which is intended to address issues identified as a result of the complexity associated with applying GAAP for certain financial instruments with characteristics of liabilities and equity. For convertible instruments, ASU 2020-06 reduces the number of accounting models for convertible debt instruments and convertible preferred stock, and enhances information transparency by making targeted improvements to the disclosures for convertible instruments and earnings-per-share guidance on the basis of feedback from financial statement users. ASU 2020-06 is effective for fiscal years, and interim periods in those fiscal years, beginning after December 15, 2021. Early adoption is permitted, but no earlier than fiscal years beginning after December 15, 2020, including interim periods with those fiscal years. The Company is evaluating the effect of adopting this new accounting guidance on its financial statements.
On January 1, 2021, the Company adopted ASU No. 2019-12, Income Taxes (Topic 740): Simplifying the Accounting for Income Taxes (“ASU 2019-12”), which is intended to simplify various aspects related to accounting for income taxes. ASU 2019-12 removes certain exceptions to the general principles in Topic 740 and also clarifies and amends existing guidance to improve consistent application. The adoption of ASU 2019-12 did not have a material impact on the Company’s condensed consolidated financial statements.
On January 1, 2021, the Company adopted ASU 2020-04, Reference Rate Reform (Topic 848): Facilitation of the Effects of Reference Rate Reform on Financial Reporting, which provides optional guidance for a limited time to ease the potential burden in accounting for reference rate reform. In January 2021, the FASB issued ASU 2021-01, “Reference Rate Reform (Topic 848): Scope: which clarified the scope of ASU 2020-04. The new guidance provides optional expedients and exceptions for applying U.S. GAAP to contracts, hedging relationships and other transactions affected by reference rate reform if certain criteria are met. The amendments apply only to contracts and hedging relationships that reference LIBOR or another reference rate expected to be discontinued due to reference rate reform. These amendments may be applied prospectively to contract modifications made and hedging relationships entered into or evaluated on or before December 31, 2022. The adoption of these ASU’s did not have a material impact on the Company’s condensed consolidated financial statements.
In March 2021, the FASB issued ASU No. 2021-03, Intangibles—Goodwill and Other (Topic 350): Accounting Alternative for Evaluating Triggering Events, an amendment of the FASB Accounting Standards Codification. The amendments in this ASU allow companies to elect not to monitor for goodwill impairment triggering events during the reporting period and instead, to evaluate the facts and circumstances as of the end of the reporting period to determine whether it is more likely than not that goodwill is impaired. This aligns the triggering event evaluation date with the reporting date, whether that date is an interim or annual reporting date. This ASU is effective on a prospective basis for fiscal years beginning after December 15, 2019, with early adoption permitted for both interim and annual financial statements that have not yet been issued or made available for issuance as of March 30, 2021. The Company does not expect this guidance to have a material impact to its consolidated financial statements or related disclosures.
In May 2021, the FASB issued ASU No. 2021-04, Earnings Per Share (Topic 260), Debt – Modifications and Extinguishments (Subtopic 470-50), Compensation – Stock Compensation (Topic 718), and Derivatives and Hedging – Contracts in Entity’s Own Equity (Subtopic 815-40): Issuer’s Accounting for Certain Modification or Exchanges of Freestanding Equity-Classified Written Call Options (“ASU 2021-04”), which will clarify and reduce diversity in practice. Specifically, the new standard includes a recognition model comprising four categories of transactions and corresponding accounting treatment for each category. The category that would apply to a modification or an exchange of an equity-classified warrant would depend on the substance of the modification transaction (e.g. a financing transaction to raise equity versus one to raise debt). This recognition model is premised on the idea that the accounting for the transaction should not differ from what it would have been had the issuer of the warrants paid cash instead of modifying the warrants. ASU 2021-04 will be effective for fiscal years beginning after December 15, 2021 and interim periods within those fiscal years. Early adoption is permitted. This ASU will be applied prospectively to modifications or exchanges occurring on or after the effective date of the ASU. The Company is currently evaluating the impact this new guidance will have on its condensed consolidated financial statements.
