10-K

UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549

FORM 10-K 

☒ ANNUAL REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934 

For the fiscal year ended December 31, 2019

OR

☐ TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934 

For the transition period from                                            to                                                           

Commission file number: 000-000147

CRAWFORD UNITED CORPORATION 

(Formerly Hickok Incorporated)

(Exact name of registrant as specified in its charter)

Ohio	34-0288470
(State or other jurisdiction of incorporation or organization)	(I.R.S. Employer Identification No.)
10514 Dupont Avenue, Cleveland, Ohio	44108
(Address of principal executive offices)	(Zip Code)

Registrant's telephone number (216) 243-2614

Securities registered pursuant to

Section 12(b) of the Act:
NONE
Securities registered pursuant to Section 12(g) of the Act:

Class A Common Shares, without par value
(Title of Class)

Indicate by check mark if the registrant is a well-known seasoned issuer, as defined by Rule 405 of the Securities Act. Yes ☐ No ☒

Indicate by check mark if the registrant is not required to file reports pursuant to Section 13 or Section 15(d) of the Act. Yes ☐ No ☒

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 preceding 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. Yes ☒ No ☐

Indicate by check mark whether the registrant has submitted electronically 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 such files). Yes ☒ No ☐

1

Indicate by check mark whether the registrant is a large accelerated filer, an accelerated filer, a non-accelerated filer, a smaller reporting company, or an emerging growth company. See the definitions of "large accelerated filer," "accelerated filer," "smaller reporting company," and “emerging growth company” in Rule 12b-2 of the Exchange Act.

Large accelerated filer ☐	Accelerated filer ☐
Non-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 13(a) of the Exchange Act.  ☐

Indicate by check mark whether the registrant is a shell company (as defined in Rule 12b-2 of the Act). Yes ☐ No ☒

As of June 30, 2019, the Registrant had 2,145,806 voting Class A Common Shares outstanding and 596,848 voting Class B Common Shares outstanding. As of such date, non-affiliates held 982,188 Class A Common Shares and 80,056 Class B Common Shares. As of June 30, 2019, based on the closing price of $18.00 per Class A Common Share on the Over The Counter Bulletin Board, the aggregate market value of the Class A Common Shares held by such non-affiliates was approximately $17,679,384. There is no trading market in the Class B Common Shares.

As of February 28, 2020, 2,537,629 Class A Common Shares and 771,848 Class B Common Shares were outstanding.

Documents Incorporated by Reference:

Portions of the Registrant’s Definitive Proxy Statement to be filed in connection with its 2020 Annual Meeting of Shareholders are incorporated by reference into Part III (Items 10, 11, 12, 13 and 14) of this report.

Except as otherwise stated, the information contained in this Form 10-K is as of December 31, 2019.

2

Table of Contents

PART I.	4
ITEM 1. BUSINESS	4
ITEM 1A. RISK FACTORS	6
ITEM 1B. UNRESOLVED STAFF COMMENTS	10
ITEM 2. PROPERTIES	10
ITEM 3. LEGAL PROCEEDINGS	10
ITEM 4. MINE SAFETY DISCLOSURES	11
ITEM 4A. EXECUTIVE OFFICERS OF REGISTRANT	11
PART II.	11
ITEM 5. MARKET FOR REGISTRANT'S COMMON EQUITY, RELATED STOCKHOLDER MATTERS AND ISSUER PURCHASES OF EQUITY SECURITIES	11
ITEM 6. SELECTED FINANCIAL DATA	12
ITEM 7. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS	13
ITEM 7A. QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISK	16
ITEM 8. FINANCIAL STATEMENTS AND SUPPLEMENTARY DATA	16
REPORT OF INDEPENDENT REGISTERED PUBLIC ACCOUNTING FIRM	17
CONSOLIDATED BALANCE SHEETS ASSETS	18
CONSOLIDATED BALANCE SHEETS LIABILITIES AND STOCKHOLDERS' EQUITY	19
CONSOLIDATED STATEMENTS OF INCOME	20
CONSOLIDATED STATEMENTS OF STOCKHOLDERS' EQUITY	21
CONSOLIDATED STATEMENTS OF CASH FLOWS	22
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS	23
1. BASIS OF PRESENTATION	23
2. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES	23
3. ACCOUNTS RECEIVABLE	26
4. INVENTORY	26
5. GOODWILL AND OTHER INTANGIBLE ASSETS	27
6. PROPERTY, PLANT AND EQUIPMENT	27
7. BANK DEBT	28
8. NOTES PAYABLE	29
9. LEASES	30
10. SHAREHOLDERS’ EQUITY	31
11. STOCK COMPENSATION	31
12. INCOME TAXES	32
13. EARNINGS PER COMMON SHARE	33
14. EMPLOYEE BENEFIT PLANS	33
15. ACQUISITIONS	34
16. DISPOSITIONS	34
17. SEGMENT AND RELATED INFORMATION	34
18. QUARTERLY DATA (UNAUDITED)	36
19. SUBSEQUENT EVENTS	36
ITEM 9. CHANGES IN AND DISAGREEMENTS WITH ACCOUNTANTS ON ACCOUNTING AND FINANCIAL DISCLOSURE	37
ITEM 9A. CONTROLS AND PROCEDURES	37
ITEM 9B. OTHER INFORMATION	39
PART III.	39
ITEM 10. DIRECTORS, EXECUTIVE OFFICERS AND CORPORATE GOVERNANCE	39
ITEM 11. EXECUTIVE COMPENSATION	39
ITEM 12. SECURITY OWNERSHIP OF CERTAIN BENEFICIAL OWNERS AND MANAGEMENT AND RELATED STOCKHOLDER MATTERS	39
ITEM 13. CERTAIN RELATIONSHIPS AND RELATED TRANSACTIONS, AND DIRECTOR INDEPENDENCE	39
ITEM 14. PRINCIPAL ACCOUNTING FEES AND SERVICES	39
PART IV.	40
ITEM 15. EXHIBITS, FINANCIAL STATEMENT SCHEDULES	40
EXHIBIT INDEX	42
SIGNATURES	44
SCHEDULE II - VALUATION AND QUALIFYING ACCOUNTS	45

3

PART I

ITEM 1. BUSINESS. 

Corporate Name Change

In connection with the sale of certain assets comprising its Test and Measurement business segment to Hickok Waekon, LLC, Hickok Incorporated agreed to take commercially reasonable efforts to change its name to one or more names that do not include “Hickok” or “Waekon” or any derivation thereof. 

Buyer granted the Company a non-exclusive, irrevocable, non-assignable, worldwide, royalty-free license to utilize the “Hickok” trademark and trade name in its business during a post-closing period following the closing of the Transaction.  Buyer granted the Company a similar license to use the “Hickok-Inc.com” domain name during such post-closing period.  On May 15, 2019, Hickok Incorporated changed its name to Crawford United Corporation and its trading symbol for its Class A Common Shares to “CRAWA.”    

General Development of Business

Crawford United was founded in 1910 and organized in 1915 as an Ohio corporation, and first offered its securities to the public in 1959. Except as otherwise stated, the terms "Company" or "Crawford United" as used herein mean Crawford United and its wholly-owned subsidiaries, CAD Enterprises Inc., Data Genomix LLC, Federal Hose Manufacturing LLC, Crawford AE LLC, doing business as Air Enterprises, and Supreme Electronics Corp. Crawford United is a publicly traded holding company serving diverse markets, including healthcare, education, automotive, aerospace, trucking, and petrochemical.

The Company operates three reportable business segments: (1) Aerospace Components, (2) Commercial Air Handling, (3) and Industrial Hose.  The Company operated the Test and Measurement business segment through June 1, 2018, at which time it was sold to Hickok Waekon, LLC.

Aerospace Components:
The Aerospace Components segment was added July 1, 2018, when the Company purchased all of the issued and outstanding shares of capital stock of CAD Enterprises, Inc. (“CAD”) in Phoenix, Arizona. This segment manufactures precision components primarily for customers in the aerospace industry.  This segment provides complete end-to-end engineering, machining, grinding, welding, brazing, heat treat and assembly solutions.  Utilizing state-of-the-art machining and welding technologies, this segment is an industry leader in providing complex components produced from nickel-based superalloys and stainless steels.  Our quality certifications include ISO 9001:2015/AS9100D, as well as Nadcap accreditation for Fluorescent Penetrant Inspection (FPI), Heat Treating/Braze, Non-Conventional Machining EDM, TIG/E-Beam welding.

Commercial Air Handling:
The Commercial Air Handling segment was added June 1, 2017, when the Company purchased certain assets and assumed certain liabilities of Air Enterprises Acquisition LLC in Akron, Ohio. The acquired business, which operates under the name Air Enterprises, is an industry leader in designing, manufacturing and installing large-scale commercial, institutional, and industrial custom air handling solutions. Its customers are typically in the health care, education, pharmaceutical and industrial manufacturing markets in the United States. This segment also sells to select international markets. The custom air handling units are constructed of non-corrosive aluminum, resulting in sustainable, long-lasting, and energy efficient solutions with life expectancies of 50 years or more. These products are distributed through a network of sales representatives, based on relationships with health care networks, building contractors and engineering firms. The custom air handling equipment is designed, manufactured and installed under the brand names FactoryBilt® and SiteBilt®. FactoryBilt® air handling solutions are designed, fabricated and assembled in a vertically integrated process entirely within the Akron, Ohio facility. SiteBilt® air handling solutions are designed and fabricated in Akron, but are then crated and shipped to the field and assembled on-site.

Industrial Hose: 

The Industrial Hose segment was added July 1, 2016, when the Company purchased the assets of  Federal Hose Manufacturing, LLC in Painesville, Ohio. This business segment includes the manufacture of flexible interlocking metal hoses and the distribution of silicone and hydraulic hoses. Metal hoses are sold primarily to major heavy-duty truck manufacturers and major aftermarket suppliers in North America. Metal hoses are also sold into the agricultural, industrial and petrochemical markets. Silicone hoses are distributed to a number of industries in North America, including agriculture and general industrial markets.

4

Test and Measurement: 

The Test and Measurement segment is the legacy business that was started in 1910 when the Company was founded, and was sold on June 1, 2018. This business segment included electronic testing products designed and manufactured for the automotive and trucking industries and includes indicators and gauges for the locomotive and aircraft industries. The automotive diagnostic products were sold to original equipment manufacturers and to the aftermarket under several brand names and through a variety of distribution methods. In the aircraft industry, primary customers were manufacturers of commercial, military and personal airplanes. In the locomotive industry, indicators and gauges were sold to manufacturers and servicers of railroad equipment and locomotives.

Sources and Availability of Raw Materials 

Raw materials essential to the business segments are acquired from a large number of domestic manufacturers and some materials are purchased from European and Southeast Asian sources.
 

The Aerospace Components segment uses various materials in the manufacture of its products, the most significant being forgings and castings. Two suppliers provide over 50% of inventory purchases in this segment. If any one of these sources of supply were interrupted for any reason, the Company would need to devote additional time and expense in obtaining the same volume of supply from its other qualified sources.

The Industrial Hose segment uses various materials in the manufacture of its products, including steel fittings and hose packing consisting of silicone, cotton and copper wire. Two suppliers provide over 50% of inventory purchases in this segment. If any one of these sources of supply were interrupted for any reason, the Company would need to devote additional time and expense in obtaining the same volume of supply from its other qualified sources.

Aluminum, the major raw material used in construction of the Commercial Air Handling units, is sourced from one major supplier but is generally readily available from other sources. Copper is used by suppliers of a major component used in the product and the Company maintains relationships with three suppliers of these components to limit vulnerability. The Company maintains relationships with multiple suppliers for most of the other componentry used in assembly of the product, in order to maintain best costs for material and competitive lead times. The majority of materials for this segment are sourced domestically or from Canada.

The Company believes it has adequate sources of supply for its primary raw materials and components and has not had difficulty in obtaining the raw materials, component parts or finished goods from its suppliers.

Importance of Patents, Licenses, Franchises, Trademarks and Concessions 

The Company had a number of patents that related to the Test and Measurement segment that was divested in June 2018. There are no significant patents associated with the Company’s existing operations. Other than the names “Federal Hose” and “Air Enterprises” and the FactoryBilt® and SiteBilt® registered trademarks, the Company does not have any material licenses, franchises or concessions.

Seasonality 

In light of the markets served by its products, the Company does not believe that its Aerospace Components, Industrial Hose, or Commercial Air Handling businesses are seasonal in nature. The Company believes that seasonality impacted the Test and Measurement segment based upon the automotive aftermarket revenues, as the first and fourth quarters of the calendar year tend to be weaker than the other two quarters in this market. Since the sale of this segment in June 2018, this seasonality has not affected operating results.

Dependence on Customers 

For the year ended December 31, 2019, sales to three customers in the Commercial Air Handling segment were 12% of consolidated sales of the Company, while one customer in the Aerospace Components segment accounted for 29% of consolidated sales. For the year ended December 31, 2018, sales to two customers in the Commercial Air Handling segment were 14% of consolidated sales of the Company, while one customer in the Aerospace Components segment accounted for 18% of consolidated sales. The Company has long-term contractual relationships with a large customer in the Aerospace Components segment.

Competitive Conditions

The Company is engaged in highly competitive industries and faces competition from domestic and international firms. Competition in the Industrial Hose segment comes from domestic and international suppliers. The Company believes that its products in this segment are largely commodities, but the Company’s products are differentiated by a well-known brand name and excellent customer service. Competition in the Commercial Air Handling segment comes from both custom and non-custom air handling solution manufacturers. The Company believes that it has a strong competitive position due to the high quality and long life of the Company’s customized aluminum air handling solutions. Competition in the Aerospace Components segment comes from other domestic and international components manufacturers; however, the Company believes that it has a strong competitive position due to its expertise, certifications, long term customer contracts, and reputation for excellent quality.

Number of Persons Employed 

Total employment by the Company was 271 full-time employees at December 31, 2019, compared to was 275 full-time employees at December 31, 2018.

Available Information

The Company's Internet address is http://www.crawfordunited.com/. Crawford United makes available free of charge on or through its website its annual report on Form 10-K, quarterly reports on Form 10-Q, current reports on Form 8-K, proxy and information statements and amendments and supplements to those reports and statements filed or furnished pursuant to Section 13(a) or 15(d) of the Securities Exchange Act of 1934, as amended, as soon as reasonably practicable after the Company electronically files such materials with, or furnishes them to, the Securities and Exchange Commission (the "SEC"). The SEC maintains an Internet site that contains these documents at www.sec.gov.

5

ITEM 1A. RISK FACTORS.

You should carefully consider the risks and uncertainties described below, together with the information included elsewhere in this Annual Report on Form 10-K and other documents we file with the SEC. The risks and uncertainties described below are those that we have identified as material, but are not the only risks and uncertainties facing us. Our business is also subject to general risks and uncertainties that affect many other companies, such as market conditions, economic conditions, geopolitical events, changes in laws, regulations or accounting rules, fluctuations in interest rates, terrorism, wars or conflicts, major health concerns, natural disasters or other disruptions of expected business conditions. Additional risks and uncertainties not currently known to us or that we currently believe are immaterial also may impair our business, including our results of operations, liquidity and financial condition.

Conditions in the global economy, the particular markets we serve and the financial markets may adversely affect our business and results of operations.

We may experience substantial increases and decreases in business volume throughout economic cycles. Industries we serve, including the heavy-duty truck, industrial equipment, aircraft, health care, education, pharmaceutical, industrial manufacturing, agricultural, and petrochemical industries are sensitive to general economic conditions. Slower global economic growth, volatility in the currency and credit markets, high levels of unemployment or underemployment, reduced levels of capital expenditures, changes or anticipation of potential changes in government trade, fiscal, tax and monetary policies, public health crises, changes in capital requirements for financial institutions, government deficit reduction and budget negotiation dynamics, sequestration, austerity measures and other challenges that affect the global economy may adversely affect us and our distributors, customers and suppliers, including having the effect of:

● reducing demand for our products, limiting the financing available to our customers and suppliers, increasing order cancellations and resulting in longer sales cycles and slower adoption of new technologies;

● increasing the difficulty in collecting accounts receivable and the risk of excess and obsolete inventories;

● increasing price competition in our served markets;

● supply interruptions, which could disrupt our ability to produce our products;

● increasing the risk that counterparties to our contractual arrangements will become insolvent or otherwise unable to fulfill their contractual obligations; and

● adversely impacting market sizes and growth rates.

6

If growth in the global economy or in any of the markets we serve slows for a significant period, if there is significant deterioration in the global economy or such markets or if improvements in the global economy do not benefit the markets we serve, it could have a material adverse effect on our financial condition, liquidity and results of operations.

Significant developments or uncertainties stemming from U.S. laws and policies, including changes in U.S. trade policies, tariffs and the reaction of other countries thereto, could have an adverse effect on our business.

Changes, potential changes or uncertainties in U.S. social, political, regulatory and economic conditions or laws and policies governing foreign trade, manufacturing, and development and investment in the territories and countries where we or our customers operate, could adversely affect our business and financial results. For example, the U.S. administration has increased tariffs on certain goods imported into the United States, raising the possibility of imposing significant, additional tariff increases and substantial changes to trade agreements. These factors have adversely affected, and in the future could further adversely affect, our business and results of operations. Furthermore, retaliatory tariffs or other trade restrictions on products and materials that we or our customers and suppliers export or import could affect demand for our products. Direct or indirect consequences of tariffs, retaliatory tariffs or other trade restrictions may also alter the competitive landscape of our products in one or more regions of the world. Trade tensions or other governmental action related to tariffs or international trade agreements or policies has the potential to negatively impact our business, financial condition and results of operations.

Decreased availability or increased costs of materials could increase our costs of producing our products.

We purchase raw materials, fabricated components, some finished goods and services from a variety of suppliers. Where appropriate, we employ contracts with our suppliers, both domestic and international. From time to time, however, the prices, availability, or quality of these materials fluctuate due to global market demands, import duties and tariffs, economic conditions, or other conditions such as public health crises, which could impair our ability to procure necessary materials or increase the cost of these materials. For example, in December 2019 and January 2020, an outbreak of a new strain of Coronavirus in Wuhan, China, has resulted in travel disruption and an impact on corporate operations in China. At this point, the exact extent to which the Coronavirus may impact our supply chain or results of operations is uncertain; however, our operational results may suffer and our revenues may be impacted in 2020 as a result of the Coronavirus outbreak. Further, inflationary and other increases in costs of materials have occurred in the past and may recur from time to time. In addition, freight costs associated with shipping products and receiving materials are impacted by fluctuations in the cost of oil and gas. A reduction in the supply or increase in the cost or change in quality of those materials could impact our ability to manufacture our products and could increase the cost of production, which could negatively impact our revenues and profitability.

Our growth could suffer if the markets into which we sell our products decline, do not grow as anticipated or experience cyclicality.

Our growth depends in part on the growth of the markets which we serve. Our quarterly sales and profits depend substantially on the volume and timing of orders received during the fiscal quarter, which are difficult to forecast. Any decline or lower than expected growth in our served markets could diminish demand for our products and services, which would adversely affect our financial results. Certain of our businesses operate in industries that may experience seasonality or other periodic, cyclical downturns. Demand for our products is also sensitive to changes in customer order patterns, which may be affected by announced price changes, marketing, new product introductions, changes in distributor or customer inventory levels due to distributor or customer management thereof or other factors. Any of these factors could adversely affect our growth and results of operations in any given period.

We are engaged in highly competitive industries and if we are unable to compete effectively, we may experience decreased demand and decreased market share.

Our businesses operate in industries that are highly competitive. In order to compete effectively, we must retain longstanding relationships with major customers and continue to grow our business by establishing relationships with new customers, continually developing new products to maintain and expand our brand recognition and position in various product categories and penetrating new markets, including high-growth markets. Our failure to compete effectively and/or pricing pressures resulting from competition may adversely impact our financial results.

Adverse credit market conditions may significantly affect our access to capital, cost of capital and ability to meet liquidity needs.

Disruptions, uncertainty or volatility in the credit markets may adversely impact our ability to access credit already arranged and the availability and cost of credit to us in the future. These market conditions may limit our ability to replace, in a timely manner, maturing liabilities and access the capital necessary to grow and maintain our business. Accordingly, we may be forced to delay raising capital or pay unattractive interest rates, which could increase our interest expense, decrease our profitability and significantly reduce our financial flexibility. Longer-term disruptions in the capital and credit markets as a result of uncertainty, changing or increased regulation, reduced alternatives or failures of significant financial institutions could adversely affect our access to liquidity needed for our business. Any disruption could require us to take measures to conserve cash until the markets stabilize or until alternative credit arrangements or other funding for our business needs can be arranged. Such measures could include deferring capital expenditures or other discretionary uses of cash. Overall, our results of operations, financial condition and cash flows could be materially adversely affected by disruptions in the credit markets.

7

Our revolving credit facility contains various covenants limiting the discretion of our management in operating our business, including requiring us to maintain a maximum fixed charge coverage ratio.

Our revolving credit facility contains various restrictive covenants and restrictions, including financial covenants that limit management’s discretion in operating our business. In particular, these instruments limit our ability to, among other things:

● incur additional debt;

● grant liens on assets;

● make investments, including capital expenditures;

● sell or acquire assets outside the ordinary course of business;

● engage in transactions with affiliates; and

● make fundamental business changes.

The revolving credit facility also requires us to maintain a fixed charge coverage ratio of 1.20 to 1.00. If we fail to comply with the restrictions in the revolving credit facility or any other current or future financing agreements, a default may allow the creditors under the relevant agreements to accelerate the related debts and to exercise their remedies under these agreements, which typically will include the right to declare the principal amount of that debt, together with accrued and unpaid interest, and other related amounts, immediately due and payable, to exercise any remedies the creditors may have to foreclose on assets that are subject to liens securing that debt, and to terminate any commitments they had made to supply further funds. The exercise of any default remedies by our creditors would have a material adverse effect on our ability to finance working capital needs and capital expenditures.

We are dependent on key customers.

We rely on several key customers. For the twelve months ended December 31, 2019, our ten largest customers accounted for approximately 53% of our net sales. For the twelve months ended December 31, 2018, our ten largest customers accounted for approximately 50% of our net sales. Due to competitive issues, we have lost key customers in the past and may again in the future. Customer orders are dependent upon their markets and may be subject to delays or cancellations. As a result of dependence on our key customers, we could experience a material adverse effect on our business and results of operations if any of the following were to occur:

● the loss of any key customer, in whole or in part;

● the insolvency or bankruptcy of any key customer;

● a declining market in which customers reduce orders or demand reduced prices; or

● a strike or work stoppage at a key customer facility, which could affect both their suppliers and customers.

If any of our key customers become insolvent or file for bankruptcy, our ability to recover accounts receivable from that customer would be adversely affected and any payments we received in the preference period prior to a bankruptcy filing may be potentially forfeitable, which could adversely impact our results of operations.

Our acquisition of businesses could negatively impact our financial results.

As part of our business strategy we acquire businesses. Acquisitions involve a number of financial, accounting, managerial, operational, legal, compliance and other risks and challenges, including the following, any of which could adversely affect our business and our financial results:

● any business that we acquire could under-perform relative to our expectations and the price that we paid or not perform in accordance with our anticipated timetable, or we could fail to operate any such business profitably;

● acquisitions could cause our financial results to differ from our own or the investment community’s expectations in any given period, or over the long-term;

● pre-closing and post-closing earnings charges could adversely impact operating results in any given period, and the impact may be substantially different from period-to-period;

● acquisitions could create demands on our management, operational resources and financial and internal control systems that we are unable to effectively address;

● we could experience difficulty in integrating personnel, operations and financial and other controls and systems and retaining key employees and customers;

● we may be unable to achieve cost savings or other synergies anticipated in connection with an acquisition; or

● we may assume unknown liabilities, known contingent liabilities that become realized, known liabilities that prove greater than anticipated or internal control deficiencies from the acquired company’s activities and the realization of any of these liabilities or deficiencies may increase our expenses or adversely affect our financial position.

8

Future claims, litigation and regulatory actions could adversely affect our financial condition and our ability to conduct our business.

While we strive to ensure that our products comply with applicable government regulatory standards and internal requirements and that our products perform effectively and safely, customers from time to time could claim that our products do not meet contractual requirements, and users could be harmed by use or misuse of our products. This could give rise to breach of contract, warranty or recall claims, or claims for negligence, product liability, strict liability, personal injury or property damage. Product liability insurance coverage may not be available or adequate in all circumstances. In addition, claims may arise related to patent infringement, environmental liabilities, distributor terminations, commercial contracts, antitrust or competition law, employment law and employee benefits issues and other regulatory matters. While we have in place processes and policies to mitigate these risks and to investigate and address such claims as they arise, we cannot predict the underlying costs to defend or resolve such claims.

Our business operations could be significantly disrupted by the loss of any members of our senior management team and segment leaders.

Our success depends to a significant degree upon the continued contributions of our senior management team and segment leaders. Our senior management team has extensive marketing, sales, manufacturing, finance and engineering experience, and we believe that the depth of our management team is instrumental to our continued success. The loss of any of our key managers in the future could significantly impede our ability to successfully implement our business strategy, financial plans, expansion of services, marketing and other objectives.

A significant disruption in, or breach in security of, our information technology systems or data could adversely affect our business, reputation and results of operations.

We rely on information technology systems to process, transmit and store electronic information (including sensitive data such as confidential business information and personally identifiable data relating to employees and customers), and to manage or support a variety of critical business processes and activities (such as receiving and fulfilling orders, billing, collecting and making payments, shipping products and fulfilling contractual obligations). These systems may be damaged, disrupted or shut down due to attacks by computer hackers, computer viruses, ransomware, human error or malfeasance, power outages, hardware failures, telecommunication or utility failures, catastrophes or other unforeseen events, and in any such circumstances our system redundancy and other disaster recovery planning may be ineffective or inadequate. Security breaches could result in the misappropriation, destruction or unauthorized disclosure of confidential information or personal data belonging to us or to our employees, customers or suppliers. Our information technology systems may be exposed to computer viruses, malicious codes, unauthorized access and other cyber-attacks and we expect the sophistication and frequency of such attacks to continue to increase. Any of the attacks, breaches or other disruptions or damage described above could interrupt our operations or the operations of our customers, delay production and shipments, result in theft of our and our customers’ intellectual property and trade secrets, damage customer and employee relationships and our reputation or result in defective products, legal claims and proceedings, liability and penalties under privacy laws and increased costs for security and remediation, each of which could adversely affect our business, reputation and results of operations.

Our business is subject to a variety of domestic and international laws, rules, policies and other obligations regarding data protection.

The processing and storage of certain information is increasingly subject to privacy and data security regulations and many such regulations are country-specific. The interpretation and application of data protection laws in the U.S., Europe and elsewhere, including but not limited to the California Consumer Privacy Act and the General Data Protection Regulation (the “GDPR”), are uncertain, evolving and may be inconsistent among jurisdictions. Complying with these various laws may be difficult and could cause us to incur substantial costs or require us to change our business practices in a manner adverse to our business. We may be required to expend additional resources to continue to enhance our information privacy and security measures, investigate and remediate any information security vulnerabilities and/or comply with regulatory requirements.

Changes in foreign, cultural, political and financial market conditions could impair the Company’s operations and financial performance.

The economies of foreign countries important to the Company’s operations could suffer slower economic growth or economic, social and/or political instability or hyperinflation in the future. The Company’s international operations, including sourcing operations (and the international operations of the Company’s customers), are subject to inherent risks which could adversely affect the Company, including, among other things:

● protectionist policies restricting or impairing the manufacturing, sales or import and export of the Company’s products, including tariffs and countermeasures;

● new restrictions on access to markets;

● lack of developed infrastructure;

● inflation (including hyperinflation) or recession;

● devaluations or fluctuations in the value of currencies;

● changes in and the burdens and costs of compliance with a variety of laws and regulations, including the Foreign Corrupt Practices Act, tax laws, accounting standards, trade protection measures and import and export licensing requirements, environmental laws and occupational health and safety laws;

● social, political or economic instability;

● acts of war and terrorism;

● natural disasters or other crises;

● reduced protection of intellectual property rights; and

● increases in duties and taxation;

9

Further, on June 23, 2016, the United Kingdom held a referendum in which voters approved the withdrawal of the United Kingdom from the European Union. Because of the referendum, the British government began negotiating the terms of the United Kingdom’s future relationship with the European Union. While the European Union and United Kingdom reached an agreement on Brexit in October 2019, and the United Kingdom exited the European Union on January 31, 2020, details of the new trade and regulatory relationship are still to be finalized. There may be greater restrictions on imports and exports between the United Kingdom and European Union countries and increased regulatory complexities in the future. These changes could cause disruptions to trade and free movement of goods, services, and people to and from the United Kingdom, disruptions to the workforce or the workforce of the Company’s suppliers or business partners, increased foreign exchange volatility with respect to the British pound and additional legal, political, and economic uncertainty. The foregoing could create uncertainty surrounding the Company’s business and the business of existing and future customers and suppliers, which could increase the cost of some of the Company’s products, thereby reducing its margins. Further, the foregoing risks could have a significant adverse impact on the Company’s ability to commercialize its products on a competitive basis in international markets and may have a material adverse effect on its business, financial condition, and results of operations. The Company’s small sales volume in some countries, relative to some multinational and local competitors, could exacerbate such risks.

Should any of these risks occur, the Company’s ability to sell or export its products could be impaired; the Company could experience a loss of sales and profitability from its international operations; and/or the Company could experience a substantial impairment or loss of assets, any of which could have a material adverse impact on the Company’s business.

The elimination of or change in the London Interbank Offered Rate (LIBOR) may adversely affect the interest rates on and value of certain floating rate securities and other instruments that we hold.

LIBOR is a common benchmark interest rate (or reference rate) used to set and make adjustments to interest rates for certain floating rate securities and other financial instruments. Published reports have indicated that regulatory authorities and/or financial institutions may change how LIBOR is calculated or discontinue its calculation and publication after 2021. Alternative reference rates have been developed, including The Federal Reserve Bank of New York’s Secured Overnight Financing Rate (SOFR), but the acceptance of such alternative rates and their applicability to existing instruments is uncertain. If LIBOR ceases to exist or if the methods of calculating LIBOR change from current methods for any reason, outstanding securities with interest rates tied to LIBOR may be adversely affected if those securities either do not provide for the automatic substitution of another reference rate or convert to another reference rate or a fixed rate that could be less favorable to us. Outstanding securities and contracts that could be affected include certain preferred stocks and other floating rate securities, fixed rate securities that may convert to LIBOR-based floating rate instruments in the future, certain derivatives, and any other assets or liabilities whose value is tied to LIBOR. Any uncertainty regarding the continued use and reliability of LIBOR as a benchmark interest rate could also adversely affect the value of those instruments.

Unforeseen future events may negatively impact our economic condition.

Future events may occur that would adversely affect the reported value of our assets. Such events may include, but are not limited to, strategic decisions made in response to changes in economic and competitive conditions, the impact of the economic environment on our customer base, or a material adverse change in our relationship with significant customers.

ITEM 1B. UNRESOLVED STAFF COMMENTS.

Not Applicable.

ITEM 2. PROPERTIES.

The Company operates facilities in the United States of America as shown below:

LOCATION	SIZE	DESCRIPTION	OWNED OR LEASED
Akron, OH	100,000 Sq. Ft.	Used for design and manufacturing air handling units and administration	Leased through 2024, with renewal options extending through 2034.
Cleveland, Ohio	37,000 Sq. Ft.	Used for corporate administrative headquarters.	Owned
Ocala, Florida	7,500 Sq. Ft.	Used for the storage of hydraulic hose.	Leased, through 2023.
Painesville, Ohio	50,000 Sq. Ft.	Used for manufacturing flexible metal hose and administration.	Leased, through 2026.
Phoenix, Arizona	71,000 Sq. Ft.	Used for manufacturing and precision machining of aerospace components.	Leased through 2022, with renewal options extending through 2026.

The Company's headquarters and executive offices are located in Cleveland, Ohio. The Company's Industrial Hose segment utilizes the Painesville, Ohio and Ocala, Florida properties. The Company’s Commercial Air Handling segment utilizes the Akron, Ohio property. The Company’s Aerospace segment utilizes the Phoenix, Arizona property. 

ITEM 3. LEGAL PROCEEDINGS. 

Crawford AE LLC (dba Air Enterprises), a wholly owned subsidiary of Crawford United Corporation, was named as a defendant in a lawsuit filed in Superior Court in Quebec, Canada by Carmichael Engineering Ltd. of Quebec (“Carmichael”). Carmichael’s lawsuit seeks payment of invoices for materials and services it allegedly provided to Air Enterprises prior to the Company’s acquisition of Air Enterprises and relating to a third-party cooling system. A trial date has been set for April 2020. The Company believes the claims have been improperly brought against the Company. The Company denies the allegations and will vigorously defend the claims asserted against it. The Company cannot predict the outcome of the above matters or estimate the possible loss or range of loss, if any. Management believes that the allegations are without merit and that the ultimate resolution of these matters will not have a material adverse effect on the consolidated financial condition, results of operations or cash flow of the Company.

10

ITEM 4. MINE SAFETY DISCLOSURES. 

Not Applicable.

ITEM 4A. INFORMATION ABOUT OUR EXECUTIVE OFFICERS.*

The following is a list of the executive officers of the Company. The executive officers are elected each year and serve at the pleasure of the Board of Directors.

Mr. Brian E. Powers was elected to the Company’s Board of Directors in February 2014 and became Chairman in July 2015. He was appointed Chief Executive Officer on September 1, 2016.

Mrs. Kelly J. Marek was elected Vice President Finance and Chief Financial Officer in December 2016.

OFFICE	OFFICER	AGE
Chairman and Chief Executive Officer	Brian E. Powers	57
Vice President Finance and Chief Financial Officer	Kelly J. Marek	49

● The description of Executive Officers called for in this Item is included pursuant to the instructions to Item 401 of Regulation S-K.

PART II

ITEM 5. MARKET FOR REGISTRANT'S COMMON EQUITY, RELATED STOCKHOLDER MATTERS AND ISSUER PURCHASES OF EQUITY SECURITIES. 

a) MARKET INFORMATION

The Company’s Class A Common Shares are traded on the Over-The-Counter Pink Sheets under the symbol “CRAWA,” formerly traded on the Over-The-Counter Pink Sheets under the symbol “HICKA.” There is no market for the Company’s Class B Common Shares.

The following table sets forth the per share range of high and low bids (Over-The-Counter Pink Sheets) for the Company’s Class A Common Shares for the periods indicated. The Over-The-Counter Pink Sheet prices reflect inter-dealer prices without retail mark-up, mark-down or commissions and may not represent actual transactions. Trading on the Over-The-Counter Pink Sheets is limited and the prices quoted by brokers are not a reliable indication of the value of our common stock.

	Fiscal year ended				Fiscal year ended
	December 31, 2019				December 31, 2018
	HIGH		LOW		HIGH		LOW
First Quarter	$	14.00	$	10.00	$	10.50	$	7.75
Second Quarter		19.96		12.06		10.20		7.05
Third Quarter		20.21		14.00		13.50		8.50
Fourth Quarter		23.00		18.00		13.00		9.79

b) HOLDERS 

As of February 28, 2020, there were approximately 157 shareholders of record of the Company's outstanding Class A Common Shares and 6 holders of record of the Company's outstanding Class B Common Shares. 

11

ITEM 6. SELECTED FINANCIAL DATA.

This item is not applicable to the Company as a smaller reporting company.

12

ITEM 7. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS.

Items Affecting the Comparability of our Financial Results

Effective June 1, 2018, the Company completed the sale of certain assets comprising its Test and Measurement business segment to Hickok Waekon, LLC, an Ohio limited liability company (“Buyer”).

Effective July 1, 2018, the Company completed the acquisition of all of the issued and outstanding shares of capital stock of CAD Enterprises, Inc., (“CAD”). The results of this acquisition are reported under the Aerospace Components segment.

Effective April 19, 2019, the Company, completed the acquisition of substantially all of the assets of Data Genomix, Inc., an Ohio corporation (“DG”). DG is in the business of developing and commercializing marketing and data analytic technology applications. The results of this acquisition are reported under the Corporate and Other segment.

Accordingly, in light of the timing of these transactions, the Company’s results for the year ended on December 31, 2019 include operations in the Aerospace Components segment and operations of DG in the Corporate and Other segment, but not in the Test and Measurement segment. Conversely, our results for the year ended December 31, 2018 include operations in the Test and Measurement segment, but not in the operations of DG in the Corporate and Other segment.

Reportable Segment Information

The Company is required to report segment information disclosures based on how management evaluates operating performance and resource allocations. The Company operates three reportable business segments: (1) Aerospace Components, (2) Commercial Air Handling, (3) and Industrial Hose.  The Company operated the Test and Measurement business segment through June 1, 2018, at which time it was sold to Hickok Waekon, LLC.

Aerospace Components:

The Aerospace Components segment was added July 1, 2018, when the Company purchased all of the issued and outstanding shares of capital stock of CAD Enterprises, Inc. (“CAD”) in Phoenix, Arizona. This segment manufactures precision components primarily for customers in the aerospace industry.  This segment provides complete end-to-end engineering, machining, grinding, welding, brazing, heat treat and assembly solutions.  Utilizing state-of-the-art machining and welding technologies, this segment is an industry leader in providing complex components produced from nickel-based superalloys and stainless steels.  Our quality certifications include ISO 9001:2015/AS9100D, as well as Nadcap accreditation for Fluorescent Penetrant Inspection (FPI), Heat Treating/Braze, Non-Conventional Machining EDM, TIG/E-Beam welding.

Commercial Air Handling:
The Commercial Air Handling segment was added June 1, 2017, when the Company purchased certain assets and assumed certain liabilities of Air Enterprises Acquisition LLC in Akron, Ohio. The acquired business, which operates under the name Air Enterprises, is an industry leader in designing, manufacturing and installing large-scale commercial, institutional, and industrial custom air handling solutions. Its customers are typically in the health care, education, pharmaceutical and industrial manufacturing markets in the United States. This segment also sells to select international markets. The custom air handling units are constructed of non-corrosive aluminum, resulting in sustainable, long-lasting, and energy efficient solutions with life expectancies of 50 years or more. These products are distributed through a network of sales representatives, based on relationships with health care networks, building contractors and engineering firms. The custom air handling equipment is designed, manufactured and installed under the brand names FactoryBilt® and SiteBilt®. FactoryBilt® air handling solutions are designed, fabricated and assembled in a vertically integrated process entirely within the Akron, Ohio facility. SiteBilt® air handling solutions are designed and fabricated in Akron, but are then crated and shipped to the field and assembled on-site.

Industrial Hose: 

The Industrial Hose segment was added July 1, 2016, when the Company purchased the assets of the Federal Hose Manufacturing, LLC in Painesville, Ohio. This business segment includes the manufacture of flexible interlocking metal hoses and the distribution of silicone and hydraulic hoses. Metal hoses are sold primarily to major heavy-duty truck manufacturers and major aftermarket suppliers in North America. Metal hoses are also sold into the agricultural, industrial and petrochemical markets. Silicone hoses are distributed to a number of industries in North America, including agriculture and general industrial markets.

Test and Measurement: 

The Test and Measurement segment is the legacy business that was started in 1910 when the Company was founded, and was sold June 1, 2018. This business segment included electronic testing products designed and manufactured for the automotive and trucking industries and indicators and gauges for the locomotive and aircraft industries. The automotive diagnostic products are sold to original equipment manufacturers and to the aftermarket under several brand names and through a variety of distribution methods. In the aircraft industry, primary customers are manufacturers of commercial, military and personal airplanes. In the locomotive industry, indicators and gauges are sold to manufacturers and servicers of railroad equipment and locomotives.

13

Results of Operations

Year Ended December 31, 2019 Compared with Year ended December 31, 2018

Sales for the year ended December 31, 2019 (“current year”) increased to $89.7 million, an increase of approximately $23.3 million or 35% from sales of $66.4 million during the year ended December 31, 2018 (“prior year”). This increase in sales was primarily attributable to results from the Aerospace Components segment acquired on July 1, 2018, as well organic growth, primarily from the Commercial Air Handling segment.

Cost of sales for the current year was $70.1 million compared to $51.1 million in the prior year, an increase of $19.0 million or 37%.  Gross profit was $19.6 million in the current year compared to $15.3 million in the prior year, an increase of $4.3 million.  The increase in cost of sales and gross profit was attributable to the addition of the Aerospace Components segment and stronger performance in the Commercial Air Handling segment.

There were no product development expenditures during the current year as those expenditures historically were related to the Test and Measurement segment which was divested in June 2018. The company had $0.2 million of product and development expenditures in the prior year, which were made prior to the divestiture of the Test and Measurement business.

Selling, general and administrative expenses (SG&A) in the current year were $9.1 million, or 10% of sales, compared to $7.8 million, or 12% of sales, in the prior year. SG&A expenses increased due to higher selling expenses to support sales growth, and decreased as a percentage of sales due to the sale of the Test and Measurement segment. SG&A costs are comprised of sales and administrative salaries, commissions, professional services, intangible asset amortization, and other costs not directly associated with manufacturing of products.

Interest charges in the current year were approximately $1.1 million compared to $0.8 million in the prior year. The increase in interest expense was primarily related to the increase in weighted outstanding debt for the current year resulting from the acquisition of the Aerospace Components segment on July 1, 2018, in addition to the higher weighted average interest rate in the current year.

There was no loss on the sale of business in the current year, as compared to $1.2 million loss in the prior year. The loss on the sale of business is directly related to the sale of certain assets of the Company comprising its Test and Measurement segment on June 1, 2018.

Other expense, net was $34 thousand in the current year compared to $123 thousand of other expense, net in the prior year.  Other (income) expense, net was comprised of rental income, gains and losses on the disposal of assets, legal settlements, transaction costs and other miscellaneous charges. The decrease is primarily related to fewer merger and acquisition (“M&A”) activities compared to the prior year.

Income tax expense in the current year was $2.4 million compared to $1.7 million in the prior year. Income tax expense increased due to higher income in the current year. Tax expense is recorded at the Company’s expected effective tax rate of 26% in the current year as compared to 32% in the prior year.

Net income for the current year was $7.0 million, or $2.13 per diluted share compared to a net income of $3.6 million, or $1.14 per diluted share in the prior year.

Liquidity and Capital Resources

As described further in Note 15 to our consolidated financial statements, effective July 1, 2018, we completed the CAD acquisition for an aggregate purchase price of $21 million, $12 million of which was payable in cash at closing, with the remainder paid in the form of a subordinated promissory note issued by the Company in favor of a seller, which is subject to certain post-closing adjustments based on working capital, indebtedness and selling expenses.  In connection with that transaction, we amended our credit agreement to, among other things, increase the maximum availability under our revolving credit facility to $12 million, and to increase the amount of our term loan to $6 million. We also amended our promissory notes payable to First Francis Company Inc. (“First Francis”) to increase the interest rate payable from 4.0% to 6.25%, and to provide First Francis with the right to convert up to $648,000 principal amount of one note into shares of Class B Common shares at a conversion price of $6.48 per share, subject to shareholder approval which was obtained on May 10, 2019. Subsequently, we also amended our outstanding convertible loan with Roundball to provide Roundball LLC (“Roundball”) with the option to convert, subject to shareholder approval which was obtained on May 10, 2019, a portion of the indebtedness into Class B Common Shares at a conversion price of $1.43 per Class B Common Share, up to a maximum amount of 75,000 Class B Common Shares.

14

On July 9, 2019, First Francis exercised its option to convert $648,000 of existing indebtedness into 100,000 Class B Common Shares of the Company.

On December 11, 2019, Roundball provided notice to the Company of its exercise of the conversion option (the “Conversion Option”) with respect to amounts outstanding under the promissory note between the Company and Roundball, dated December 30, 2011, and issued in the aggregate original principal amount of $466,880 (the “Promissory Note”).  On December 18, 2019, the Company issued 75,000 Class B Shares and 251,489 shares of the Company’s Class A common stock (the “Class A Shares”) to Roundball following the Company’s receipt on December 11, 2019, of a notice from Roundball of its exercise of the Conversion Option in respect of $466,880 of the principal and interest amount outstanding under the Promissory Note between the Company and Roundball, thereupon retiring all outstanding debt incurred and accrued interest under the Promissory Note.  On December 11, 2019, Roundball exercised the warrants issued pursuant to the Warrant Agreement dated December 30, 2012 (as amended) between the Company and Roundball for 100,000 of the Company’s Class A Shares at an exercise price of $2.50 per share, resulting in an aggregate exercise price of $250,000.

On September 30, 2019, we amended our credit agreement, dated as of June 1, 2017, by and between the Company and JPMorgan Chase Bank, N.A. as lender (as amended, the “Credit Agreement”)  to, among other things, increase the maximum availability under our revolving credit facility from $12 million to $20 million, and to extend the maturity of the revolving loan from June 1, 2021 to June 1, 2024. On December 30, 2019, we amended our Credit Agreement to remove the borrowing base requirement.  Management believes the increase of the revolving credit facility and other modifications to the loan agreement provided additional flexibility to fund acquisitions, working capital and other strategic initiatives. 

Total current assets at December 31, 2019 increased to $27.0 million from $23.3 million at December 31, 2018, an increase of $3.8 million. The increase in current assets is comprised of the following: an increase in accounts receivable of $4.2 million, an increase in inventories of $2.2 million and an increase in contract assets of $0.3 million offset by a decrease in cash of $2.8 million. Fluctuations in accounts receivable and contract assets related to the Commercial Air Handling division are dependent upon progress billing milestones for contracts.

Total current liabilities at December 31, 2019 decreased to $16.3 million from $16.9 million at December 31, 2018, a decrease of $0.6 million.  Changes in current liabilities are comprised of the following: an increase of short term notes payable of $0.9 million, an increase in current leases payable of $0.8 million, an increase in accounts payable of $0.9 million, offset by a decrease in contract liabilities (included in unearned revenue on the balance sheet)  of $3.3 million and a decrease in convertible notes of $0.2 million.  The increase in leases payable is related to the adoption of the new lease accounting standard adopted January 1, 2019 as discussed in Note 1 and Note 9 of the notes to the consolidated financial statements. The increase in notes payable reflects required principal payments due in the next twelve months related to the CAD seller note. Fluctuations in contract liabilities related to the Commercial Air Handling division are dependent upon progress billing milestones for contracts.

Cash provided by operating activities in the current year was approximately $0.9 million, compared to cash provided by operating activities of $10.3 million in the same period a year ago. Cash provided by operating activities for the current year is comprised of the following: net income of $7.0 million and adjustments for non-cash items of $3.0 million, offset by cash used for working capital adjustments of $9.1 million.  The primary uses of working capital were the increase in accounts receivable of $4.2 million, the increase in inventory of $2.2 million, and the decrease in contract liability (included in unearned revenue) of $3.3 million, offset by the increase in accounts payable of $0.7 million. Fluctuations in accounts receivable and costs and estimated earnings in excess of billing related to the Commercial Air Handling division are dependent upon the timing of achievement of progress billing milestones for contracts.

Cash used in investing activities for the current year of $0.8 million, compared to cash used in investing activities of $11.7 million in prior year. Cash used in investing activities in the current year was for the purchase of DG in April 2019 and capital expenditures in the normal course of business. Cash used in investing activities in the prior year was for the purchase CAD in July 2018 and capital expenditures in the normal course of business.

Cash used in financing activities was approximately $2.9 million for the current year, compared to cash provided by financing activities of $4.0 million in the prior year. Cash used by financing activities for the current year was primarily related to: $1.6 million for payments against notes and $1.8 million for net payments against bank debt, offset by $0.3 million proceeds from the Roundball borrowing and $0.3 million from proceeds from the Roundball warrant exercise. Cash provided by financing activities for the prior year was primarily related to: $9.0 million seller note entered into in connection with the acquisition of CAD and $14.2 million borrowed against bank debt ($12.0 million directly related to the acquisition of CAD). The increases in borrowings were offset by the $9.8 million repayment against bank debt and the $0.4 million repayments for the notes.

The Company expects positive cash flow from operations to be sufficient to fund working capital needs and service principal and interest payments due related to the bank debt and notes payable. In addition, the Company had $16.2 million available to borrow on the revolving credit facility at December 31, 2019. See Note 7 of the notes to the consolidated financial statements. Management believes the Company has adequate liquidity for debt service, working capital, capital expenditures and other strategic initiatives.

15

Off-Balance Sheet Arrangements

From time to time, the Company enters into performance and payment bonds in the ordinary course of business. These bonds are secured by certain assets of the Company by the surety until the Company's completion of the requirements of the commercial air handling contract. At December 31, 2019, the Company did not have any active surety bonds for which performance and payment not been satisfied. The Company has no other off-balance sheet arrangements (as defined in Regulation S-K Item 303 paragraph (a)(4)(ii)) that have or are reasonably likely to have a material current or future effect on its financial condition, changes in financial condition, revenues or expenses, results of operations, liquidity, capital expenditures or capital resources.

Impact of Inflation

Over the past five years, inflation has had a minimal effect on the Company because of low rates of inflation.

Forward-Looking Statements

The foregoing discussion includes forward-looking statements relating to the business of the Company. Generally, these statements can be identified by the use of words such as “guidance,” “outlook,” “believes,” “estimates,” “anticipates,” “expects,” “forecasts,” “seeks,” “projects,” “intends,” “plans,” “may,” “will,” “should,” “could,” “would” and similar expressions intended to identify forward-looking statements, although not all forward-looking statements contain these identifying words. These forward-looking statements, or other statements made by the Company, are made based on management's expectations and beliefs concerning future events impacting the Company and are subject to uncertainties and factors (including, but not limited to, those specified below) which are difficult to predict and, in many instances, are beyond the control of the Company. As a result, actual results of the Company could differ materially from those expressed in or implied by any such forward-looking statements. These uncertainties and factors include (a) the Company's ability to effectively integrate acquisitions, including the acquisition of MPI Products, Inc. (dba Marine Products International), and manage the larger operations of the combined businesses, (b) the Company's dependence upon a limited number of customers and the aerospace industry, (c) the highly competitive industry in which the Company operates, which includes several competitors with greater financial resources and larger sales organizations, (d) the Company's ability to capitalize on market opportunities in certain sectors, (e) the Company's ability to obtain cost effective financing and (f) the Company's ability to satisfy obligations under its financing arrangements, and the other risks described in “Item 1A. Risk Factors” in this Annual Report on Form 10-K and the Company’s subsequent filings with the SEC. 

ITEM 7A. QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISK.

This item is not applicable to the Company as a smaller reporting company.

ITEM 8. FINANCIAL STATEMENTS AND SUPPLEMENTARY DATA. 

The following pages contain the Financial Statements and Supplementary Data as specified for Item 8 of Part II of Form 10-K.

16

REPORT OF INDEPENDENT REGISTERED PUBLIC ACCOUNTING FIRM

Shareholders and Board of Directors

Crawford United Corporation

Cleveland, Ohio

Opinion on the Financial Statements

We have audited the accompanying consolidated balance sheets of Crawford United Corporation (the "Company") as of December 31, 2019 and 2018, and the related consolidated statements of income, stockholders' equity, and cash flows, for the years then ended, and the related notes and schedules (collectively referred to as the "financial statements"). In our opinion, the consolidated financial statements present fairly, in all material respects, the financial position of the Company as of December 31, 2019 and 2018, and the results of its operations and its cash flows for the years then ended, in conformity with accounting principles generally accepted in the United States of America.

Basis for Opinion

These financial statements are the responsibility of the Company's management. Our responsibility is to express an opinion on these financial statements based on our audits. We are a public accounting firm registered with the Public Company Accounting Oversight Board (United States) ("PCAOB") and are required to be independent with respect to the Company in accordance with the U.S. federal securities laws and the applicable rules and regulations of the Securities and Exchange Commission and the PCAOB.

We conducted our audits in accordance with the standards of the PCAOB. Those standards require that we plan and perform the audits to obtain reasonable assurance about whether the financial statements are free of material misstatement, whether due to error or fraud. The Company is not required to have, nor were we engaged to perform, an audit of its internal control over financial reporting. As part of our audits we are required to obtain an understanding of internal control over financial reporting but not for the purpose of expressing an opinion on the effectiveness of the Company's internal control over financial reporting. Accordingly, we express no such opinion.

Our audits included performing procedures to assess the risks of material misstatement of the financial statements, whether due to error or fraud, and performing procedures that respond to those risks. Such procedures included examining, on a test basis, evidence regarding the amounts and disclosures in the financial statements. Our audits also included evaluating the accounting principles used and significant estimates made by management, as well as evaluating the overall presentation of the financial statements. We believe that our audits provide a reasonable basis for our opinion.

/s/ MEADEN & MOORE, LTD.

Meaden & Moore, Ltd.

We are uncertain as to the year we began servicing consecutively as the auditor of the Company’s financial statements; however, we are aware that we have been the Company’s auditor consecutively since at least 1979.

Cleveland, Ohio

March 12, 2020

17

CRAWFORD UNITED CORPORATION

CONSOLIDATED BALANCE SHEETS

ASSETS

	December 31,
	2019		2018
CURRENT ASSETS:
Cash and cash equivalents	$	2,232,499	$	5,057,626
Accounts receivable less allowance for doubtful accounts		14,001,795		9,835,262
Contract assets		2,422,379		2,083,349
Inventory less allowance for obsolete inventory		7,678,690		5,497,982
Prepaid expenses and other current assets		703,002		818,609
Total Current Assets		27,038,365		23,292,828
PROPERTY, PLANT AND EQUIPMENT:
Land and improvements		228,872		257,205
Buildings and leasehold improvements		1,837,009		1,709,165
Machinery and equipment		13,950,444		13,343,878
Total property, plant and equipment		16,016,325		15,310,248
Less accumulated depreciation		3,622,153		2,006,133
Property, Plant and Equipment, Net		12,394,172		13,304,115
Operating right of use assets, net		9,224,840		-
OTHER ASSETS:
Goodwill		9,791,745		9,582,202
Intangibles, net of accumulated amortization		3,950,838		4,332,202
Other non-current assets		88,046		95,263
Total Non-Current Other Assets		13,830,629		14,009,667
Total Assets	$	62,488,006	$	50,606,610

See accompanying notes to consolidated financial statements

18

CRAWFORD UNITED CORPORATION

CONSOLIDATED BALANCE SHEETS

LIABILITIES AND STOCKHOLDERS' EQUITY 

	December 31,
	2019			2018
CURRENT LIABILITIES:
Notes payable - current	$	2,749,459		$	1,755,663
Bank debt - current		1,333,333			1,333,333
Leases payable		850,664			13,800
Accounts payable		6,071,522			5,169,819
Unearned revenue		1,998,578			5,257,797
Accrued expenses		3,281,445			3,325,337
Total Current Liabilities		16,285,001			16,855,749
LONG-TERM LIABILITIES:
Notes payable		7,676,697			11,086,402
Bank debt		6,376,594			8,194,679
Leases payable		8,513,448			2,642
Deferred income taxes		2,207,734			1,701,653
Total Long-Term Liabilities		24,774,473			20,985,376
STOCKHOLDERS' EQUITY
Preferred 1,000,000 shares authorized, no shares outstanding
Common shares - no par value		-			-
Class A 10,000,000 shares authorized, 2,553,503 issued at December 31, 2019 and 2,161,014 issued at December 31, 2018		3,599,806			2,641,300
Class B 2,500,000 shares authorized, 954,283 shares issued at December 31, 2019 and 779,283 issued at December 31, 2018		1,465,522			710,272
Contributed capital		1,741,901			1,741,901
Treasury shares		(1,905,780	)		(1,905,780	)
Class A – 37,208 shares issued at December 31, 2019 and December 31, 2018
Class B -182,435 shares issued at December 31, 2019 and December 31, 2018
Retained earnings		16,527,083			9,577,792
Total Stockholders' Equity		21,428,532			12,765,485
Total Liabilities and Stockholders' Equity	$	62,488,006		$	50,606,610

See accompanying notes to consolidated financial statements.

19

CRAWFORD UNITED CORPORATION

CONSOLIDATED STATEMENTS OF INCOME

	Years Ended
	December 31, 2019		December 31, 2018
Total Sales	$	89,698,527	$	66,378,306
Cost of Sales		70,123,892		51,074,339
Gross Profit		19,574,635		15,303,967
Operating Expenses:
Product development costs		-		220,418
Selling, general and administrative expenses		9,063,969		7,769,090
Operating Income		10,510,666		7,314,459
Other (Income) and Expenses:
Interest charges		1,056,843		749,021
Loss on sale of business		-		1,160,574
Other (income) expense, net		34,333		123,134
Total Other (Income) and Expenses		1,091,176		2,032,729
Income before Provision for Income Taxes		9,419,490		5,281,730
Provision for Income Taxes:
Current		1,890,912		543,031
Deferred		548,715		1,124,989
Total Provision for Income Taxes		2,439,627		1,668,020
Net Income	$	6,979,863	$	3,613,710
Net Income per Common Share - Basic	$	2.45	$	1.29
Net Income per Common Share - Diluted	$	2.13	$	1.14
Weighted Average Shares of Common Stock Outstanding – Basic		2,849,239		2,799,706
Weighted Average Shares of Common Stock Outstanding - Diluted		3,277,857		3,181,572

See accompanying notes to consolidated financial statements

20

CRAWFORD UNITED CORPORATION

CONSOLIDATED STATEMENTS OF STOCKHOLDERS' EQUITY

	COMMON SHARES - NO PAR VALUE
	CLASS A		CLASS B		CONTRIBUTED CAPITAL		TREASURY SHARES			RETAINED EARNINGS			TOTAL
Balance at December 31, 2017	$	2,246,367	$	710,272	$	1,741,901	$	(264,841	)	$	5,964,082		$	10,397,781
Share-based compensation expense		394,933		-		-		-			-			394,933
Repurchase of Class B Shares		-		-		-		(1,640,939	)					(1,640,939	)
Net Income		-		-		-		-			3613,710			3,613,710
Balance at December 31, 2018	$	2,641,300	$	710,272	$	1,741,901	$	(1,905,780	)	$	9,577,792		$	12,765,485
Share-based compensation expense		348,877		-		-		-			-			348,877
Warrant exercise		250,000		-		-		-			-			250,000
Note conversion		359,629		755,250		-		-			-			1,114,879
Cumulative effect of accounting change related to lease standard		-		-		-		-			(30,572	)		(30,572	)
Net Income		-		-		-		-			6,979,863			6,979,863
Balance at December 31, 2019	$	3,599,806	$	1,465,522	$	1,741,901	$	(1,905,780	)	$	16,527,083		$	21,428,532

	COMMON SHARES ISSUED				TREASURY SHARES				COMMON SHARES OUTSTANDING
	CLASS A		CLASS B		CLASS A		CLASS B		CLASS A			CLASS B
Balance at December 31, 2017		2,130,681		779,283		15,795		667		2,114,886			778,616
Stock Awards		30,333		-		-		-		30,333			-
Repurchase of shares		-		-		21,413		181,768		(21,413	)		(181,768	)
Balance at December 31, 2018		2,161,014		779,283		37,208		182,435		2,123,806			596,848
Stock Awards		41,000		-		-		-		41,000			-
Warrant exercise		100,000		-		-		-		100,000			-
Note conversion		251,489		175,000		-		-		251,489			175,000
Balance at December 31, 2019		2,553,503		954,283		37,208		182,435		2,516,295			771,848

See accompanying notes to consolidated financial statements

21

CRAWFORD UNITED CORPORATION

CONSOLIDATED STATEMENTS OF CASH FLOW

	Years Ended
	December 31, 2019			December 31, 2018
Cash Flows from Operating Activities
Net Income	$	6,979,863		$	3,613,710
Adjustments to reconcile net income to net cash provided by operating activities:
Depreciation and amortization		2,054,721			1,606,509
Loss on disposal of assets		10,544			10,750
Loss on disposal of operations		-			1,160,574
Non-cash share-based compensation expense		348,877			394,933
Deferred income taxes		548,715			1,124,910
Changes in assets and liabilities:
Decrease (Increase) in accounts receivable		(4,164,533	)		761,496
Decrease (Increase) in inventories		(2,180,708	)		(1,681,250	)
Decrease (Increase) in contract assets		(339,030	)		(477,358	)
Decrease (Increase) in prepaid expenses & other assets		125,324			(697,202	)
Increase (Decrease) in accounts payable		747,632			1,578,467
Increase (Decrease) in accrued expenses		32,328			282,079
Increase (Decrease) in unearned revenue		(3,269,190	)		2,656,442
Total adjustments		(6,085,320	)		6,720,350
Net Cash Provided by Operating Cash Activities	$	894,543		$	10,334,060
Cash Flows from Investing Activities
Cash paid for acquisition	$	(50,001	)	$	(11,209,583	)
Capital expenditures		(746,430	)		(479,880	)
Net Cash Used in Investing Activities		(796,431	)		(11,689,463	)
Cash Flows from Financing Activities
Payments on related party notes		(1,592,298	)		(362,427	)
Borrowings on convertible notes		266,880			-
Payments on bank debt		(4,385,211	)		(9,823,106	)
Borrowings on bank debt		2,539,598			14,186,750
Payments on capital lease		(11,158	)		(32,298	)
Proceeds from options and warrants		258,950			-
Net Cash Provided by (Used in) Financing Activities		(2,923,239	)		3,968,919
Net Increase (decrease) in cash and cash equivalents		(2,825,127	)		2,613,516
Cash and cash equivalents at beginning of year		5,057,626			2,444,110
Cash and cash equivalents at end of year	$	2,232,499		$	5,057,626
Supplemental disclosures of cash flow information
Interest paid	$	949,280		$	783,739
Income taxes paid	$	1,815,482		$	205,514
Non-cash proceeds received for Class A and Class B Shares in exchange for the sale of certain assets	$	-		$	1,640,939
Non-cash seller notes issued for acquisition	$	-		$	9,000,000
Conversion of debt to equity	$	848,000		$	-

See accompanying notes to consolidated financial statements  

22

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
CRAWFORD UNITED CORPORATION
DECEMBER 31, 2019 AND 2018

1.   BASIS OF PRESENTATION

The accompanying consolidated financial statements have been prepared in accordance with generally accepted accounting principles for financial information and with the instructions to Form 10-K and Article 8 of Regulation S-X. In the opinion of management, all adjustments (consisting of normal recurring accruals) considered necessary for a fair presentation have been included.

Principles of Consolidation
The consolidated financial statements include the accounts of Crawford United and its wholly-owned domestic subsidiaries. Significant intercompany transactions and balances have been eliminated in the financial statements.

Reclassifications

Certain prior year amounts were reclassified to conform to the current year’s presentation. These reclassifications have no effect on the financial position or results of operations reported as of and for the periods presented.

2.   SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES

New Accounting Standards Adopted

In February 2016, the FASB issued ASU 2016-02 “Leases (Topic 842),” a new standard related to leases to increase transparency and comparability among organizations by requiring the recognition of lease assets and lease liabilities on the balance sheet. Most prominent among the amendments is the recognition of assets and liabilities by lessees for those leases classified as operating leases under previous U.S. GAAP. Under the new standard, disclosures are required to meet the objective of enabling users of financial statements to assess the amount, timing, and uncertainty of cash flows arising from leases. The new standard requires a modified retrospective transition for capital or operating leases existing at or entered into after the beginning of the earliest comparative period presented in the financial statements, but it does not require transition accounting for leases that expire prior to the date of initial application. The new standard was effective for fiscal years and interim periods within those years, beginning on or after December 15, 2018. The adoption of this new standard on January 1, 2019 resulted in assets of $9.7 million recorded as Operating Right of Use Assets, net, and additional lease liabilities of $9.8 million.  The Company also recorded an adjustment to retained earnings resulting from the cumulative effect of the change in accounting of ($0.1) million.  See Note 9 for further information.

23

New Accounting Standards Not Yet Adopted
In January 2017, FASB issued ASU 2017-04, "Intangibles-Goodwill and Other (Topic 350): Simplifying the Test for Goodwill Impairment." ASU 2017-04 eliminates the second step in the goodwill impairment test which requires an entity to determine the implied fair value of the reporting unit’s goodwill. Instead, an entity should perform its annual or interim goodwill impairment test by comparing the fair value of a reporting unit with its carrying value and recognize an impairment charge for the amount by which the carrying amount exceeds the reporting unit’s fair value, not to exceed the total amount of goodwill allocated to the reporting unit. The standard, which should be applied prospectively, is effective for fiscal years beginning after December 15, 2019. Early adoption is permitted. We are currently evaluating the impact of the adoption of ASU 2017-04 on our consolidated financial statements. We do not expect the adoption of this guidance to have a material impact on our consolidated financial statements.

In June 2016, the FASB issued ASU 2016-13, Financial Instruments-Credit Losses. The standard requires a financial asset (including trade receivables) measured at amortized cost basis to be presented at the net amount expected to be collected. Thus, the income statement will reflect the measurement of credit losses for newly-recognized financial assets as well as the expected increases or decreases of expected credit losses that have taken place during the period. This standard will be effective for fiscal years beginning after December 15, 2019. The Company is currently in the process of evaluating the impact of adoption of this ASU on the consolidated financial statements. We do not expect the adoption of this guidance to have a material impact on our consolidated financial statements. 

Concentration of Credit Risk
The Company sells its products and services primarily to customers in the United States of America and to a lesser extent overseas. All sales are made in U.S. dollars. The Company extends normal credit terms to its customers. For the year ended December 31, 2019, sales to three customers in the Commercial Air Handling segment were 12% of consolidated sales of the Company, while one customer in the Aerospace Components segment accounted for 29% of consolidated sales. For the year ended December 31, 2018, there were sales to one customer in the Aerospace segment that were greater than 18% of the consolidated sales of the company.

Use of Estimates in the Preparation of Financial Statements
The preparation of financial statements in conformity with generally accepted accounting principles requires management to make estimates and assumptions that may affect the reported amounts of certain assets and liabilities and disclosure of contingencies at the date of the financial statements, and the reported amounts of revenue and expenses during the reporting period. Actual results could differ from those estimates.

Fair Value of Financial Instruments
Accounting for "Financial Instruments" requires the Company to disclose estimated fair values of financial instruments. Financial instruments held by the Company include, among others, accounts receivable, accounts payable, and convertible notes payable. The carrying amounts reported in the consolidated balance sheet for assets and liabilities qualifying as financial instruments is a reasonable estimate of fair value.

Revenue Recognition
The Company recognizes revenue under ASC 606, “Revenue from Contracts with Customers”. The core principle of the revenue standard is that a company should recognize revenue to depict the transfer of promised goods or services to customers in an amount that reflects the consideration to which the company expects to be entitled in exchange for those goods or services. The Company applies the following standards and recognizes revenue when (1) it has a firm contract and the parties are committed to perform their respective obligations, (2) the product has been shipped to and accepted by the customer or the service has been provided, (3) the sales price is fixed or determinable and (4) amounts are reasonably assured of collection, including the consideration of the customer’s ability and intention to pay when the amount is due.  The Company primarily receives fixed consideration for sales of product.  The Company does not have any significant financing components as payment is received at or shortly after the point of sale. Costs incurred to obtain a contract will be expensed as incurred when the amortization period is less than a year.  Shipping and handling amounts paid by customers are included in revenue. Sales tax and other similar taxes are excluded from revenue.

Construction Contracts

The Company recognizes revenue on construction contracts over time; as performance obligations are satisfied, due to the continuous transfer of control to the customer.  The customer typically controls the work in process, as evidenced by the contract.  The Company’s construction contracts are generally accounted for as a single performance obligation, since the Company is providing a significant service of integrating components into a single project.  The Company recognizes revenue using a cost-based input method, by which actual costs incurred relative to total estimated contract costs determine, as a percentage, progress toward contract completion.  This percentage is applied to the transaction price to determine the amount of revenue to recognize.  The Company believes the cost-based input method is the best depiction of performance, because it directly measures the value of the services transferred to the customer. Revenues on uninstalled materials are recognized when control is transferred to the customer, which does not necessarily equate to when the cost is incurred.

The payment terms of the Company’s construction contracts from time to time require the customer to make advance payments as well as interim payments as work progresses.  The advance payment generally is not considered a significant financing component as the Company expect to recognize those amounts in revenue within a year of receipt as work progresses on the related performance obligation. 

Contract Estimates

Due to the nature of the Company’s performance obligations, the estimation of total revenue and cost at completion is subject to many variables and requires significant judgment. Since a significant change in one or more of these variables could affect the profitability of contracts, the Company reviews and updates contract-related estimates regularly through a review process in which the Company reviews the progress and execution of performance obligations and the estimated cost at completion.

The Company recognizes adjustments in estimated profit on contracts under the cumulative catch-up method.  Under this method, the impact of the adjustment on profit recorded to date is recognized in the period the adjustment is identified.  Revenue and profit in future periods of contract performance is recognized using the adjusted estimate.  If at any time the estimate of contract profitability indicates an anticipated loss on the contract, a provision for the entire loss is recognized in the period it is identified.

Contract Modifications

Contract modifications are routine in the performance of the Company’s contracts.  Contracts are often modified to account for changes in the contract specifications or requirements.  In most instances, contract modifications are for goods or services that are not distinct, and, therefore, are accounted for as part of the existing contract.

24

Variable Consideration

The nature of the Company’s contracts can give rise to several types of variable consideration, including claims, unpriced change orders, and liquidated damages and penalties.  The Company recognizes revenue for variable consideration when it is probable that a significant reversal in the amount of cumulative revenue recognized will not occur.  The Company estimates the amount of revenue to be recognized on variable consideration using the expected value (i.e., the sum of a probability-weighted amount) or the most likely amount method, whichever is expected to better predict the amount.

Estimates of variable consideration and determination of whether to include estimated amounts in the transaction price are based largely on assessment of legal enforceability, past performance, and all information (historical, current, and forecasted) that is reasonably available to the Company.

Cost and Expense Recognition

Contract costs include all direct labor, materials, subcontractor, and equipment costs, and those indirect costs related to contract performance, such as indirect labor, tools and supplies. For construction contracts, costs are generally recognized as incurred. 

Unearned Revenue

Unearned revenue consists of customer deposits and contract liabilities related to the Commercial Air Handling segment.

Disaggregation of  Revenue

Revenue earned over time was $51.6 million and $41.8 million for the years ended December 31, 2019 and 2018.  Revenue earned at a  point in time was $38.1 million and $24.6 million for the years ended December 31, 2019 and 2018.

Deferred Commissions

Commissions are earned based on the status of the contract. Commissions are paid upon receipt of payment for units shipped.

Product Warranties

The Company provides a warranty for its custom air handling business covering parts for 12 months from startup or 18 months from shipment, whichever comes first. The warranty reserve is maintained at a level which, in management’s judgment, is adequate to absorb potential warranties incurred. The amount of the reserve is based on management’s knowledge of the contracts and historical trends. Because of the uncertainties involved in the contracts, it is reasonably possible that management’s estimates may change in the near term. However, the amount of change that is reasonably possible cannot be precisely estimated at this time.

Product Development Costs
Product development costs, which include engineering production support for the test and measurement business segment, are expensed as incurred.

Cash and Cash Equivalents
The Company considers all highly liquid debt instruments purchased with a maturity of three months or less to be cash equivalents. From time to time the Company maintains cash balances in excess of the FDIC limits.

Accounts Receivable
The Company establishes an allowance for doubtful accounts based upon factors surrounding the credit risk of specific customers, historical trends and other information.

Inventory
Inventory is valued at the lower of cost (first-in, first-out) or net realizable value. The Company establishes reserves for excess and obsolete inventory based upon historical inventory usage trends and other information.

Property, Plant and Equipment
Property, plant and equipment are carried at cost. Maintenance and repair costs are expensed as incurred. Additions and betterments are capitalized. The depreciation policy of the Company is generally as follows:

Class	Method	Estimated Useful Lives (years)
Buildings & Improvements	Straight-line	10	to	40
Machinery and equipment	Straight-line	3	to	20
Tools and dies	Straight-line		3

Valuation of Long-Lived Assets
Long-lived assets such as property, plant and equipment and software are reviewed for impairment whenever events or changes in circumstances indicate that the carrying amount may not be recoverable. If the total of the expected future undiscounted cash flows is less than the carrying amount of the asset, a loss is recognized for the difference between the fair value and carrying value of the asset.

25

Shipping and Handling Costs
Shipping and handling costs are classified as cost of product sold.

Income Taxes
The provision for income taxes is computed on domestic financial statement income. Where transactions are included in the determination of taxable income in a different year, deferred income tax accounting is used.

The provision for income taxes is determined using the asset and liability approach of accounting for income taxes. Under this approach, deferred taxes represent the future tax consequences expected to occur when the reported amounts of assets and liabilities are recovered or paid. The provision for income taxes represents income taxes paid or payable for the current year plus any change in deferred taxes during the year. Deferred taxes result from differences between the tax basis of assets and liabilities and their reported amounts in the consolidated financial statements and are adjusted for changes in tax rates and tax laws when changes are enacted. Valuation allowances are recorded to reduce deferred tax assets when it is more likely than not that a tax benefit will not be realized.

Income per Common Share
Income per common share information is computed on the weighted average number of shares outstanding during each period.

3.    ACCOUNTS RECEIVABLE

The Company establishes an allowance for doubtful accounts based upon factors surrounding the credit risk of specific customers, historical trends and other information. The reserve for doubtful accounts was $18,325 and $35,000 at December 31, 2019 and 2018, respectively.

4.    INVENTORY

Inventory is valued at the lower of cost (first-in, first-out) or net realizable value and consist of the following:

	December 31, 2019		December 31, 2018
Raw materials and component parts	$	2,945,427	$	2,313,664
Work-in-process		2,800,699		1,209,117
Finished products		2,183,170		2,201,693
Total Inventory		7,929,296		5,724,474
Less: Inventory reserves		250,606		226,492
Net Inventory	$	7,678,690	$	5,497,982

26

5.     GOODWILL AND OTHER INTANGIBLE ASSETS

Intangible assets relate to the purchase of businesses. Goodwill represents the excess of cost over the fair value of identifiable assets acquired. Goodwill is not amortized, but is reviewed on an annual basis for impairment. Amortization of other intangible assets is calculated on a straight-line basis over periods ranging from one year to 15 years. Intangible assets consist of the following:

	December 31, 2019		December 31, 2018
Customer Intangibles	$	4,970,000	$	4,970,000
Non-Compete Agreements		200,000		200,000
Trademarks		340,000		340,000
Total Other Intangibles		5,510,000		5,510,000
Less: Accumulated Amortization		1,559,162		1,177,798
Other Intangibles, Net	$	3,950,838	$	4,332,202

Intangible amortization expense was as follows:

	December 31, 2019		December 31, 2018
Accumulated amortization at the beginning of the period	$	1,177,798	$	613,601
Amortization expense		381,364		564,197
Accumulated amortization at end of period	$	1,559,162	$	1,177,798

Intangible amortization for the next five years is as follows:

	Amortization in future periods
2020	$	379,030
2021		379,030
2022		355,697
2023		339,030
2024		339,030

 6.      PROPERTY, PLANT AND EQUIPMENT, NET

Property, plant and equipment are recorded at cost and depreciated over their useful lives. Maintenance and repair costs are expenses as incurred. Property, plant and equipment are as follows:

	December 31, 2019		December 31, 2018
Land	$	228,872	$	257,205
Buildings and Improvements		1,837,009		1,709,165
Machinery & Equipment		13,950,444		13,343,878
Total Property, Plant & Equipment		16,016,325		15,310,248
Less: Accumulated Depreciation		3,622,153		2,006,133
Property Plant & Equipment, Net	$	12,394,172	$	13,304,115

Depreciation expense and other adjustments to accumulated depreciation expense are as follows:

	December 31, 2019			December 31, 2018
Accumulated depreciation, beginning balance	$	2,006,133		$	4,242,913
Depreciation expense		1,645,829			1,042,312
Disposals		(29,809	)		(3,279,092	)
Accumulated depreciation ending balance	$	3,622,153		$	2,006,133

27

7.      BANK DEBT

The Company entered into a Credit Agreement on June 1, 2017 with JPMorgan Chase Bank, N.A. as lender, which was subsequently amended in connection with funding the acquisition of CAD Enterprises, Inc. (“CAD”) on July 5, 2018 (as amended, the “Credit Agreement”). As amended, the Credit Agreement is comprised of a revolving facility in the amount of $12,000,000, subject to a borrowing base (determined based on 80% of Eligible Accounts, plus 50% of Eligible Progress Billing Accounts, plus 50% of Eligible Inventory, minus Reserves, each as defined in the Credit Agreement) and a term A loan in the amount of $6,000,000. Outstanding borrowings on the term A loan are payable in consecutive monthly installments, which currently amount to $111,111 per month. The Credit Agreement was amended on September 30, 2019 to expand the revolving loan amount from $12,000,000 to $20,000,000, subject to a borrowing base, and to extend the maturity of revolving facility from June 1, 2021 to June 1, 2024. The Credit Agreement was amended on December 30, 2019 to eliminate the borrowing base.

The revolving facility under the Credit Agreement includes a $3 million sublimit for the issuance of letters of credit thereunder.  [The Credit Agreement also provides for a separate credit line for borrowings of up to an aggregate of $1,000,000 for capital expenditures until July 5, 2019, at which time any outstanding capital expenditure borrowings will be converted into a term loan maturing at the earlier of five years after such conversion or the termination of the revolving credit facility.]²  The Company did not borrow from this credit line prior to its expiration. Interest for borrowings under the revolving facility accrues at a per annum rate equal to Prime Rate or LIBOR plus applicable margins of (i) (0.25%) for Prime Rate loans and (ii) 1.75% for LIBOR loans. The maturity date of the revolving facility is June 1, 2024. Interest for borrowings under the term A loan accrues at a per annum rate equal to Prime Rate or LIBOR plus applicable margins of (i) 0.25% for Prime Rate loans and (ii) 2.25% for LIBOR loans. The maturity date of the term A loan is December 1, 2022. The Credit Agreement includes a commitment fee on the unused portion of the revolving facility of 0.25% per annum payable quarterly. The obligations of the Company and other borrowers under the Credit Agreement are secured by a blanket lien on all the assets of the Company and its subsidiaries. The Credit Agreement also includes customary representations and warranties and applicable reporting requirements and covenants. The financial covenants under the Credit Agreement include a minimum fixed charge coverage ratio, a maximum senior funded debt to EBITDA ratio and a maximum total funded debt to EBITDA ratio.

Bank debt balances consist of the following:

	December 31, 2019		December 31, 2018
Term Debt	$	4,111,111	$	5,444,444
Revolving Debt		3,722,995		4,184,158
Total Bank Debt		7,834,106		9,628,602
Less: Current Portion		1,333,333		1,333,333
Non-Current Bank Debt		6,500,773		8,295,269
Less: Unamortized Debt Costs		124,179		100,590
Net Non-Current Bank Debt	$	6,376,594	$	8,194,679

Minimum principal payments due on the term loan until maturity are:

	Term Loan
2020	$	1,333,333
2021		1,333,333
2022		1,444,445
Total principal payments	$	4,111,111

The Company had $16.3 million and $7.8 million available to borrow on the revolving credit facility at December 31, 2019 and 2018, respectively.  

28

8.     NOTES PAYABLE

Convertible Notes Payable

On December 30, 2011, management entered into a Convertible Loan Agreement (“Convertible Loan”) with Roundball, LLC (“Roundball”). The Convertible Loan provides approximately $467,000 of liquidity to meet on- going working capital requirements of the Company and allows $250,000 of borrowing on the agreement at the Company's discretion at an interest rate of 0.25%. Roundball, a major shareholder of the Company, is an affiliate of Steven Rosen and Matthew Crawford, Directors of the Company.

There have been several amendments to the original agreement over the years for the purpose of extending the existing terms of the Convertible Loan. On December 29, 2018, management entered into Amendment No. 7 of the Convertible Loan Agreement with Roundball. The amended Convertible Loan:

● Continues to provide approximately $467,000 of liquidity to meet on going working capital requirements;

● Continues to allow $250,000 of borrowing on the agreement at the Company's discretion at an interest rate of 0.34%;

● Expand the rights available to Roundball under the Roundball Option to include the option, exercisable by Roundball in its sole discretion, and subject to requisite shareholder approval thereof and the terms and conditions set forth therein, to purchase up to 75,000 shares of Class B Common Stock of the Company at the Conversion Price; and

● Extends the due date of the loan agreement from December 30, 2018 to December 30, 2019.

As part of the Convertible Loan, the parties entered into a Warrant Agreement, dated December 30, 2012 (as amended to date, the “Warrant Agreement”), whereby the Company issued a warrant to Roundball to purchase, at its option, up to 100,000 shares of Class A Common Stock of the Company at an exercise price of $2.50 per share, subject to certain anti-dilution and other adjustments. The Warrant Agreement, as amended, expired December 30, 2019.