The Company does not believe that any other recently issued, but not yet effective, accounting standards if currently adopted would have a material effect on the accompanying condensed consolidated financial statements. |
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Summary of Significant Accounting Policies (Tables) |
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| Accounting Policies [Abstract] | ||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
| Schedule of credit and concentration risks |
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| Schedule of Earnings Per Share, Basic and Diluted [Table Text Block] |
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| Schedule of Antidilutive Securities Excluded from Computation of Earnings Per Share [Table Text Block] |
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| Schedule of anti-dilutive securities |
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Property and Equipment (Tables) |
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| Property, Plant and Equipment [Abstract] | ||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
| Schedule of property and equipment |
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Leases (Tables) |
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| Leases, Operating [Abstract] | |||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
| Schedule of operating and finance leases |
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| Schedule of aggregate undiscounted cash flows of operating lease payments |
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Notes Payable, Related Party Notes Payable and Finance Lease Obligations (Tables) |
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| Debt Disclosure [Abstract] | |||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
| Schedule of notes payable, related party notes payable and finance lease obligations |
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| Schedule of payments for the term note |
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| Schedule of SBA Loans future minimum loan payments |
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| Schedule of subordinated principal balance of the notes |
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Liability Related to the Sale of Future Proceeds from Disposition of Subsidiary (Tables) |
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| Liability Related To Sale Of Future Proceeds From Disposition Of Subsidiary [Abstract] | ||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
| Schedule of activity within the liability account |
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Segment Reporting (Tables) |
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| Segment Reporting [Abstract] | ||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
| Schedule of operating segments |
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Formation and Basis of Presentation (Details) - USD ($) |
3 Months Ended | 6 Months Ended | ||
|---|---|---|---|---|
Jun. 30, 2021 |
Jun. 30, 2020 |
Jun. 30, 2021 |
Jun. 30, 2020 |
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| Accounting Policies [Abstract] | ||||
| Net operating income | $ 239,000 | $ (1,584,000) | $ 87,000 | $ (526,000) |
Summary of Significant Accounting Policies (Details) - Schedule of credit and concentration risks |
3 Months Ended | 6 Months Ended | 12 Months Ended | ||||||||||||||
|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|
Jun. 30, 2021 |
Jun. 30, 2020 |
Jun. 30, 2021 |
Jun. 30, 2020 |
Dec. 31, 2020 |
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| Customer One [Member] | |||||||||||||||||
| Concentration Risk [Line Items] | |||||||||||||||||
| Percentage of Sales | 41.30% | 33.30% | 34.40% | 32.20% | |||||||||||||
| Percentage of Receivables | 60.40% | 57.10% | |||||||||||||||
| Customers Two [Member] | |||||||||||||||||