On December 11, 2019, Roundball provided notice to the Company of its exercise of the Conversion Option and exercised the Warrants.  On December 18, 2019, the Company issued 75,000 Class B Shares and 251,489 shares of the Company’s Class A common stock (the “Class A Shares”) to Roundball following the Company’s receipt on December 11, 2019, of a notice from Roundball of its exercise of the Conversion Option in respect of $466,880 of the principal and interest amount outstanding under the Promissory Note between the Company and Roundball, thereupon retiring all outstanding debt incurred and accrued interest under the Promissory Note.

On December 11, 2019, Roundball exercised the Warrants for 100,000 of the Company’s Class A Shares at an exercise price of $2.50 per share, resulting in an aggregate exercise price of $250,000.

The outstanding balance on the Convertible Loan as of December 31, 2019 and 2018, respectively was $0 and $200,000.

 Notes Payable – Related Party

The Company has two separate outstanding promissory notes with First Francis Company Inc. (“First Francis”), which were originally issued in July 2016 in connection with the acquisition of Federal Hose Manufacturing (“Federal Hose”) and which were amended in July 2018 in connection with acquisition of CAD. The first promissory note was issued with original principal in the amount of $2,000,000, and the second was issued with original principal in the amount of $2,768,662. The promissory notes each have an interest rate of 6.25% per annum, which was increased from 4.0% per annum as part of the July 2018 amendments to the Credit Agreement. In addition, the promissory note with original principal amount of $2,768,662 was amended in July 2018 to provide for a conversion option commencing July 5, 2019 which allows First Francis to convert the promissory note, in whole in part with respect to a maximum amount of $648,000, into shares of the Company’s Class B common stock at the price of $6.48 per share (subject to adjustment), subject to shareholder approval which was obtained on May 10, 2019.  On July 9, 2019, First Francis exercised its option to convert $648,000 of existing indebtedness into 100,000 Class B Common Shares of the Company. First Francis is owned by Matthew Crawford, who serves on the Board of Directors of the Company, and Edward Crawford, who served on the Board of Directors of the Company until June 17, 2019.  

Notes Payable – Seller Note

Effective July 1, 2018, the Company completed the acquisition of all of the issued and outstanding shares of capital stock of CAD.  Upon the closing of the transaction, the CAD shares were transferred and assigned to the Company in consideration of the payment by the Company of an aggregate purchase price of $21 million, $12 million of which was payable in cash at closing, with the remainder paid in the form of a subordinated promissory note issued by the Company in favor of a Seller (the “Seller Note), which is subject to certain post-closing adjustments based on working capital, indebtedness and selling expenses, as specified in the Share Purchase Agreement entered into in connection with the acquisition (the “Share Purchase Agreement”).   The Seller Note bears interest at a rate of four percent (4%) per annum and is payable in full no later than June 30, 2023 (the “Maturity Date”).  The Maturity Date, with respect to any then-outstanding portion of the original principal amount which is subject to an indemnification claim by the Company (asserted in accordance with the terms of the Share Purchase Agreement) pending as of the date thereof, will be automatically extended until such time as any claim relating to such disputed amount is no longer pending, pursuant to the terms of the Seller Note and subject to additional conditions set forth therein and in the Share Purchase Agreement. The Company is not permitted to prepay any amounts due and owing under the Seller Note.  Payment of the Seller Note is secured by a second-priority security interest in the assets of the Company.   Interest accrued on the original principal amount becomes due and payable in arrears beginning September 30, 2018, and subsequent interest is due on the first day of each calendar quarter thereafter up to and including June 30, 2019.  The Company is required to make quarterly principal payments, the amount of which will be calculated based on a four (4) year amortization schedule, beginning on September 30, 2019 and continuing on the last day of each calendar quarter thereafter up to and including the Maturity Date.

29

Notes Payable

Notes payable consist of the following:

	December 31, 2019		December 31, 2018
In connection with the Federal Hose acquisition, the Company entered into a promissory note on July 1, 2016 for a $2,000,000 loan due to First Francis Company, payable in quarterly installments beginning on October 31, 2016.	$	1,302,776	$	1,485,061
In connection with the Federal Hose acquisition, the Company entered into a promissory note on July 1, 2016 for a $2,768,662 loan due to First Francis Company, payable in quarterly installments beginning on October 31, 2016.		1,248,380		2,157,004
In connection with the CAD acquisition, the Company entered into a promissory note on July 1, 2018 for a $9,000,000 loan due to the Loudermilks, payable in quarterly installments beginning September 30, 2018.		7,875,000		9,000,000
Total notes payable		10,426,156		12,642,065
Less current portion		2,749,459		1,555,663
Notes payable – non-current portion	$	7,676,697	$	11,086,402

Principal payments on the notes payable are as follows for the years ended December 31:

	Related Party Notes		Seller Note
2020	$	499,459	$	2,250,000
2021		533,479		2,250,000
2022		1,518,218		2,250,000
2023		-		1,125,000
2024		-		-
Total principal payments	$	2,551,156	$	7,875,000

9.     LEASES 

On January 1, 2019, the Company adopted ASU 2016-02 “Leases (Topic 842),” a new standard related to leases to increase transparency and comparability among organizations by requiring the recognition of lease assets and lease liabilities on the balance sheet. Most prominent among the amendments is the recognition of assets and liabilities by lessees for those leases classified as operating leases under previous U.S. GAAP.

The Company has operating leases for facilities, vehicles and equipment. These leases have remaining terms of 2 years to 15 years, some of which include options to extended the leases for up to 10 years.  Lease expense for the year ended December 31, 2019 was approximately $1.6 million.  Lease expense for operating leases under the prior leasing standards for the year ended December 31, 2018 was approximately $1.3 million.

Supplemental balance sheet information related to leases:

	December 31, 2019
Operating leases:
Operating lease right-of-use assets	$	9,224,840
Other current liabilities		850,664
Operating lease liabilities		8,513,448
Total operating lease liabilities	$	9,364,112
Weighted Average Remaining Lease Term
Operating Leases (in years)		11.0
Weighted Average Discount Rate
Operating Leases		5.0	%

30

Future minimum lease payments at December 31, 2019 were as follows:

	Operating Leases
Year Ending December 31,
2020	$	1,301,166
2021		1,269,036
2022		1,271,491
2023		1,268,341
2024		1,285,820
Thereafter		5,601,342
Total future minimum lease payments	$	11,997,169
Less: imputed interest		(2,633,084	)
Total	$	9,364,112

Commitments and Contingencies
From time to time, the Company is involved in legal matters arising in the ordinary course of business. While the Company believes that such matters are currently not material, there can be no assurance that matters arising in the ordinary course of business for which the Company is, or could be, involved in litigation, will not have an adverse effect on its business, financial condition or results of operations. 

10. SHAREHOLDERS’ EQUITY

There are 10,000,000 Class A Shares and 2,500,000 Class B Shares authorized, as well as 1,000,000 Serial Preferred Shares.

Unissued shares of Class A common stock (1,045,848 and 832,233 shares at December 31, 2019 and 2018, respectively) are reserved for the share-for-share conversion rights of the Class B common stock, stock options under the Directors Plans, conversion rights of the Convertible Promissory Note and available warrants. The Class A shares have one vote per share and the Class B shares have three votes per share, except under certain circumstances such as voting on voluntary liquidation, sale of substantially all the assets, etc. Dividends up to $0.10 per year, noncumulative, must be paid on Class A shares before any dividends are paid on Class B shares.

11. STOCK COMPENSATION 

The Company's 2013 Omnibus Equity Plan (the “Plan”) was approved and adopted by an affirmative vote of a majority of the Company's Class A and Class B Shareholders and provides for the grant of the following types of incentive awards: stock options, stock appreciation rights, restricted shares, restricted share units, performance shares and Class A Common Shares. Those who will be eligible for awards under the Plan include employees who provide services to the Company and its affiliates, executive officers, non-employee Directors and consultants designated by the Compensation Committee. Under the Plan, 150,000 Class A Common Shares were initially reserved for issuance. The Plan was materially revised in 2019 to increase the maximum number of the Company’s Class A Common Shares, without par value, available for issuance to 400,000, providing an additional 250,000 Class A Common Shares under the Plan. This change to the Plan was approved in connection with the Company’s 2019 Annual Meeting of Shareholders. The Class A Common Shares may be either authorized, but unissued, common shares or treasury shares. The Company granted 12,000 and 30,333 restricted stock awards under the Plan during the fiscal years ended December 31, 2019 and December 31, 2018, respectively. Approximately 274,000 Class A Common Shares remain available for issuance under the Plan.

The Company's expired Outside Directors Stock Option Plans (collectively the "Directors Plans"), provided for the automatic grant of options to purchase up to 5,000 shares of Class A Common Stock over a three-year period to members of the Board of Directors who were not employees of the Company, at the fair market value on the date of grant. The options are exercisable for up to 10 years. All options granted under the Directors Plans became fully exercisable on March 8, 2015.

Non-cash compensation expense related to stock option plans was $348,877 and $394,933 for the years ended December 31, 2019 and December 31, 2018, respectively. 

31

12. INCOME TAXES 

A reconciliation of the provision of income taxes to the statutory federal income tax rate is as follows:

	Year			Year
	December 31, 2019			December 31, 2018
Income Before Provision for Income Taxes	$	9,419,490		$	5,281,730
Statutory rate		21	%		21	%
Tax at statutory rate		1,978,092			1,109,163
State taxes, net of federal benefit		551,179			79,165
Permanent differences		23,889			196,142
Return to Provision Adjustments and Other		(113,533	)		283,550
Provision for income taxes	$	2,439,627		$	1,668,020

Deferred tax assets (liabilities) consist of the following: 

	December 31, 2019			December 31, 2018
Inventories	$	164,768		$	145,844
Bad debts		4,659			8,773
Accrued liabilities		279,508			281,475
Prepaid expense		(116,524	)		(95,371	)
Depreciation and amortization		(2,798,040	)		(2,928,232	)
Research and development and other credit carryforwards		556,387			1,266,043
Right of use lease accounting		(19,600	)		-
Directors stock option plan		163,427			62,134
Total deferred tax liability		(1,765,415	)		(1,259,334	)
Valuation allowance		(47,319	)		(47,319	)
Reserve for uncertain tax positions		(395,000	)		(395,000	)
Total reserves & allowances		(442,319	)		(442,319	)
Net deferred tax liability, net of reserves	$	(2,207,734	)	$	(1,701,653	)

Valuation Allowance
The Company has a valuation allowance for deferred tax assets based upon certain credits that may not be fully utilized in the future. The Company believes the valuation allowance of $47 thousand at December 31, 2019 and 2018, respectively, is adequate.

Reserve for Uncertain Tax Positions
The Company has a reserve of unrecognized tax benefits related to exposures in accordance with ASC 740. The Company believes the valuation allowance of $0.4 million at December 31, 2019 and 2018, respectively, is adequate. Due to the uncertainties involved with this significant estimate, it is reasonably possible that the Company’s estimate may change in the near term.
 

32

Tax Credits and Net Operating losses:

At December 31, 2019, the Company has state net operating losses (NOLs) and research and development (R&D) and other credit carryforwards for tax purposes which expire as follows: 

Tax Year Expires	State NOLs		R& D & Other Credits
2020		-		3,000
2021		-		3,000
2022		-		3,000
2023		-		3,000
2024		-		3,000
2025		-		3,000
2026		-		72,216
2027		-		152,732
2028		-		68,676
2029		191,519		31,081
2030		414,231		44,712
2031		641,229		59,085
2032		-		71,062
2033		532,837		73,198
2034		285,607		76,429
2035		-		73,315
2036 and beyond		-		-
	$	2,065,423	$	740,506

13.     EARNINGS PER COMMON SHARE 

The following table sets forth the computation of basic and diluted earnings per share.

	Years Ended
	2019		2018
Net Income Per Common Share - Basic
Income available to common stockholders	$	6,979,863	$	3,613,710
Weighted Average Shares of Common Stock Outstanding		2,849,239		2,799,706
Net Income Per Common Share - Basic	$	2.45	$	1.29
Effect of Dilutive Securities
Weighted Average Shares of Common Stock Outstanding - Basic		2,849,239		2,799,706
Options and warrants under convertible note		428,618		381,866
Weighted Average Shares of Common Stock Outstanding - Diluted		3,277,857		3,181,572
Net Income Per Common Share – Diluted
Income available to common stockholders	$	6,979,863	$	3,613,710
Weighted Average Shares of Common Stock Outstanding - Diluted		3,277,857		3,181,572
Net Income Per Common Share - Diluted	$	2.13	$	1.14

Included in the computation of diluted earnings per for fiscal ended December 31, 2019 and December 31, 2018 were options, warrants and underlying shares related to the convertible notes. 

14.     EMPLOYEE BENEFIT PLANS 

The Company has a 401(k) Savings and Retirement Plans covering all full-time employees, except for employees of CAD Enterprises, Inc. (“CAD”). The employees of CAD are covered by a separate 401(k) Savings and Retirement Plan that was in place at the time of acquisition July 1, 2018. Company contributions for each of these plans, including matching of employee contributions, are at the Company's discretion.

For the years ended December 31, 2019 and December 31, 2018, the Company made matching contributions to the plans in the amount of $315,090 and $183,996 respectively. The Company does not provide any other postretirement benefits to its employees.

33

15.  ACQUISITIONS

Effective July 1, 2018, the Company completed the acquisition of all of the issued and outstanding shares of capital stock of CAD Enterprises, Inc., pursuant to the Share Purchase Agreement. Upon the closing of the transaction, the acquired shares were transferred and assigned to the Company in consideration of the payment by the Company of an aggregate purchase price of $21 million, $12 million of which was payable in cash at closing, with the remainder paid in the form of the Seller Note, which is subject to certain post-closing adjustments based on working capital, indebtedness and selling expenses, as specified in the Share Purchase Agreement. 

CAD manufactures high end components for the aerospace industry and has one operating location in Phoenix, Arizona. The purchase price was assigned to the book value of the net assets acquired with the excess over the book value assigned to intangible assets and goodwill and has been allocated to the following accounts:

Cash	$	790,417
Accounts Receivable		2,221,635
Inventory		2,098,732
Fixed Assets		10,867,500
Prepaid and Other Assets		35,264
Intangibles Assets		3,000,000
Goodwill		7,326,289
Total Assets Acquired	$	26,339,837
Accounts Payable	$	1,846,247
Accrued Payroll and related expenses		224,139
Accrued Expense		518,816
Deferred Income Taxes		2,750,635
Total Liabilities Assumed	$	5,339,837
Net Assets Acquired	$	21,000,000

On April 19, 2019, the Company, completed the acquisition of substantially all of the assets of Data Genomix, Inc., an Ohio corporation (“DG”), pursuant to the terms of an Asset Purchase Agreement (the “Asset Purchase Agreement”) entered into by and between Hickok Operating LLC, an Ohio limited liability company and wholly-owned subsidiary of the Company (“Hickok Operating”), and DG on the date thereof. DG is in the business of developing and commercializing marketing and data analytic technology applications, which applications include, but are not limited to topplr, anglrjobs, anglrlegal and anglrads.

Acquisition related costs are included in Other Expense, Net in the consolidated statements of income. Acquisition related costs were $74,117 and $268,607 for the years ended December 31, 2019 and December 31, 2018, respectively. Also, see Note 7, Bank Debt and Note 8, Notes Payable regarding further information regarding the acquisitions and the loan agreements and notes issued in connection with such acquisitions.

16. DISPOSITIONS  

Effective June 1, 2018, the Company completed the sale (the “Sale”) of certain assets comprising its Test and Measurement business segment (the “Test and Measurement Segment”) to Hickok Waekon, LLC, an Ohio limited liability company (“Buyer”), pursuant to an Asset Purchase Agreement (the “Purchase Agreement”) by and among Buyer, the Company, Supreme Electronics Corp., a Mississippi corporation and wholly-owned subsidiary of the Company (“Supreme”), Waekon Corporation, an Ohio corporation and wholly-owned subsidiary of the Company (“Waekon Corporation”), and Robert L. Bauman, who was a director of the Company. Prior to the effectiveness of the Sale, Supreme and Waekon Corporation owned certain of the assets used in the operation of the Test and Measurement Segment and were primarily responsible for the operation thereof.

Upon the closing of the Sale, all of the issued and outstanding shares of capital stock of the Company then-owned, directly or indirectly, by Mr. Bauman or his affiliate, equaling approximately 21,413 shares of Class A Common Stock of the Company and 176,768 shares of Class B Common Stock of the Company, were transferred and assigned to the Company. The shares constituted the consideration received by the Company in the Sale.  Based upon the share price at closing, the value of the proceeds received was approximately $1.6 million.  The net assets sold were approximately $2.7 million.  The Company recorded a loss on sale of approximately $1.2 million.

  
17. SEGMENT AND RELATED INFORMATION  

The Company operates three reportable business segments: (1) Aerospace Components, (2) Commercial Air Handling, (3) and Industrial Hose.  The Company operated the Test and Measurement business segment through June 1, 2018, at which time it was sold to Hickok Waekon, LLC. The Company's management evaluates segment performance based primarily on operating income. Certain corporate costs are allocated to the segments and interest expense directly related to financing the acquisition of a business is allocated to that segment, respectively.  Intangible assets are allocated to each segment and the related amortization of these assets are recorded in selling, general and administrative expenses.

34

Aerospace Components:
The Aerospace Components segment was added July 1, 2018, when the Company purchased all of the issued and outstanding shares of capital stock of CAD Enterprises, Inc. (“CAD”) in Phoenix, Arizona. This segment manufactures precision components primarily for customers in the aerospace industry.  This segment provides complete end-to-end engineering, machining, grinding, welding, brazing, heat treat and assembly solutions.  Utilizing state-of-the-art machining and welding technologies, this segment is an industry leader in providing complex components produced from nickel-based superalloys and stainless steels.  Our quality certifications include ISO 9001:2015/AS9100D, as well as Nadcap accreditation for Fluorescent Penetrant Inspection (FPI), Heat Treating/Braze, Non-Conventional Machining EDM, TIG/E-Beam welding.

Commercial Air Handling:
The Commercial Air Handling segment was added June 1, 2017, when the Company purchased certain assets and assumed certain liabilities of Air Enterprises Acquisition LLC in Akron, Ohio. The acquired business, which operates under the name Air Enterprises, is an industry leader in designing, manufacturing and installing large-scale commercial, institutional, and industrial custom air handling solutions. Its customers are typically in the health care, education, pharmaceutical and industrial manufacturing markets in the United States. This segment also sells to select international markets. The custom air handling units are constructed of non-corrosive aluminum, resulting in sustainable, long-lasting, and energy efficient solutions with life expectancies of 50 years or more. These products are distributed through a network of sales representatives, based on relationships with health care networks, building contractors and engineering firms. The custom air handling equipment is designed, manufactured and installed under the brand names FactoryBilt® and SiteBilt®. FactoryBilt® air handling solutions are designed, fabricated and assembled in a vertically integrated process entirely within the Akron, Ohio facility. SiteBilt® air handling solutions are designed and fabricated in Akron, but are then crated and shipped to the field and assembled on-site.

Industrial Hose: 

The Industrial Hose segment was added July 1, 2016, when the Company purchased the assets of the Federal Hose Manufacturing, LLC in Painesville, Ohio. This business segment includes the manufacture of flexible interlocking metal hoses and the distribution of silicone and hydraulic hoses. Metal hoses are sold primarily to major heavy-duty truck manufacturers and major aftermarket suppliers in North America. Metal hoses are also sold into the agricultural, industrial and petrochemical markets. Silicone hoses are distributed to a number of industries in North America, including agriculture and general industrial markets.

Test and Measurement: 

The Test and Measurement segment is the legacy business that was started in 1910 when the Company was founded, and was sold June 1, 2018. This business segment included electronic testing products designed and manufactured for the automotive and trucking industries and included indicators and gauges for the locomotive and aircraft industries. The automotive diagnostic products are sold to original equipment manufacturers and to the aftermarket under several brand names and through a variety of distribution methods. In the aircraft industry, primary customers are manufacturers of commercial, military and personal airplanes. In the locomotive industry, indicators and gauges are sold to manufacturers and servicers of railroad equipment and locomotives.

Corporate and Other: 

Corporate costs not allocated to the three primary business segments are aggregated with the results of DG, acquired in April 2019.

	Year Ended December 31, 2019
	Commercial Air Handling		Aerospace Components		Industrial Hose		Corporate and Other			Consolidated
Sales	$	51,564,344	$	30,126,438	$	7,171,164	$	836,581		$	89,698,527
Gross Profit		12,350,412		5,015,003		1,970,149		239,071			19,574,635
Operating Income		7,141,097		2,876,304		859,114		(365,849	)		10,510,666
Pretax Income		7,140,398		2,073,239		635,995		(430,142	)		9,419,490
Net Income		5,291,035		1,536,270		471,272		(318,714	)		6,979,863

	Year Ended December 31, 2018
	Commercial Air Handling		Aerospace Components		Industrial Hose		Corporate and Other			Consolidated
Sales		41,833,444		14,397,557		6,942,886		3,204,419			66,378,306
Gross Profit		11,046,113		1,653,123		1,813,752		790,979			15,303,967
Operating Income		6,409,687		807,860		820,881		(723,969	)		7,314,459
Pretax Income		6,328,158		630,966		619,909		(2,297,303	)		5,281,730
Net Income		4,746,119		473,225		464,461		(2,070,095	)		3,613,710

35

Geographical Information
Included in the consolidated financial statements are the following amounts related to geographic locations:

	Year Ended December 31, 2019		Year Ended December 31, 2018
United States of America	$	89,370,005	$	64,874,554
Canada		283,011		351,211
China		23,134		-
Mexico		-		53,246
Poland		1,750		10,299
Peru		12,202		-
Other		8,425		1,088,996
	$	89,698,527	$	66,378,306

All export sales to foreign countries are made in US Dollars.

18. QUARTERLY DATA (UNAUDITED)

The following table presents the Company’s unaudited quarterly consolidated income statement data for the years ended December 31, 2019 and 2018. These quarterly results include all adjustments consisting of normal recurring adjustments that the Company considers necessary for the fair presentation for the quarters presented and are not necessarily indicative of the operating results for any future period.

	Year Ended December 31, 2019
	March 31,		June 30,		September 30,		December 31,
	2019		2019		2019		2019
Sales	$	21,836,087	$	24,514,636	$	22,244,681	$	21,103,124
Gross Profit		4,829,888		5,226,933		4,987,563		4,530,251
Operating Income		2,571,071		2,791,553		2,558,779		2,589,263
Net Income		1,745,458		1,831,479		1,694,868		1,708,058
Net Income per Common Share:
Basic	$	0.63	$	0.66	$	0.59	$	0.58
Diluted	$	0.55	$	0.57	$	0.52	$	0.51

	Year Ended December 31, 2018
	March 31,		June 30,		September 30,		December 31,
	2018		2018		2018		2018
Sales	$	11,878,700	$	13,593,192	$	19,771,137	$	21,135,277
Gross Profit		3,018,441		3,486,578		4,450,389		4,348,726
Operating Income		643,085		1,816,945		2,471,279		2,383,150
Net Income		373,752		394,625		1,497,079		1,348,254
Net Income per Common Share:
Basic	$	0.13	$	0.14	$	0.55	$	0.50
Diluted	$	0.11	$	0.13	$	0.48	$	0.43

19. SUBSEQUENT EVENTS

Effective January 2, 2020, the Company, completed the acquisition (the “Transaction”) of substantially all of the assets (the “Assets”) of MPI Products, Inc. (dba Marine Products International), an Ohio corporation and supplier of marine hose and marine accessories to boat builders and distributors (the “Seller”), pursuant to an Asset Purchase Agreement (the “Asset Purchase Agreement”) entered into as of January 1, 2020 by and among the Company, the Seller, the seller parties named therein (the “Seller Parties”) and the Seller Parties’ representative named therein (the “Sellers’ Representative”). Upon the closing of the Transaction, the Assets were transferred and assigned to the Company in consideration of the payment by the Company of an aggregate purchase price of $9.4 million, payable at closing, which is subject to certain post-closing adjustments based on working capital, indebtedness and selling expenses, as specified in the Asset Purchase Agreement, plus the assumption of specified liabilities of the Seller.

36

ITEM 9. CHANGES IN AND DISAGREEMENTS WITH ACCOUNTANTS ON ACCOUNTING AND FINANCIAL DISCLOSURE. 

None.

ITEM 9A. CONTROLS AND PROCEDURES.

As of December 31, 2019, an evaluation was performed, under the supervision and with the participation of the Company's management, including the Company's Chief Executive Officer along with the Company's Vice President, Finance and Chief Financial Officer, of the effectiveness of the design and operation of the Company's disclosure controls and procedures. Based upon that evaluation, the Company's management, including the Chief Executive Officer along with the Company's Vice President, Finance and Chief Financial Officer, concluded that the Company's disclosure controls and procedures as defined in Rules 13a-15(e) and 15d-15(e) under the Securities Exchange Act of 1934, as amended ("Exchange Act") were effective as of December 31, 2018 to ensure that information required to be disclosed by the Company in reports that it files and submits under the Exchange Act is (1) recorded, processed, summarized and reported, within the time periods specified in the Commission's rules and forms, and (2) is accumulated and communicated to the Company's management, including its principal executive and principal financial officer, as appropriate to allow timely decisions regarding required disclosure. There were no changes in the Company's internal controls over financial reporting during the quarter ended December 31, 2019 that have materially affected, or are reasonably likely to materially affect the Company's internal control over financial reporting.

The Company's internal control over financial reporting is designed to provide reasonable assurance regarding the reliability of financial reporting and the preparation of financial statements for external reporting purposes in accordance with generally accepted accounting principles. The Company's internal control over financial reporting includes policies and procedures that (1) pertain to maintaining records that, in reasonable detail, accurately and fairly reflect the transactions and dispositions of the Company assets, (2) provide reasonable assurance that transactions are recorded as necessary to permit preparation of financial statements in accordance with generally accepted accounting principles, and that the Company's receipts and expenditures are being made only in accordance with authorization of the Company's management and directors, and (3) provide reasonable assurance regarding prevention or the timely detection of unauthorized acquisition, use or disposal of the company's assets that could have a material effect on the financial statements.

Management, including the Company's Chief Executive Officer along with the Company's Vice President, Finance and Chief Financial Officer, does not expect that the Company's internal controls will prevent or detect all errors and all fraud. An internal control system no matter how well designed and operated can provide only reasonable, not absolute, assurance that the objectives of the system are met. Further, the design of a control system must reflect the fact that there are resource constraints, and the benefits of controls must be considered relative to their costs. Because of the inherent limitations in all control systems, no evaluation of controls can provide absolute assurance that all control issues and instances of fraud, if any, within the Company have been detected. These inherent limitations include the realities that judgments in decision-making can be faulty, and that breakdowns can occur because of a simple error or mistake. Additionally, controls can be circumvented by the individual acts of some persons, collusion of two or more people, or by management override of the control. Also, any evaluation of the effectiveness of controls in future periods are subject to the risk that those internal controls may become inadequate because of changes in business conditions, or that the degree of compliance with the policies or procedures may deteriorate.

37

MANAGEMENT'S REPORT ON INTERNAL CONTROL OVER FINANCIAL REPORTING

The management of Crawford United is responsible for establishing and maintaining adequate internal control over financial reporting, as such term is defined in rules 13a-15(f) and 15d-15(f) of the Securities Exchange Act of 1934, as amended. Under the supervision and with the participation of management, including the Company's Chief Executive Officer along with the Company's Vice President, Finance and Chief Financial Officer, we conducted an evaluation of the effectiveness of the Company's internal control over financial reporting as of December 31, 2019, as required by Rule 13a-15(c) of the Securities Exchange Act of 1934, as amended. In making this assessment, we used the criteria set forth in the framework in Internal Control-Integrated Framework (1992) for Small Public Companies issued by the Committee of Sponsoring Organizations of the Treadway Commission. Based on our evaluation under the framework in Internal Control-Integrated Framework for Small Public Companies, our management concluded that our internal control over financial reporting was effective as of December 31, 2019.

This annual report does not include an attestation report of the Company's registered public accounting firm regarding internal control over financial reporting. Management's report was not subject to attestation by the Company's registered public accounting firm pursuant to rules of the Securities and Exchange Commission that permit the Company to provide only management's report in this annual report.

/s/ B. E. Powers

B. E. Powers
Chief Executive Officer

/s/ K. J. Marek

K. J. Marek
Chief Financial Officer

March 13, 2020

38

ITEM 9B. OTHER INFORMATION.

None.

PART III

ITEM 10. DIRECTORS, EXECUTIVE OFFICERS AND CORPORATE GOVERNANCE. 

Information required by this Item as to the Audit Committee, the Audit Committee financial expert, the procedures for recommending nominees to the Board of Directors and compliance with Section 16(a) of the Exchange Act is incorporated herein by reference to the information set forth under the captions "Information Regarding Meetings and Committees of the Board of Directors" and "Delinquent Section 16(a) Reports" in the Company's definitive Proxy Statement for the 2020 Annual Meeting of Shareholders.

The Company has historically operated under informal ethical guidelines, under which the Company's principal executive, financial, and accounting officers, are held accountable. In accordance with these guidelines, the Company has always promoted honest, ethical and lawful conduct throughout the organization and has adopted a written Code of Ethics for the Chief Executive Officer and Chief Financial Officer. In addition, the Company adopted and the Board of Directors approved a written Code of Business Conduct for all officers and employees. The Company also implemented a system to address the "Whistle Blower" provision of the Sarbanes-Oxley Act of 2002.

ITEM 11. EXECUTIVE COMPENSATION. 

The information required by this Item 11 is incorporated by reference to the information set forth under the caption "Executive Compensation" in the Company's definitive Proxy Statement for the 2020 Annual Meeting of Shareholders, since such Proxy Statement will be filed with the Securities and Exchange Commission not later than 120 days after the end of the Company's fiscal year pursuant to Regulation 14A.

ITEM 12. SECURITY OWNERSHIP OF CERTAIN BENEFICIAL OWNERS AND MANAGEMENT AND RELATED STOCKHOLDER MATTERS. 

The information required by this Item 12 is incorporated by reference to the information set forth under the captions "Principal Shareholders," "Share Ownership of Directors and Officers" and “Equity Compensation Plan Information” in the Company's definitive Proxy Statement for the 2020 Annual Meeting of Shareholders, since such Proxy Statement will be filed with the Securities and Exchange Commission not later than 120 days after the end of the Company's fiscal year pursuant to Regulation 14A.

ITEM 13. CERTAIN RELATIONSHIPS AND RELATED TRANSACTIONS, AND DIRECTOR INDEPENDENCE. 

 The information required by this Item 13 is incorporated by reference to the information set forth under the caption "Transactions with Management" in the Company's definitive Proxy Statement for the 2019 Annual Meeting of Shareholders, since such Proxy Statement will be filed with the Securities and Exchange Commission not later than 120 days after the end of the Company's fiscal year pursuant to Regulation 14A.

ITEM 14. PRINCIPAL ACCOUNTING FEES AND SERVICES. 

The information required by this Item 14 is incorporated by reference to the information set forth under the caption "Independent Public Accountants" in the Company's definitive Proxy Statement for the 2020 Annual Meeting of Shareholders, since such Proxy Statement will be filed with the Securities and Exchange Commission not later than 120 days after the end of the Company's fiscal year pursuant to Regulation 14A.

39

PART IV

ITEM 15. EXHIBITS, FINANCIAL STATEMENT SCHEDULES. 

(a) (1) FINANCIAL STATEMENTS 

The following Consolidated Financial Statements of the Registrant and its subsidiaries are included in Part II, Item 8:

Report of Independent Registered Public Accounting Firm	17
Consolidated Balance Sheet - As of December 31, 2019 and 2018,	18
Consolidated Statement of Income – Fiscal Years Ended December 31, 2019 and December 31, 2018	20
Consolidated Statement of Stockholders' Equity - Fiscal Years Ended December 31, 2019 and December 31, 2018	21
Consolidated Statement of Cash Flows – Fiscal Years Ended December 31, 2019 and December 31, 2018	22
Notes to Consolidated Financial Statements	23

(a) (2) FINANCIAL STATEMENT SCHEDULES 

The following Consolidated Financial Statement Schedules of the Registrant and its subsidiaries are included in Item 15 hereof.

ITEM 16. FORM 10-K SUMMARY.

None

40

SEQUENTIAL PAGE 

Schedule II - Valuation and Qualifying Accounts

All other Schedules for which provision is made in the applicable accounting regulation of the Securities and Exchange Commission are not required under the related instructions or are inapplicable, and therefore have been omitted.

(a) (3) EXHIBITS 

Reference is made to the Exhibit Index set forth herein.

41

EXHIBIT INDEX

EXHIBIT NO.:	DOCUMENT
2.1	Agreement and Plan of Merger, dated January 8, 2016, by and among First Francis Company Inc., Federal Hose Manufacturing LLC, Edward F. Crawford, Matthew V. Crawford, the Company and Federal Hose Merger Sub, Inc. (incorporated herein by reference to the appropriate exhibit to the Company’s Form 8-K as filed with the Commission on January 12, 2016).
2.1(a)	Asset Purchase Agreement, effective as of June 1, 2018, by and among Buyer, the Company, Supreme, Waekon Corporation and Robert L. Bauman (incorporated herein by reference to the appropriate exhibit to the Company’s Form 8-K as filed with the Commission on June 6, 2018).
2.1(b)	Share Purchase Agreement, entered into as of July 5, 2018, by and among the Company, CAD Enterprises, Inc. and the Sellers’ Representative (incorporated herein by reference to the appropriate exhibit to the Company’s Form 8-K as filed with the Commission on July 6, 2018).
2.1(c)	Asset Purchase Agreement, entered into as of April 19, 2019, by and between Hickok Operating LLC and Data Genomix, Inc.  (incorporated herein by reference to the appropriate exhibit to the Company’s Form 8-K as filed with the Commission on April 23, 2019).
2.1(d)	Asset Purchase Agreement, entered into as of January 1, 2020, by and among the Company, the Seller, the Seller Parties and the Sellers’ Representative (incorporated herein by reference to the appropriate exhibit to the Company’s Form 8-K as filed with the Commission on January 1, 2020).
3.1	Amendment to Amended and Restated Articles of Incorporation (incorporated herein by reference to the appropriate exhibit to the Company’s Form 8-K as filed with the Commission on May 21, 2019).
3.2	Amended and Restated Articles of Incorporation (incorporated herein by reference to the appropriate exhibit to the Company's Form 10-K as filed with the Commission on January 14, 2013).
3.3	Second Amended and Restated Code of Regulations (incorporated herein by reference to the appropriate exhibit to the Company’s Form 8-K as filed with the Commission on May 21, 2019).
10(a)	Convertible Promissory Note, dated April 9, 2014, issued by the Company to Roundball in the principal amount of $100,000.00 (incorporated herein by reference to the appropriate exhibit to the Company's Form 10-K as filed with the Commission on January 13, 2015).
10(b)	Convertible Promissory Note, dated May 2, 2014, issued by the Company to Roundball in the principal amount of $100,000.00 (incorporated herein by reference to the appropriate exhibit to the Company's Form 10-K as filed with the Commission on January 13, 2015).
10(c)	Hickok Incorporated 2010 Outside Directors Stock Option Plan (incorporated herein by reference to Appendix A of the Company's definitive proxy statement for its 2010 annual meeting of shareholders as filed with the Commission on January 26, 2010).**
10(d)	Hickok Incorporated 2013 Omnibus Equity Plan (incorporated herein by reference to Appendix A of the Company's definitive proxy statement for its 2013 annual meeting of shareholders as filed with the Commission on January 28, 2013).**
10(e)	Convertible Loan Agreement, dated December 30, 2011, among the Company, the Investors, and solely with respect to Section 3 thereof, Robert L. Bauman (incorporated herein by reference to the appropriate exhibit to the Company's Form 8-K as filed with the Commission on January 5, 2012) effective through December 30, 2012.
10(f)	Convertible Promissory Note, dated December 30, 2011, issued by the Company to Roundball in the principal amount of $466,879.87 (incorporated herein by reference to the appropriate exhibit to the Company's Form 8-K as filed with the Commission on January 5, 2012).
10(g)	Convertible Promissory Note, dated December 30, 2011, issued by the Company to the Aplin Trust in the principal amount of $208,591.20 (incorporated herein by reference to the appropriate exhibit to the Company's Form 8-K as filed with the Commission on January 5, 2012) effective through December 30, 2012.
10(h)	Registration Rights Agreement, dated December 30, 2011, among the Company and the Investors (incorporated herein by reference to the appropriate exhibit to the Company's Form 8-K as filed with the Commission on January 5, 2012).
10(i)	Voting Agreement, dated December 30, 2011, among the Company, the Investors and the Class B Shareholders of the Company (incorporated herein by reference to the appropriate exhibit to the Company's Form 8-K as filed with the Commission on January 5, 2012) effective through December 30, 2012.
10(j)	Subscription Agreement, dated December 30, 2011, between the Company and Roundball (incorporated herein by reference to the appropriate exhibit to the Company's Form 8-K as filed with the Commission on January 5, 2012) effective through December 30, 2012.
10(k)	Amendment No. 1 to Convertible Loan Agreement, dated December 30, 2012, by and between the Company and Roundball, LLC. (incorporated herein by reference to the appropriate exhibit to the Company's Form 8-K as filed with the Commission on January 4, 2013) effective through December 30, 2013.
10(l)	Warrant Agreement, dated December 30, 2012, by and between the Company and Roundball, LLC. (incorporated herein by reference to the appropriate exhibit to the Company's Form 8-K as filed with the Commission on January 4, 2013) effective through December 30, 2015.
10(m)	Amendment No. 2 to Convertible Loan Agreement, dated December 30, 2013, by and between the Company and Roundball, LLC. (incorporated herein by reference to the appropriate exhibit to the Company's Form 8-K as filed with the Commission on January 2, 2014) effective through December 30, 2014.
10(n)	Amendment No. 3 to Convertible Loan Agreement, dated December 31, 2014, by and between the Company and Roundball, LLC. (incorporated herein by reference to the appropriate exhibit to the Company's Form 8-K as filed with the Commission on January 6, 2015) effective through December 30, 2015.
10(o)	Amendment No. 1 to Registration Rights Agreement, dated December 31, 2014, by and between the Company and Roundball, LLC. (incorporated herein by reference to the appropriate exhibit to the Company's Form 8-K as filed with the Commission on January 6, 2015).