| Concentration Risk [Line Items] | |||||||||||||||||
| Percentage of Sales | 20.80% | 38.60% | 26.90% | 37.10% | |||||||||||||
| Percentage of Receivables | 12.60% | [1] | |||||||||||||||
| Customers Three [Member] | |||||||||||||||||
| Concentration Risk [Line Items] | |||||||||||||||||
| Percentage of Sales | 14.10% | [2] | 15.70% | [3] | |||||||||||||
| Percentage of Receivables | 12.00% | 12.00% | |||||||||||||||
| Customers Four [Member] | |||||||||||||||||
| Concentration Risk [Line Items] | |||||||||||||||||
| Percentage of Receivables | [4] | 11.20% | |||||||||||||||
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Summary of Significant Accounting Policies (Details) - Schedule of calculation of net income (loss) applicable to common stockholders utilized to calculate EPS - USD ($) |
3 Months Ended | 6 Months Ended | ||
|---|---|---|---|---|
Jun. 30, 2021 |
Jun. 30, 2020 |
Jun. 30, 2021 |
Jun. 30, 2020 |
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| Schedule of calculation of net income (loss) applicable to common stockholders utilized to calculate EPS [Abstract] | ||||
| Net income (Loss) per condensed consolidated statements of operations | $ 239,000 | $ (1,584,000) | $ 87,000 | $ (526,000) |
| Add: Convertible Note Interest for Potential Note Conversion | 77,000 | 155,000 | ||
| Income (loss) used to calculate diluted earnings per share | $ 316,000 | $ (1,584,000) | $ 242,000 | $ (526,000) |
Summary of Significant Accounting Policies (Details) - Schedule of earnings per share for continuing operations - shares |
3 Months Ended | 6 Months Ended | ||
|---|---|---|---|---|
Jun. 30, 2021 |
Jun. 30, 2020 |
Jun. 30, 2021 |
Jun. 30, 2020 |
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| Schedule of earnings per share for continuing operations [Abstract] | ||||
| Weighted average shares outstanding used to compute basic earnings per share | 32,021,522 | 30,552,147 | 31,996,859 | 30,476,289 |
| Effect of dilutive stock options and warrants | 1,912,500 | 2,750,500 | ||
| Effect of dilutive convertible notes payable | 4,057,892 | 4,057,892 | ||
| Weighted average shares outstanding and dilutive securities used to compute dilutive earnings per share | 37,991,914 | 30,552,147 | 38,805,251 | 30,476,289 |
Summary of Significant Accounting Policies (Details) - Schedule of anti-dilutive securities - shares |
3 Months Ended | 6 Months Ended | ||
|---|---|---|---|---|
Jun. 30, 2021 |
Jun. 30, 2020 |
Jun. 30, 2021 |
Jun. 30, 2020 |
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| Exercise Price Was Greater Than The Average Market Price [Member] | ||||
| Summary of Significant Accounting Policies (Details) - Schedule of anti-dilutive securities [Line Items] | ||||
| Stock options | 456,000 | 216,000 | 98,000 | 216,000 |
| Warrants | 1,903,000 | 1,423,000 | 1,423,000 | 1,423,000 |
| Exercise price | 2,359,000 | 1,639,000 | 1,521,000 | 1,639,000 |
| Exercise Price Was Less Than The Average Market Price [Member] | ||||
| Summary of Significant Accounting Policies (Details) - Schedule of anti-dilutive securities [Line Items] | ||||
| Stock options | 1,696,000 | |||
| Warrants | 760,000 | |||
| Convertible notes payable | 5,045,000 | |||
| Total | 7,501,000 | |||
Property and Equipment (Details) - USD ($) |
3 Months Ended | 6 Months Ended | |||
|---|---|---|---|---|---|
Jun. 30, 2021 |
Jun. 30, 2020 |
Jun. 30, 2021 |
Jun. 30, 2020 |
Dec. 31, 2020 |
|
| Property and Equipment (Details) [Line Items] | |||||
| Depreciation expense | $ 704,000 | $ 688,000 | $ 1,417,000 | $ 1,344,000 | |
| Property, Plant and Equipment [Member] | |||||
| Property and Equipment (Details) [Line Items] | |||||
| Accumulated depreciation | $ 31,000 | $ 31,000 | $ 28,000 | ||
Leases (Details) - USD ($) |
6 Months Ended | 12 Months Ended | |
|---|---|---|---|
Jun. 30, 2021 |
Dec. 31, 2019 |
May 01, 2021 |
|
| Disclosure Text Block [Abstract] | |||
| Operating lease term description | The leases have remaining lease terms of one to five years, some of which include options to extend or terminate the leases. | ||
| Payment percentage | 40.00% | ||
| Due to landlord | $ 37,000 | ||
| Lease impairment | $ 275,000 |
Leases (Details) - Schedule of operating and finance leases |
Jun. 30, 2021 |
Dec. 31, 2020 |
|---|---|---|
| Schedule of operating and finance leases [Abstract] | ||
| Weighted Average Remaining Lease Term - in years | 5 years 1 month 13 days | 5 years 6 months 10 days |
| Weighted Average discount rate - % | 8.89% | 8.90% |
Leases (Details) - Schedule of aggregate undiscounted cash flows of operating lease payments - Operating lease payments [Member] |
6 Months Ended |
|---|---|
|
Jun. 30, 2021
USD ($)
| |
| Leases (Details) - Schedule of aggregate undiscounted cash flows of operating lease payments [Line Items] | |
| December 31, 2021 (remainder of the year) | $ 492,000 |
| December 31, 2022 | 1,007,000 |
| December 31, 2023 | 1,038,000 |
| December 31, 2024 | 1,070,000 |
| December 31, 2025 | 992,000 |
| Thereafter | 730,000 |
| Total future minimum lease payments | 5,329,000 |
| Less: discount | (1,091,000) |
| Total operating lease maturities | 4,238,000 |
| Less: current portion of operating lease liabilities | (643,000) |
| Total long term portion of operating lease maturities | $ 3,595,000 |
Notes Payable, Related Party Notes Payable and Finance Lease Obligations (Details) - USD ($) |
1 Months Ended | 3 Months Ended | 6 Months Ended | 12 Months Ended | |||
|---|---|---|---|---|---|---|---|
Jun. 14, 2021 |
Dec. 31, 2019 |
Jun. 30, 2021 |
Jun. 30, 2020 |
Jun. 30, 2021 |
Jun. 30, 2020 |
Dec. 31, 2020 |
|
| Notes Payable, Related Party Notes Payable and Finance Lease Obligations (Details) [Line Items] | |||||||
| Debt expiring date | Dec. 30, 2022 | ||||||
| Loan and security agreement, description | the Company entered into the First Amendment to Loan and Security Agreement (“First Amendment”). The terms of the amendment increase the Term Loan to $5,685,000. The repayment terms of the term loan were amended to provide monthly principal installments in the amount of $67,679 beginning on December 1, 2020, with a final payment of any unpaid balance of principal and interest payable on December 30, 2022. Additionally, the date by which certain subordinated third-party notes need to be extended was changed from September 30, 2020 to November 30, 2020. The Company paid an amendment fee of $20,000. | ||||||
| SNB facility, description | On June 14, 2021, the Company entered into the Second Amendment to the Loan and Security Agreement (“Second Amendment”). The purpose of the Second Amendment was to clarify the definition and calculation of Excess Cash Flow, and to confirm the extension of the due date for the payment of the Excess Cash Flow payment. The amount of the Excess Cash Flow payment for the year ended December 31, 2020 was calculated to be $558,750. Per the terms of the Second Amendment, the Excess Cash Flow is payable in three installments of $186,250 on each of June 15, 2021, June 30, 2021, and September 15, 2021. As of June 30, 2021, the Company paid the first two installments totaling $372,500. Additionally, the Company paid an amendment fee of $10,000. | Under the terms of the SNB Facility, both the SNB revolving line of credit and the SNB term loan will bear an interest rate equal to 30-day LIBOR, (with a 1% floor), plus 2.5%. The average interest rate charged during the period ended June 30, 2021 was 3.5%. | |||||
| Payable | $ 44,000 | $ 44,000 | $ 48,000 | ||||
| Amendment fee | 10,000 | ||||||
| Interest expense | 125,000 | $ 125,000 | $ 250,000 | $ 253,000 | |||
| Interest incurred on notes to third parties | 38,000 | 80,000 | |||||
| Amortization of debt discount | 3,000 | 7,000 | |||||
| Robert and Michael Taglich [Member] | |||||||
| Notes Payable, Related Party Notes Payable and Finance Lease Obligations (Details) [Line Items] | |||||||