42

10(p)	Amendment No. 4 to Convertible Loan Agreement, dated December 30, 2015, by and between the Company and Roundball, LLC. (incorporated herein by reference to the appropriate exhibit to the Company's Form 8-K as filed with the Commission on December 30, 2015 effective through December 30, 2016.
10(q)	Amendment No. 1 to Warrant Agreement, dated December 30, 2015, by and between the Company and Roundball, LLC. (incorporated herein by reference to the appropriate exhibit to the Company's Form 8-K as filed with the Commission on December 30, 2015) effective through December 30, 2016.
10(r)	Revolving Credit Agreement, dated June 3, 2016 between the Company and First Francis Company Inc. (incorporated herein by reference to the appropriate exhibit to the Company's Form 8-K filed with the Commission on June 7, 2016).
10(s)	Revolver Credit Promissory Note, dated June 3, 2016, between the Company and First Francis Company Inc. (incorporated herein by reference to the appropriate exhibit to the Company's Form 8-K filed with the Commission on June 7, 2016).
10(t)	Revolving Credit Promissory Note, dated June 27, 2016, between the Company and First Francis Company Inc. (incorporated herein by reference to the appropriate exhibit to the Company's Form 8-K filed with the Commission on June 30, 2016).
10(u)	Amendment No. 5 to Convertible Loan Agreement, dated December 20, 2016, by and between the Company and Roundball, LLC. effective through December 30, 2017 (incorporated herein by reference to the appropriate exhibit to the Company’s Form 8-K filed with the Commission on December 27, 2016).
10(v)	Amendment No. 2 to Warrant Agreement, dated December 20, 2016, by and between the Company and Roundball, LLC. effective through December 30, 2017 (incorporated herein by reference to the appropriate exhibit to the Company’s Form 8-K filed with the Commission on December 27, 2016).
10(w)	Credit Agreement, dated June 1, 2017, among Hickok Incorporated, Hickok Acquisition A LLC, Supreme Electronics Corp., Federal Hose Manufacturing LLC, Waekon Corporation, Hickok Operating LLC and JPMorgan Chase Bank, N.A. (incorporated by reference to Exhibit 10.1 to the Company’s Form 8-K filed with the Commission on June 5, 2017.)
10(x)	Asset Purchase Agreement dated June 1, 2017, among Hickok Acquisition A LLC, Air Enterprises Acquisition LLC, A. Malachi Mixon, III and William M. Weber (incorporated herein by reference to the appropriate exhibit to the Company’s Form 8-K filed with the Commission on June 5, 2017).
10(y)	Amendment No. 6 to Convertible Loan Agreement, dated December 29, 2017, by and between the Company and Roundball, LLC. effective through December 30, 2018 (incorporated herein by reference to the appropriate exhibit to the Company’s Form 8-K filed with the Commission on January 4, 2018).
10(z)	Amendment No. 3 to Warrant Agreement, dated December 29, 2017, by and between the Company and Roundball, LLC. effective through December 30, 2018 (incorporated herein by reference to the appropriate exhibit to the Company’s Form 8-K filed with the Commission on January 4, 2018).
10(aa)	Credit Agreement, dated June 1, 2017, among Hickok Incorporated, Hickok Acquisition A LLC, Supreme Electronics Corp., Federal Hose Manufacturing LLC, Waekon Corporation, Hickok Operating LLC, CAD Enterprises, Inc. and JPMorgan Chase Bank, N.A., as amended July 5, 2018 (incorporated herein by reference to the appropriate exhibit to the Company’s Form 8-K filed with the Commission on July 11, 2018).
10(ab)	First Amendment to Promissory Note entered into as of July 5, 2018 between Hickok Incorporated and First Francis Company, Inc. with respect to Promissory Note in the original principal amount of $2,000,000. (incorporated herein by reference to the appropriate exhibit to the Company’s Form 8-K filed with the Commission on July 11, 2018).
10(ac)	First Amendment to Promissory Note entered into as of July 5, 2018 between Hickok Incorporated and First Francis Company, Inc. with respect to Promissory Note in the original principal amount of $2,768,662. (incorporated herein by reference to the appropriate exhibit to the Company’s Form 8-K filed with the Commission on July 11, 2018).
10(ad)	Amended and Restated 2013 Omnibus Equity Plan (incorporated herein by reference to the appropriate exhibit to the Company’s Form 8-K as filed with the Commission on May 14, 2019).
10(ae)	Credit Agreement, dated June 1, 2017, as amended by that certain First Amendment Agreement, dated as of July 5, 2018, among Crawford United Corporation, Crawford AE LLC, Supreme Electronics Corp., Federal Hose Manufacturing LLC, Data Genomix LLC, Waekon Corporation, CAD Enterprises, Inc., Crawford United Acquisition Company, LLC, and JPMorgan Chase Bank, N.A., as amended September 30, 2019 (incorporated herein by reference to the appropriate exhibit to the Company’s Form 8-K as filed with the Commission on October 4, 2019).
10(af)	Credit Agreement, dated June 1, 2017, as amended by that certain First Amendment Agreement, dated as of July 5, 2018, and that certain Second Amendment Agreement, dated as of September 30, 2019, among Crawford United Corporation, Crawford AE LLC, Supreme Electronics Corp., Federal Hose Manufacturing LLC, Data Genomix LLC, Waekon Corporation, CAD Enterprises, Inc., Crawford United Acquisition Company, LLC, and JPMorgan Chase Bank, N.A., as amended December 30, 2019 (filed herewith).
11	Computation of Net Income Per Common Share.
14	Crawford United Corporation Financial Code of Ethics for the Chief Executive Officer and Specified Financial Officers.
21	Subsidiaries of the Registrant.
23	Consent of Independent Registered Public Accounting Firm.
31.1	Rule 13a-14(a)/15d-14(a)Certification by the Chief Executive Officer.
31.2	Rule 13a-14(a)/15d-14(a)Certification by the Chief Financial Officer.
32.1	Certification by the Chief Executive Officer pursuant to 18 U.S.C. Section 1350, as adopted pursuant to Section 906 of the Sarbanes-Oxley Act of 2002.
32.2	Certification by the Chief Financial Officer pursuant to 18 U.S.C. Section 1350, as adopted pursuant to Section 906 of the Sarbanes-Oxley Act of 2002.
101.INS*	XBRL Instance
101.SCH*	XBRL Taxonomy Extension Schema
101.CAL*	XBRL Taxonomy Extension Calculation
101.DEF*	XBRL Extension Definition
101.LAB*	XBRL Taxonomy Extension Labels
101.PRE*	XBRL Taxonomy Extension Presentation
	*XBRL information is furnished and not filed or a part of a registration statement or prospectus for purposes of sections 11 or 12 of the Securities Act of 1933, as amended, is deemed not filed for purposes of section 18 of the Securities Exchange Act of 1934, as amended, and otherwise is not subject to liability under these sections.
	**Management contract, compensation plan or arrangement.

The following pages contain the Consolidated Financial Statement Schedules as specified for Item 8 of Part II of Form 10-K.

43

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.

CRAWFORD UNITED CORPORATION

By: /s/ Brian E. Powers
Brian E. Powers
Chairman, President and Chief Executive Officer
Date: March 13, 2020

Pursuant to the requirements of the Securities Exchange Act of 1934, this report has been signed below by the following persons on behalf of the registrant and in the capacities indicated and on the 13th day of March 2020:

SIGNATURE:	TITLE
/s/ Brian E. Powers	Chairman, President and Chief
Brian E. Powers	Executive Officer
	(Principal Executive Officer)
/s/ Kelly J. Marek	Vice President and Chief
Kelly J. Marek	Financial Officer
	(Principal Financial and Accounting Officer)
/s/ Matthew V. Crawford	Director
Matthew V. Crawford
/s/ Steven H. Rosen	Director
Steven H. Rosen
/s/ Kirin M. Smith	Director
Kirin M. Smith
/s/ Luis E. Jimenez	Director
Luis E. Jimenez

44

CRAWFORD UNITED CORPORATION

SCHEDULE II - VALUATION AND QUALIFYING ACCOUNTS

			Additions
Description	Balance at Beginning of Period		Charged to Costs and Expenses		Deductions			Balance at End of Period
Year Ended December 31, 2018
Reserve for doubtful accounts	$	60,275	$	-	$	(25,275	)	$	35,000
Reserve for inventory obsolescence		242,239		56,261		(72,008	)		226,492
Reserve for product warranty		199,899		419,460		(145,055	)		474,304
Valuation allowance for deferred taxes		47,319		-		-			47,319
Reserve for uncertain tax positions	$	395,000	$	-	$	-		$	395,000
Year Ended December 31, 2019
Reserve for doubtful accounts	$	35,000	$	-	$	(16,675	)	$	18,325
Reserve for inventory obsolescence		226,492		24,114		-			250,606
Reserve for product warranty		474,304		417,505		(589,323	)		302,486
Valuation allowance for deferred taxes		47,319		-		-			47,319
Reserve for uncertain tax positions	$	395,000	$	-	$	-		$	395,000

45

EX-10.AF

Exhibit 10(af)

Conformed Copy of

CREDIT AGREEMENT

dated as of

June 1, 2017

among

CRAWFORD UNITED CORPORATION

CRAWFORD AE LLC

SUPREME ELECTRONICS CORP.

FEDERAL HOSE MANUFACTURING LLC

WAEKON CORPORATION

DATA GENOMIX LLC

CAD ENTERPRISES, INC.

CRAWFORD UNITED ACQUISITION COMPANY, LLC

and

JPMORGAN CHASE BANK, N.A.

With First Amendment Agreement, dated July 5, 2018,

Second Amendment Agreement, dated September 30, 2019, and

Third Amendment Agreement, dated December 30, 2019

TABLE OF CONTENTS

Page

ARTICLE I.  Definitions	1
SECTION 1.01.  Defined Terms	1
SECTION 1.02.  Classification of Loans and Borrowings.	27
SECTION 1.03.  Terms Generally.	27
SECTION 1.04.  Accounting Terms; GAAP	28
SECTION 1.05.  Interest Rates; LIBOR Notification	28
SECTION 1.06.  Status of Obligations	28
ARTICLE II.  The Credits	28
SECTION 2.01.  Commitments	29
SECTION 2.02. Loans and Borrowings	29
SECTION 2.03.  Borrowing Procedures; Requests for Revolving and CapEx Borrowings	30
SECTION 2.04.  Letters of Credit	31
SECTION 2.05.  Funding of Borrowings.	34
SECTION 2.06.  Interest Elections.	34
SECTION 2.07.  Termination of Commitment	35
SECTION 2.08.  Repayment and Amortization of Loans; Evidence of Debt.	36
SECTION 2.09.  Prepayment of Loans	37
SECTION 2.10.  Fees.	38
SECTION 2.11.  Interest	39
SECTION 2.12.  Alternate Rate of Interest; Illegality.	39
SECTION 2.13.  Increased Costs.	41
SECTION 2.14.  Break Funding Payments.	42
SECTION 2.15.  Taxes	42
SECTION 2.16.  Payments Generally; Allocation of Proceeds	43
SECTION 2.17.  Indemnity for Returned Payments	44
ARTICLE III.  Representations and Warranties	45
SECTION 3.01.  Organization; Powers	45
SECTION 3.02.  Authorization; Enforceability	45
SECTION 3.03.  Governmental Approvals; No Conflicts.	45
SECTION 3.04.  Financial Condition; No Material Adverse Change	45
SECTION 3.05.  Properties	46
SECTION 3.06.  Litigation and Environmental Matters.	46
SECTION 3.07.  Compliance with Laws and Agreements; No Default.	46
SECTION 3.08.  Investment Company Status.	46
SECTION 3.09.  Taxes.	47
SECTION 3.10.  ERISA	47
SECTION 3.11.  Disclosure.	47
SECTION 3.12.  Material Agreements	47
SECTION 3.13.  Solvency.	48
SECTION 3.14.  Insurance.	48
SECTION 3.15.  Capitalization and Subsidiaries.	48
SECTION 3.16. Security Interest in Collateral	48
SECTION 3.17.  Employment Matters	48

i

SECTION 3.18. Federal Reserve Regulations	49
SECTION 3.19. Use of Proceeds	49
SECTION 3.20. No Burdensome Restrictions	49
SECTION 3.21. Anti-Corruption Laws and Sanctions	49
SECTION 3.22. FFC Subordinated Debt Documents	49
SECTION 3.23. Air Enterprises Acquisition Documents	49
SECTION 3.24. Roundball Subordinated Debt Documents	49
SECTION 3.25. CAD Acquisition Documents	50
SECTION 3.26. CAD Subordinated Debt Documents	50
ARTICLE IV.  Conditions	50
SECTION 4.01.  Effective Date	50
SECTION 4.02.  Each Credit Event.	53
ARTICLE V.  Affirmative Covenants	54
SECTION 5.01.  Financial Statements and Other Information	54
SECTION 5.02.  Notices of Material Events; Name  Change.	56
SECTION 5.03.  Existence; Conduct of Business	57
SECTION 5.04.  Payment of Obligations.	57
SECTION 5.05.  Maintenance of Properties	57
SECTION 5.06.  Books and Records; Inspection Rights	57
SECTION 5.07.  Compliance with Laws and Material Contractual Obligations.	57
SECTION 5.08.  Use of Proceeds.	58
SECTION 5.09.  Accuracy of Information	58
SECTION 5.10.  Insurance	58
SECTION 5.11.  Appraisals	58
SECTION 5.12.  Casualty and Condemnation	59
SECTION 5.13. Depository Banks	59
SECTION 5.14. Additional Collateral; Further Assurances	59
SECTION 5.15. Post-Closing Covenant	60
ARTICLE VI.  Negative Covenants	60
SECTION 6.01.  Indebtedness.	60
SECTION 6.02.  Liens.	62
SECTION 6.03.  Fundamental Changes.	63
SECTION 6.04.  Investments, Loans, Advances, Guarantees and Acquisitions	64
SECTION 6.05.  Asset Sales	65
SECTION 6.06.  Sale and Leaseback Transactions	66
SECTION 6.07.  Swap Agreements	66
SECTION 6.08.  Restricted Payments; Certain Payments of Indebtedness.	66
SECTION 6.09.  Transactions with Affiliates.	67
SECTION 6.10.  Restrictive Agreements.	67
SECTION 6.11. Amendment of Material Documents	68
SECTION 6.12. Financial Covenants	68
SECTION 6.13. Excluded Subsidiary Restrictions	68
ARTICLE VII.  Events of Default	68
ARTICLE VIII.  Miscellaneous	71
SECTION 8.01.  Notices	71
SECTION 8.02.  Waivers; Amendments.	73
SECTION 8.03.  Expenses; Indemnity; Damage Waiver.	73
SECTION 8.04.  Successors and Assigns	75
SECTION 8.05.  Survival	76
SECTION 8.06.  Counterparts; Integration; Effectiveness; Electronic Execution.	76

ii

SECTION 8.07.  Severability	77
SECTION 8.08.  Right of Setoff.	77
SECTION 8.09.  Governing Law; Jurisdiction; Consent to Service of Process.	77
SECTION 8.10.  WAIVER OF JURY TRIAL.	78
SECTION 8.11.  Headings.	78
SECTION 8.12.  Confidentiality.	78
SECTION 8.13.  Nonreliance; Violation of Law	79
SECTION 8.14.  USA PATRIOT Act	79
SECTION 8.15.  Disclosure	79
SECTION 8.16.  Interest Rate Limitation	79
SECTION 8.17. Marketing Consent	79
SECTION 8.18. Confession of Judgment	79
ARTICLE IX.  Loan Guaranty	80
SECTION 9.01.  Guaranty.	80
SECTION 9.02.  Guaranty of Payment	80
SECTION 9.03.  No Discharge or Diminishment of Loan Guaranty	80
SECTION 9.04.  Defenses Waived.	81
SECTION 9.05.  Rights of Subrogation	81
SECTION 9.06.  Reinstatement; Stay of Acceleration.	82
SECTION 9.07.  Information	82
SECTION 9.08.  Termination	82
SECTION 9.09.  Taxes.	82
SECTION 9.10.  Maximum Liability	82
SECTION 9.11.  Contribution	83
SECTION 9.12.  Liability Cumulative	83
SECTION 9.13.  Keepwell	83
ARTICLE X.  The Borrower Representative	84
SECTION 10.01.  Appointment; Nature of Relationship	84
SECTION 10.02.  Powers	84
SECTION 10.03.  Employment of Agents	84
SECTION 10.04.  Notices	84
SECTION 10.05.  Successor Borrower Representative	84
SECTION 10.06.  Execution of Loan Documents	84
SECTION 10.07.  Reporting	85

SCHEDULES:

Schedule 3.05 – Properties

Schedule 3.06 – Disclosed Matters

Schedule 3.12 – Material Agreements

Schedule 3.14 – Insurance

Schedule 3.15 – Capitalization and Subsidiaries

Schedule 4.01 – Customer Consents

Schedule 6.01 – Existing Indebtedness

Schedule 6.02 – Existing Liens

Schedule 6.04 – Existing Investments

Schedule 6.10 – Existing Restrictions

EXHIBITS:

Exhibit A - Opinion of Counsel for the Loan Parties

Exhibit B - [Reserved]

Exhibit C - Compliance Certificate

Exhibit D - Joinder Agreement

Exhibit E - CapEx Draw Request

iii

CREDIT AGREEMENT dated as of June 1, 2017 (as it may be amended or modified from time to time, this “Agreement”), among CRAWFORD UNITED CORPORATION (f/k/a Hickok Incorporated), an Ohio corporation (“Hickok”), CRAWFORD AE LLC, an Ohio limited liability company (f/k/a Hickok Acquisition AE LLC which was f/k/a Air Enterprises LLC which was f/k/a Hickok Acquisition A LLC) (“Hickok Air Enterprises”), SUPREME ELECTRONICS CORP., a Mississippi corporation (“Supreme”), FEDERAL HOSE MANUFACTURING LLC, an Ohio limited liability company (“Federal”), DATA GENOMIX LLC (f/k/a Hickok Operating LLC), an Ohio limited liability company (“Data”), WAEKON CORPORATION, an Ohio corporation (“Waekon”), CAD ENTERPRISES, INC., an Arizona corporation (“CAD”), CRAWFORD UNITED ACQUISITION COMPANY, LLC, an Ohio limited liability company (“Crawford Acquisition” and together with Hickok, Hickok Air Enterprises, Supreme, Federal, Data, Waekon and CAD, collectively, the “Borrowers”, and each individually a “Borrower”), the other Loan Parties party hereto, and JPMORGAN CHASE BANK, N.A., as Lender.

The parties hereto agree as follows:

ARTICLE I 

Definitions

SECTION 1.01. Defined Terms. As used in this Agreement, the following terms have the meanings specified below:

“Account” has the meaning assigned to such term in the Security Agreement.

“Account Debtor” means any Person obligated on an Account.

“Acquisition” means any transaction, or any series of related transactions, consummated on or after the Second Amendment Effective Date, by which any Loan Party (a) acquires any going business or all or substantially all of the assets of any Person, whether through purchase of assets, merger or otherwise or (b) directly or indirectly acquires (in one transaction or as the most recent transaction in a series of transactions) at least a majority (in number of votes) of the Equity Interests of a Person which has ordinary voting power for the election of directors or other similar management personnel of a Person (other than Equity Interests having such power only by reason of the happening of a contingency) or a majority of the outstanding Equity Interests of a Person.

Adjusted EBITDA means, for any period, the sum of EBITDA for such period plus, to the extent a Permitted Acquisition has been consummated during such period, Pro Forma EBITDA attributable to such Permitted Acquisition (but only that portion of Pro Forma EBITDA attributable to the portion of such period that occurred prior to the date of consummation of such Permitted Acquisition).

“Adjusted LIBOR Rate” means, with respect to any Eurodollar Borrowing for any Interest Period or for any CBFR Borrowing, an interest rate per annum (rounded upwards, if necessary, to the next 1/16 of 1%) equal to (a) the LIBOR Rate for such Interest Period multiplied by (b) the Statutory Reserve Rate.

“Adjusted One Month LIBOR Rate” means, for any day, an interest rate per annum equal to the sum of (i) 2.50% per annum plus (ii) the Adjusted LIBOR Rate for a one-month interest period on such day (or if such day is not a Business Day, the immediately preceding Business Day); provided that, for the avoidance of doubt, the Adjusted LIBOR Rate for any day shall be based on the LIBOR Screen Rate at approximately 11:00 a.m. London time on such day.

1

“Affiliate” means, with respect to a specified Person, another Person that directly, or indirectly through one or more intermediaries, Controls or is Controlled by or is under common Control with the specified Person.

“Air Enterprises” means Air Enterprises LLC, a Delaware limited liability company.

“Air Enterprises Acquisition” means the acquisition by Hickok Air Enterprises of substantially all of the assets of Air Enterprises on the Effective Date pursuant to the Air Enterprises Acquisition Documents.

“Air Enterprises Acquisition Documents” means the Air Enterprises Purchase Agreement and all agreements, instruments and documents executed pursuant thereto or in connection therewith, as any of the foregoing may from time to time be amended, restated or otherwise modified.

“Air Enterprises Assignment of Rights” shall mean the Assignment of Rights relating to Hickok Air Enterprises’ rights under the Air Enterprises Acquisition Documents, executed and delivered to Lender by Hickok Air Enterprises and Air Enterprises in connection with this Agreement, as the same may from time to time be amended, restated or otherwise modified.

“Air Enterprises Purchase Agreement” means that certain Asset Purchase Agreement, dated as of June 1, 2017, among Hickok Air Enterprises, Air Enterprises and certain equity holders of Air Enterprises party thereto, as amended and as the same may from time to time be further amended, restated or otherwise modified.

“Anti-Corruption Laws” means all laws, rules, and regulations of any jurisdiction applicable to any Borrower or any of its Affiliates from time to time concerning or relating to bribery or corruption.

“Applicable Rate” means, for any day, the applicable rate per annum equal to:

(a)     with respect to Revolving Loans (i) -0.25% for CBRF Loans, and (ii) 1.75% for Eurodollar Loans; and

(b)     with respect to the Term A Loan and CapEx Loans (i) 0.25% for CBFR Loans, and (ii) 2.25% for Eurodollar Loans.

“Approved Fund” has the meaning assigned to such term in Section 8.04(b).

“Availability” means, at any time, an amount equal to (a) the Revolving Commitment minus (b) the Revolving Exposure.

“Availability Period” means the period from and including the Effective Date to but excluding the earlier of the Revolving Credit Maturity Date and the date of termination of the Revolving Commitment.

“Banking Services” means each and any of the following bank services provided to any Loan Party or any Subsidiary by the Lender or any of its Affiliates: (a) credit cards for commercial customers (including, without limitation, “commercial credit cards” and purchasing cards), (b) stored value cards, (c) merchant processing services, and (d) treasury management services (including, without limitation, controlled disbursement, automated clearinghouse transactions, return items, any direct debit scheme or arrangement, overdrafts and interstate depository network services).

2

“Banking Services Obligations” means any and all obligations of the Loan Parties or their Subsidiaries, whether absolute or contingent and howsoever and whensoever created, arising, evidenced or acquired (including all renewals, extensions and modifications thereof and substitutions therefor) in connection with Banking Services.

“Bankruptcy Event” means, with respect to any Person, when such Person becomes the subject of a bankruptcy or insolvency proceeding, or has had a receiver, conservator, trustee, administrator, custodian, assignee for the benefit of creditors or similar Person charged with the reorganization or liquidation of its business appointed for it, or, in the good faith determination of the Lender, has taken any action in furtherance of, or indicating its consent to, approval of, or acquiescence in, any such proceeding or appointment, provided that a Bankruptcy Event shall not result solely by virtue of any ownership interest, or the acquisition of any ownership interest, in such Person by a Governmental Authority or instrumentality thereof, unless such ownership interest results in or provides such Person with immunity from the jurisdiction of courts within the U.S. or from the enforcement of judgments or writs of attachment on its assets or permits such Person (or such Governmental Authority or instrumentality) to reject, repudiate, disavow or disaffirm any contracts or agreements made by such Person.

“Beneficial Ownership Certification” means a certification regarding beneficial ownership as required by the Beneficial Ownership Regulation.

“Beneficial Ownership Regulation” means 31 C.F.R. § 1010.230.

“Board” means the Board of Governors of the Federal Reserve System of the U.S.

“Borrower” or “Borrowers” shall have the meaning given to such term in the opening paragraph of this Agreement.

“Borrower Representative” has the meaning assigned to such term in Section 10.01.

“Borrowing” means (a) Revolving Loans of the same Type, made, converted or continued on the same date and, in the case of Eurodollar Loans, as to which a single Interest Period is in effect, (b) Term Loans made, converted or continued on the same date and, in the case of Eurodollar Loans, as to which a single Interest Period is in effect, and (c) a CapEx Loan made, converted or continued on the same date, and, in the case of Eurodollar Loans, as to which a single Interest Period is in effect.

“Borrowing Request” means a request by the Borrower Representative for a Revolving Borrowing or CapEx Borrowing in accordance with Section 2.03.

“Burdensome Restrictions” means any consensual encumbrance or restriction of the type described in clause (a) or (b) of Section 6.10.     

“Business Day” means a day (other than a Saturday or Sunday) on which banks generally are open in Ohio and/or New York for the conduct of substantially all of their commercial lending activities and on which dealings in United States dollars are carried on in the London interbank market.

“CAD” means CAD ENTERPRISES, INC., an Arizona corporation.

“CAD Acquisition” means the acquisition by Hickok of all of the Equity Interests of CAD from the CAD Seller pursuant to the terms of the CAD Acquisition Documents.

3

“CAD Acquisition Agreement” means that certain Share Purchase Agreement dated as of July 5, 2018, by and among Hickok (as buyer), CAD Seller, and the CAD Seller Representative, together with all exhibits and schedules thereto, as the same may be amended, modified, supplemented or restated from time to time.

“CAD Acquisition Documents” means the CAD Acquisition Agreement and all other agreements, documents and writings heretofore, now or hereafter executed, delivered, or otherwise signed in connection with or related to the CAD Acquisition Agreement, in each case as any of the foregoing may be amended, restated or otherwise modified from time to time.

“CAD Assignment of Rights” shall mean the Assignment of Rights relating to Hickok’s rights under the CAD Acquisition Documents, executed and delivered to Lender by Hickok, as the same may from time to time be amended, restated or otherwise modified.

“CAD Security Agreement” means that certain All Assets Security Agreement, dated July 5, 2018, between CAD and CAD Seller Payee], as amended, restated or otherwise modified from time to time.

“CAD Seller” means the shareholders of CAD listed on Schedule 4.2 to the CAD Acquisition Agreement.

“CAD Seller Payee” means Arvin and Cheryl Loudermilk Family, LLLP, an Arizona limited liability limited partnership.

“CAD Seller Representative” means Cheryl Loudermilk.

“CAD Subordinated Note” means the Subordinated Promissory Note, dated July 5, 2018, executed by Hickok in favor of the CAD Seller Payee in the original principal amount of $9,000,000, as amended, restated or otherwise modified from time to time.

“CAD Subordinated Debt” means the Indebtedness of Hickok owed to the CAD Seller through the CAD Seller Payee pursuant to the CAD Subordinated Debt Documents.

“CAD Subordinated Debt Documents” means the CAD Subordinated Note, the CAD Security Agreement and the other documents, agreements, instruments and writings executed by any of the Loan Parties to the CAD Seller Payee and/or any CAD Seller in connection with or related to the CAD Subordinated Note, as any of the same may be amended, restated or otherwise modified from time to time.

“CAD Subordinated Payment Conditions” means (a) the CAD Seller Payee is not in breach or violation of the CAD Subordination Agreement, (b) no Default or Event of Default has occurred and is continuing (or has not been waived by the Lender) under this Agreement or any other Loan Document, (c) no Default or Event of Default will occur as a result of any such payment, (d) after giving effect to any such payment, Lender is satisfied that the Fixed Charge Coverage Ratio, as calculated in accordance with Section 6.12 of this Agreement, is not less than 1.45 to 1.00, as evidenced by a Compliance Certificate delivered by the Loan Parties to the Lender prior to any such payment being made, and (e) after giving effect to any such payment, Availability is greater than or equal to $500,000.

“CAD Subordination Agreement” means the Debt and Lien Subordination Agreement entered into among the Loan Parties, the CAD Seller Payee, and the Lender (as senior lender) in connection with the CAD Subordinated Debt, as such agreement may be amended, restated or otherwise modified from time to time.

4

“CapEx Commitment” means the commitment of the Lender, during the CapEx Commitment Period, to make CapEx Loans to the Borrowers and to convert CapEx Loans to CapEx Term Loans, up to the CapEx Maximum Amount (or such lesser amount as shall be determined pursuant to Section 2.01(c) hereof).

“CapEx Commitment Period” means the period from the First Amendment Effective Date to the CapEx Conversion Date, or such earlier date on which the Commitment shall have been terminated pursuant to Article VII hereof.

“CapEx Conversion Date” means the earlier to occur of (a) the date that the amount of CapEx Loans made to Borrowers equal the CapEx Maximum Amount, or (b) July 5, 2019.

“CapEx Draw Request” means a request form, substantially in the form of the attached Exhibit E.

“CapEx Exposure” means, at any time, the sum of the outstanding principal amount of CapEx Loans and CapEx Term Loans at such time.

“CapEx Loan” means a Loan made pursuant to Section 2.01(c) hereof.

“CapEx Maximum Amount” shall mean $1,000,000.

“CapEx Term Loan” shall mean any CapEx Loan or CapEx Loans that have been converted to a term loan pursuant to Section 2.02(c) hereof.

“Capital Expenditures” means, without duplication, any expenditure or commitment to expend money for any purchase or other acquisition of any asset which would be classified as a fixed or capital asset on a consolidated balance sheet of the Company and its Subsidiaries prepared in accordance with GAAP but excluding in each case any such expenditures that (i) are made to restore, repair, replace or rebuild property to the condition of such property immediately prior to any casualty event, to the extent such expenditure is made with insurance proceeds, condemnation awards or damage recover proceeds relating to any such casualty event or (ii) are financed with the proceeds of any Disposition of fixed or capital assets to the extent such expenditure is permitted under Section 6.05 hereof.

“Capital Lease Obligations” of any Person means the obligations of such Person to pay rent or other amounts under any lease of (or other arrangement conveying the right to use) real or personal property, or a combination thereof, which obligations are required to be classified and accounted for as capital leases on a balance sheet of such Person under GAAP, and the amount of such obligations shall be the capitalized amount thereof determined in accordance with GAAP.

“CB Floating Rate” means the Prime Rate; provided that the CB Floating Rate shall never be less than the Adjusted One Month LIBOR Rate on such day (or if such day is not a Business Day, the immediately preceding Business Day). Any change in the CB Floating Rate due to a change in the Prime Rate or the Adjusted One Month LIBOR Rate shall be effective from and including the effective date of such change in the Prime Rate or the Adjusted One Month LIBOR Rate, respectively.

“CBFR”, when used in reference to any Loan or Borrowing, refers to whether such Loan, or the Loans comprising such Borrowing, bear interest at a rate determined by reference to the CB Floating Rate.

5

“Change in Control” means (a) the acquisition of ownership, directly or indirectly, beneficially or of record, by any Person or group (within the meaning of the Securities Exchange Act of 1934 and the rules of the SEC thereunder as in effect on the date hereof) of Equity Interests representing more than 50% of the aggregate ordinary voting power represented by the issued and outstanding Equity Interests of the Company; (b) occupation at any time of a majority of the seats (other than vacant seats) on the board of directors of the Company by Persons who were neither (i) directors of the Company on the date of this Agreement, (ii) nominated, appointed or approved by the board of directors of the Company nor (iii) nominated, appointed or approved by directors so nominated, appointed or approved; or (c) the Company shall cease to own, free and clear of all Liens or other encumbrances, 100% of the outstanding voting Equity Interests of the other Borrowers on a fully diluted basis.

“Change in Law” means the occurrence after the date of this Agreement of any of the following: (a) the adoption of or taking effect of any law, rule, regulation or treaty, (b) any change in any law, rule, regulation or treaty or in the administration, interpretation or application thereof by any Governmental Authority or (c) compliance by the Lender (or, for purposes of Section 2.13(b), by any lending office of the Lender or by the Lender’s holding company, if any) with any request, guideline, requirement or directive (whether or not having the force of law) of any Governmental Authority made or issued after the date of this Agreement; provided that, notwithstanding anything herein to the contrary, (x) the Dodd-Frank Wall Street Reform and Consumer Protection Act and all requests, rules, guidelines, requirements or directives thereunder or issued in connection therewith or in the implementation thereof, and (y) all requests, rules, guidelines, requirements or directives promulgated by the Bank for International Settlements, the Basel Committee on Banking Supervision (or any successor or similar authority) or the U.S. or foreign regulatory authorities, in each case pursuant to Basel III, shall in each case be deemed to be a “Change in Law”, regardless of the date enacted, adopted, issued or implemented.     

“Charges” has the meaning assigned to such term in Section 8.16.

“Class”, when used in reference to (a) any Loan or Borrowing, refers to whether such Loan, or the Loans comprising such Borrowing, are Revolving Loans, CapEx Loans or a Term A Loan, and (b) any Commitment, refers to whether such Commitment is a Revolving Commitment, a CapEx Commitment or a Term A Commitment.

“Code” means the Internal Revenue Code of 1986, as amended from time to time.

“Collateral” means any and all property owned, leased or operated by a Person covered by the Collateral Documents and any and all other property of any Loan Party, now existing or hereafter acquired, that is at any time, becomes or is intended to be, subject to a security interest or Lien in favor of the Lender, on behalf of the Secured Parties, to secure the Secured Obligations.

“Collateral Access Agreement” has the meaning assigned to such term in the Security Agreement.

“Collateral Documents” means, collectively, the Security Agreement, the Air Enterprises Assignment of Rights, the CAD Assignment of Rights, and any other agreements, instruments and documents executed in connection with this Agreement that are intended to create, perfect or evidence Liens to secure the Secured Obligations, including, without limitation, all other security agreements, pledge agreements, mortgages, deeds of trust, loan agreements, notes, guarantees, subordination agreements, pledges, powers of attorney, consents, assignments, contracts, fee letters, notices, leases, financing statements and all other written matter whether theretofore, now or hereafter executed by any Loan Party and delivered to the Lender.

6

“Commercial LC Exposure” means, at any time, the sum of (a) the aggregate undrawn amount of all outstanding commercial Letters of Credit plus (b) the aggregate amount of all LC Disbursements relating to commercial Letters of Credit that have not yet been reimbursed by or on behalf of the Borrowers.

“Commitment” means the sum of the Revolving Commitment, the Term Commitments and the CapEx Commitment.

“Commodity Exchange Act” means the Commodity Exchange Act (7 U.S.C. § 1 et seq.), as amended from time to time, and any successor statute.

“Commitment Fee Applicable Rate” means 0.25%.

“Company” means Hickok.

“Connection Income Taxes” means Other Connection Taxes that are imposed on or measured by net income (however denominated) or that are franchise Taxes or branch profits Taxes.

“Control” means the possession, directly or indirectly, of the power to direct or cause the direction of the management or policies of a Person, whether through the ability to exercise voting power, by contract or otherwise. “Controlling” and “Controlled” have meanings correlative thereto.

“Default” means any event or condition which constitutes an Event of Default or which upon notice, lapse of time or both would, unless cured or waived, become an Event of Default.

“Disclosed Matters” means the actions, suits, proceedings and environmental matters disclosed in Schedule 3.06.

“Distributions” means all dividends and other distributions made to shareholders, partners, owners or members, as the case may be, other than salary, bonuses, and other compensation for services expended in the current accounting period.

“Disposition” or “Dispose” means the sale, transfer, license, lease or other disposition (in one transaction or in a series of transactions and whether effected pursuant to a Division or otherwise) of any property by any Person (including any sale and leaseback transaction and any issuance of Equity Interests by a Subsidiary of such Person), including any sale, assignment, transfer or other disposal, with or without recourse, of any notes or accounts receivable or any rights and claims associated therewith.

“Dividing Person” has the meaning assigned to it in the definition of “Division.”

“Division” means the division of the assets, liabilities and/or obligations of a Person (the “Dividing Person”) among two or more Persons (whether pursuant to a “plan of division” or similar arrangement), which may or may not include the Dividing Person and pursuant to which the Dividing Person may or may not survive.

“Division Successor” means any Person that, upon the consummation of a Division of a Dividing Person, holds all or any portion of the assets, liabilities and/or obligations previously held by such Dividing Person immediately prior to the consummation of such Division. A Dividing Person which retains any of its assets, liabilities and/or obligations after a Division shall be deemed a Division Successor upon the occurrence of such Division.

7

“Document” has the meaning assigned to such term in the Security Agreement.

“Dollars”, “dollars” or “$” refers to lawful money of the U.S.

“EBITDA” means, for any period, Net Income for such period plus (a) without duplication and to the extent deducted in determining Net Income for such period, the sum of (i) Interest Expense for such period, (ii) income tax expense for such period, (iii) all amounts attributable to depreciation and amortization expense for such period, (iv) any non-recurring non-cash charges for such period, (v) any non-recurring fees, cash charges and other cash expenses (including severance costs) made or incurred in connection with the Transactions occurring on the Effective Date that are paid or otherwise accounted for within 90 days of the consummation of such Transactions in an amount not to exceed $1,000,000, (vi) any non-recurring fees, cash charges and other cash expenses (including severance costs) made or incurred in connection with Permitted Acquisitions or sales or other divestitures of any businesses permitted under this Agreement that are paid or otherwise accounted for within 90 days of the consummation of any such Permitted Acquisitions or sale or other divestiture in an aggregate amount not to exceed $1,000,000 for such period, (vii) any non-recurring fees, cash charges and other cash expenses (including severance costs) made or incurred in connection with the CAD Acquisition that are paid or otherwise accounted for within 90 days of the consummation of the CAD Acquisition in an amount not to exceed $1,000,000, (viii) one-time, non-recurring fees, cash charges and other cash expenses in connection with restructurings in an amount not to exceed $1,000,000 for such period, (ix) non-cash expenses related to stock options incurred during such period in accordance with Financial Accounting Standards Board Accounting Standards Codification Topic No. 718 – Compensation – Stock Compensation, (x) goodwill and other intangible asset impairment charges, (xi) any net losses associated with discontinued operations or disposed of businesses, minus (b) without duplication and to the extent included in Net Income, the sum of (i) any non-recurring non-cash gains for such period, plus (ii )any net gains associated with discontinued operations or disposed of businesses, all calculated for the Company and its Subsidiaries on a consolidated basis in accordance with GAAP.

“ECP” means an “eligible contract participant” as defined in Section 1(a)(18) of the Commodity Exchange Act or any regulations promulgated thereunder and the applicable rules issued by the Commodity Futures Trading Commission and/or the SEC.

“Effective Date” means the date on which the conditions specified in Section 4.01 are satisfied (or waived in accordance with Section 8.02).

“Electronic Signature” means an electronic sound, symbol, or process attached to, or associated with, a contract or other record and adopted by a Person with the intent to sign, authenticate or accept such contract or record.

“Electronic System” means any electronic system, including e-mail, e-fax, web portal access for the Borrower, Intralinks®, ClearPar®, Debt Domain, Syndtrak and any other Internet or extranet-based site, whether such electronic system is owned, operated or hosted by the Lender and any of its respective Related Parties or any other Person, providing for access to data protected by passcodes or other security system.

“Environmental Laws” means all laws, rules, regulations, codes, ordinances, orders, decrees, judgments, injunctions, notices or binding agreements issued, promulgated or entered into by any Governmental Authority, relating in any way to the environment, preservation or reclamation of natural resources, the management, Release or threatened Release of any Hazardous Material or to health and safety matters.

8

“Environmental Liability” means any liability, contingent or otherwise (including any liability for damages, costs of environmental remediation, fines, penalties or indemnities), of a Borrower or any Subsidiary directly or indirectly resulting from or based upon (a) any violation of any Environmental Law, (b) the generation, use, handling, transportation, storage, treatment or disposal of any Hazardous Materials, (c) any exposure to any Hazardous Materials, (d) the Release or threatened Release of any Hazardous Materials into the environment or (e) any contract, agreement or other consensual arrangement pursuant to which liability is assumed or imposed with respect to any of the foregoing.

“Equipment” has the meaning assigned to such term in the Security Agreement.

“Equity Interests” means shares of capital stock, partnership interests, membership interests in a limited liability company, beneficial interests in a trust or other equity ownership interests in a Person, and any warrants, options or other rights entitling the holder thereof to purchase or acquire any of the foregoing.

“ERISA” means the Employee Retirement Income Security Act of 1974, as amended from time to time, and the rules and regulations promulgated thereunder.

“ERISA Affiliate” means any trade or business (whether or not incorporated) that, together with a Borrower, is treated as a single employer under Section 414(b) or (c) of the Code or, Section 4001 (14) of ERISA or, solely for purposes of Section 302 of ERISA and Section 412 of the Code, is treated as a single employer under Section 414 (b), (c), (m), (o) or (t) of the Code.

“ERISA Event” means (a) any “reportable event”, as defined in Section 4043 of ERISA or the regulations issued thereunder, with respect to a Plan (other than an event for which the 30-day notice period is waived); (b) the failure to satisfy the “minimum funding standard” (as defined in Section 412 of the Code or Section 302 of ERISA) with respect to any Plan, whether or not waived; (c) the filing pursuant to Section 412(c) of the Code or Section 302(c) of ERISA of an application for a waiver of the minimum funding standard with respect to any Plan; (d) the incurrence by any Borrower or any ERISA Affiliate of any liability under Title IV of ERISA with respect to the termination of any Plan; (e) the receipt by any Borrower or any ERISA Affiliate from the PBGC or a plan administrator of any notice relating to an intention to terminate any Plan or Plans under Section 4041, Section 4042 or Section 4041A of ERISA or to appoint a trustee to administer any Plan; (f) the incurrence by any Borrower or any ERISA Affiliate of any liability with respect to the withdrawal or partial withdrawal of any Borrower or any ERISA Affiliate from any Plan or Multiemployer Plan; or (g) the receipt by any Borrower or any ERISA Affiliate of any notice concerning the imposition upon any Borrower or any ERISA Affiliate of Withdrawal Liability or a determination that a Multiemployer Plan is, or is expected to be, insolvent or in reorganization, within the meaning of Title IV of ERISA.

“Eurodollar”, when used in reference to any Loan or Borrowing, refers to whether such Loan, or the Loans comprising such Borrowing, bear interest at a rate determined by reference to the Adjusted LIBOR Rate.

“Event of Default” has the meaning assigned to such term in Article VII.

“Excluded Collateral” has the meaning assigned to such term in the Security Agreement.

“Excluded Subsidiary” means a joint venture entity owned by a Loan Party in connection with a Permitted Joint Venture Investment where such Loan Party’s aggregate investment (whether in a single investment or a series of investments) in such joint venture entity does not exceed $500,000.

9

“Excluded Swap Obligation” means, with respect to any Guarantor, any Swap Obligation if, and to the extent that, all or a portion of the Guarantee of such Guarantor of, or the grant by such Guarantor of a security interest to secure, such Swap Obligation (or any Guarantee thereof) is or becomes illegal under the Commodity Exchange Act or any rule, regulation or order of the Commodity Futures Trading Commission (or the application or official interpretation of any thereof) by virtue of such Guarantor’s failure for any reason to constitute an ECP at the time the Guarantee of such Guarantor or the grant of such security interest becomes or would become effective with respect to such Swap Obligation. If a Swap Obligation arises under a master agreement governing more than one swap, such exclusion shall apply only to the portion of such Swap Obligation that is attributable to swaps for which such Guarantee or security interest is or becomes illegal.

“Excluded Taxes” means any of the following Taxes imposed on or with respect to the Lender or required to be withheld or deducted from a payment to the Lender: (a) Taxes imposed on or measured by net income (however denominated), franchise Taxes, and branch profits Taxes, in each case, (i) imposed as a result of the Lender being organized under the laws of, or having its principal office or its applicable lending office located in, the jurisdiction imposing such Tax (or any political subdivision thereof) or (ii) that are Other Connection Taxes, (b) U.S. federal withholding Taxes imposed on amounts payable to or for the account of the Lender with respect to an applicable interest in a Loan, Letter of Credit or Commitment pursuant to a law in effect on the date on which (i) the Lender acquires such interest in the Loan, Letter of Credit or Commitment or (ii) the Lender changes its lending office, except in each case to the extent that, pursuant to Section 2.15, amounts with respect to such Taxes were payable either to the Lender’s assignor immediately before the Lender acquired the applicable interest in such Loan, Letter of Credit or Commitment or to the Lender immediately before it changed its lending office, and (c) any U.S. federal withholding Taxes imposed under FATCA.

“FATCA” means Sections 1471 through 1474 of the Code as of the date of this Agreement (or any amended or successor version that is substantively comparable and not materially more onerous to comply with), any current or future regulations or official interpretations thereof and any agreement entered into pursuant to Section 1471(b)(1) of the Code.

“Federal Funds Effective Rate” means, for any day, the rate calculated by the NYFRB based on such day’s federal funds transactions by depositary institutions (as determined in such manner as the NYFRB shall set forth on its public website from time to time) and published on the next succeeding Business Day by the NYFRB as the effective federal funds rate, provided that, if the Federal Funds Effective Rate as so determined would be less than zero, such rate shall be deemed to zero for the purposes of this Agreement.

“Federal Reserve Board” means the Board of Governors of the Federal Reserve System of the United States of America.

“FFC” means First Francis Company Inc., an Ohio corporation.

“FFC Security Agreement” means that certain All Assets Security Agreement, dated July 1, 2016, among Hickok Incorporated, Federal, Supreme and FFC.

“FFC Subordinated Debt” means the Indebtedness of certain of the Loan Parties owed to FFC pursuant to the FFC Subordinated Debt Documents in the aggregate current principal amount, as of the Effective Date, of $3,995,600.

10

“FFC Subordinated Debt Documents” means the FFC Subordinated Notes, the FFC Security Agreement, and the other documents, agreements, instruments and writings executed by any of the Loan Parties to FFC in connection with or related to the FFC Subordinated Debt, as any of the same may be amended, restated or otherwise modified from time to time.

“FFC Subordinated Payment Conditions” means (a) FFC is not in breach or violation of the FFC Subordination Agreement, (b) no Default or Event of Default has occurred and is continuing (or has not been waived by the Lender) under this Agreement or any other Loan Document, (c) no Default or Event of Default will occur as a result of any such payment, (d) after giving effect to any such payment, Lender is satisfied that the Fixed Charge Coverage Ratio, as calculated in accordance with Section 6.12 of this Agreement, is not less than 1.45 to 1.00, as evidenced by a Compliance Certificate delivered by the Loan Parties to the Lender prior to any such payment being made, and (e) after giving effect to any such payment, Availability is greater than or equal to $500,000.

“FFC Subordinated Notes” means, together, (i) that certain Promissory Note, dated July 1, 2016, by Hickok Incorporated in favor of First Francis Company Inc., in the original principal amount of $2,768,662 and (ii) that certain Promissory Note, dated July 1, 2016, by Hickok Incorporated in favor of First Francis Company Inc., in the original principal amount of $2,000,000.

“FFC Subordination Agreement” means the Subordination Agreement entered into among the Loan Parties, FFC (as subordinated lender), and the Lender (as senior lender) in connection with the FFC Subordinated Debt, as such agreement may be amended, restated or otherwise modified from time to time.

“Financial Officer” means the chief financial officer, principal accounting officer, treasurer or controller of a Borrower.

“Financial Statements” has the meaning assigned to such term in Section 5.01.

“First Amendment Effective Date” means July 5, 2018.

“Fixed Charges” means, for any period, without duplication, cash Interest Expense, plus scheduled principal payments on Indebtedness (excluding Subordinated Indebtedness) actually made, plus principal payments made after the Effective Date on Subordinated Indebtedness, plus Distributions, plus scheduled Capital Lease Obligation payments, all calculated for the Company and its Subsidiaries on a consolidated basis in accordance with GAAP.

“Fixed Charge Coverage Ratio” means, for any period, the ratio of (a) Adjusted EBITDA minus (i) income tax expense for such period and (ii) Maintenance Capital Expenditures to (b) Fixed Charges, all calculated for the Company and its Subsidiaries on a consolidated basis in accordance with GAAP.

“Fixtures” has the meaning assigned to such term in the Security Agreement.

“Funding Account” has the meaning assigned to such term in Section 4.01(h).

“GAAP” means generally accepted accounting principles in the U.S.

“Governmental Authority” means the government of the U.S., any other nation or any political subdivision thereof, whether state or local, and any agency, authority, instrumentality, regulatory body, court, central bank or other entity exercising executive, legislative, judicial, taxing, regulatory or administrative powers or functions of or pertaining to government.

11

“Guarantee” of or by any Person (the “guarantor”) means any obligation, contingent or otherwise, of the guarantor guaranteeing or having the economic effect of guaranteeing any Indebtedness or other obligation of any other Person (the “primary obligor”) in any manner, whether directly or indirectly, and including any obligation of the guarantor, direct or indirect, (a) to purchase or pay (or advance or supply funds for the purchase or payment of) such Indebtedness or other obligation or to purchase (or to advance or supply funds for the purchase of) any security for the payment thereof, (b) to purchase or lease property, securities or services for the purpose of assuring the owner of such Indebtedness or other obligation of the payment thereof, (c) to maintain working capital, equity capital or any other financial statement condition or liquidity of the primary obligor so as to enable the primary obligor to pay such Indebtedness or other obligation or (d) as an account party in respect of any letter of credit or letter of guaranty issued to support such Indebtedness or obligation; provided that the term Guarantee shall not include (i) warranties or indemnities made in trade contracts, asset sale agreements, acquisition agreements, commitment letters, engagement letters and brokerage and deposit agreements in the ordinary course of business and not otherwise prohibited hereunder, and warranties and indemnities to lenders in any documents evidencing Indebtedness permitted pursuant to Section 6.01 with respect to the guarantor, (ii) any indemnities made in connection with liability of a Person’s directors, officers and employees in their capacities as such as permitted by applicable law so long as the same is in the ordinary course of business and consistent with such Person’s past practices and, (iii) any contingent liability arising from the endorsement of negotiable or other instruments for deposit or collection in the ordinary course of business, and (iv) any continuing liability of Hickok or its Subsidiaries as a lessee under a real property or equipment lease after such lease has been assigned or subleased by such Person.

“Guaranteed Obligations” has the meaning assigned to such term in Section 9.01.

“Guarantors” means all Loan Guarantors and all non-Loan Parties who have delivered an Obligation Guaranty, and the term “Guarantor” means each or any one of them individually.

“Hazardous Materials” means: (a) any substance, material, or waste that is included within the definitions of “hazardous substances,” “hazardous materials,” “hazardous waste,” “toxic substances,” “toxic materials,” “toxic waste,” or words of similar import in any Environmental Law; (b) those substances listed as hazardous substances by the United States Department of Transportation (or any successor agency) (49 C.F.R. 172.101 and amendments thereto) or by the Environmental Protection Agency (or any successor agency) (40 C.F.R. Part 302 and amendments thereto); and (c) any substance, material, or waste that is petroleum, petroleum-related, or a petroleum by-product, asbestos or asbestos-containing material, polychlorinated biphenyls, flammable, explosive, radioactive, freon gas, radon, or a pesticide, herbicide, or any other agricultural chemical.

“Hickok Air Enterprises Name Change” shall mean the name change which will occur on or about the date hereof, whereby Hickok Air Enterprises will change its name to Air Enterprises, LLC.

“Hickok Air Enterprises Name Change Documents” shall mean the documentation filed with the Secretary of State of the State of Delaware in order to effectuate the Hickok Air Enterprises Name Change and all other agreements, instruments and documents executed pursuant thereto or in connection therewith.

12

“Indebtedness” of any Person means, without duplication, (a) all obligations of such Person for borrowed money, (b) all obligations of such Person evidenced by bonds, debentures, notes or similar instruments, (c) all obligations of such Person upon which interest charges are customarily paid, (d) all obligations of such Person under conditional sale or other title retention agreements relating to property acquired by such Person, (e) all obligations of such Person in respect of the deferred purchase price of property or services (excluding current accounts payable incurred in the ordinary course of business), (f) all Indebtedness of others secured by (or for which the holder of such Indebtedness has an existing right, contingent or otherwise, to be secured by) any Lien on property owned or acquired by such Person, whether or not the Indebtedness secured thereby has been assumed, provided, in the case of any such obligations that are non-recourse to such Person, that the amount of obligations counted as Indebtedness shall be no greater than the fair market value of the assets subject to such Lien, (g) all Guarantees by such Person of Indebtedness of others, (h) all Capital Lease Obligations of such Person, (i) all obligations, contingent or otherwise, of such Person as an account party in respect of letters of credit and letters of guaranty, (j) all obligations, contingent or otherwise, of such Person in respect of bankers’ acceptances, and (k) obligations under any liquidated earn-out and (l) any other Off-Balance Sheet Liability and (m) obligations, whether absolute or contingent and howsoever and whensoever created, arising, evidenced or acquired (including all renewals, extensions and modifications thereof and substitutions therefor), under (i) any and all Swap Agreements, and (ii) any and all cancellations, buy backs, reversals, terminations or assignments of any Swap Agreement transaction. The Indebtedness of any Person shall include the Indebtedness of any other entity (including any partnership in which such Person is a general partner) to the extent such Person is liable therefor as a result of such Person’s ownership interest in or other relationship with such entity, except to the extent the terms of such Indebtedness provide that such Person is not liable therefor.

“Indemnified Taxes” means (a) Taxes, other than Excluded Taxes, imposed on or with respect to any payment made by or on account of any obligation of any Loan Party under any Loan Document and (b) to the extent not otherwise described in the foregoing clause (a), Other Taxes.

“Indemnitee” has the meaning assigned to such term in Section 8.03(b).

“Information” has the meaning assigned to such term in Section 8.12.

“Interest Election Request” means a request by the Borrower Representative to convert or continue a Borrowing in accordance with Section 2.06.

“Interest Expense” means, with reference to any period, total interest expense (including that attributable to Capital Lease Obligations) of the Company and its Subsidiaries for such period with respect to all outstanding Indebtedness of the Company and its Subsidiaries (including all commissions, discounts and other fees and charges owed with respect to letters of credit and bankers’ acceptances and net costs under Swap Agreements in respect of interest rates, to the extent such net costs are allocable to such period in accordance with GAAP), calculated for the Company and its Subsidiaries on a consolidated basis for such period in accordance with GAAP.

“Interest Payment Date” means (a) with respect to any CBFR Loan, the first Business Day of each calendar month and the Revolving Credit Maturity Date or the Term A Maturity Date, as applicable, and (b) with respect to any Eurodollar Loan, the last day of the Interest Period applicable to the Borrowing of which such Loan is a part and the Revolving Credit Maturity Date or the Term A Maturity Date, as applicable.

“Interest Period” means, with respect to any Eurodollar Borrowing, each consecutive one month period, the first of which shall commence on the date of this Agreement, ending on the day which corresponds numerically to such date one (1) month thereafter, provided, however, that if there is no such numerically corresponding day in such first succeeding month, such Interest Period shall end on the last Business Day of such first succeeding month. If an Interest Period would otherwise end on a day which is not a Business Day, such Interest Period shall end on the next succeeding Business Day, provided, however, that if said next succeeding Business Day falls in a new calendar month, such Interest Period shall end on the immediately preceding Business Day.

13

“Interpolated Rate” means, at any time, for any Interest Period, the rate per annum (rounded to the same number of decimal places as the LIBOR Screen Rate) determined by the Lender (which determination shall be conclusive and binding absent manifest error) to be equal to the rate that results from interpolating on a linear basis between: (a) the LIBOR Screen Rate for the longest period (for which the LIBOR Screen Rate is available) that is shorter than the Impacted Interest Period and (b) the LIBOR Screen Rate for the shortest period (for which the LIBOR Screen Rate is available) that exceeds the Impacted Interest Period, in each case, at such time; provided that, if any Interpolated Rate shall be less than zero, such rate shall be deemed to be zero for purposes of this Agreement.

“Inventory” has the meaning assigned to such term in the Security Agreement.

“IRS” means the United States Internal Revenue Service.

“Joinder Agreement” means a Joinder Agreement in substantially the form of Exhibit D.

“LC Collateral Account” has the meaning assigned to such term in Section 2.04(h).

“LC Disbursement” means any payment made by the Lender pursuant to a Letter of Credit.

“LC Exposure” means, at any time, the sum of the Commercial LC Exposure and the Standby LC Exposure at such time.

“LC Sublimit” means $3,000,000.

“Lender” means JPMorgan Chase Bank, N.A., its successors and assigns.

“Letters of Credit” means the letters of credit issued pursuant to this Agreement, and the term “Letter of Credit” means any one of them or each of them singularly, as the context may require.

“LIBOR Rate” means, with respect to any Eurodollar Borrowing for any applicable Interest Period or for any CBFR Borrowing, the LIBOR Screen Rate at approximately 11:00 a.m., London time, two (2) Business Days prior to the commencement of such Interest Period; provided that, if the LIBOR Screen Rate shall not be available at such time for such Interest Period (an “Impacted Interest Period”), then the LIBOR Rate shall be the Interpolated Rate.

“LIBOR Screen Rate” means, for any day and time, with respect to any Eurodollar Borrowing for any Interest Period or for any CBFR Borrowing, the London interbank offered rate as administered by ICE Benchmark Administration (or any other Person that takes over the administration of such rate for Dollars) for a period equal in length to such Interest Period as displayed on such day and time on pages LIBOR01 or LIBOR02 of the Reuters screen that displays such rate (or, in the event such rate does not appear on a Reuters page or screen, on any successor or substitute page on such screen that displays such rate, or on the appropriate page of such other information service that publishes such rate from time to time as selected by the Lender in its reasonable discretion); provided that if the LIBOR Screen Rate as so determined would be less than zero, such rate shall be deemed to be zero for the purposes of this Agreement.

“Lien” means, with respect to any asset, (a) any mortgage, deed of trust, lien, pledge, hypothecation, encumbrance, charge or security interest in, on or of such asset, (b) the interest of a vendor or a lessor under any conditional sale agreement, capital lease or title retention agreement (or any financing lease having substantially the same economic effect as any of the foregoing) relating to such asset and (c) in the case of securities, any purchase option, call or similar right of a third party with respect to such securities.

14

“Loan Documents” means, collectively, this Agreement, each promissory note issued pursuant to this Agreement, any Letter of Credit application, each Collateral Document, the Loan Guaranty, any Obligation Guaranty, the FFC Subordination Agreement, the Roundball Subordination Agreement, the CAD Subordination Agreement, and each other agreement, instrument, document and certificate identified in Section 4.01 executed and delivered to, or in favor of, the Lender and including each other pledge, power of attorney, consent, assignment, contract, notice, letter of credit agreement, letter of credit application and each other written matter whether heretofore, now or hereafter executed by or on behalf of any Loan Party, or any employee of any Loan Party, and delivered to the Lender in connection with this Agreement or the transactions contemplated hereby. Any reference in this Agreement or any other Loan Document to a Loan Document shall include all appendices, exhibits or schedules thereto, and all amendments, restatements, supplements or other modifications thereto, and shall refer to this Agreement or such Loan Document as the same may be in effect at any and all times such reference becomes operative.

“Loan Guarantor” means each Loan Party other than the Borrowers’ foreign Subsidiaries.

“Loan Guaranty” means Article IX of this Agreement.

“Loan Parties” means, collectively, the Borrowers, the Borrowers’ domestic Subsidiaries and any other Person who becomes a party to this Agreement pursuant to a Joinder Agreement and their successors and assigns, and the term “Loan Party” shall mean any one of them or all of them individually, as the context may require.

“Loans” means the loans and advances made by the Lender pursuant to this Agreement.

“Maintenance Capital Expenditures” means Capital Expenditures that are made in connection with the replacement, substitution, restoration or repair of existing assets in order to maintain existing operational capacities (it being agreed that Maintenance Capital Expenditures does not include Capital Expenditures made in connection with an acquisition of a new asset that seeks to expand existing operational capacities).

“Material Adverse Effect” means a material adverse effect on (a) the business, assets, operations, prospects or condition, financial or otherwise, of the Company and its Subsidiaries taken as a whole, (b) the ability of any Loan Party to perform any of its obligations under the Loan Documents to which it is a party, (c) the Collateral, or the Lender’s Liens (on behalf of itself and the other Secured Parties) on the Collateral or the priority of such Liens, or (d) the rights of or benefits available to the Lender under any of the Loan Documents.

“Material Indebtedness” means Indebtedness (other than the Loans and Letters of Credit), or obligations in respect of one or more Swap Agreements, of any one or more of the Loan Parties in an aggregate principal amount exceeding $1,000,000. For purposes of determining Material Indebtedness, the “principal amount of the obligations” of the Loan Parties in respect of any Swap Agreement at any time shall be the maximum aggregate amount (giving effect to any netting agreements) that such Loan Party would be required to pay if such Swap Agreement were terminated at such time.

“Maximum Rate” has the meaning assigned to such term in Section 8.16.

15

“Moody’s” means Moody’s Investors Service, Inc.

“Mortgage” means any mortgage, deed of trust or other agreement which conveys or evidences a Lien in favor of the Lender, on real property of a Loan Party, including any amendment, restatement, modification or supplement thereto.

“Multiemployer Plan” means a multiemployer plan as defined in Section 4001(a)(3) of ERISA.

“Net Income” means, for any period, the consolidated net income (or loss) determined for the Company and its Subsidiaries, on a consolidated basis in accordance with GAAP; provided that there shall be excluded (a) the income (or deficit) of any Person accrued prior to the date it becomes a Subsidiary or is merged into or consolidated with the Company or any Subsidiary, and (b) the income (or deficit) of any Person (other than a Subsidiary) in which the Company or any Subsidiary has an ownership interest, except to the extent that any such income is actually received by the Company or such Subsidiary in the form of dividends or similar distributions, and (c) the undistributed earnings of any Subsidiary, to the extent that the declaration or payment of dividends or similar distributions by such Subsidiary is not at the time permitted by the terms of any contractual obligation (other than under any Loan Document) or Requirement of Law applicable to such Subsidiary.

“Net Proceeds” means, with respect to any event, (a) the cash proceeds received in respect of such event including (i) any cash received in respect of any non-cash proceeds (including any cash payments received by way of deferred payment of principal pursuant to a note or installment receivable or purchase price adjustment receivable or otherwise, but excluding any interest payments), but only as and when received, (ii) in the case of a casualty, insurance proceeds and (iii) in the case of a condemnation or similar event, condemnation awards and similar payments, minus (b) the sum of (i) all reasonable fees and out-of-pocket expenses paid to third parties (other than Affiliates) in connection with such event, (ii) in the case of a sale, transfer or other disposition of an asset (including pursuant to a sale and leaseback transaction or a casualty or a condemnation or similar proceeding), the amount of all payments required to be made as a result of such event to repay Indebtedness (other than Loans) secured by such asset or otherwise subject to mandatory prepayment as a result of such event and (iii) the amount of all taxes paid (or reasonably estimated to be payable) and the amount of any reserves established to fund contingent liabilities reasonably estimated to be payable, in each case during the year that such event occurred or the next succeeding year and that are directly attributable to such event (as determined reasonably and in good faith by a Financial Officer of the Borrower Representative).

“NYFRB” means the Federal Reserve Bank of New York.

“Obligated Party” has the meaning assigned to such term in Section 9.02.

“Obligation Guaranty” means any Guarantee of all or any portion of the Secured Obligations executed and delivered to the Lender for the benefit of the Secured Parties by a guarantor who is not a Loan Party.

“Obligations” “ means all unpaid principal of and accrued and unpaid interest on the Loans, all LC Exposure, all accrued and unpaid fees and all expenses, reimbursements, indemnities and other obligations and indebtedness (including interest and fees accruing during the pendency of any bankruptcy, insolvency, receivership or other similar proceeding, regardless of whether allowed or allowable in such proceeding), obligations and liabilities of any of the Loan Parties to the Lender or any indemnified party, individually or collectively, existing on the Effective Date or arising thereafter, direct or indirect, joint or several, absolute or contingent, matured or unmatured, liquidated or unliquidated, secured or unsecured, arising by contract, operation of law or otherwise, arising or incurred under this Agreement or any of the other Loan Documents or in respect of any of the Loans made or reimbursement or other obligations incurred or any of the Letters of Credit or other instruments at any time evidencing any thereof.

16

“OFAC” means the Office of Foreign Assets Control of the United States Department of the Treasury.

“Off-Balance Sheet Liability” of a Person means (a) any repurchase obligation or liability of such Person with respect to accounts or notes receivable sold by such Person, (b) any indebtedness, liability or obligation under any so-called “synthetic lease” transaction entered into by such Person, or (c) any indebtedness, liability or obligation arising with respect to any other transaction which is the functional equivalent of or takes the place of borrowing but which does not constitute a liability on the balance sheet of such Person (other than operating leases).

“Other Connection Taxes” means, with respect to the Lender, Taxes imposed as a result of a present or former connection between the Lender and the jurisdiction imposing such Taxes (other than a connection arising from the Lender having executed, delivered, become a party to, performed its obligations under, received payments under, received or perfected a security interest under, engaged in any other transaction pursuant to, or enforced, any Loan Document), or sold or assigned an interest in any Loan, Letter of Credit, or any Loan Document.

“Other Taxes” means all present or future stamp, court or documentary, intangible, recording, filing or similar Taxes that arise from any payment made under, from the execution, delivery, performance, enforcement or registration of, from the receipt or perfection of a security interest under, or otherwise with respect to, any Loan Document, except any such Taxes that are Other Connection Taxes imposed with respect to an assignment.

“Parent” means, with respect to the Lender, the Person of which the Lender is, directly or indirectly, a subsidiary.

“Participant” has the meaning assigned to such term in Section 8.04(c).

“Participant Register” has the meaning assigned to such term in Section 8.04(c).

“PBGC” means the Pension Benefit Guaranty Corporation referred to and defined in ERISA and any successor entity performing similar functions.

“Permitted Acquisition” means any Acquisition by any Loan Party in a transaction that satisfies each of the following requirements:

(a)     such Acquisition is not a hostile or contested acquisition;

(b)     the business acquired in connection with such Acquisition is (i) located in the U.S., (ii) organized under applicable U.S. and state laws, and (iii) not engaged, directly or indirectly, in any line of business other than the businesses in which the Loan Parties are engaged on the Second Amendment Effective Date and any business activities that are substantially similar, related, or incidental thereto;

(c)     both before and after giving effect to such Acquisition and the Loans (if any) requested to be made in connection therewith, each of the representations and warranties in the Loan Documents is true and correct (except (i) any such representation or warranty which relates to a specified prior date and (ii) to the extent the Lender has been notified in writing by the Loan Parties that any representation or warranty is not correct and the Lender has explicitly waived in writing compliance with such representation or warranty) and no Default or Event of Default exists, will exist, or would result therefrom;

17

(d)     as soon as available, but not less than thirty (30) days prior to such Acquisition, the Borrower Representative has provided the Lender (i) notice of such Acquisition, (ii) pro forma financial statements, statements of cash flow, and Availability projections, and (iii) a copy of all other business and financial information reasonably requested by the Lender within ten (10) days after receipt of notice of such Acquisition;

(e)     [reserved];

(f)     if such Acquisition is an acquisition of the Equity Interests of a Person, such Acquisition is structured so that the acquired Person shall become a wholly-owned Subsidiary of the Company and, a Loan Party pursuant to the terms of this Agreement;

(g)     if such Acquisition is an acquisition of assets, such Acquisition is structured so that a Borrower shall acquire such assets;

(h)     if such Acquisition is an acquisition of Equity Interests, such Acquisition will not result in any violation of Regulation U;

(i)     if such Acquisition involves a merger or a consolidation involving a Borrower or any other Loan Party, such Borrower or such Loan Party, as applicable, shall be the surviving entity;

(j)     no Loan Party shall, as a result of or in connection with any such Acquisition, assume or incur any direct or contingent liabilities (whether relating to environmental, tax, litigation, or other matters) that could reasonably be expected to have a Material Adverse Effect;

(k)     in connection with an Acquisition of the Equity Interests of any Person, all Liens on property of such Person shall be terminated unless the Lender in its sole discretion consents otherwise, and in connection with an Acquisition of the assets of any Person, all Liens on such assets shall be terminated;

(l)     before and after giving effect to the completion of such Acquisition, on a pro forma basis, (i) the Senior Funded Indebtedness to EBITDA Ratio shall be at least 0.50x below the highest Senior Funded Indebtedness to EBITDA Ratio permitted under Section 6.12, and (ii) the Total Funded Indebtedness to EBITDA Ratio shall be at least 0.50x below the highest Total Funded Indebtedness to EBITDA Ratio permitted under Section 6.12;

(m)     the Borrower Representative shall certify to the Lender (and provide the Lender with a pro forma calculation in form and substance reasonably satisfactory to the and the Lender) that, after giving effect to the completion of such Acquisition, on a pro forma basis and at all times during the 30-day period prior to the consummation of such Acquisition, Availability will not be less than $2,500,000 which includes all consideration given in connection with such Acquisition, other than Equity Interests of the applicable Borrower delivered to the seller(s) in such Acquisition, as having been paid in cash at the time of making such Acquisition;

18

(n)     all actions required to be taken with respect to any newly acquired or formed wholly-owned Subsidiary of a Borrower or a Loan Party, as applicable, required under Section 5.14 shall have been taken; and

(o)     the Borrower Representative shall have delivered to the Lender the final executed material documentation relating to such Acquisition within 15 days following the consummation thereof.

“Permitted Discretion” means a determination made in good faith and in the exercise of reasonable (from the perspective of a secured lender) business judgment.

“Permitted Encumbrances” means:

(a) Liens imposed by law for Taxes that are not yet due or are being contested in compliance with Section 5.04;

(b) carriers’, warehousemen’s, mechanics’, materialmen’s, repairmen’s and other like Liens imposed by law, arising in the ordinary course of business and securing obligations that are not overdue by more than thirty (30) days or are being contested in compliance with Section 5.04;

(c) pledges and deposits made in the ordinary course of business in compliance with workers’ compensation, unemployment insurance and other social security laws or regulations;

(d) deposits to secure the performance of bids, trade contracts, leases, statutory obligations, surety and appeal bonds, performance bonds and other obligations of a like nature, in each case in the ordinary course of business;

(e) judgment Liens in respect of judgments that do not constitute an Event of Default under clause (k) of Article VII; and

(f) easements, zoning restrictions, rights-of-way and similar encumbrances on real property imposed by law or arising in the ordinary course of business that do not secure any monetary obligations and do not materially detract from the value of the affected property or interfere with the ordinary conduct of business of any Borrower or any Subsidiary;

provided that the term “Permitted Encumbrances” shall not include any Lien securing Indebtedness, except with respect to clause (e) above.

“Permitted Investments” means:

(a) direct obligations of, or obligations the principal of and interest on which are unconditionally guaranteed by, the U.S. (or by any agency thereof to the extent such obligations are backed by the full faith and credit of the U.S.), in each case maturing within one year from the date of acquisition thereof;

(b) investments in commercial paper maturing within 270 days from the date of acquisition thereof and having, at such date of acquisition, the highest credit rating obtainable from S&P or from Moody’s;

(c) investments in certificates of deposit, bankers’ acceptances and time deposits maturing within 180 days from the date of acquisition thereof issued or guaranteed by or placed with, and money market deposit accounts issued or offered by, any domestic office of any commercial bank organized under the laws of the U.S. or any state thereof which has a combined capital and surplus and undivided profits of not less than $500,000,000;

19

(d) fully collateralized repurchase agreements with a term of not more than 30 days for securities described in clause (a) above and entered into with a financial institution satisfying the criteria described in clause (c) above; and

(e) money market funds that (i) comply with the criteria set forth in Securities and Exchange Commission Rule 2a-7 under the Investment Company Act of 1940, (ii) are rated AAA by S&P and Aaa by Moody’s and (iii) have portfolio assets of at least $5,000,000,000.

“Permitted Joint Venture Investments” means an investment in joint ventures by any Loan Party that satisfies each of the following requirements:

(a)     after giving effect to the investment in the joint venture entity a Loan Party will own at least 51% of the Equity Interests having ordinary voting power of such joint venture entity;

(b)      the aggregate amount of all such investments in all joint venture entities does not exceed (i) $1,000,000 in any twelve month period, and (ii) $3,000,000 invested at any time in question;

(c)     the joint venture entity is not engaged, directly or indirectly, in any line of business other than the businesses in which the Loan Parties are engaged on the Second Amendment Effective Date and any business activities that are substantially similar, related, or incidental thereto;

(d)     both before and after giving effect to the investment in the joint venture entity each of the representations and warranties in the Loan Documents is true and correct (except (i) any such representation or warranty which relates to a specified prior date and (ii) to the extent the Lender has been notified in writing by the Loan Parties that any representation or warranty is not correct and the Lender has explicitly waived in writing compliance with such representation or warranty) and no Default or Event of Default exists, will exist, or would result therefrom on a pro forma basis after giving effect to any such investment;

(e)     not less than thirty (30) days prior to such investment in the joint venture entity, the Borrower Representative has provided the Lender (i) notice of such investment and (ii) a copy of all other business and financial information reasonably requested by the Lender within ten (10) days after receipt of notice of such investment;

(f)     no Loan Party shall, as a result of or in connection with investment in the joint venture entity, assume or incur any direct or contingent liabilities (whether relating to environmental, tax, litigation, or other matters) that could reasonably be expected to have a Material Adverse Effect;

(g)     with respect to any investment (or series of investments) in a joint venture entity that exceeds $500,000 in the aggregate, all actions required under Section 5.14 shall have been taken.

“Person” means any natural person, corporation, limited liability company, trust, joint venture, association, company, partnership, Governmental Authority or other entity.

“Plan” means any employee pension benefit plan (other than a Multiemployer Plan) subject to the provisions of Title IV of ERISA or Section 412 of the Code or Section 302 of ERISA, and in respect of which any Borrower or any ERISA Affiliate is (or, if such plan were terminated, would under Section 4069 of ERISA be deemed to be) an “employer” as defined in Section 3(5) of ERISA.

20

“Prepayment Event” means:

(a) any sale, transfer or other disposition (including pursuant to a sale and leaseback transaction) of any property or asset of any Loan Party or any Subsidiary, other than dispositions described in Section 6.05(a); or

(b) subject to Section 2.09(c), any casualty or other insured damage to, or any taking under power of eminent domain or by condemnation or similar proceeding of, any property or asset of any Loan Party or any Subsidiary with a fair value immediately prior to such event equal to or greater than $150,000; or

(c) the issuance by the Company of any Equity Interests, or the receipt by the Company of any capital contribution, (other than the offering or exercise of stock options or other equity awards pursuant to management incentive plans); or

(d) the incurrence by any Loan Party or any Subsidiary of any Indebtedness, other than Indebtedness permitted under Section 6.01.

“Prime Rate” means the rate of interest last quoted by The Wall Street Journal as the “Prime Rate” in the U.S. or, if The Wall Street Journal ceases to quote such rate, the highest per annum interest rate published by the Federal Reserve Board in Federal Reserve Statistical Release H.15 (519) (Selected Interest Rates) as the “bank prime loan” rate or, if such rate is no longer quoted therein, any similar rate quoted therein (as determined by the Lender) or any similar release by the Federal Reserve Board (as determined by the Lender). Each change in the Prime Rate shall be effective from and including the date such change is publicly announced or quoted as being effective.

“Pro Forma EBITDA” means, at any time with respect to any Target acquired in a Permitted Acquisition, the Net Income of such Target for the then most recent twelve (12) month period for which financial statements of such Target have been made available to Lender, plus (a) without duplication and to the extent deducted in determining Net Income for such period, the sum of (i) Interest Expense for such period, (ii) income tax expense for such period, (iii) all amounts attributable to depreciation and amortization expense for such period, (iv) any non-recurring non-cash charges for such period, (v) any non-recurring fees, cash charges and other cash expenses, minus (b) without duplication and to the extent included in Net Income, any non-recurring non-cash gains for such period, all calculated in accordance with GAAP.

“Projections” has the meaning assigned to such term in Section 5.01(e).

“Qualified ECP Guarantor” means, in respect of any Swap Obligation, each Loan Party that has total assets exceeding $10,000,000 at the time the relevant Loan Guaranty or grant of the relevant security interest becomes or would become effective with respect to such Swap Obligation or such other person as constitutes an “eligible contract participant” under the Commodity Exchange Act or any regulations promulgated thereunder and can cause another person to qualify as an “eligible contract participant” at such time by entering into a keepwell under Section 1a(18)(A)(v)(II) of the Commodity Exchange Act.

21

“Real Property” means all real property that was, is now or may hereafter be owned, occupied or otherwise controlled by any Loan Party pursuant to any contract of sale, lease or other conveyance of any legal interest in any real property to any Loan Party.

“Refinance Indebtedness” has the meaning assigned to such term in Section 6.01(f).

“Regulation D” means Regulation D of the Board of Governors of the Federal Reserve System as from time to time in effect and any successor thereto or other regulation or official interpretation of said Board of Governors relating to reserve requirements applicable to member banks of the Federal Reserve System.

“Related Parties” means, with respect to any specified Person, such Person’s Affiliates and the respective directors, officers, partners, members, trustees, employees, agents, administrators, managers, representatives and advisors of such Person and such Person’s Affiliates.

“Release” means any releasing, spilling, leaking, pumping, pouring, emitting, emptying, discharging, injecting, escaping, leaching, migrating, disposing, or dumping of any substance into the environment.

“Report” means reports prepared by the Lender or another Person showing the results of appraisals, field examinations or audits pertaining to a Borrower’s assets from information furnished by or on behalf of such Borrower, after the Lender has exercised its rights of inspection pursuant to this Agreement.

“Requirement of Law” means, with respect to any Person, (a) the charter, articles or certificate of organization or incorporation and bylaws or operating, management or partnership agreement, or other organizational or governing documents of such Person and (b) any statute, law (including common law), treaty, rule, regulation, code, ordinance, order, decree, writ, judgment, injunction or determination of any arbitrator or court or other Governmental Authority (including Environmental Laws), in each case applicable to or binding upon such Person or any of its property or to which such Person or any of its property is subject.

“Reserves” means any and all reserves which the Lender deems necessary, in its Permitted Discretion, to maintain with respect to the Collateral or any Loan Party.

“Reserve Requirement” means, with respect to an Interest Period, the maximum aggregate reserve requirement (including all basic, supplemental, marginal and other reserves) which is imposed under Regulation D.

“Restricted Payment” means any dividend or other distribution (whether in cash, securities or other property) with respect to any Equity Interests in any Borrower or any Subsidiary, or any payment (whether in cash, securities or other property), including any sinking fund or similar deposit, on account of the purchase, redemption, retirement, acquisition, cancellation or termination of any such Equity Interests or any option, warrant or other right to acquire any such Equity Interests.

“Revolving Commitment” means the commitment of the Lender to make Revolving Loans and issue Letters of Credit hereunder, as such commitment may be reduced from time to time pursuant to Section 2.07. As of the Second Amendment Effective Date, the amount of the Lender’s Revolving Commitment is $20,000,000.

22

“Revolving Credit Maturity Date” means June 1, 2024 (if the same is a Business Day, or if not then the immediately next succeeding Business Day), or any earlier date on which the Revolving Commitment is reduced to zero or otherwise terminated pursuant to the terms hereof.

“Revolving Exposure” means, at any time, the sum of the aggregate outstanding principal amount of the Lender’s Revolving Loans and its LC Exposure at such time.

“Revolving Loan” means a Loan made pursuant to Section 2.01(a).

“Roundball” means Roundball LLC, an Ohio limited liability company.

“Roundball Subordinated Note” means (a) the Convertible Promissory Note, dated December 30, 2015, made by Hickok in favor of Roundball in the original principal amount of $466,879.87, and referred to in the Roundball Subordinated Loan Agreement as the “Roundball/Borrower Option Note”, as amended, restated or otherwise modified from time to time.

“Roundball Subordinated Debt” means the Indebtedness of Hickok owed to Roundball pursuant to the Roundball Subordinated Debt Documents in the aggregate current principal amount, as of the Effective Date, of $200,000 for Roundball.

“Roundball Subordinated Debt Documents” means the Roundball Subordinated Loan Agreement, the Roundball Subordinated Note and the other documents, agreements, instruments and writings executed by any of the Loan Parties to Roundball in connection with or related to the Roundball Subordinated Debt, as any of the same may be amended, restated or otherwise modified from time to time.

“Roundball Subordinated Loan Agreement” means that certain Convertible Loan Agreement, dated as of December 30, 2011, among Hickok (as borrower) and Roundball (as lender), as amended, restated or otherwise modified from time to time.

“Roundball Subordinated Payment Conditions” means (a) Roundball is not in breach or violation of the Roundball Subordination Agreement, (b) no Default or Event of Default has occurred and is continuing (or has not been waived by the Lender) under this Agreement or any other Loan Document, (c) no Default or Event of Default will occur as a result of any such payment, (d) after giving effect to any such payment, Lender is satisfied that the Fixed Charge Coverage Ratio, as calculated in accordance with Section 6.12 of this Agreement, is not less than 1.45 to 1.00, as evidenced by a Compliance Certificate delivered by the Loan Parties to the Lender prior to any such payment being made, and (e) after giving effect to any such payment, Availability is greater than or equal to $500,000.

“Roundball Subordination Agreement” means the Subordination Agreement entered into among the Loan Parties, Roundball (as subordinated lender), and the Lender (as senior lender) in connection with the Roundball Subordinated Debt, as such agreement may be amended, restated or otherwise modified from time to time.

“S&P” means Standard & Poor’s Ratings Services, a Standard & Poor’s Financial Services LLC business.

“Sale and Leaseback Transaction” has the meaning assigned to such term in Section 6.06.

“Sanctioned Country” means, at any time, a country, region or territory which is the subject or target of any Sanctions (at the time of this Agreement, Crimea, Cuba, Iran, North Korea, Sudan and Syria).

23

“Sanctioned Person” means, at any time, (a) any Person listed in any Sanctions-related list of designated Persons maintained by the Office of Foreign Assets Control of the U.S. Department of the Treasury, or the U.S. Department of State; (b) any Person operating, organized or resident in a Sanctioned Country; (c) any Person owned or controlled by any such Person or Persons described in the foregoing clauses (a) or (b); or (d) any Person otherwise the subject of any Sanctions.

“Sanctions” means all economic or financial sanctions or trade embargoes imposed, administered or enforced from time to time by the U.S. government, including those administered by the Office of Foreign Assets Control of the U.S. Department of the Treasury or the U.S. Department of State.

“SEC” means the Securities and Exchange Commission of the U.S.

“Second Amendment Effective Date” means September 30, 2019.

“Secured Obligations” means all Obligations, together with all (i) Banking Services Obligations and (ii) Swap Agreement Obligations owing to the Lender or its Affiliates; provided, however, that the definition of “Secured Obligations” shall not create any guarantee by any Guarantor of (or grant of security interest by any Guarantor to support, as applicable) any Excluded Swap Obligations of such Guarantor for purposes of determining any obligations of any Guarantor.

“Secured Parties” means (a) the Lender, (b) each provider of Banking Services, to the extent the Banking Services Obligations in respect thereof constitute Secured Obligations, (c) each counterparty to any Swap Agreement, to the extent the obligations thereunder constitute Secured Obligations, (d) the beneficiaries of each indemnification obligation undertaken by any Loan Party under any Loan Document and (e) the successors and assigns of each of the foregoing.