| Loan facility, description | From 2016 through 2020, the Company entered into various subordinated notes payable and convertible subordinated notes payable with Michael and Robert Taglich. These notes resulted in proceeds to the Company totaling $6,550,000. In connection with these notes, Michael and Robert were issued a total of 355,082 shares of common stock and Taglich Brothers Inc. was issued promissory notes totaling $554,000 for placement agency fees. On January 1, 2021, the related party subordinated notes due to Michael and Robert Taglich and Taglich Brothers, Inc., were amended to include all accrued interest through December 31, 2020 in the principal balance of the notes. Per the terms of the SNB Facility, these notes remain subordinate to the SNB Facility and are due on July 1, 2023. There are no principal payments due on these notes until such time. The note holders and the principal balance of the notes as amended on January 1, 2021 are shown below | ||||||
| Three Installments [Member] | |||||||
| Notes Payable, Related Party Notes Payable and Finance Lease Obligations (Details) [Line Items] | |||||||
| Payable | 186,250 | $ 186,250 | |||||
| First Two Installments [Member] | |||||||
| Notes Payable, Related Party Notes Payable and Finance Lease Obligations (Details) [Line Items] | |||||||
| Paid | 372,500 | 372,500 | |||||
| Notes Payable to Banks [Member] | |||||||
| Notes Payable, Related Party Notes Payable and Finance Lease Obligations (Details) [Line Items] | |||||||
| Loan obligation | 44,000 | 44,000 | 48,000 | ||||
| Convertible Notes Payable – Third Parties [Member] | |||||||
| Notes Payable, Related Party Notes Payable and Finance Lease Obligations (Details) [Line Items] | |||||||
| Interest payable related parties | 0 | 0 | |||||
| SBA Loans [Member] | |||||||
| Notes Payable, Related Party Notes Payable and Finance Lease Obligations (Details) [Line Items] | |||||||
| Revolving credit loan term amount | $ 16,000,000 | ||||||
| SNB Bank [Member] | |||||||
| Notes Payable, Related Party Notes Payable and Finance Lease Obligations (Details) [Line Items] | |||||||
| Loan facility, description | The terms of the SNB Facility require that, among other things, the Company maintain a specified Fixed Charge Coverage Ratio of 1.25 to 1.00 at the end of each Fiscal Quarter beginning with the Fiscal Quarter ending March 31, 2020. | ||||||
| Principal amount | 20,049,000 | $ 20,049,000 | 21,207,000 | ||||
| Revolving credit loan debt to SNB | 15,256,000 | 15,649,000 | |||||
| Term loan amount | 4,793,000 | $ 5,558,000 | |||||
| Interest expense | $ 180,000 | $ 154,000 | $ 361,000 | $ 274,000 | |||
Notes Payable, Related Party Notes Payable and Finance Lease Obligations (Details) - Schedule of notes payable, related party notes payable and finance lease obligations - USD ($) |
Jun. 30, 2021 |
Dec. 31, 2020 |
|---|---|---|
| Schedule of notes payable, related party notes payable and finance lease obligations [Abstract] | ||
| Revolving credit note payable to Sterling National Bank (“SNB”) | $ 15,256,000 | $ 15,649,000 |
| Term loan, SNB | 4,793,000 | 5,558,000 |
| Finance lease obligations | 3,000 | 6,000 |
| Loan Payable - financed asset | 44,000 | 48,000 |
| Related party notes payable | 6,412,000 | 6,012,000 |
| Subtotal | 26,508,000 | 27,273,000 |
| Less: Current portion of notes payable, related party notes payable and finance lease obligations | (16,266,000) | (16,475,000) |
| Notes payable, related party notes payable and finance lease obligations, net of current portion | $ 10,242,000 | $ 10,798,000 |
Notes Payable, Related Party Notes Payable and Finance Lease Obligations (Details) - Schedule of payments for the term note - Term Loans [Member] |
Jun. 30, 2021
USD ($)
|
|---|---|
| Notes Payable, Related Party Notes Payable and Finance Lease Obligations (Details) - Schedule of payments for the term note [Line Items] | |
| December 31, 2021 (remainder of the year) | $ 592,000 |
| December 31, 2022 | 4,247,000 |