“Security Agreement” means that certain Pledge and Security Agreement (including any and all supplements thereto), dated as of the date hereof, among the Loan Parties and the Lender, for the benefit of the Secured Parties, and any other pledge or security agreement entered into, after the date of this Agreement by any other Loan Party (as required by this Agreement or any other Loan Document) or any other Person for the benefit of the Lender, on behalf of the Secured Parties, as the same may be amended, restated, supplemented or otherwise modified from time to time.

“Senior Funded Indebtedness” means, at any date, the aggregate principal amount of total liabilities of the Company and its Subsidiaries on a consolidated basis, minus the sum of (a) accounts payable arising from the purchase of goods and services in the ordinary course of business, (b) accrued expenses or losses, (c) deferred revenues or gains, and (d) Subordinated Indebtedness, determined for the Company and its Subsidiaries on a consolidated basis at such date, in accordance with GAAP.

“Senior Funded Indebtedness to EBITDA Ratio” means, at any date, the ratio of (a) Senior Funded Indebtedness for such date to (b) Adjusted EBITDA for the period of four fiscal quarters ended on or most recently prior to such date.

“Standby LC Exposure” means, at any time, the sum of (a) the aggregate undrawn amount of all standby Letters of Credit outstanding at such time plus (b) the aggregate amount of all LC Disbursements relating to standby Letters of Credit that have not yet been reimbursed by or on behalf of a Borrower at such time.

“Statement” has the meaning assigned to such term in Section 2.16(d).

24

“Statutory Reserve Rate” means a fraction (expressed as a decimal), the numerator of which is the number one and the denominator of which is the number one minus the aggregate of the maximum reserve percentage (including any marginal, special, emergency or supplemental reserves) established by the Federal Reserve Board to which the Lender is subject with respect to the Adjusted LIBOR Rate, for eurocurrency funding (currently referred to as “Eurocurrency liabilities” in Regulation D). Such reserve percentages shall include those imposed pursuant to Regulation D of the Federal Reserve Board. Eurodollar Loans shall be deemed to constitute eurocurrency funding and to be subject to such reserve requirements without benefit of or credit for proration, exemptions or offsets that may be available from time to time to the Lender under Regulation D of the Federal Reserve Board or any comparable regulation. The Statutory Reserve Rate shall be adjusted automatically on and as of the effective date of any change in any reserve percentage.

“Subordinated Indebtedness” of a Person means any Indebtedness of such Person, the payment of which is subordinated to payment of the Obligations to the written satisfaction of the Lender.

“subsidiary” means, with respect to any Person (the “parent”) at any date, any corporation, limited liability company, partnership, association or other entity the accounts of which would be consolidated with those of the parent in the parent’s consolidated financial statements if such financial statements were prepared in accordance with GAAP as of such date, as well as any other corporation, limited liability company, partnership, association or other entity (a) of which securities or other ownership interests representing more than 50% of the equity or more than 50% of the ordinary voting power or, in the case of a partnership, more than 50% of the general partnership interests are, as of such date, owned, controlled or held, or (b) that is, as of such date, otherwise Controlled, by the parent or one or more subsidiaries of the parent or by the parent and one or more subsidiaries of the parent. Notwithstanding the foregoing, Excluded Subsidiaries shall not be considered or deemed a “Subsidiary” for purposes of the provisions of this Agreement (including, without limitation, in connection with the calculation of the financial covenants set forth in Section 6.12 hereof (and the definitions related such calculations) or the issuing of letters of credit under Section 2.04) other than the following provisions: the definition of “Banking Services”, Section 3.03, Section 3.06, Section 3.07, Section 3.15, Section 3.21, Section 5.07, Section 5.08, clauses (c) and (f) of Article VII, and Section 8.03(b).

“Subsidiary” means any direct or indirect subsidiary of the Company, a Borrower or of any other Loan Party, as applicable.

“Swap Agreement” means any agreement with respect to any swap, forward, spot, future, credit default or derivative transaction or any option or similar agreement involving, or settled by reference to, one or more rates, currencies, commodities, equity or debt instruments or securities, or economic, financial or pricing indices or measures of economic, financial or pricing risk or value or any similar transaction or any combination of these transactions; provided that no phantom stock or similar plan providing for payments only on account of services provided by current or former directors, officers, employees or consultants of the Borrowers or their Subsidiaries shall be a Swap Agreement.

“Swap Agreement Obligations” means any and all obligations of the Loan Parties or their Subsidiaries, whether absolute or contingent and howsoever and whensoever created, arising, evidenced or acquired (including all renewals, extensions and modifications thereof and substitutions therefor), under (a) any Swap Agreement permitted hereunder with the Lender or an Affiliate of the Lender, and (b) any cancellations, buy backs, reversals, terminations or assignments of any Swap Agreement transaction permitted hereunder with the Lender or an Affiliate of the Lender.

25

“Swap Obligation” means, with respect to any Guarantor, any obligation to pay or perform under any agreement, contract or transaction that constitutes a “swap” within the meaning of section 1a(47) of the Commodity Exchange Act or any rules or regulations promulgated thereunder.

“Target” means the Person, or business or substantially all of the assets of a Person, acquired in a Permitted Acquisition.

“Taxes” means any and all present or future taxes, levies, imposts, duties, deductions, withholdings (including backup withholding), value added taxes, or any other goods and services, use or sales taxes, assessments, fees or other charges imposed by any Governmental Authority, including any interest, additions to tax or penalties applicable thereto.

“Term A Commitment” means the commitment of the Lender to make a Term A Loan, expressed as an amount representing the maximum principal amount of the Term A Loan to be made by the Lender. The amount of the Lender’s Term A Commitment on the First Amendment Effective Date is $6,000,000.

“Term A Loan” means a Loan made pursuant to Section 2.01(b).

“Term A Maturity Date” means December 2, 2022; provided, however, that if the Revolving Commitment shall be terminated for any reason, the unpaid amounts owing on the Term Loans shall be immediately due and payable in full.

“Term Commitments” means the Term A Commitment.

“Term Loans” means the Term A Loans.

“Total Funded Indebtedness” means, at any date, the aggregate principal amount of total liabilities of the Company and its Subsidiaries on a consolidated basis, minus the sum of (a) accounts payable arising from the purchase of goods and services in the ordinary course of business, (b) accrued expenses or losses, and (c) deferred revenues or gains, determined for the Company and its Subsidiaries on a consolidated basis at such date, in accordance with GAAP.

“Total Funded Indebtedness to EBITDA Ratio” means, at any date, the ratio of (a) Total Funded Indebtedness for such date to (b) Adjusted EBITDA for the period of four fiscal quarters ended on or most recently prior to such date.

“Transactions” means the execution, delivery and performance by the Borrowers of this Agreement and the other Loan Documents, the Air Enterprises Acquisition, the CAD Acquisition, the borrowing of Loans and other credit extensions hereunder, the use of the proceeds thereof and the issuance of Letters of Credit hereunder.

“Type”, when used in reference to any Loan or Borrowing, refers to whether the rate of interest on such Loan, or on the Loans comprising such Borrowing, is determined by reference to the Adjusted LIBOR Rate or the CB Floating Rate.

“UCC” means the Uniform Commercial Code as in effect from time to time in the State of Ohio or in any other state, the laws of which are required to be applied in connection with the issue of perfection of security interests.

26

“Unliquidated Obligations” means, at any time, any Secured Obligations (or portion thereof) that are contingent in nature or unliquidated at such time, including any Secured Obligation that is: (i) an obligation to reimburse a bank for drawings not yet made under a letter of credit issued by it; (ii) any other obligation (including any guarantee) that is contingent in nature at such time; or (iii) an obligation to provide collateral to secure any of the foregoing types of obligations.

“U.S.” means the United States of America.

“USA PATRIOT Act” means the Uniting and Strengthening America by Providing Appropriate Tools Required to Intercept and Obstruct Terrorism Act of 2001.

“Withdrawal Liability” means liability to a Multiemployer Plan as a result of a complete or partial withdrawal from such Multiemployer Plan, as such terms are defined in Part I of Subtitle E of Title IV of ERISA.

SECTION 1.02. Classification of Loans and Borrowings. For purposes of this Agreement, Loans may be classified and referred to by Class (e.g., a “Revolving Loan”) or by Type (e.g., a “Eurodollar Loan”) or by Class and Type (e.g., a “Eurodollar Revolving Loan”). Borrowings also may be classified and referred to by Class (e.g., a “Revolving Borrowing”) or by Type (e.g., a “Eurodollar Borrowing”) or by Class and Type (e.g., a “Eurodollar Revolving Borrowing”).

SECTION 1.03. Terms Generally. The definitions of terms herein shall apply equally to the singular and plural forms of the terms defined. Whenever the context may require, any pronoun shall include the corresponding masculine, feminine and neuter forms. The words “include”, “includes” and “including” shall be deemed to be followed by the phrase “without limitation”. The word “law” shall be construed as referring to all statutes, rules, regulations, codes and other laws (including official rulings and interpretations thereunder having the force of law or with which affected Persons customarily comply) and all judgments, orders and decrees of all Governmental Authorities. The word “will” shall be construed to have the same meaning and effect as the word “shall”. Unless the context requires otherwise (a) any definition of or reference to any agreement, instrument or other document herein shall be construed as referring to such agreement, instrument or other document as from time to time amended, restated, supplemented or otherwise modified (subject to any restrictions on such amendments, restatements, supplements or modifications set forth herein), (b) any definition of or reference to any statute, rule or regulation shall be construed as referring thereto as from time to time amended, supplemented or otherwise modified (including by succession of comparable successor laws), (c) any reference herein to any Person shall be construed to include such Person’s successors and assigns (subject to any restrictions on assignments set forth herein) and, in the case of any Governmental Authority, any other Governmental Authority that shall have succeeded to any or all functions thereof, (d) the words “herein”, “hereof” and “hereunder”, and words of similar import, shall be construed to refer to this Agreement in its entirety and not to any particular provision hereof, (e) all references herein to Articles, Sections, Exhibits and Schedules shall be construed to refer to Articles and Sections of, and Exhibits and Schedules to, this Agreement, (f) any reference in any definition to the phrase “at any time” or “for any period” shall refer to the same time or period for all calculations or determinations within such definition, and (g) the words “asset” and “property” shall be construed to have the same meaning and effect and to refer to any and all tangible and intangible assets and properties, including cash, securities, accounts and contract rights.

27

SECTION 1.04. Accounting Terms; GAAP. Except as otherwise expressly provided herein, all terms of an accounting or financial nature shall be construed in accordance with GAAP, as in effect from time to time; provided that, if after the date hereof there occurs any change in GAAP or in the application thereof on the operation of any provision hereof and the Borrower Representative notifies the Lender that the Borrowers request an amendment to any provision hereof to eliminate the effect of such change in GAAP or in the application thereof (or if the Lender notifies the Borrower Representative that the Lender requests an amendment to any provision hereof for such purpose), regardless of whether any such notice is given before or after such change in GAAP or in the application thereof, then such provision shall be interpreted on the basis of GAAP as in effect and applied immediately before such change shall have become effective until such notice shall have been withdrawn or such provision amended in accordance herewith. Notwithstanding any other provision contained herein, all terms of an accounting or financial nature used herein shall be construed, and all computations of amounts and ratios referred to herein shall be made (i) without giving effect to any election under Financial Accounting Standards Board Accounting Standards Codification 825-10-25 (or any other Accounting Standards Codification or Financial Accounting Standard having a similar result or effect) to value any Indebtedness or other liabilities of any Loan Party at “fair value”, as defined therein and (ii) without giving effect to any treatment of Indebtedness in respect of convertible debt instruments under Financial Accounting Standards Board Accounting Standards Codification 470-20 (or any other Accounting Standards Codification or Financial Accounting Standard having a similar result or effect) to value any such Indebtedness in a reduced or bifurcated manner as described therein, and such Indebtedness shall at all times be valued at the full stated principal amount thereof. Notwithstanding anything to the contrary contained in this Section 1.04 or in the definition of “Capital Lease Obligations,” in the event of an accounting change requiring all leases to be capitalized, only those leases (assuming for purposes hereof that such leases were in existence on the date hereof) that would constitute capital leases in conformity with GAAP on the date hereof shall be considered capital leases, and all calculations and deliverables under this Agreement or any other Loan Document shall be made or delivered, as applicable, in accordance therewith.

SECTION 1.05.        Interest Rates; LIBOR Notification . The interest rate on Eurodollar Loans is determined by reference to the LIBOR Rate, which is derived from the London interbank offered rate (“LIBOR”). LIBOR is intended to represent the rate at which contributing banks may obtain short-term borrowings from each other in the London interbank market. In July 2017, the U.K. Financial Conduct Authority announced that, after the end of 2021, it would no longer persuade or compel contributing banks to make rate submissions to the ICE Benchmark Administration (together with any successor to the ICE Benchmark Administrator, the “IBA”) for purposes of the IBA setting LIBOR. As a result, it is possible that commencing in 2022, LIBOR may no longer be available or may no longer be deemed an appropriate reference rate upon which to determine the interest rate on Eurodollar Loans. In light of this eventuality, public and private sector industry initiatives are currently underway to identify new or alternative reference rates to be used in place of LIBOR. In the event LIBOR is no longer available (or in certain other circumstances), Section 2.12(c) of this Agreement provides a mechanism for determining an alternative rate of interest. The Lender will notify the Borrower Representative, pursuant to Section 2.12(c), in advance of any change to the reference rate upon which the interest rate of Eurodollar Loans is based. However, the Lender does not warrant or accept any responsibility for, and shall not have any liability with respect to, the administration, submission or any other matter related to LIBOR or other rates in the definition of “LIBOR Rate” or with respect to any alternative, successor rate thereto, or replacement rate thereof, including without limitation, whether the composition or characteristics of any such alternative, successor or replacement reference rate will be similar to, or produce the same value or economic equivalence of the LIBOR Rate or have the same volume or liquidity as did LIBOR prior to its discontinuance or unavailability.

SECTION 1.06.     Status of Obligations. In the event that any Borrower or any other Loan Party shall at any time issue or have outstanding any Subordinated Indebtedness, such Borrower shall take or cause such other Loan Party to take all such actions as shall be necessary to cause the Obligations to constitute senior indebtedness (however denominated) in respect of such Subordinated Indebtedness and to enable the Lender to have and exercise any payment blockage or other remedies available or potentially available to holders of senior indebtedness under the terms of such Subordinated Indebtedness. Without limiting the foregoing, the Secured Obligations are hereby designated as “senior indebtedness” and as “designated senior indebtedness” and words of similar import under and in respect of any indenture or other agreement or instrument under which such Subordinated Indebtedness is outstanding and are further given all such other designations as shall be required under the terms of any such Subordinated Indebtedness in order that the Lender may have and exercise any payment blockage or other remedies available or potentially available to holders of senior indebtedness under the terms of such Subordinated Indebtedness.

28

ARTICLE II

The Credits

SECTION 2.01. Commitments. (a) Subject to the terms and conditions set forth herein, the Lender agrees to make Revolving Loans in dollars to the Borrowers from time to time during the Availability Period in an aggregate principal amount that will not result in the Revolving Exposure exceeding the Revolving Commitment. Within the foregoing limits and subject to the terms and conditions set forth herein, the Borrowers may borrow, prepay and reborrow Revolving Loans.

(b) On the Effective Date the Lender made a “Term A Loan" to Borrowers a portion of which remains outstanding on the First Amendment Effective Date in the amount of $1,499,999.96 (the “Existing Term A Loan”). Subject to the terms and conditions set forth herein, the Existing Term A Loan shall remain outstanding and, on the First Amendment Effective Date, the Lender agrees to make an additional term loan in dollars to the Borrowers in an amount equal to the difference between the Existing Term A Loan and the Term A Loan Commitment. For purposes of this Agreement, the term “Term A Loan” shall mean the aggregate amount of the Existing Term A Loan and the additional term loan advanced on the First Amendment Effective Date pursuant to this subsection (b) which such aggregate amount shall be consolidated in accordance with this subsection. Amounts prepaid or repaid in respect of Term A Loans may not be reborrowed.

(c)     Subject to the terms and conditions set forth herein, the Lender agrees to make CapEx Loans to the Borrowers from time to time during the CapEx Commitment Period in an aggregate principal amount that will not result in the aggregate amount of all CapEx Loans exceeding the CapEx Commitment. On the date of the making a CapEx Loan to the Borrowers hereunder, the CapEx Commitment shall be permanently reduced by an amount equal to such CapEx Loan or CapEx Loans. Within the foregoing limits and subject to the terms and conditions set forth herein, the Borrowers may prepay, in whole or in part, any CapEx Loan or CapEx Loans, together with all accrued interest thereon at any time; provided, however, that the Borrowers may not reborrow the amount of any CapEx Loan prepaid or converted to a CapEx Term Loan pursuant to the provisions below.

SECTION 2.02.      Loans and Borrowings.

(a)     Each Loan shall be made as part of a Borrowing consisting of Loans of the same Class and Type.

(b)     Subject to Section 2.12, each Revolving Borrowing, CapEx Borrowing and Term Loan Borrowing shall be comprised entirely of CBFR Loans or Eurodollar Loans as the Borrower Representative may request in accordance herewith, provided that (i) all Revolving Borrowings and Term Loan Borrowings made on the Effective Date must be made as CBFR Borrowings but may be converted into Eurodollar Borrowings in accordance with Section 2.06, and (ii) all CapEx Borrowings made on the First Amendment Effective Date must be made as CBFR Borrowings but may be converted into Eurodollar Borrowings in accordance with Section 2.06. The Lender at its option may make any Eurodollar Loan by causing any domestic or foreign branch or Affiliate of the Lender to make such Loan (and in the case of an Affiliate, the provisions of Sections 2.12, 2.13, 2.14 and 2.15 shall apply to such Affiliate to the same extent as to the Lender); provided that any exercise of such option shall not affect the obligation of the Borrowers to repay such Loan in accordance with the terms of this Agreement.

29

(c)     Notwithstanding anything to the contrary contained in this Agreement, Borrowers shall not be entitled to request more than 4 CapEx Loans during the CapEx Commitment Period, and each request for a CapEx Loan shall be in an amount of at least $250,000. On the last day of the CapEx Commitment Period, the Lenders shall convert all CapEx Loans outstanding into a CapEx Term Loan in the aggregate principal amount of such CapEx Loans. The Lender is hereby authorized and directed by the Borrowers to apply the proceeds of the CapEx Term Loan to the principal and interest then owed on the CapEx Loans being converted. The Borrower Representative shall notify the Lender at the time of the conversion of the CapEx Loans to a CapEx Term Loan whether the CapEx Term Loan will be a CBFR Borrowing or a Eurodollar Borrowing. If the Borrower Representative fails to notify the Lender at the time of the conversion whether the CapEx Term Loan will be a CBFR Loans or a Eurodollar Loans, then the CapEx Term Loan will be a CBFR Loan.

(d)     Notwithstanding any other provision of this Agreement, the Borrowers shall not be entitled to request, or to elect to convert or continue, any Borrowing if the Interest Period requested with respect thereto would end after the Revolving Credit Maturity Date or the Term A Maturity Date.

SECTION 2.03. Borrowing Procedures; Requests for Revolving and CapEx Borrowings.

(a)     To request a Borrowing (other than a CapEx Borrowing), the Borrower Representative shall notify the Lender of such request either in writing (delivered by hand or fax) in a form reasonably satisfactory to the Lender and signed by the Borrower Representative or by telephone or through Electronic System, if arrangements for doing so have been approved by the Lender, not later than noon, Eastern Standard Time, on the date of the proposed Borrowing; provided that any such notice of a CBFR Revolving Borrowing to finance the reimbursement of an LC Disbursement as contemplated by Section 2.04(d) may be given not later than 9:00 a.m., Eastern Standard Time, on the date of the proposed Borrowing. Each such telephonic Borrowing Request shall be irrevocable and shall be confirmed promptly by hand delivery, fax or a communication through Electronic System to the Lender of a written Borrowing Request in a form approved by the Lender and signed by the Borrower Representative. Each such telephonic and written Borrowing Request shall specify the following information in compliance with Section 2.01:

(i) the Class of Borrowing, the aggregate amount of the requested Borrowing, and a breakdown of the separate wires comprising such Borrowing;

(ii) name of the applicable Borrower(s);

(iii) the date of such Borrowing, which shall be a Business Day; and

(iv) whether such Borrowing is to be a CBFR Borrowing or a Eurodollar Borrowing;

If no election as to the Type of Borrowing is specified, then the requested Borrowing shall be a CBFR Borrowing.

30

(b)     To request a CapEx Borrowing, the Borrower Representative shall deliver to the Lender a CapEx Draw Request and one (1) or more invoices (or other similar sale documents) evidencing that the CapEx Loan being requested is in excess of $250,000 but not in excess of 100% percent of the hard invoiced costs of the capital spending for new machinery or new equipment, determined in accordance with GAAP, that has been purchased by a Borrower and paid for in full at the time of the request (I) in the case of a Eurodollar Borrowing, not later than 9:00 a.m., Eastern Standard Time, three Business Days before the date of the proposed Borrowing or (II) in the case of a CBFR Borrowing, not later than noon, Eastern Standard Time, on the date of the proposed Borrowing. If no election as to the Type of CapEx Borrowing is specified on the CapEx Draw Request, then the requested CapEx Borrowing shall be a CBFR Borrowing.

SECTION 2.04. Letters of Credit.

(a)     General. Subject to the terms and conditions set forth herein, the Borrower Representative, on behalf of a Borrower, may request the issuance of Letters of Credit denominated in dollars as the applicant thereof for the support of the obligations of any Borrower or any Subsidiary thereof, in a form reasonably acceptable to the Lender, at any time and from time to time during the Availability Period. In the event of any inconsistency between the terms and conditions of this Agreement and the terms and conditions of any form of letter of credit application or other agreement submitted by the Borrowers to, or entered into by the Borrowers with, the Lender relating to any Letter of Credit, the terms and conditions of this Agreement shall control. Each Borrower unconditionally and irrevocably agrees that, in connection with any Letter of Credit issued for the support of any Subsidiary’s obligations as provided in the first sentence of this paragraph, such Borrower will be fully responsible for the reimbursement of LC Disbursements in accordance with the terms hereof, the payment of interest thereon and the payment of fees due under Section 2.10(b) to the same extent as if it were the sole account party in respect of such Letter of Credit (each Borrower hereby irrevocably waiving any defenses that might otherwise be available to it as a guarantor or surety of the obligations of such Subsidiary that is an account party in respect of any such Letter of Credit). Notwithstanding anything herein to the contrary, the Lender shall have no obligation hereunder to issue, and shall not issue, any Letter of Credit (i) the proceeds of which would be made available to any Person (A) to fund any activity or business of or with any Sanctioned Person, or in any country or territory that, at the time of such funding, is the subject of any Sanctions or (B) in any manner that would result in a violation of any Sanctions by any party to this Agreement, (ii) if any order, judgment or decree of any Governmental Authority or arbitrator shall by its terms purport to enjoin or restrain the Lender from issuing such Letter of Credit, or any Requirement of Law relating to the Lender or any request or directive (whether or not having the force of law) from any Governmental Authority with jurisdiction over the Lender shall prohibit, or request that the Lender refrain from, the issuance of letters of credit generally or such Letter of Credit in particular or shall impose upon the Lender with respect to such Letter of Credit any restriction, reserve or capital requirement (for which the Lender is not otherwise compensated hereunder) not in effect on the Effective Date, or shall impose upon the Lender any unreimbursed loss, cost or expense which was not applicable on the Effective Date and which the Lender in good faith deems material to it, or (iii) if the issuance of such Letter of Credit would violate one or more policies of the Lender applicable to letters of credit generally; provided that, notwithstanding anything herein to the contrary, (x) the Dodd-Frank Wall Street Reform and Consumer Protection Act and all requests, rules, guidelines, requirements or directives thereunder or issued in connection therewith or in the implementation thereof, and (y) all requests, rules, guidelines, requirements or directives promulgated by the Bank for International Settlements, the Basel Committee on Banking Supervision (or any successor or similar authority) or the United States or foreign regulatory authorities, in each case pursuant to Basel III, shall in each case be deemed not to be in effect on the Effective Date for purposes of clause (ii) above, regardless of the date enacted, adopted, issued or implemented.

31

(b)     Notice of Issuance, Amendment, Renewal, Extension; Certain Conditions. To request the issuance of a Letter of Credit (or the amendment, renewal or extension of an outstanding Letter of Credit), the Borrower Representative shall hand deliver or fax (or transmit through Electronic System, if arrangements for doing so have been approved by the Lender) to the Lender (reasonably in advance of the requested date of issuance, amendment, renewal or extension, but in any event no less than three (3) Business Days) a notice requesting the issuance of a Letter of Credit, or identifying the Letter of Credit to be amended, renewed or extended, and specifying the date of issuance, amendment, renewal or extension (which shall be a Business Day), the date on which such Letter of Credit is to expire (which shall comply with paragraph (c) of this Section), the amount of such Letter of Credit, the name and address of the beneficiary thereof, and such other information as shall be necessary to prepare, amend, renew or extend such Letter of Credit. If requested by the Lender, the applicable Borrower also shall submit a letter of credit application on the Lender’s standard form in connection with any request for a Letter of Credit. A Letter of Credit shall be issued, amended, renewed or extended only if (and upon issuance, amendment, renewal or extension of each Letter of Credit the Borrowers shall be deemed to represent and warrant that), after giving effect to such issuance, amendment, renewal or extension (i) the LC Exposure shall not exceed the LC Sublimit, and (ii) the Revolving Exposure shall not exceed the Revolving Commitment.

(c)     Expiration Date. Each Letter of Credit shall expire (or be subject to termination or non-renewal by notice from the Lender to the beneficiary thereof) at or prior to the close of business on the earlier of (i) the date one year after the date of the issuance of such Letter of Credit (or, in the case of any renewal or extension thereof, including, without limitation, any automatic renewal provision, one year after such renewal or extension) and (ii) the date that is five Business Days prior to the Revolving Credit Maturity Date.

(d)     Reimbursement. If the Lender shall make any LC Disbursement in respect of a Letter of Credit, the Borrowers shall reimburse such LC Disbursement by paying to the Lender an amount equal to such LC Disbursement not later than 11:00 a.m., Eastern Standard Time, on (i) the Business Day that the Borrower Representative receives notice of such LC Disbursement, if such notice is received prior to 9:00 a.m., Eastern Standard Time, on the day of receipt, or (ii) the Business Day immediately following the day that the Borrower Representative receives such notice, if such notice is received after 9:00 a.m., Eastern Standard Time on the day of receipt; provided that, the Borrowers may, subject to the conditions to borrowing set forth herein, request in accordance with Section 2.03 or 2.05 that such payment be financed with a CBFR Revolving Borrowing in an equivalent amount and, to the extent so financed, the Borrowers’ obligation to make such payment shall be discharged and replaced by the resulting CBFR Revolving Borrowing.

(e)     Obligations Absolute. The Borrowers’ joint and several obligation to reimburse LC Disbursements as provided in paragraph (d) of this Section shall be absolute, unconditional and irrevocable, and shall be performed strictly in accordance with the terms of this Agreement under any and all circumstances whatsoever and irrespective of any (i) lack of validity or enforceability of any Letter of Credit or this Agreement, or any term or provision therein or herein, (ii) draft or other document presented under a Letter of Credit proving to be forged, fraudulent or invalid in any respect or any statement therein being untrue or inaccurate in any respect, (iii) payment by the Lender under a Letter of Credit against presentation of a draft or other document that does not comply with the terms of such Letter of Credit, or (iv) other event or circumstance whatsoever, whether or not similar to any of the foregoing, that might, but for the provisions of this Section, constitute a legal or equitable discharge of, or provide a right of setoff against, the Borrowers’ obligations hereunder. Neither the Lender nor any of its Related Parties, shall have any liability or responsibility by reason of or in connection with the issuance or transfer of any Letter of Credit, any payment or failure to make any payment thereunder (irrespective of any of the circumstances referred to in the preceding sentence), or any error, omission, interruption, loss or delay in transmission or delivery of any draft, notice or other communication under or relating to any Letter of Credit (including any document required to make a drawing thereunder), any error in interpretation of technical terms or any consequence arising from causes beyond the control of the Lender; provided that the foregoing shall not be construed to excuse the Lender from liability to the Borrowers to the extent of any direct damages (as opposed to special, indirect, consequential or punitive damages, claims in respect of which are hereby waived by the Borrowers to the extent permitted by applicable law) suffered by any Borrower that are caused by the Lender’s failure to exercise care when determining whether drafts and other documents presented under a Letter of Credit comply with the terms thereof. The parties hereto expressly agree that, in the absence of gross negligence or willful misconduct on the part of the Lender (as finally determined by a court of competent jurisdiction), the Lender shall be deemed to have exercised care in each such determination. In furtherance of the foregoing and without limiting the generality thereof, the parties agree that, with respect to documents presented which appear on their face to be in substantial compliance with the terms of a Letter of Credit, the Lender may, in its sole discretion, either accept and make payment upon such documents without responsibility for further investigation, regardless of any notice or information to the contrary, or refuse to accept and make payment upon such documents if such documents are not in strict compliance with the terms of such Letter of Credit.

32

(f)     Disbursement Procedures. The Lender shall, promptly following its receipt thereof, examine all documents purporting to represent a demand for payment under a Letter of Credit. The Lender shall promptly notify the Borrower Representative by telephone (confirmed by fax) of such demand for payment and whether the Lender has made or will make an LC Disbursement thereunder; provided that any failure to give or delay in giving such notice shall not relieve the Borrowers of their obligation to reimburse the Lender with respect to any such LC Disbursement.

(g)     Interim Interest. If the Lender shall make any LC Disbursement, then, unless the Borrowers shall reimburse such LC Disbursement in full on the date such LC Disbursement is made, the unpaid amount thereof shall bear interest, for each day from and including the date such LC Disbursement is made to but excluding the date that the Borrowers reimburse such LC Disbursement, at the rate per annum then applicable to CBFR Revolving Loans and such interest shall be due and payable on the date when such reimbursement is due; provided that, if the Borrowers fail to reimburse such LC Disbursement when due pursuant to paragraph (d) of this Section, then Section 2.11(c) shall apply. Interest accrued pursuant to this paragraph shall be for the account of the Lender.

(h)     Cash Collateralization.   If any Event of Default shall occur and be continuing, on the Business Day that the Borrower Representative receives notice from the Lender demanding the deposit of cash collateral pursuant to this paragraph, the Borrowers shall deposit in an account with the Lender, in the name and for the benefit of the Lender (the “LC Collateral Account”), an amount in cash equal to 105% of the amount of the LC Exposure as of such date plus accrued and unpaid interest thereon; provided that the obligation to deposit such cash collateral shall become effective immediately, and such deposit shall become immediately due and payable, without demand or other notice of any kind, upon the occurrence of any Event of Default with respect to any Borrower described in clause (h) or (i) of Article VII. The Borrowers also shall deposit cash collateral in accordance with this paragraph as and to the extent required by Section 2.09(b). Each such deposit shall be held by the Lender as collateral for the payment and performance of the Secured Obligations. The Lender shall have exclusive dominion and control, including the exclusive right of withdrawal, over the LC Collateral Account and the Borrowers hereby grant the Lender a security interest in the LC Collateral Account and all moneys or other assets on deposit therein or credited thereto. Other than any interest earned on the investment of such deposits, which investments shall be made at the option and sole discretion of the Lender and at the Borrowers’ risk and expense, such deposits shall not bear interest. Interest or profits, if any, on such investments shall accumulate in such account. Moneys in such account shall be applied by the Lender for LC Disbursements for which it has not been reimbursed and, to the extent not so applied, shall be held for the satisfaction of the reimbursement obligations of the Borrowers for the LC Exposure at such time or, if the maturity of the Loans has been accelerated, be applied to satisfy other Secured Obligations. If the Borrowers are required to provide an amount of cash collateral hereunder as a result of the occurrence of an Event of Default, such amount (to the extent not applied as aforesaid) shall be returned to the Borrowers within three (3) Business Days after all such Events of Default have been cured or waived as confirmed in writing by the Lender.

33

(i)     LC Exposure Determination. For all purposes of this Agreement, the amount of a Letter of Credit that, by its terms or the terms of any document related thereto, provides for one or more automatic increases in the stated amount thereof shall be deemed to be the maximum stated amount of such Letter of Credit after giving effect to all such increases, whether or not such maximum stated amount is in effect at the time of determination.

(j)      Letters of Credit Issued for Account of Subsidiaries. Notwithstanding that a Letter of Credit issued or outstanding hereunder supports any obligations of, or is for the account of, a Subsidiary, or states that a Subsidiary is the “account party,” “applicant,” “customer,” “instructing party,” or the like of or for such Letter of Credit, and without derogating from any rights of the Lender (whether arising by contract, at law, in equity or otherwise) against such Subsidiary in respect of such Letter of Credit, the Borrowers (i) shall reimburse, indemnify and compensate the Lender hereunder for such Letter of Credit (including to reimburse any and all drawings thereunder) as if such Letter of Credit had been issued solely for the account of such Borrower and (ii) irrevocably waives any and all defenses that might otherwise be available to it as a guarantor or surety of any or all of the obligations of such Subsidiary in respect of such Letter of Credit. Each Borrower hereby acknowledges that the issuance of such Letters of Credit for its Subsidiaries inures to the benefit of such Borrower, and that such Borrower’s business derives substantial benefits from the businesses of such Subsidiaries.

SECTION 2.05. Funding of Borrowings. The Lender shall make each Loan to be made by it hereunder on the proposed date thereof available to the Borrowers by promptly crediting the amounts in immediately available funds, to the Funding Account(s); provided that CBFR Revolving Loans made to finance the reimbursement of an LC Disbursement as provided in Section 2.04(d) shall be remitted to the Lender.

SECTION 2.06. Interest Elections.

(a)     Each Borrowing initially shall be of the Type specified in the applicable Borrowing Request. Thereafter, the Borrower Representative may elect to convert such Borrowing to a different Type or to continue such Borrowing. The Borrower Representative may elect different options with respect to different portions of the affected Borrowing, and the Loans comprising each such portion shall be considered a separate Borrowing.

(b)     To make an election pursuant to this Section, the Borrower Representative shall notify the Lender of such election by telephone or through Electronic System, if arrangements for doing so have been approved by the Lender, by the time that a Borrowing Request would be required under Section 2.03 if the Borrowers were requesting a Borrowing of the Type resulting from such election to be made on the effective date of such election. Each such telephonic Interest Election Request shall be irrevocable and shall be confirmed promptly by hand delivery, Electronic System or fax to the Lender of a written Interest Election Request in a form approved by the Lender and signed by the Borrower Representative.

34

(c)     Each telephonic and written Interest Election Request (including requests submitted through Electronic System) shall specify the following information in compliance with Section 2.02:

(i)     the name of the applicable Borrower and the Borrowing to which such Interest Election Request applies and, if different options are being elected with respect to different portions thereof, the portions thereof to be allocated to each resulting Borrowing (in which case the information to be specified pursuant to clauses (iii) and (iv) below shall be specified for each resulting Borrowing);

(ii)     the effective date of the election made pursuant to such Interest Election Request, which shall be a Business Day; and

(iii)     whether the resulting Borrowing is to be a CBFR Borrowing or a Eurodollar Borrowing.

Notwithstanding any contrary provision hereof, if an Event of Default has occurred and is continuing and the Lender so notifies the Borrower Representative, then, so long as an Event of Default is continuing (i) no outstanding Borrowing may be converted to or continued as a Eurodollar Borrowing and (ii) unless repaid, each Eurodollar Borrowing shall be converted to a CBFR Borrowing at the end of the Interest Period applicable thereto.

SECTION 2.07. Termination of Commitment.

(a)     Unless previously terminated, (i) the Term Commitments shall terminate at 5:00 p.m., Eastern Standard Time, on the Effective Date, (ii) the Revolving Commitment shall terminate on the Revolving Credit Maturity Date, and (iii) the CapEx Commitment shall terminate on the CapEx Conversion Date.

(b)     The Borrowers may at any time terminate the Revolving Commitment upon (i) the payment in full of all outstanding Revolving Loans and LC Disbursements, together with accrued and unpaid interest thereon, (ii) the cancellation and return of all outstanding Letters of Credit (or alternatively, with respect to each such Letter of Credit, the furnishing to the Lender of a cash deposit (or at the discretion of the Lender a backup standby letter of credit satisfactory to the Lender) in an amount equal to 105% of the LC Exposure as of such date), (iii) the payment in full of the accrued and unpaid fees, and (iv) the payment in full of all reimbursable expenses and other Obligations together with accrued and unpaid interest thereon.

(c)     The Borrower Representative shall notify the Lender of any election to terminate the Revolving Commitment under paragraph (b) of this Section at least three (3) Business Days prior to the effective date of such termination, specifying such election and the effective date thereof. Each notice delivered by the Borrower Representative pursuant to this Section shall be irrevocable; provided that a notice of termination of the Revolving Commitment delivered by the Borrower Representative may state that such notice is conditioned upon the effectiveness of other credit facilities, in which case such notice may be revoked by the Borrower Representative (by notice to the Lender on or prior to the specified effective date) if such condition is not satisfied. Any termination of the Revolving Commitment shall be permanent.

35

SECTION 2.08. Repayment and Amortization of Loans; Evidence of Debt.

(a)     The Borrowers hereby unconditionally promise to pay the Lender the then unpaid principal amount of each Revolving Loan on the Revolving Credit Maturity Date.

(b)     The Borrowers hereby unconditionally promise to repay the Term A Loan to the Lender in consecutive monthly installments of $111,111.11 on the first Business Day of each month, commencing on August 1, 2018, and continuing on the first Business Day of each month thereafter, with a final payment of all unpaid amounts owing on the Term A Loan to be paid in full in cash by the Borrowers on the Term A Maturity Date; provided, however, that if the Revolving Commitment shall be terminated for any reason, the unpaid amounts owing on the Term A Loan shall be immediately due and payable in full.

(c)     The Borrowers shall repay the CapEx Term Loan in consecutive monthly installments based on a 5 year amortization schedule, on the first Business Day of each month, with the first of such payments commencing on the first Business Day of the first month following the CapEx Conversion Date, and continuing on the first Business Day of each month thereafter, with all unpaid amounts owing on the CapEx Loans and CapEx Term Loans to be paid on the 60^th and final monthly payment; provided, however, that if the Revolving Commitment shall be terminated for any reason, the unpaid amounts owing on all CapEx Loans and CapEx Term Loans shall be immediately due and payable in full.

(d)     Prior to any repayment of any Term Loan Borrowings of any Class under this Section, the Borrowers shall select the Borrowing or Borrowings of the applicable Class to be repaid and shall notify the Lender by telephone (confirmed by fax) of such selection not later than 11:00 a.m., Eastern Standard Time, three (3) Business Days before the scheduled date of such repayment. Each repayment of a Term Loan Borrowing shall be applied ratably to the Loans included in the repaid Term Loan Borrowing. Repayments of Term Loan Borrowings shall be accompanied by accrued interest on the amounts repaid.

(e)     The Lender shall maintain in accordance with its usual practice an account or accounts evidencing the Indebtedness of the Borrowers to the Lender resulting from each Loan made by the Lender, including the amounts of principal and interest payable and paid to the Lender from time to time hereunder.

(f)     The Lender shall maintain accounts in which it shall record (i) the amount of each Loan made hereunder, the Class and Type thereof and the Interest Period applicable thereto, if any, (ii) the amount of any principal or interest due and payable or to become due and payable from the Borrowers to the Lender hereunder and (iii) the amount of any sum received by the Lender hereunder.

(g)     The entries made in the accounts maintained pursuant to paragraph (d) or (e) of this Section shall be prima facie evidence of the existence and amounts of the obligations recorded therein; provided that the failure of the Lender to maintain such accounts or any error therein shall not in any manner affect the obligation of the Borrowers to repay the Loans in accordance with the terms of this Agreement.

(h)     The Lender may request that Loans made by it be evidenced by a promissory note. In such event, the Borrowers shall prepare, execute and deliver to the Lender a promissory note payable to the Lender (or, if requested by the Lender, to the Lender and its registered assigns) and in a form approved by the Lender. Thereafter, the Loans evidenced by such promissory note and interest thereon shall at all times (including after assignment pursuant to Section 8.04) be represented by one or more promissory notes in such form.

36

SECTION 2.09. Prepayment of Loans.

(a)     The Borrowers shall have the right at any time and from time to time to prepay any Borrowing in whole or in part, subject to prior notice in accordance with paragraph (e) of this Section and, if applicable, payment of any break funding expenses under Section 2.14.

(b)     In the event and on such occasion that the Revolving Exposure exceeds the Revolving Commitment, the Borrowers shall promptly prepay (and in any event within one Business Day) the Revolving Loans and/or LC Exposure (or, if no such Borrowings are outstanding, deposit cash collateral in the LC Collateral Account in an aggregate amount equal to such excess, in accordance with Section 2.04(h)). In addition, in the event and on such occasion that the CapEx Exposure exceeds the CapEx Commitment, the Borrowers shall prepay the CapEx Loans and/or CapEx Term Loans in an aggregate amount equal to such excess.

(c)     In the event and on each occasion that any Net Proceeds are received by or on behalf of any Loan Party or any Subsidiary in respect of any Prepayment Event, the Borrowers shall, immediately after such Net Proceeds are received by any Loan Party or Subsidiary, prepay the Obligations and cash collateralize the LC Exposure as set forth in Section 2.09(d) below in an aggregate amount equal to 100% of such Net Proceeds, provided that, in the case of any event described in clause (a) or (b) of the definition of the term “Prepayment Event”, if the Borrower Representative shall deliver to the Lender a certificate of a Financial Officer to the effect that the Loan Parties intend to apply the Net Proceeds from such event (or a portion thereof specified in such certificate), within 120 days after receipt of such Net Proceeds, to acquire (or replace or rebuild) real property, equipment or other tangible assets (excluding inventory) to be used in the business of the Loan Parties, and certifying that no Default has occurred and is continuing, then no prepayment shall be required pursuant to this paragraph in respect of the Net Proceeds specified in such certificate, provided that to the extent of any such Net Proceeds that have not been so applied by the end of such 120-day period, a prepayment shall be required at such time in an amount equal to such Net Proceeds that have not been so applied; provided further that the Borrowers shall not be permitted to make elections to use Net Proceeds to acquire (or replace or rebuild) real property, equipment or other tangible assets (excluding inventory) with respect to Net Proceeds in any fiscal year in an aggregate amount in excess of $1,000,000.   

(d)     (i) All prepayments required to be made pursuant to Section 2.09(c) (as to the extent they arise from Equipment purchased with CapEx Loans) shall be applied, first to prepay the CapEx Loans and/or CapEx Term Loan (to be applied to installments of such Loans in inverse order of maturity, ratably in accordance with the then outstanding amounts thereof), and second to prepay the Term Loans (and in the event Term Loans of more than one Class shall be outstanding at the time, shall be allocated among the Term Loans pro rata based on the aggregate principal amounts of outstanding Term Loans of each such Class) as so allocated, and shall be applied to reduce the subsequent scheduled repayments of Term Loans of each Class to be made pursuant to Section 2.08 in inverse order of maturity, and third to prepay the Revolving Loans without a corresponding reduction in the Revolving Commitment and fourth to cash collateralize outstanding LC Exposure.

(ii)     All prepayments required to be made pursuant to Section 2.09(c) (as to the extent they arise from any assets (other than Equipment purchased with CapEx Loans) shall be applied, first to prepay the Term Loans (and in the event Term Loans of more than one Class shall be outstanding at the time, shall be allocated among the Term Loans pro rata based on the aggregate principal amounts of outstanding Term Loans of each such Class) as so allocated, and shall be applied to reduce the subsequent scheduled repayments of Term Loans of each Class to be made pursuant to Section 2.08 in inverse order of maturity, and second to prepay the CapEx Loans and/or CapEx Term Loan (to be applied to installments of such Loans in inverse order of maturity, ratably in accordance with the then outstanding amounts thereof), and third to prepay the Revolving Loans without a corresponding reduction in the Revolving Commitment and third to cash collateralize outstanding LC Exposure; provided that all prepayments required to be made pursuant to Section 2.09(c) (with respect to Net Proceeds arising from any casualty or other insured damage to, or any taking under power of eminent domain or by condemnation or similar proceeding, to the extent they arise from casualties or losses to cash or Inventory) shall be applied, first, to prepay the Revolving Loans without a corresponding reduction in the Revolving Commitment and second, to cash collateralize outstanding LC Exposure, and third, to prepay the Term Loans (allocated and applied to subsequent scheduled repayments as set forth above) and fourth to prepay the CapEx Loans and/or CapEx Term Loan (allocated and applied to subsequent scheduled repayments as set forth above).

37

(e)     The Borrower Representative shall notify the Lender by telephone (confirmed by fax) or through Electronic System, if arrangements for doing so have been approved by the Lender, of any prepayment under this Section: (i) in the case of prepayment of a Eurodollar Borrowing, not later than 10:00 a.m., Eastern Standard Time, three (3) Business Days before the date of prepayment, or (ii) in the case of prepayment of a CBFR Borrowing, not later than 10:00 a.m., Eastern Standard Time on the date of prepayment. Each such notice shall be irrevocable and shall specify the prepayment date and the principal amount of each Borrowing or portion thereof to be prepaid; provided that if a notice of prepayment is given in connection with a conditional notice of termination of the Revolving Commitment as contemplated by Section 2.07, then such notice of prepayment may be revoked if such notice of termination is revoked in accordance with Section 2.07. Each partial prepayment of any Revolving Borrowing or Term Loan shall be in an amount that would be permitted in the case of an advance of a Borrowing of the same Type as provided in Section 2.02, except as necessary to apply fully the required amount of a mandatory prepayment. Each prepayment of a Borrowing shall be applied ratably to the Loans included in the prepaid Borrowing. Prepayments shall be accompanied by (i) accrued interest to the extent required by Section 2.11 and (ii) break funding payments pursuant to Section 2.14.

SECTION 2.10. Fees.

(a)     The Borrowers agree to pay to the Lender a commitment fee, which shall accrue at the Commitment Fee Applicable Rate on the daily amount of the undrawn portion of the Revolving Commitment of the Lender during the period from and including the Effective Date to but excluding the date on which the Lender’s Revolving Commitment terminates; it being understood that the LC Exposure shall be included in the drawn portion of the Revolving Commitment for purposes of calculating the commitment fee. Accrued commitment fees shall be payable in arrears on the last day of March, June, September and December of each year and on the date on which the Revolving Commitment terminates, commencing on the first such date to occur after the date hereof. All commitment fees shall be computed on the basis of a year of 360 days and shall be payable for the actual number of days elapsed (including the first day but excluding the last day).

(b)     The Borrowers agree to pay (i) to the Lender a letter of credit fee with respect to Letters of Credit, which shall accrue at the same Applicable Rate used to determine the interest rate applicable to Eurodollar Revolving Loans on the daily amount of the Lender’s LC Exposure (excluding any portion thereof attributable to unreimbursed LC Disbursements) during the period from and including the Effective Date to but excluding the later of the date on which the Lender’s Revolving Commitment terminates and the date on which the Lender ceases to have any LC Exposure, and (ii) the Lender’s standard fees and commissions with respect to the issuance, amendment, cancellation, negotiation, transfer, presentment, renewal or extension of any Letter of Credit or processing of drawings thereunder. Letter of credit fees accrued through and including the last day of March, June, September and December of each year shall be payable on the third Business Day following such last day, commencing on the first such date to occur after the Effective Date; provided that all such fees shall be payable on the date on which the Revolving Commitment terminates and any such fees accruing after the date on which the Revolving Commitment terminates shall be payable on demand. Any other fees payable to the Lender pursuant to this paragraph shall be payable within ten (10) days after demand. All letter of credit fees shall be computed on the basis of a year of 360 days and shall be payable for the actual number of days elapsed (including the first day but excluding the last day).

38

(c)     [Reserved].

(d)     All fees payable hereunder shall be paid on the dates due, in immediately available funds, to the Lender. Fees paid shall not be refundable under any circumstances.

SECTION 2.11. Interest.

(a)     The Loans comprising each CBFR Borrowing shall bear interest at the CB Floating Rate plus the Applicable Rate.

(b)     The Loans comprising each Eurodollar Borrowing shall bear interest at the Adjusted LIBOR Rate for the Interest Period in effect for such Borrowing plus the Applicable Rate.

(c)     Notwithstanding the foregoing, during the occurrence and continuance of an Event of Default, the Lender may, at its option, by written notice to the Borrower Representative, declare that (i) all Loans shall bear interest at 2% plus the rate otherwise applicable to such Loans as provided in the preceding paragraphs of this Section or (ii) in the case of any other amount outstanding hereunder, such amount shall accrue at 2% plus the rate applicable to such fee or other obligation as provided hereunder.

(d)     Accrued interest on each Loan (for CBFR Loans, accrued through the last day of the prior calendar month) shall be payable in arrears on each Interest Payment Date for such Loan and, in the case of Revolving Loans, upon termination of the Revolving Commitment; provided that (i) interest accrued pursuant to paragraph (c) of this Section shall be payable on demand, (ii) in the event of any repayment or prepayment of any Loan (other than a prepayment of a CBFR Revolving Loan prior to the end of the Availability Period), accrued interest on the principal amount repaid or prepaid shall be payable on the date of such repayment or prepayment and (iii) in the event of any conversion of any Eurodollar Loan prior to the end of the current Interest Period therefor, accrued interest on such Loan shall be payable on the effective date of such conversion.

(e)     All interest hereunder shall be computed on the basis of a year of 360 days, except that interest computed by reference to the CB Floating Rate shall be computed on the basis of a year of 365 days (or 366 days in a leap year), and in each case shall be payable for the actual number of days elapsed (including the first day but excluding the last day). The applicable CB Floating Rate, Adjusted LIBOR Rate or LIBOR Rate shall be determined by the Lender, and such determination shall be conclusive absent manifest error.

SECTION 2.12. Alternate Rate of Interest; Illegality.

      (a) If prior to the commencement of any Interest Period for a Eurodollar Borrowing:

(i) the Lender determines (which determination shall be conclusive and binding absent manifest error) that adequate and reasonable means do not exist for ascertaining the Adjusted LIBOR Rate or the LIBOR Rate, as applicable (including, without limitation, by means of an Interpolated Rate or because the LIBOR Screen Rate is not available or published on a current basis) for such Interest Period; or

39

(ii) the Lender determines the Adjusted LIBOR Rate or the LIBOR Rate, as applicable, for such Interest Period will not adequately and fairly reflect the cost to the Lender of making or maintaining its Loans (or Loan) included in such Borrowing for such Interest Period;

then the Lender shall give notice thereof to the Borrower Representative by telephone, fax or through an Electronic System as provided in Section 8.01 as promptly as practicable thereafter and, until the Lender notifies the Borrower Representative that the circumstances giving rise to such notice no longer exist, (A) any Interest Election Request that requests the conversion of any Borrowing to, or continuation of any Borrowing as, a Eurodollar Borrowing shall be ineffective and any such Eurodollar Borrowing shall be repaid or converted into a CBFR Borrowing on the last day of the then current Interest Period applicable thereto, and (B) if any Borrowing Request requests a Eurodollar Borrowing, such Borrowing shall be made as a CBFR Borrowing.

(b) If the Lender determines that any Requirement of Law has made it unlawful, or if any Governmental Authority has asserted that it is unlawful, for the Lender or its applicable lending office to make, maintain, fund or continue any Eurodollar Borrowing, or any Governmental Authority has imposed material restrictions on the authority of the Lender to purchase or sell, or to take deposits of, dollars in the London interbank market, then, on notice thereof by the Lender to the Borrower Representative, any obligations of the Lender to make, maintain, fund or continue Eurodollar Loans or to convert CBFR Borrowings to Eurodollar Borrowings will be suspended until the Lender notifies the Borrower Representative that the circumstances giving rise to such determination no longer exist. Upon receipt of such notice, the Borrowers will upon demand from the Lender, either prepay or convert all Eurodollar Borrowings of the Lender to CBFR Borrowings, either on the last day of the Interest Period therefor, if the Lender may lawfully continue to maintain such Eurodollar Borrowings to such day, or immediately, if the Lender may not lawfully continue to maintain such Loans. Upon any such prepayment or conversion, the Borrowers will also pay accrued interest on the amount so prepaid or converted.

(c) If at any time the Lender determines (which determination shall be conclusive absent manifest error) that (i) the circumstances set forth in clause (a)(i) have arisen and such circumstances are unlikely to be temporary or (ii) the circumstances set forth in clause (a)(i) have not arisen but either (w) the supervisor for the administrator of the LIBOR Screen Rate has made a public statement that the administrator of the LIBOR Screen Rate is insolvent (and there is no successor administrator that will continue publication of the LIBOR Screen Rate), (x) the administrator of the LIBOR Screen Rate has made a public statement identifying a specific date after which the LIBOR Screen Rate will permanently or indefinitely cease to be published by it (and there is no successor administrator that will continue publication of the LIBOR Screen Rate), (y) the supervisor for the administrator of the LIBOR Screen Rate has made a public statement identifying a specific date after which the LIBOR Screen Rate will permanently or indefinitely cease to be published or (z) the supervisor for the administrator of the LIBOR Screen Rate or a Governmental Authority having jurisdiction over the Lender has made a public statement identifying a specific date after which the LIBOR Screen Rate may no longer be used for determining interest rates for loans, then the Lender and the Borrower Representative shall endeavor to establish an alternate rate of interest to the LIBOR Rate that gives due consideration to the then prevailing market convention for determining a rate of interest for bank loans in the United States at such time, and shall enter into an amendment to this Agreement to reflect such alternate rate of interest and such other related changes to this Agreement as may be applicable (but, for the avoidance of doubt, such related changes shall not include a reduction of the Applicable Rate). Until an alternate rate of interest shall be determined in accordance with this clause (c) (but, in the case of the circumstances described in clauses (ii)(w), (ii)(x) or (ii)(y) of the first sentence of this Section 2.12(c), only to the extent the LIBOR Screen Rate for such Interest Period is not available or published at such time on a current basis), (x) any Interest Election Request that requests the conversion of any Borrowing to, or continuation of any Borrowing as, a Eurodollar Borrowing shall be ineffective and any such Eurodollar Borrowing shall be repaid or converted into a CBFR Borrowing on the last day of the then current Interest Period applicable thereto, and (y) if any Borrowing Request requests a Eurodollar Borrowing, such Borrowing shall be made as a CBFR Borrowing; provided that, if such alternate rate of interest shall be less than zero, such rate shall be deemed to be zero for the purposes of this Agreement.

40

SECTION 2.13. Increased Costs.

(a) If any Change in Law shall: 

(i)     impose, modify or deem applicable any reserve, special deposit, liquidity or similar requirement (including any compulsory loan requirement, insurance charge or other assessment) against assets of, deposits with or for the account of, or credit extended by, the Lender (except any such reserve requirement reflected in the Adjusted LIBOR Rate); or

(ii)     impose on the Lender or the London interbank market any other condition, cost or expense (other than Taxes) affecting this Agreement or Loans made by the Lender or any Letter of Credit; or

(iii)     subject the Lender to any Taxes (other than (A) Indemnified Taxes, (B) Taxes described in clauses (b) through (d) of the definition of Excluded Taxes and (C) Connection Income Taxes) on its loans, loan principal, letters of credit, commitments, or other obligations, or its deposits, reserves, other liabilities or capital attributable thereto;

and the result of any of the foregoing shall be to increase the cost to the Lender of making, continuing, converting into or maintaining any Loan (or of maintaining its obligation to make any such Loan) or to increase the cost to the Lender of issuing or maintaining any Letter of Credit or to reduce the amount of any sum received or receivable by the Lender hereunder (whether of principal, interest or otherwise), then the Borrowers will pay to the Lender such additional amount or amounts as will compensate the Lender for such additional costs incurred or reduction suffered.

(b)     If the Lender determines that any Change in Law regarding capital or liquidity requirements has or would have the effect of reducing the rate of return on the Lender’s capital or on the capital of the Lender’s holding company as a consequence of this Agreement, the Commitment of or the Loans made by Letters of Credit issued by the Lender to a level below that which the Lender or the Lender’s holding company could have achieved but for such Change in Law (taking into consideration the Lender’s policies and the policies of the Lender’s holding company with respect to capital adequacy and liquidity), then from time to time the Borrowers will pay to the Lender such additional amount or amounts as will compensate the Lender or the Lender’s holding company for any such reduction suffered.

(c)     A certificate of the Lender setting forth the amount or amounts necessary to compensate the Lender or its holding company, as the case may be, as specified in paragraph (a) or (b) of this Section shall be delivered to the Borrower Representative and shall be conclusive absent manifest error. The Borrowers shall pay the Lender the amount shown as due on any such certificate within ten (10) days after receipt thereof.

41

(d)     Failure or delay on the part of the Lender to demand compensation pursuant to this Section shall not constitute a waiver of the Lender’s right to demand such compensation; provided that the Borrowers shall not be required to compensate the Lender pursuant to this Section for any increased costs or reductions incurred more than 210 days prior to the date that the Lender notifies the Borrower Representative of the Change in Law giving rise to such increased costs or reductions and of the Lender’s intention to claim compensation therefor; provided further that, if the Change in Law giving rise to such increased costs or reductions is retroactive, then the 210-day period referred to above shall be extended to include the period of retroactive effect thereof.

SECTION 2.14. Break Funding Payments. In the event of (a) the payment of any principal of any Eurodollar Loan other than on the last day of an Interest Period applicable thereto (including as a result of an Event of Default or as a result of any prepayment pursuant to Section 2.09), (b) the conversion of any Eurodollar Loan other than on the last day of the Interest Period applicable thereto, or (c) the failure to borrow, convert, continue or prepay any Eurodollar Loan on the date specified in any notice delivered pursuant hereto (regardless of whether such notice may be revoked under Section 2.07(c) and is revoked in accordance therewith), then, in any such event, the Borrowers shall compensate the Lender for the loss, cost and expense attributable to such event. A certificate of the Lender setting forth any amount or amounts that the Lender is entitled to receive pursuant to this Section shall be delivered to the Borrower Representative and shall be conclusive absent manifest error. The Borrowers shall pay the Lender the amount shown as due on any such certificate within ten (10) days after receipt thereof.

SECTION 2.15. Taxes.

(a)     Withholding Taxes; Gross-Up; Payments Free of Taxes. Any and all payments by or on account of any obligation of any Loan Party under any Loan Document shall be made without deduction or withholding for any Taxes, except as required by applicable law. If any applicable law (as determined in the good faith discretion of an applicable withholding agent) requires the deduction or withholding of any Tax from any such payment by a withholding agent, then the applicable withholding agent shall be entitled to make such deduction or withholding and shall timely pay the full amount deducted or withheld to the relevant Governmental Authority in accordance with applicable law and, if such Tax is an Indemnified Tax, then the sum payable by the applicable Loan Party shall be increased as necessary so that after such deduction or withholding has been made (including such deductions and withholdings applicable to additional sums payable under this Section 2.15), the Lender receives an amount equal to the sum it would have received had no such deduction or withholding been made.

(b)     Payment of Other Taxes by Loan Parties. The Loan Parties shall timely pay to the relevant Governmental Authority in accordance with applicable law, or at the option of the Lender, timely reimburse it for, Other Taxes.

(c)     Evidence of Payment. As soon as practicable after any payment of Taxes by any Loan Party to a Governmental Authority pursuant to this Section 2.15, such Loan Party shall deliver to the Lender the original or a certified copy of a receipt issued by such Governmental Authority evidencing such payment, a copy of the return reporting such payment, or other evidence of such payment reasonably satisfactory to the Lender.

(d)     Indemnification by the Loan Parties. The Loan Parties shall jointly and severally indemnify the Lender, within ten (10) days after demand therefor, for the full amount of any Indemnified Taxes (including Indemnified Taxes imposed or asserted on or attributable to amounts payable under this Section) payable or paid by the Lender or required to be withheld or deducted from a payment to the Lender and any reasonable expenses arising therefrom or with respect thereto, whether or not such Indemnified Taxes were correctly or legally imposed or asserted by the relevant Governmental Authority. A certificate as to the amount of such payment or liability delivered to the Borrower Representative by the Lender shall be conclusive absent manifest error.

42

(e)     Treatment of Certain Refunds. If the Lender determines, in its sole discretion exercised in good faith, that it has received a refund of any Taxes as to which it has been indemnified pursuant to this Section 2.15 (including by the payment of additional amounts pursuant to this Section 2.15), it shall pay to the indemnifying party an amount equal to such refund (but only to the extent of indemnity payments made under this Section 2.15 with respect to the Taxes giving rise to such refund), net of all out-of-pocket expenses (including Taxes) of the Lender and without interest (other than any interest paid by the relevant Governmental Authority with respect to such refund). Such indemnifying party, upon the request of the Lender, shall repay to the Lender the amount paid to the Lender (plus any penalties, interest or other charges imposed by the relevant Governmental Authority) in the event the Lender is required to repay such refund to such Governmental Authority. Notwithstanding anything to the contrary in this paragraph (e), in no event will the Lender be required to pay any amount to any indemnifying party pursuant to this paragraph (e), the payment of which would place the Lender in a less favorable net after-Tax position than the Lender would have been in if the Tax subject to indemnification and giving rise to such refund had not been deducted, withheld or otherwise imposed and the indemnification payments or additional amounts giving rise to such refund had never been paid. This paragraph (e) shall not be construed to require the Lender to make available its Tax returns (or any other information relating to its Taxes that it deems confidential) to the indemnifying party or any other Person.

(f)     Survival. Each party’s obligations under this Section 2.15 shall survive the resignation or replacement of the Lender or any assignment of rights by, or the replacement of, the Lender, the termination of the Commitment and the repayment, satisfaction or discharge of all obligations under any Loan Document.

(g)     Defined Terms. For purposes of this Section 2.15, the term “applicable law” includes FATCA.

SECTION 2.16. Payments Generally; Allocation of Proceeds.

(a)     The Borrowers shall make each payment required to be made by them hereunder (whether of principal, interest, fees or reimbursement of LC Disbursements, or of amounts payable under Sections 2.13, 2.14 or 2.15, or otherwise) prior to 2:00 p.m., Eastern Standard Time, on the date when due, in immediately available funds, without set-off or counterclaim. Any amounts received after such time on any date may, in the discretion of the Lender, be deemed to have been received on the next succeeding Business Day for purposes of calculating interest thereon. All such payments shall be made to the Lender at its offices at 1300 East Ninth Street - 13th floor, Cleveland, OH 44114-1573. Unless otherwise provided for herein, if any payment hereunder shall be due on a day that is not a Business Day, the date for payment shall be extended to the next succeeding Business Day, and, in the case of any payment accruing interest, interest thereon shall be payable for the period of such extension. All payments hereunder shall be made in dollars.

(b)     Any proceeds of Collateral received by the Lender (i) not constituting either (A) a specific payment of principal, interest, fees or other sum payable under the Loan Documents (which shall be applied as specified by the Borrowers), or (B) a mandatory prepayment (which shall be applied in accordance with Section 2.09) or (ii) after an Event of Default has occurred and is continuing and the Lender so elects, such funds shall be applied ratably first, to pay any fees, indemnities, or expense reimbursements including amounts then due to the Lender from the Borrowers, second, to pay interest then due and payable on the Loans ratably, third, to prepay principal on the Loans and unreimbursed LC Disbursements and to pay any amounts owing with respect to Swap Agreement Obligations, ratably (with amounts allocated to the Term Loans and CapEx Loans and/or CapEx Term Loans of any Class applied to reduce the subsequent scheduled repayments of the Term Loans and CapEx Loans and/or CapEx Term Loans of such Class to be made pursuant to Section 2.08 in inverse order of maturity, fourth, to pay an amount to the Lender equal to one hundred five percent (105%) of the aggregate LC Exposure, to be held as cash collateral for such Obligations, fifth, to the payment of any amounts owing with respect to Banking Services Obligations, and sixth, to the payment of any other Secured Obligation due to the Lender from the Borrowers or any other Loan Party. The Lender shall have the continuing and exclusive right to apply and reverse and reapply any and all such proceeds and payments to any portion of the Secured Obligations.

43

(c)     At the election of the Lender, all payments of principal, interest, LC Disbursements, fees, premiums, reimbursable expenses (including, without limitation, all reimbursement for fees, costs and expenses pursuant to Section 8.03), and other sums payable under the Loan Documents, may be paid from the proceeds of Borrowings made hereunder, whether made following a request by the Borrower Representative pursuant to Section 2.03 or a deemed request as provided in this Section or may be deducted from any deposit account of any Borrower maintained with the Lender. The Borrowers hereby irrevocably authorize (i) the Lender to make a Borrowing for the purpose of paying each payment of principal, interest and fees as it becomes due hereunder or any other amount due under the Loan Documents and agree that all such amounts charged shall constitute Loans, and that all such Borrowings shall be deemed to have been requested pursuant to Section 2.03 and (ii) the Lender to charge any deposit account of any Borrower maintained with the Lender for each payment of principal, interest and fees as it becomes due hereunder or any other amount due under the Loan Documents.

(d)     The Lender may from time to time provide the Borrowers with account statements or invoices with respect to any of the Secured Obligations (the “Statements”). The Lender is under no duty or obligation to provide Statements, which, if provided, will be solely for the Borrowers’ convenience. Statements may contain estimates of the amounts owed during the relevant billing period, whether of principal, interest, fees or other Secured Obligations. If the Borrowers pay the full amount indicated on a Statement on or before the due date indicated on such Statement, the Borrowers shall not be in default of payment with respect to the billing period indicated on such Statement; provided, that acceptance by the Lender of any payment that is less than the total amount actually due at that time (including but not limited to any past due amounts) shall not constitute a waiver of the Lender’s right to receive payment in full at another time.

SECTION 2.17. Indemnity for Returned Payments. If after receipt of any payment which is applied to the payment of all or any part of the Obligations (including a payment effected through exercise of a right of setoff), the Lender is for any reason compelled to surrender such payment or proceeds to any Person because such payment or application of proceeds is invalidated, declared fraudulent, set aside, determined to be void or voidable as a preference, impermissible setoff, or a diversion of trust funds, or for any other reason (including pursuant to any settlement entered into by the Lender in its discretion), then the Obligations or part thereof intended to be satisfied shall be revived and continued and this Agreement shall continue in full force as if such payment or proceeds had not been received by the Lender. The provisions of this Section 2.17 shall be and remain effective notwithstanding any contrary action which may have been taken by the Lender in reliance upon such payment or application of proceeds. The provisions of this Section 2.17 shall survive the termination of this Agreement.

44

ARTICLE III

Representations and Warranties

Each Loan Party represents and warrants to the Lender that (and where applicable, agrees):

SECTION 3.01. Organization; Powers. Each Loan Party and each Subsidiary is duly organized, validly existing and in good standing under the laws of the jurisdiction of its organization, has all requisite power and authority to carry on its business as now conducted and, except where the failure to do so, individually or in the aggregate, could not reasonably be expected to result in a Material Adverse Effect, is qualified to do business in, and is in good standing in, every jurisdiction where such qualification is required.

SECTION 3.02. Authorization; Enforceability. The Transactions are within each Loan Party’s organizational powers and have been duly authorized by all necessary organizational actions and, if required, actions by equity holders. Each Loan Document to which each Loan Party is a party has been duly executed and delivered by such Loan Party and constitutes a legal, valid and binding obligation of such Loan Party, enforceable in accordance with its terms, subject to applicable bankruptcy, insolvency, reorganization, moratorium or other laws affecting creditors’ rights generally and subject to general principles of equity, regardless of whether considered in a proceeding in equity or at law.

SECTION 3.03. Governmental Approvals; No Conflicts. The Transactions (a) do not require any consent or approval of, registration or filing with, or any other action by, any Governmental Authority, except such as have been obtained or made and are in full force and effect and except for filings necessary to perfect Liens created pursuant to the Loan Documents, (b) will not violate any Requirement of Law applicable to any Loan Party or any Subsidiary, (c) will not violate or result in a default under any indenture, agreement or other instrument binding upon any Loan Party or any Subsidiary or the assets of any Loan Party or any Subsidiary, including, without limitation, the FFC Subordinated Debt Documents, the Roundball Subordinated Debt Documents and the CAD Subordinated Debt Documents, or give rise to a right thereunder to require any payment to be made by any Loan Party or any Subsidiary, except in the case of subparts (b) and (c) to the extent that such violation or default, individually or in the aggregate, could not reasonably be expected to result in a Material Adverse Effect, and (d) will not result in the creation or imposition of any Lien on any asset of any Loan Party or any Subsidiary, except Liens created pursuant to the Loan Documents.

SECTION 3.04. Financial Condition; No Material Adverse Change.

(a)     The Company has heretofore furnished to the Lender its consolidated balance sheet and statements of income, stockholders equity and cash flows (i) as of and for the fiscal year ended September 30, 2016, reported on by Meaden & Moore, independent public accountants, and (ii) as of and for the fiscal quarter and the portion of the fiscal year ended March 31, 2017, certified by a Financial Officer. Such financial statements present fairly, in all material respects, the financial position and results of operations and cash flows of the Company and its consolidated Subsidiaries as of such dates and for such periods in accordance with GAAP, subject to normal year-end audit adjustments all of which, when taken as a whole, would not be materially adverse and the absence of footnotes in the case of the statements referred to in clause (ii) above.

(b)     No event, change or condition has occurred that has had, or could reasonably be expected to have, a Material Adverse Effect, since September 30, 2016.

45

SECTION 3.05. Properties.

(a)     As of the date of this Agreement, Schedule 3.05 sets forth the address of each parcel of real property that is owned or leased by any Loan Party. Each of such leases and subleases is valid and enforceable in accordance with its terms and is in full force and effect, and no default by any party to any such lease or sublease exists, except to the extent the foregoing would not reasonably be expected to have a Material Adverse Effect. Each of the Loan Parties and each Subsidiary has good and indefeasible title to, or valid leasehold interests in, all of its real and personal property, free of all Liens other than those permitted by Section 6.02.

(b)     Each Loan Party and each Subsidiary owns, or is licensed to use, all trademarks, tradenames, copyrights, patents and other intellectual property necessary to its business as currently conducted, a correct and complete list of which, as of the date of this Agreement, is set forth on Schedule 3.05, and the use thereof by each Loan Party and each Subsidiary does not infringe in any material respect upon the rights of any other Person, and each Loan Party’s and each Subsidiary’s rights thereto are not subject to any licensing agreement or similar arrangement (other than (i) restrictions relating to software licenses that may limit such Loan Party’s ability to transfer or assign any such agreement to a third party and (ii) licensing agreements or similar agreements that do not materially impair the ability of the Lender to avail itself of its rights of disposal and other rights granted under the Collateral Documents in respect of Inventory).

SECTION 3.06. Litigation and Environmental Matters.

(a)     There are no actions, suits or proceedings by or before any arbitrator or Governmental Authority pending against or, to the knowledge of any Loan Party, threatened against or affecting any Loan Party or any Subsidiary (i) as to which there is a reasonable possibility of an adverse determination and that, if adversely determined, would reasonably be expected, individually or in the aggregate, to result in a Material Adverse Effect (other than the Disclosed Matters set forth on Schedule 3.06) or (ii) that directly involve any Loan Document or the Transactions.

(b)     Except for the Disclosed Matters, (i) no Loan Party or any Subsidiary has received notice of any claim with respect to any Environmental Liability or knows of any basis for any Environmental Liability which would reasonably be expected to have a Material Adverse Effect and (ii) and except with respect to any other matters that, individually or in the aggregate, could not reasonably be expected to result in a Material Adverse Effect, no Loan Party or any Subsidiary (A) has failed to comply with any Environmental Law or to obtain, maintain or comply with any permit, license or other approval required under any Environmental Law (B) has become subject to any Environmental Liability, (C) has received notice of any claim with respect to any Environmental Liability or (D) knows of any basis for any Environmental Liability.

(c)     Since the date of this Agreement, there has been no change in the status of the Disclosed Matters that, individually or in the aggregate, has resulted in, or materially increased the likelihood of, a Material Adverse Effect.

SECTION 3.07. Compliance with Laws and Agreements; No Default. Except where the failure to do so, individually or in the aggregate, could not reasonably be expected to result in a Material Adverse Effect, each Loan Party and each Subsidiary is in compliance with (i) all Requirements of Law applicable to it or its property and (ii) all indentures, agreements and other instruments binding upon it or its property. No Default has occurred and is continuing.

SECTION 3.08. Investment Company Status. No Loan Party or any Subsidiary is an “investment company” as defined in, or subject to regulation under, the Investment Company Act of 1940.

46

SECTION 3.09. Taxes. Each Loan Party and each Subsidiary has timely filed or caused to be filed all federal, state and other Tax returns and reports required to have been filed and has paid or caused to be paid all federal, state and other Taxes required to have been paid by it, except (a) Taxes that are being contested in good faith by appropriate proceedings and for which such Loan Party or such Subsidiary, as applicable, has set aside on its books adequate reserves or (b) to the extent that the failure to do so could not be expected to result in a Material Adverse Effect. No tax liens have been filed and no claims are being asserted with respect to any such taxes.

SECTION 3.10. ERISA. No ERISA Event has occurred or is reasonably expected to occur that, when taken together with all other such ERISA Events for which liability is reasonably expected to occur, could reasonably be expected to result in a Material Adverse Effect. The present value of all accumulated benefit obligations under each Plan (based on the assumptions used for purposes of Statement of Financial Accounting Standards No. 87) did not, as of the date of the most recent financial statements reflecting such amounts, exceed the fair market value of the assets of such Plan, and the present value of all accumulated benefit obligations of all underfunded Plans (based on the assumptions used for purposes of Statement of Financial Accounting Standards No. 87) did not, as of the date of the most recent financial statements reflecting such amounts, exceed by more than $500,000 the fair market value of the assets of all such underfunded Plans.

SECTION 3.11. Disclosure. (a) The Loan Parties have disclosed to the Lender all agreements, instruments and corporate or other restrictions to which any Loan Party or any Subsidiary is subject, and all other matters known to it, that, individually or in the aggregate, could reasonably be expected to result in a Material Adverse Effect. None of the reports, financial statements, certificates or other information furnished by or on behalf of any Loan Party or any Subsidiary to the Lender in connection with the negotiation of this Agreement or any other Loan Document (as modified or supplemented by other information so furnished) contains any material misstatement of fact or omits to state any material fact necessary to make the statements therein, in the light of the circumstances under which they were made, not misleading; provided that, with respect to projected financial information, the Loan Parties represent only that such information was prepared in good faith based upon assumptions believed to be reasonable at the time delivered and, if such projected financial information was delivered prior to the Effective Date, as of the Effective Date, it being understood that projections are subject to inherent uncertainties and contingencies which may be outside the control of any Loan Party and that no assurance can be given that such projected financial information will be realized.

(b) As of the Second Amendment Effective Date, to the best knowledge of each Borrower, the information included in the Beneficial Ownership Certification provided on or prior to the Second Amendment Effective Date to the Lender in connection with this Agreement is true and correct in all respects.

SECTION 3.12. Material Agreements. All material agreements and contracts to which any Loan Party is a party or is bound as of the date of this Agreement are listed on Schedule 3.12. Except as would not reasonably be expected to have a Material Adverse Effect, no Loan Party is in default in the performance, observance or fulfillment of any of the obligations, covenants or conditions contained in (i) any material agreement to which it is a party or (ii) any agreement or instrument evidencing or governing Indebtedness.

47

SECTION 3.13. Solvency.

(a)     Immediately after the consummation of the Transactions to occur on the Effective Date, (i) the fair value of the assets of each Loan Party, at a fair valuation, will exceed its debts and liabilities, subordinated, contingent or otherwise; (ii) the present fair saleable value of the property of each Loan Party will be greater than the amount that will be required to pay the probable liability of its debts and other liabilities, subordinated, contingent or otherwise, as such debts and other liabilities become absolute and matured; (iii) each Loan Party will be able to pay its debts and liabilities, subordinated, contingent or otherwise, as such debts and liabilities become absolute and matured; and (iv) no Loan Party will have unreasonably small capital with which to conduct the business in which it is engaged as such business is now conducted and is proposed to be conducted after the Effective Date.

(b)     No Loan Party intends to, nor will permit any Subsidiary to, and no Loan Party believes that it or any Subsidiary will, incur debts beyond its ability to pay such debts as they mature, taking into account the timing of and amounts of cash to be received by it or any such Subsidiary and the timing of the amounts of cash to be payable on or in respect of its Indebtedness or the Indebtedness of any such Subsidiary.

SECTION 3.14. Insurance. Schedule 3.14 sets forth a description of all insurance maintained by or on behalf of the Loan Parties and their Subsidiaries as of the Effective Date. As of the Effective Date, all premiums in respect of such insurance have been paid. The Loan Parties believe that the insurance maintained by or on behalf of the Loan Parties and their Subsidiaries is adequate and is customary for companies engaged in the same or similar businesses operating in the same or similar locations.

SECTION 3.15. Capitalization and Subsidiaries. Schedule 3.15 sets forth (a) a correct and complete list of the name and relationship to the Company of each Subsidiary, (b) other than with respect to Hickok, a true and complete listing of each class of each Loan Parties’ authorized Equity Interests, of which all of such issued Equity Interests are validly issued, outstanding, fully paid and non-assessable, and owned beneficially and of record by the Persons identified on Schedule 3.15, and (c) the type of entity of the Company and each Subsidiary. All of the issued and outstanding Equity Interests owned by any Loan Party have been (to the extent such concepts are relevant with respect to such ownership interests) duly authorized and issued and are fully paid and non-assessable.

SECTION 3.16. Security Interest in Collateral. The provisions of this Agreement and the other Loan Documents create legal and valid Liens on all the Collateral in favor of the Lender, for the benefit of the Secured Parties, and such Liens constitute perfected and continuing Liens on the Collateral, securing the Secured Obligations, enforceable against the applicable Loan Party and all third parties, and having priority over all other Liens on the Collateral except in the case of (a) Permitted Encumbrances, to the extent any such Permitted Encumbrances would have priority over the Liens in favor of the Lender pursuant to any applicable law and (b) Liens perfected only by possession (including possession of any certificate of title), to the extent the Lender has not obtained or does not maintain possession of such Collateral.

SECTION 3.17. Employment Matters. As of the Effective Date, there are no strikes, lockouts or organized slowdowns against any Loan Party or any Subsidiary pending or, to the knowledge of any Loan Party, threatened. The hours worked by and payments made to employees of the Loan Parties and their Subsidiaries have not been in violation of the Fair Labor Standards Act or any other applicable federal, state, local or foreign law dealing with such matters. All payments due from any Loan Party or any Subsidiary, or for which any claim may be made against any Loan Party or any Subsidiary, on account of wages and employee health and welfare insurance and other benefits, have been paid or accrued as a liability on the books of such Loan Party or such Subsidiary.

48

SECTION 3.18. Federal Reserve Regulations. No part of the proceeds of any Loan or Letter of Credit has been used or will be used, whether directly or indirectly, for any purpose that entails a violation of any of the Regulations of the Board, including Regulations T, U and X.

SECTION 3.19. Use of Proceeds. The proceeds of the Loans have been used and will be used, whether directly or indirectly as set forth in Section 5.08.

SECTION 3.20. No Burdensome Restrictions. No Loan Party is subject to any Burdensome Restrictions except Burdensome Restrictions permitted under Section 6.10.

SECTION 3.21. Anti-Corruption Laws and Sanctions. Each Loan Party has implemented and maintains in effect policies and procedures designed to ensure compliance by such Loan Party, its Subsidiaries and their respective directors, officers, employees and agents with Anti-Corruption Laws and applicable Sanctions, and such Loan Party, its Subsidiaries and their respective officers and employees and to the knowledge of such Loan Party its directors and agents, are in compliance with Anti-Corruption Laws and applicable Sanctions in all material respects. None of (a) any Loan Party, any Subsidiary or, to the knowledge of any such Loan Party or Subsidiary, any of their respective directors, officers or employees, or (b) to the knowledge of any such Loan Party or Subsidiary, any agent of such Loan Party or any Subsidiary that will act in any capacity in connection with or benefit from the credit facility established hereby, is a Sanctioned Person. No Borrowing or Letter of Credit, use of proceeds, Transaction or other transaction contemplated by this Agreement or the other Loan Documents will violate Anti-Corruption Laws or applicable Sanctions.

SECTION 3.22. FFC Subordinated Debt Documents .   The Loan Parties have delivered and the Lender has received complete copies of the FFC Subordinated Debt Documents (including, in each case, all exhibits, schedules and disclosure letters referred to therein or delivered pursuant thereto, if any) and, in each case, all amendments thereto and other side letters or agreements affecting the terms thereof. Since the date hereof, none of such documents and agreements has been amended or supplemented, nor have any of the provisions thereof been waived, except pursuant to a written agreement or instrument which has heretofore been delivered to the Lender or which would not be adverse to the interests of the Lender under the Loan Documents. Each of the representations made by each Loan Party in the FFC Subordinated Debt Documents is true and correct in all material respects.