| SNB Term Loan payable | 4,839,000 |
| Less: debt issuance costs | (46,000) |
| Total SNB Term loan payable, net of debt issuance costs | 4,793,000 |
| Less: Current portion of SNB term loan payable | (998,000) |
| Total long-term portion of SNB term loan payable | $ 3,795,000 |
Notes Payable, Related Party Notes Payable and Finance Lease Obligations (Details) - Schedule of SBA Loans future minimum loan payments - USD ($) |
Jun. 30, 2021 |
Dec. 31, 2020 |
|---|---|---|
| Schedule of SBA Loans future minimum loan payments [Abstract] | ||
| December 31, 2021 (remainder of the year) | $ 5,000 | |
| December 31, 2022 | 9,000 | |
| December 31, 2023 | 9,000 | |
| December 31, 2024 | 9,000 | |
| December 31, 2025 | 9,000 | |
| Thereafter | 3,000 | |
| Loan Payable - financed asset | 44,000 | $ 48,000 |
| Less: Current portion | 9,000 | |
| Long-term portion | $ 35,000 |
Liability Related to the Sale of Future Proceeds from Disposition of Subsidiary (Details) - USD ($) |
3 Months Ended | 6 Months Ended | |||
|---|---|---|---|---|---|
Jan. 15, 2019 |
Jun. 30, 2021 |
Jun. 30, 2020 |
Jun. 30, 2021 |
Jun. 30, 2020 |
|
| Liability Related To Sale Of Future Proceeds From Disposition Of Subsidiary [Abstract] | |||||
| Sale of subsidiary, description | In connection with the sale of the Company’s wholly-owned subsidiary, AMK Welding, Inc. (“AMK”) to Meyer Tool, Inc., (“Meyer”) in 2017, Meyer was obligated to pay the Company within 30 days after the end of each calendar quarter, commencing April 1, 2017, an amount equal to five (5%) percent of the net sales of AMK for that quarter until the aggregate payments made to the Company (the “Meyer Agreement”) equals $1,500,000 (the “Maximum Amount”). | ||||
| Purchase agreement, description | the Company entered into a “Purchase Agreement” with 15 accredited investors (the “Purchasers”), including Michael and Robert Taglich, pursuant to which the Company assigned to the Purchasers all of its rights, title and interest to the remaining $1,137,000 of the $1,500,000 in payments due from Meyer for the sale of AMK (the “Remaining Amount”) for an immediate payment of $800,000, including $100,000 from each of Michael and Robert Taglich, and $75,000 for the benefit of the children of Michael Taglich. The timing of the payments is based upon the net sales of AMK. If the Purchasers have not received the entire Remaining Amount by March 31, 2023, they have the right to demand payment of their pro rata portion of the unpaid Remaining Amount from the Company (“Put Right”). To the extent the Purchasers exercise their Put Right, the remaining payments from Meyer will be retained by the Company. | ||||
| Non-Cash other income | $ 91,000 | $ 119,000 | $ 195,000 | $ 211,000 | |
| Non-Cash interest expense | $ 27,000 | $ 36,000 | $ 58,000 | $ 64,000 | |
Liability Related to the Sale of Future Proceeds from Disposition of Subsidiary (Details) - Schedule of activity within the liability account - Subsidiary [Member] - USD ($) |
6 Months Ended | 12 Months Ended |
|---|---|---|
Jun. 30, 2021 |
Dec. 31, 2020 |
|
| Liability Related to the Sale of Future Proceeds from Disposition of Subsidiary (Details) - Schedule of activity within the liability account [Line Items] | ||
| Liabilities related to sale of future proceeds from disposition of subsidiaries - beginning balance | $ 322,000 | $ 602,000 |
| Non-Cash other income recognized | (195,000) | (402,000) |
| Non-Cash interest expense recognized | 58,000 | 122,000 |
| Liabilities related to sale of future proceeds from disposition of subsidiary - ending balance | 185,000 | 322,000 |
| Less: unamortized transaction costs | (3,000) | (3,000) |
| Liability related to sale of future proceeds from disposition of subsidiary, net | $ 182,000 | $ 319,000 |
Stockholders' Equity (Details) - USD ($) |
1 Months Ended | 3 Months Ended | 6 Months Ended | 9 Months Ended | ||||||
|---|---|---|---|---|---|---|---|---|---|---|
Jan. 11, 2021 |
Jan. 15, 2020 |
Jul. 30, 2021 |
Mar. 24, 2021 |
Jan. 31, 2020 |
Jun. 30, 2021 |
Jun. 30, 2020 |
Jun. 30, 2021 |
Jun. 30, 2020 |
Sep. 30, 2021 |
|
| Stockholders' Equity (Details) [Line Items] | ||||||||||
| Issuance of common stock | 37,392 | 47,126 | 79,352 | 90,897 | ||||||
| Directors’ fees (in Dollars) | $ 52,000 | $ 46,000 | $ 104,000 | $ 101,000 | ||||||
| Common stock share | 51,224 | |||||||||
| Issuance of common stock, shares | 419,597 | |||||||||
| Issuance of common stock (in Dollars) | $ 984,000 | |||||||||
| Costs of sales (in Dollars) | $ 145,000 | |||||||||
| Common stock issued for directors fees, shares | 590,243 | |||||||||
| Subordinated debt (in Dollars) | $ 885,000 | |||||||||
| Aggregate of stock options | 70,000 | 327,500 | ||||||||
| Common stock price per share (in Dollars per share) | $ 1.32 | $ 1.39 | ||||||||
| Issuance of stock options, description | The options expire on the seventh anniversary of the grant date and vest over a term of one year. | The options expire on the fifth anniversary of the grant date and vest over a term of three years. | ||||||||
| Subsequent Event [Member] | ||||||||||
| Stockholders' Equity (Details) [Line Items] | ||||||||||
| Directors’ fees (in Dollars) | $ 52,000 | |||||||||
| Issuance of common stock, shares | 39,983 | |||||||||
| Aggregate of stock options | 415,000 | |||||||||
| Common stock price per share (in Dollars per share) | $ 1.22 | |||||||||
| Issuance of stock options, description | The options expire on the fifth anniversary of the grant date and vest over a term of one to three years. | |||||||||
Contingencies (Details) - USD ($) |
6 Months Ended | |
|---|---|---|
Jul. 08, 2021 |
Jun. 30, 2021 |
|
| Contingencies (Details) [Line Items] | ||
| Damages value | $ 1,000,000 | |
| Subsequent Event [Member] | ||
| Contingencies (Details) [Line Items] | ||
| Damages claim | $ 700,000 |
Income Taxes (Details) - USD ($) |
3 Months Ended | 6 Months Ended | |||
|---|---|---|---|---|---|
Jun. 30, 2021 |
Jun. 30, 2020 |
Jun. 30, 2021 |
Jun. 30, 2020 |
Mar. 31, 2020 |
|
| Income Tax Disclosure [Abstract] | |||||
| Annual effective tax rate | 0.00% | 0.00% | 0.00% | 0.00% | |
| Net operating loss carryback claim (in Dollars) | $ 1,416,000 | ||||
Segment Reporting (Details) - Schedule of operating segments - USD ($) |
3 Months Ended | 6 Months Ended | ||
|---|---|---|---|---|
Jun. 30, 2021 |
Jun. 30, 2020 |
Jun. 30, 2021 |
Jun. 30, 2020 |
|
| COMPLEX MACHINING | ||||
| Segment Reporting, Revenue Reconciling Item [Line Items] | ||||
| Net Sales | $ 13,783,000 | $ 7,308,000 | $ 25,949,000 | $ 19,372,000 |
| Gross Profit | 2,325,000 | 681,000 | 3,944,000 | 2,849,000 |
| Income (Loss) before benefit from income taxes | 1,573,000 | (10,000) | 2,553,000 | 1,160,000 |
| Assets | 51,956,000 | 48,490,000 | 51,956,000 | 48,490,000 |
| TURBINE ENGINE COMPONENTS | ||||
| Segment Reporting, Revenue Reconciling Item [Line Items] | ||||
| Net Sales | 1,670,000 | 1,186,000 | 3,216,000 | 2,569,000 |
| Gross Profit | 278,000 | (67,000) | 456,000 | (54,000) |
| Income (Loss) before benefit from income taxes | 114,000 | (217,000) | 99,000 | (343,000) |
| Assets | 3,471,000 | 4,430,000 | 3,471,000 | 4,430,000 |
| CORPORATE | ||||
| Segment Reporting, Revenue Reconciling Item [Line Items] | ||||
| Net Sales | ||||
| Gross Profit | ||||
| Income (Loss) before benefit from income taxes | (1,448,000) | (1,357,000) | (2,565,000) | (2,757,000) |
| Assets | 823,000 | 1,808,000 | 823,000 | 1,808,000 |
| CONSOLIDATED | ||||
| Segment Reporting, Revenue Reconciling Item [Line Items] | ||||
| Net Sales | 15,453,000 | 8,494,000 | 29,165,000 | 21,941,000 |
| Gross Profit | 2,603,000 | 614,000 | 4,400,000 | 2,795,000 |
| Income (Loss) before benefit from income taxes | 239,000 | (1,584,000) | 87,000 | (1,940,000) |
| Benefit from Income Taxes | (1,414,000) | |||
| Net Income (loss) | 239,000 | (1,584,000) | 87,000 | (526,000) |
| Assets | $ 56,250,000 | $ 54,728,000 | $ 56,250,000 | $ 54,728,000 |