SECTION 3.23. Air Enterprises Acquisition Documents .   The Loan Parties have delivered and the Lender has received complete copies of the Air Enterprises Acquisition Documents (including, in each case, all exhibits, schedules and disclosure letters referred to therein or delivered pursuant thereto, if any) and, in each case, all amendments thereto and other side letters or agreements affecting the terms thereof. Since the date hereof, none of such documents and agreements has been amended or supplemented, nor have any of the provisions thereof been waived, except pursuant to a written agreement or instrument which has heretofore been delivered to the Lender or which would not be adverse to the interests of the Lender under the Loan Documents. Each of the representations made by each Loan Party in the Air Enterprises Acquisition Documents is true and correct in all material respects.

SECTION 3.24. Roundball Subordinated Debt Documents.   The Loan Parties have delivered and the Lender has received complete copies of the Roundball Subordinated Debt Documents (including, in each case, all exhibits, schedules and disclosure letters referred to therein or delivered pursuant thereto, if any) and, in each case, all amendments thereto and other side letters or agreements affecting the terms thereof. Since the date hereof, none of such documents and agreements has been amended or supplemented, nor have any of the provisions thereof been waived, except pursuant to a written agreement or instrument which has heretofore been delivered to the Lender or which would not be adverse to the interests of the Lender under the Loan Documents. Each of the representations made by each Loan Party in the Roundball Subordinated Debt Documents is true and correct in all material respects.

49

SECTION 3.25. CAD Acquisition Documents.   The Loan Parties have delivered and the Lender has received complete copies of the CAD Acquisition Documents (including, in each case, all exhibits, schedules and disclosure letters referred to therein or delivered pursuant thereto, if any) and, in each case, all amendments thereto and other side letters or agreements affecting the terms thereof. Since the First Amendment Effective Date, none of such documents and agreements has been amended or supplemented, nor have any of the provisions thereof been waived, except pursuant to a written agreement or instrument which has heretofore been delivered to the Lender or which would not be adverse to the interests of the Lender under the Loan Documents. Each of the representations made by each Loan Party in the CAD Acquisition Documents is true and correct in all material respects.

SECTION 3.26. CAD Subordinated Debt Documents .   The Loan Parties have delivered and the Lender has received complete copies of the CAD Subordinated Debt Documents (including, in each case, all exhibits, schedules and disclosure letters referred to therein or delivered pursuant thereto, if any) and, in each case, all amendments thereto and other side letters or agreements affecting the terms thereof. Since the First Amendment Effective Date, none of such documents and agreements has been amended or supplemented, nor have any of the provisions thereof been waived, except pursuant to a written agreement or instrument which has heretofore been delivered to the Lender or which would not be adverse to the interests of the Lender under the Loan Documents. Each of the representations made by each Loan Party in the CAD Subordinated Debt Documents is true and correct in all material respects.

ARTICLE IV

Conditions

SECTION 4.01. Effective Date. The obligations of the Lender to make Loans and to issue Letters of Credit hereunder shall not become effective until the date on which each of the following conditions is satisfied (or waived in accordance with Section 8.02):

(a)     Credit Agreement and Loan Documents. The Lender (or its counsel) shall have received (i) from each party hereto either (A) a counterpart of this Agreement signed on behalf of such party or (B) written evidence satisfactory to the Lender (which may include fax or other electronic transmission of a signed signature page of this Agreement) that such party has signed a counterpart of this Agreement and (ii) duly executed copies of the Loan Documents and such other certificates, documents, instruments and agreements as the Lender shall reasonably request in connection with the transactions contemplated by this Agreement and the other Loan Documents, including a written opinion of the Loan Parties’ counsel, addressed to the Lender in substantially the form of Exhibit A.

(b)     Financial Statements and Projections. The Lender shall have received (i) audited consolidated financial statements of the Company for the 2015 and 2016 fiscal years, (ii) unaudited interim consolidated financial statements of the Company for each fiscal quarter ended after the date of the latest applicable financial statements delivered pursuant to clause (i) of this paragraph as to which such financial statements are available, and such financial statements shall not, in the reasonable judgment of the Lender, reflect any material adverse change in the consolidated financial condition of the Loan Parties, as reflected in the audited, consolidated financial statements described in clause (i) of this paragraph, and (iii) satisfactory Projections through 2019.

50

(c)     Closing Certificates; Certified Certificate of Incorporation; Good Standing Certificates. The Lender shall have received (i) a certificate of each Loan Party, dated the Effective Date and executed by its Secretary or Assistant Secretary, which shall (A) certify the resolutions of its Board of Directors, members or other body authorizing the execution, delivery and performance of the Loan Documents to which it is a party, (B) identify by name and title and bear the signatures of the officers of such Loan Party authorized to sign the Loan Documents to which it is a party and, in the case of a Borrower, its Financial Officers, and (C) contain appropriate attachments, including the charter, articles or certificate of organization or incorporation of each Loan Party certified by the relevant authority of the jurisdiction of organization of such Loan Party and a true and correct copy of its bylaws or operating, management or partnership agreement, or other organizational or governing documents, and (ii) a long form good standing certificate for each Loan Party from its jurisdiction of organization.

(d)     No Default Certificate. The Lender shall have received a certificate, signed by a Financial Officer of each other Loan Party, dated as of the Effective Date (i) stating that no Default has occurred and is continuing, (ii) stating that the representations and warranties contained in the Loan Documents are true and correct as of such date, and (iii) certifying as to any other factual matters as may be reasonably requested by the Lender.

(e)     Fees. The Lender shall have received all fees required to be paid, and all expenses required to be reimbursed for which invoices have been presented (including the reasonable fees and expenses of legal counsel), on or before the Effective Date. All such amounts will be paid with proceeds of Loans made on the Effective Date and will be reflected in the funding instructions given by the Borrower Representative to the Lender on or before the Effective Date.

(f)     Lien Searches. The Lender shall have received the results of a recent lien search in the jurisdiction of organization of each Loan Party and each jurisdiction where assets of the Loan Parties are located, and such search shall reveal no Liens on any of the assets of the Loan Parties except for liens permitted by Section 6.02 or discharged on or prior to the Effective Date pursuant to a pay-off letter or other documentation satisfactory to the Lender.

(g)     Pay-off Letter. The Lender shall have received satisfactory pay-off letters for all existing Indebtedness required to be repaid and which confirms that all Liens upon any of the property of the Loan Parties constituting Collateral will be terminated concurrently with such payment and all letters of credit issued or guaranteed as part of such Indebtedness shall have been cash collateralized or supported by a Letter of Credit.

(h)     Funding Account. The Lender shall have received a notice setting forth the deposit account of the Borrowers (the “Funding Account”) to which the Lender is authorized by the Borrowers to transfer the proceeds of any Borrowings requested or authorized pursuant to this Agreement.

(i)     Collateral Access and Control Agreements. The Lender shall have received each of (i) a Collateral Access Agreement required to be provided pursuant to the Security Agreement and (ii) a deposit account control agreement required to be provided pursuant to the Security Agreement.

51

(j)     Solvency. The Lender shall have received a solvency certificate signed by a Financial Officer of the Company dated the Effective Date in form and substance reasonably satisfactory to the Lender.

(k)     Borrowing Base Certificate. The Lender shall have received a Borrowing Base Certificate (as defined in the Credit Agreement as in effect on the Effective Date) which calculates the Borrowing Base (as defined in the Credit Agreement as in effect on the Effective Date) as of the end of the week immediately preceding the Effective Date.    

(l)     Closing Availability. After giving effect to all Borrowings to be made on the Effective Date and the issuance of any Letters of Credit on the Effective Date and payment of all fees and expenses due hereunder, and with all of the Loan Parties’ Indebtedness, the Borrowers’ Availability shall not be less than $500,000.

(m)     Pledged Equity Interests; Stock Powers; Pledged Notes. The Lender shall have received (i) the certificates representing the Equity Interests pledged pursuant to the Security Agreement, together with an undated stock power for each such certificate executed in blank by a duly authorized officer of the pledgor thereof and (ii) each promissory note (if any) pledged to the Lender pursuant to the Security Agreement endorsed (without recourse) in blank (or accompanied by an executed transfer form in blank) by the pledgor thereof.

(n)     Filings, Registrations and Recordings. Each document (including any Uniform Commercial Code financing statement) required by the Collateral Documents or under law or reasonably requested by the Lender to be filed, registered or recorded in order to create in favor of the Lender, for the benefit of the Secured Parties, a perfected Lien on the Collateral described therein, prior and superior in right to any other Person (other than with respect to Liens expressly permitted by Section 6.02), shall be in proper form for filing, registration or recordation.

(o)     Air Enterprises Acquisition. In connection with the Air Enterprises Acquisition, Borrowers shall have delivered to Lender:

(i)     a fully executed Air Enterprises Assignment of Rights;

(ii)     copies of the Air Enterprises Acquisition Documents having been certified by a Financial Officer of the Company as true and correct;

(iii)     any other evidence that Lender reasonably requests, in form and substance satisfactory to Lender, that the Air Enterprises Acquisition has been completed;

(iv)     evidence that all necessary documents or instruments have been filed with all appropriate Governmental Authorities;

(v)     evidence that all necessary approvals have been obtained, other than the consents of certain customers as described on Schedule 4.01; and

(vi)     satisfactory evidence that no Person has or is threatening to oppose or challenge the Air Enterprises Acquisition or has or threatened to file any litigation or similar action opposing or challenging the Air Enterprises Acquisition or alleging that such acquisition violates any applicable laws; and

52

(vii)     all legal opinions, if any, delivered by any party in connection with the Air Enterprises Acquisition (including from company counsel or buyer’s counsel), with an agreement from each opinion giver allowing Lender to rely on such opinions.

(p)     FFC Subordinated Debt Documents. The Lender shall have received (i) fully signed copies of the FFC Subordinated Debt Documents, certified to the Lender as true and correct, which such documents shall be in form and substance satisfactory to the Lender and its counsel, and (ii) the FFC Subordination Agreement fully signed by all parties, which such agreement shall be in form and substance satisfactory to the Lender and its counsel.

(q)     Insurance. Subject to Section 5.15 hereof, the Lender shall have received evidence of insurance coverage in compliance with the terms of Section 5.10 of this Agreement and Section 4.12 of the Security Agreement.

(r)     Hickok Holdings Dissolution. The Lender shall have received evidence that Hickok Holdings LLC, an Ohio limited liability company, has been dissolved.

(s)     Legal Due Diligence. The Lender and its counsel shall have completed all legal due diligence, including without limitation, appraisals and field exams, the results of which shall be satisfactory to Lender in its sole discretion.

(t)     USA PATRIOT Act, Etc. The Lender shall have received all documentation and other information required by bank regulatory authorities under applicable “know your customer” and anti-money laundering rules and regulations, including USA PATRIOT Act, and a properly completed and signed IRS Form W-8 or W-9, as applicable, for each Loan Party.

(u)     Roundball Subordinated Debt Documents. The Lender shall have received (i) fully signed copies of the Roundball Subordinated Debt Documents, certified to the Lender as true and correct, which such documents shall be in form and substance satisfactory to the Lender and its counsel, and (ii) the Roundball Subordination Agreement fully signed by all parties, which such agreement shall be in form and substance satisfactory to the Lender and its counsel.

(v)     Other Documents. The Lender shall have received such other documents as the Lender or its counsel may have reasonably requested.

The Lender shall notify the Borrowers of the Effective Date, and such notice shall be conclusive and binding. Notwithstanding the foregoing, the obligations of the Lender to make Loans and to issue Letters of Credit hereunder shall not become effective unless each of the foregoing conditions is satisfied (or waived pursuant to Section 8.02) at or prior to 2:00 p.m., Eastern Standard Time, on June 1, 2017 (and, in the event such conditions are not so satisfied or waived, the Commitment shall terminate at such time).

SECTION 4.02. Each Credit Event. The obligation of the Lender to make a Loan on the occasion of any Borrowing, and to issue, amend, renew or extend any Letter of Credit, is subject to the satisfaction of the following conditions:

(a)     Representations and warranties of the Loan Parties set forth in the Loan Documents shall be true and correct in all material respects with the same effect as though made on and as of the date of such Borrowing or the date of issuance, amendment, renewal or extension of such Letter of Credit, as applicable (it being understood and agreed that any representation or warranty which by its terms is made as of a specified date shall be required to be true and correct in all material respects only as of such specified date, and that any representation or warranty which is subject to any materiality qualifier shall be required to be true and correct in all respects).

53

(b)     At the time of and immediately after giving effect to such Borrowing or the issuance, amendment, renewal or extension of such Letter of Credit, as applicable, no Default shall have occurred and be continuing.

(c)     After giving effect to any Borrowing or the issuance, amendment, renewal or extension of any Letter of Credit, Availability shall not be less than zero.

(d)     No event shall have occurred and no condition shall exist which has or could be reasonably expected to have a Material Adverse Effect.

Each Borrowing and each issuance, amendment, renewal or extension of a Letter of Credit shall be deemed to constitute a representation and warranty by the Borrowers on the date thereof as to the matters specified in paragraphs (a) and (b) and (d) of this Section.

ARTICLE V 

Affirmative Covenants

Until the Commitment shall have expired or been terminated and the principal of and interest on each Loan and all fees payable hereunder shall have been paid in full (other than contingent or indemnity obligations for which no claim has been made) and all Letters of Credit shall have expired or terminated (or have been cash collateralized pursuant to the terms hereof), in each case without any pending draw, and all LC Disbursements shall have been reimbursed, each Loan Party executing this Agreement covenants and agrees, jointly and severally with all of the other Loan Parties, with the Lender that:

SECTION 5.01. Financial Statements and Other Information. The Borrowers will furnish to the Lender:

(a)     within 120 days after the end of each fiscal year of the Company, if not filed electronically with the SEC and publicly available for retrieval by the Lender after notice from the Company as described below, its audited consolidated balance sheet and related statements of operations, stockholders’ equity and cash flows as of the end of and for such year, setting forth in each case in comparative form the figures for the previous fiscal year, all reported on by independent public accountants acceptable to the Lender (without a “going concern” or like qualification, commentary or exception, and without any qualification or exception as to the scope of such audit) to the effect that such consolidated financial statements present fairly in all material respects the financial condition and results of operations of the Company and its consolidated Subsidiaries on a consolidated basis in accordance with GAAP consistently applied, accompanied by any management letter prepared by said accountants; provided that notice by the Company to Lender that the Company has filed with the SEC its Form 10-K annual report of the Company for such annual period within such time period shall be deemed to satisfy the requirements of this subsection (a), so long as such financial statements and reports shall be readily available to Lender.

54

(b)     within 45 days after the end of each of the first three fiscal quarters of the Company, if not filed electronically with the SEC and publicly available for retrieval by the Lender after notice from the Company as described below, its consolidated balance sheet and related statements of operations, stockholders’ equity and cash flows as of the end of and for such fiscal quarter and the then elapsed portion of such fiscal year, setting forth in each case in comparative form the figures for the corresponding period or periods of (or, in the case of the balance sheet, as of the end of) the previous fiscal year, all certified by a Financial Officer of the Borrower Representative as presenting fairly in all material respects the financial condition and results of operations of the Company and its consolidated Subsidiaries on a consolidated basis in accordance with GAAP consistently applied, subject to normal year-end audit adjustments and the absence of footnotes; provided that notice by the Company to Lender that the Company has filed with the SEC its Form 10-Q quarterly report of the Company for such quarterly period within such time period shall be deemed to satisfy the requirements of this subsection (b), so long as such financial statements and reports shall be readily available to Lender.

(c)     concurrently with any delivery of financial statements under clause (a) or (b) above (collectively or individually, as the context requires, the “Financial Statements”), a certificate of a Financial Officer of the Borrower Representative in substantially the form of Exhibit C (i) certifying, in the case of the Financial Statements delivered under clause (a) or (b) above, as presenting fairly in all material respects the financial condition and results of operations of the Company and its consolidated Subsidiaries on a consolidated basis in accordance with GAAP consistently applied, subject to normal year-end audit adjustments and the absence of footnotes, (ii) certifying as to whether a Default has occurred and, if a Default has occurred, specifying the details thereof and any action taken or proposed to be taken with respect thereto, (iii) setting forth reasonably detailed calculations demonstrating compliance with Sections 6.12, and (iv) stating whether any change in GAAP or in the application thereof has occurred since the date of the audited financial statements referred to in Section 3.04 and, if any such change has occurred, specifying the effect of such change on the Financial Statements accompanying such certificate;

(d)     [reserved];

(e)     as soon as available, but in any event no later than 60 days after the end of each fiscal year of the Company, a copy of the plan and forecast (including a projected consolidated balance sheet, income statement and cash flow statement) of the Company for each month of the upcoming fiscal year (the “Projections”) in form reasonably satisfactory to the Lender;

(f)     [reserved];

(g)      [reserved];

(h)     [reserved];

(i)     promptly after the same become publicly available, copies of all periodic and other reports, proxy statements and other materials filed by any Loan Party or any Subsidiary with the SEC, or any Governmental Authority succeeding to any or all of the functions of the SEC, or with any national securities exchange, or distributed by the Company to its shareholders generally, as the case may be; provided that prompt notice by the Company to Lender that the Company has filed any such reports, proxy statements or other materials with the SEC or any succeeding Governmental Authority shall be deemed to satisfy the requirements of this subsection (i), so long as such reports, proxy statements or other materials shall be readily available to Lender;

(j)     promptly following any request therefor, information and documentation reasonably requested by the Lender for purposes of compliance with applicable “know your customer” and anti-money laundering rules and regulations, including the USA PATRIOT Act and the Beneficial Ownership Regulation; and

55

(k)     promptly following any request therefor, such other information regarding the operations, business affairs and financial condition of any Loan Party, or compliance with the terms of this Agreement, as the Lender may reasonably request.

SECTION 5.02. Notices of Material Events; Name Change. The Loan Parties will furnish to the Lender prompt (but in any event within any time period that may be specified below) written notice of the following:

(a)     the occurrence of any Default;

(b)     receipt of any notice of any investigation by a Governmental Authority or any litigation or proceeding commenced or, to a Loan Party’s knowledge, threatened against any Loan Party or any Subsidiary that (i) seeks damages in excess of $1,000,000, (ii) seeks injunctive relief, (iii) is asserted or instituted against any Plan, its fiduciaries or its assets, that could reasonably be expected to result in liability of the Loan Parties and their Subsidiaries in an aggregate amount exceeding $1,000,000 (iv) alleges criminal misconduct by any Loan Party or any Subsidiary, (v) alleges the violation of, or seeks to impose remedies under, any Environmental Law or related Requirement of Law, or seeks to impose Environmental Liability, in each case that could reasonably be expected to result in liability of the Loan Parties and their Subsidiaries in an aggregate amount exceeding $1,000,000 (vi) asserts liability on the part of any Loan Party or any Subsidiary in excess of $1,000,000 in respect of any tax, fee, assessment, or other governmental charge, or (vii) involves any product recall in excess of $1,000,000 in the aggregate;

(c)     the occurrence of any ERISA Event that, alone or together with any other ERISA Events that have occurred, could reasonably be expected to result in liability of the Loan Parties and their Subsidiaries in an aggregate amount exceeding $1,000,000;

(d)     within two (2) Business Days after the occurrence thereof, any Loan Party entering into a Swap Agreement or an amendment to a Swap Agreement, together with copies of all agreements evidencing such Swap Agreement or amendment;

(e)     the occurrence of, or alleged occurrence of, any event of default under the FFC Subordinated Debt Documents, the Roundball Subordinated Debt Documents, the Air Enterprises Acquisition Documents, the CAD Acquisition Documents or the CAD Subordinated Debt Documents;

(f)     any change in the information provided in the Beneficial Ownership Certification delivered to such Lender that would result in a change to the list of beneficial owners identified in such certification; and

(g)     any other development that results in, or could reasonably be expected to result in, a Material Adverse Effect.

In addition, the Loan Parties will furnish to Lender the Hickok Air Enterprises Name Change Documents after such documents have been filed with the Secretary of the State of Delaware.

56

Each notice delivered under this Section shall be accompanied by a statement of a Financial Officer or other executive officer of the Borrower Representative setting forth the details of the event or development requiring such notice and any action taken or proposed to be taken with respect thereto.

SECTION 5.03. Existence; Conduct of Business. Each Loan Party will, and will cause each Subsidiary to, (a) do or cause to be done all things necessary to preserve, renew and keep in full force and effect its legal existence and, except as would not reasonably be expected to have a ‘Material Adverse Effect, the rights, qualifications, licenses, permits, franchises, governmental authorizations, intellectual property rights, licenses and permits material to the conduct of its business, and maintain all requisite authority to conduct its business in each jurisdiction in which its business is conducted; provided that the foregoing shall not prohibit any merger, consolidation, liquidation or dissolution permitted under Section 6.03 and (b) carry on and conduct its business in substantially the same manner and in substantially the same fields of enterprise as it is presently conducted.

SECTION 5.04. Payment of Obligations. Each Loan Party will pay or discharge all Material Indebtedness and all other material liabilities and obligations, including Taxes, before the same shall become delinquent or in default, except where (a) the validity or amount thereof is being contested in good faith by appropriate proceedings, (b) such Loan Party has set aside on its books adequate reserves with respect thereto in accordance with GAAP and (c) the failure to make payment pending such contest could not reasonably be expected to result in a Material Adverse Effect; provided, however, that each Loan Party will, and will cause each Subsidiary to, remit withholding taxes and other payroll taxes to appropriate Governmental Authorities as and when claimed to be due, notwithstanding the foregoing exceptions.

SECTION 5.05. Maintenance of Properties. Except as permitted under this Agreement, each Loan Party will keep and maintain all property material to the conduct of its business in good working order and condition, ordinary wear and tear excepted.

SECTION 5.06. Books and Records; Inspection Rights. Each Loan Party will, and will cause each Subsidiary to, (a) keep proper books of record and account in which full, true and correct entries are made of all dealings and transactions in relation to its business and activities and (b) permit any representatives designated by the Lender (including employees of the Lender or any consultants, accountants, lawyers, agents and appraisers retained by the Lender), upon reasonable prior notice (and so long as no Event of Default exists, no more than one time in any calendar year), to visit and inspect its properties, conduct at the Loan Party’s premises field examinations of the Loan Party’s assets, liabilities, books and records, including examining and making extracts from its books and records, environmental assessment reports and Phase I or Phase II studies, and to discuss its affairs, finances and condition with its officers and independent accountants, all at such reasonable times and as often as reasonably requested. The Loan Parties acknowledge that the Lender, after exercising its rights of inspection, may prepare certain Reports pertaining to the Loan Parties’ assets for internal use by the Lender.

SECTION 5.07. Compliance with Laws and Material Contractual Obligations. Each Loan Party will, and will cause each Subsidiary to, (i) comply with each Requirement of Law applicable to it or its property (including, without limitation, Environmental Laws) and (ii) perform in all material respects its obligations under material agreements to which it is a party, except, in each case, where the failure to do so, individually or in the aggregate, could not reasonably be expected to result in a Material Adverse Effect. Each Loan Party will maintain in effect and enforce policies and procedures designed to ensure compliance by such Loan Party, its Subsidiaries and their respective directors, officers, employees and agents with Anti-Corruption Laws and applicable Sanctions.

57

SECTION 5.08. Use of Proceeds.

(a)     The proceeds of the Loans and the Letters of Credit will be used only to consummate the Air Enterprises Acquisition, the CAD Acquisition and any Permitted Acquisition, to refinance existing indebtedness of the Loan Parties and for general working capital purposes of the Loan Parties; provided, however, that with respect to CapEx Loans, Borrowers shall only use the proceeds of CapEx Loans in connection with the purchase by Borrowers of new machinery and/or new equipment reasonably acceptable to Lender and which machinery and/or equipment is located at a location owned by a Borrower or for which a Collateral Access Agreement has been delivered to Lender. No part of the proceeds of any Loan and no Letter of Credit will be used, whether directly or indirectly, (i) for any purpose that entails a violation of any of the Regulations of the Board, including Regulations T, U and X or (ii) to make any Acquisition other than Air Enterprises Acquisition and the CAD Acquisition.

(b)     The Borrowers will not request any Borrowing or Letter of Credit, and no Borrower shall use, and each Borrower shall procure that its Subsidiaries and its or their respective directors, officers, employees and agents shall not use, the proceeds of any Borrowing or Letter of Credit (a) in furtherance of an offer, payment, promise to pay, or authorization of the payment or giving of money, or anything else of value, to any Person in violation of any Anti-Corruption Laws, (b) for the purpose of funding, financing or facilitating any activities, business or transaction of or with any Sanctioned Person, or in any Sanctioned Country, to the extent such activities, businesses or transaction would be prohibited by Sanctions if conducted by a corporation incorporated in the United States or the European Union, or (c) in any manner that would result in the violation of any Sanctions applicable to any party hereto.

SECTION 5.09. Accuracy of Information. The Loan Parties will ensure that any information, including financial statements or other documents, furnished to the Lender in connection with this Agreement or any other Loan Document or any amendment or modification hereof or thereof or waiver hereunder or thereunder contains no material misstatement of fact or omits to state any material fact necessary to make the statements therein, in the light of the circumstances under which they were made, not misleading, and the furnishing of such information shall be deemed to be a representation and warranty by the Loan Parties on the date thereof as to the matters specified in this Section 5.09; provided that, with respect to the Projections, the Borrowers will cause the Projections to be prepared in good faith based upon assumptions believed to be reasonable at the time (it being understood that projections are subject to inherent uncertainties and contingencies which may be outside the control of any Loan Party and that no assurance can be given that such projected financial information will be realized).

SECTION 5.10. Insurance. Each Loan Party will, and will cause each Subsidiary to, maintain with financially sound and reputable carriers having a financial strength rating of at least A- by A.M. Best Company (a) insurance in such amounts (with no greater risk retention) and against such risks (including loss or damage by fire and loss in transit; theft, burglary, pilferage, larceny, embezzlement, and other criminal activities; business interruption; and general liability) and such other hazards, as is customarily maintained by companies of established repute engaged in the same or similar businesses operating in the same or similar locations and (b) all insurance required pursuant to the Collateral Documents. The Borrowers will furnish to the Lender information in reasonable detail as to the insurance so maintained.

SECTION 5.11. Appraisals. At any time that the Lender requests during the existence and continuation of an Event of Default, each Loan Party will provide the Lender with appraisals or updates thereof of their respective assets from an appraiser selected and engaged by the Lender, and prepared on a basis satisfactory to the Lender, such appraisals and updates to include, without limitation, information required by any applicable Requirement of Law.

58

SECTION 5.12. Casualty and Condemnation. The Borrowers (a) will furnish to the Lender prompt written notice of any casualty or other insured damage to any material portion of the Collateral or the commencement of any action or proceeding for the taking of any material portion of the Collateral or interest therein under power of eminent domain or by condemnation or similar proceeding and (b) will ensure that the Net Proceeds of any such event (whether in the form of insurance proceeds, condemnation awards or otherwise) are collected and applied in accordance with the applicable provisions of this Agreement and the Collateral Documents.

SECTION 5.13. Depository Banks. Subject to Section 4.14 of the Security Agreement, each Loan Party will maintain the Lender as its principal depository bank, including for the maintenance of operating, administrative, cash management, collection activity, and other deposit accounts for the conduct of its business.

SECTION 5.14. Additional Collateral; Further Assurances.

(a)     Subject to applicable Requirements of Law, each Loan Party will cause each of its domestic Subsidiaries formed or acquired after the date of this Agreement or any limited liability companies formed pursuant to any division to become a Loan Party by executing a Joinder Agreement. In connection therewith, the Lender shall have received all documentation and other information regarding such newly formed or acquired Subsidiaries as may be required to comply with the applicable “know your customer” rules and regulations, including the USA Patriot Act. Upon execution and delivery thereof, each such Person (i) shall automatically become a Loan Guarantor or Borrower hereunder and thereupon shall have all of the rights, benefits, duties, and obligations in such capacity under the Loan Documents and (ii) will grant Liens to the Lender, for the benefit of the Secured Parties, in any property of such Loan Party which constitutes Collateral, including any parcel of real property located in the U.S. owned by any Loan Party.

(b)     Each Loan Party will cause (i) 100% of the issued and outstanding Equity Interests of each of its domestic Subsidiaries and (ii) 65% of the issued and outstanding Equity Interests entitled to vote (within the meaning of Treas. Reg. Section 1.956-2(c)(2)) and 100% of the issued and outstanding Equity Interests not entitled to vote (within the meaning of Treas. Reg. Section 1.956-2(c)(2)) in each foreign Subsidiary directly owned by any Borrower or any domestic Subsidiary to be subject at all times to a first priority, perfected Lien in favor of the Lender, for the benefit of the Secured Parties, pursuant to the terms and conditions of the Loan Documents or other security documents as the Lender shall reasonably request.

(c)     Without limiting the foregoing, each Loan Party will, and will cause each Subsidiary to, execute and deliver, or cause to be executed and delivered, to the Lender such documents, agreements and instruments, and will take or cause to be taken such further actions (including the filing and recording of financing statements, fixture filings, mortgages, deeds of trust and other documents and such other actions or deliveries of the type required by Section 4.01, as applicable), which may be required by any Requirement of Law or which the Lender may, from time to time, reasonably request to carry out the terms and conditions of this Agreement and the other Loan Documents and to ensure perfection and priority of the Liens created or intended to be created by the Collateral Documents, all at the expense of the Loan Parties.

59

(d)     If any material assets (including any real property or improvements thereto or any interest therein) are acquired by any Loan Party after the Effective Date (other than assets constituting Collateral under the Security Agreement that become subject to the Lien under the Security Agreement upon acquisition thereof), the Borrower Representative will (i) notify the Lender and, if requested by the Lender, cause such assets to be subjected to a Lien securing the Secured Obligations and (ii) take, and cause each applicable Loan Party to take, such actions as shall be necessary or reasonably requested by the Lender to grant and perfect such Liens, including actions described in paragraph (c) of this Section, all at the expense of the Loan Parties.

SECTION 5.15. Post-Closing Covenant. Within 10 Business Days after the Effective Date, Borrowers shall provide to Lender updated insurance certificates reasonably satisfactory to Lender showing coverage at the location of the Loan Parties in Houston, Texas disclosed on Exhibit A to the Security Agreement.

ARTICLE VI 

Negative Covenants

Until the Commitment shall have expired or been terminated and the principal of and interest on each Loan and all fees, expenses and other amounts payable under any Loan Document shall have been paid in full (other than contingent or indemnity obligations for which no claim has been made) and all Letters of Credit shall have expired or terminated (or have been cash collateralized pursuant to the terms hereof), in each case without any pending draw, and all LC Disbursements shall have been reimbursed, each Loan Party executing this Agreement covenants and agrees, jointly and severally with all of the other Loan Parties, with the Lender that:

SECTION 6.01. Indebtedness. No Loan Party will, nor will it permit any Subsidiary to, create, incur, assume or suffer to exist any Indebtedness, except:

(a)     the Secured Obligations;

(b)     Indebtedness existing on the date hereof and set forth in Schedule 6.01 (excluding, however, following the making of the initial Loan hereunder, the Indebtedness to be repaid with the proceeds of such Loans as indicated on Schedule 6.01) and any extensions, renewals, refinancings and replacements of any such Indebtedness in accordance with clause (f) hereof;

(c)     Indebtedness of any Borrower to any Subsidiary and of any Subsidiary to any Borrower or any other Subsidiary, provided that (i) Indebtedness of any Subsidiary that is not a Loan Party to any Borrower or any other Loan Party shall be subject to Section 6.04 and (ii) Indebtedness of any Loan Party to any Subsidiary that is not a Loan Party shall be subordinated to the Obligations on terms reasonably satisfactory to the Lender;

(d)     Guarantees by any Borrower of Indebtedness of any Subsidiary and by any Subsidiary of Indebtedness of any Borrower or any other Subsidiary, provided that (i) the Indebtedness so Guaranteed is permitted by this Section 6.01, (ii) Guarantees by any Borrower or any other Loan Party of Indebtedness of any Subsidiary that is not a Loan Party shall be subject to Section 6.04 and (iii) Guarantees permitted under this clause (d) shall be subordinated to the Obligations on the same terms as the Indebtedness so Guaranteed is subordinated to the Obligations;

60

(e)     Indebtedness of any Borrower or any Subsidiary incurred to finance the acquisition, construction or improvement of any fixed or capital assets (whether or not constituting purchase money Indebtedness), including Capital Lease Obligations and any Indebtedness assumed in connection with the acquisition of any such assets or secured by a Lien on any such assets prior to the acquisition thereof, and extensions, renewals and replacements of any such Indebtedness in accordance with clause (f) below; provided that (i) such Indebtedness is incurred prior to or within 90 days after such acquisition or the completion of such construction or improvement and (ii) the aggregate principal amount of Indebtedness permitted by this clause (e) together with any Refinance Indebtedness in respect thereof permitted by clause (f) below, shall not exceed $500,000 at any time outstanding;

(f)     Indebtedness which represents extensions, renewals, refinancing or replacements (such Indebtedness being so extended, renewed, refinanced or replaced being referred to herein as the “Refinance Indebtedness”) of any of the Indebtedness described in clauses (b), and (e) hereof (such Indebtedness being referred to herein as the “Original Indebtedness”); provided that (i) such Refinance Indebtedness does not increase the principal amount or interest rate of the Original Indebtedness, (ii) any Liens securing such Refinance Indebtedness are not extended to any additional property of any Loan Party or any Subsidiary, (iii) no Loan Party or any Subsidiary that is not originally obligated with respect to repayment of such Original Indebtedness is required to become obligated with respect to such Refinance Indebtedness, (iv) such Refinance Indebtedness does not result in a shortening of the average weighted maturity of such Original Indebtedness, (v) the terms of such Refinance Indebtedness are not less favorable to the obligor thereunder than the original terms of such Original Indebtedness and (vi) if such Original Indebtedness was subordinated in right of payment to the Obligations, then the terms and conditions of such Refinance Indebtedness must include subordination terms and conditions that are at least as favorable to the Lender as those that were applicable to such Original Indebtedness;

(g)     Indebtedness owed to any Person providing workers’ compensation, health, disability or other employee benefits or property, casualty or liability insurance, pursuant to reimbursement or indemnification obligations to such Person, in each case incurred in the ordinary course of business;

(h)     Indebtedness of any Loan Party in respect of performance bonds, bid bonds, appeal bonds, surety bonds and similar obligations, in each case provided in the ordinary course of business;

(i)     the FFC Subordinated Debt as long as such Indebtedness remains at all times subject to the FFC Subordination Agreement and the CAD Subordinated Debt as long as such Indebtedness remains at all times subject to the CAD Subordination Agreement;

(j)     the Roundball Subordinated Debt as long as such Indebtedness remains at all times subject to the Roundball Subordination Agreement and such Indebtedness does not increase from the outstanding principal amount existing on the date hereof;

(k)     Indebtedness in respect of Swap Agreements permitted under Section 6.07;

(l)     Indebtedness of any Person that becomes a Loan Party after the date hereof in connection with a Permitted Acquisition or that is assumed by a Borrower in connection with a Permitted Acquisition; provided that (1) such Indebtedness exists at the time such Permitted Acquisition is consummated and is not created in contemplation of or in connection therewith, and (ii) the aggregate principal amount of Indebtedness permitted by clause (1) above, together with any Refinance Indebtedness in respect thereof permitted by Section 6.01(f) (it being understood that Indebtedness under clause (1) above shall constitute “Original Indebtedness” for purposes of Section 6.01(f)), shall not exceed $300,000 at any time outstanding;

61

(l)     other unsecured Indebtedness in an aggregate principal amount not exceeding $250,000 at any time outstanding;

(m)     the endorsement of negotiable instruments payable to the Loan Parties for deposit or collection in the ordinary course of business; and

(n)     contingent obligations arising with respect to real property leases for property leased by a Loan Party.

SECTION 6.02. Liens. No Loan Party will, nor will it permit any Subsidiary to, create, incur, assume or permit to exist any Lien on any property or asset now owned or hereafter acquired by it, or assign or sell any income or revenues (including Accounts) or rights in respect of any thereof, except:

(a)     Liens created pursuant to any Loan Document;

(b)     Permitted Encumbrances;

(c)     any Lien on any property or asset of any Borrower or any Subsidiary existing on the date hereof and set forth in Schedule 6.02; provided that (i) such Lien shall not apply to any other property or asset of such Borrower or Subsidiary or any other Borrower or Subsidiary and (ii) such Lien shall secure only those obligations which it secures on the date hereof and extensions, renewals and replacements thereof that do not increase the outstanding principal amount thereof;

(d)     Liens on fixed or capital assets acquired, constructed or improved by any Borrower or any Subsidiary; provided that (i) such Liens secure Indebtedness permitted by clause (e) of Section 6.01, (ii) such Liens and the Indebtedness secured thereby are incurred prior to or within 90 days after such acquisition or the completion of such construction or improvement, (iii) the Indebtedness secured thereby does not exceed 100% of the cost of acquiring, constructing or improving such fixed or capital assets and (iv) such Liens shall not apply to any other property or assets of any Borrower or any Subsidiary;

(e)     any Lien existing on any property or asset (other than Accounts and Inventory) prior to the acquisition thereof by any Borrower or any Subsidiary or existing on any property or asset (other than Accounts and Inventory) of any Person that becomes a Loan Party after the date hereof prior to the time such Person becomes a Loan Party; provided that (i) such Lien is not created in contemplation of or in connection with such acquisition or such Person becoming a Loan Party, as the case may be, (ii) such Lien shall not apply to any other property or assets of the Loan Party and (iii) such Lien shall secure only those obligations which it secures on the date of such acquisition or the date such Person becomes a Loan Party, as the case may be, and extensions, renewals and replacements thereof that do not increase the outstanding principal amount thereof;

(f)     Liens of a collecting bank arising in the ordinary course of business under Section 4-208 of the UCC in effect in the relevant jurisdiction covering only the items being collected upon;

(g)     Liens arising out of Sale and Leaseback Transactions permitted by Section 6.06;

62

(h)     Liens granted by a Subsidiary that is not a Loan Party in favor of a Borrower or another Loan Party in respect of Indebtedness owed by such Subsidiary;

(i)     Liens (other than any Lien created by Section 4068 of ERISA and securing an obligation of any employer or employers which is delinquent) under workers compensation, unemployment, insurance and other types of social security so long as not incurred in connection with the borrowing of money or the obtaining of advances or credits to finance the purchase price of property;

(j)     the interests of lessors or sublessors under operating leases and non-exclusive licensors under license agreements, in each case in the ordinary course of business and not interfering with the business of the Loan Parties in any material respect;

(k)     Liens arising from precautionary UCC financing statement filings regarding operating leases entered into by any Loan Party in the ordinary course of business;

(l)     other statutory Liens incidental to the conduct of its business or the ownership of its property and assets which (i) were not incurred in connection with the borrowing of money or the obtaining of advances or credit, and (ii) which do not in the aggregate materially detract from the value of its property or assets or materially impair the use thereof in the operation of its business; and

(m)     Liens in favor of FFC to secure the FFC Subordinated Debt as long as such Liens remain at all times subject to the FFC Subordination Agreement, and Liens in favor of the CAD Seller Payee to secure the CAD Subordinated Debt as long as such Liens remain at all times subject to the CAD Subordination Agreement.

SECTION 6.03. Fundamental Changes.

(a)     No Loan Party will, nor will it permit any Subsidiary to, merge into or consolidate with any other Person, or permit any other Person to merge into or consolidate with it, otherwise Dispose of all or substantially all of its assets, or all or substantially all of the stock of any of its Subsidiaries (in each case, whether now owned or hereafter acquired), or liquidate, divide or dissolve, provided, however, that, (1) any Loan Party may consummate a Permitted Acquisition, (2) any Loan Party may make a Disposition to the extent permitted under Section 6.05, and (3) if at the time thereof and immediately after giving effect thereto no Event of Default shall have occurred and be continuing, (i) any Subsidiary of any Borrower may merge into a Borrower in a transaction in which a Borrower is the surviving entity, (ii) any Borrower may merge into another Borrower, (iii) any Loan Party (other than any Borrower) may merge into any other Loan Party in a transaction in which the surviving entity is a Loan Party and (iv) any Subsidiary that is not a Loan Party may liquidate, divide or dissolve if the Borrowers determine in good faith that such liquidation, division or dissolution is in the best interests of the Borrowers and is not materially disadvantageous to the Lender; provided, further that any such merger involving a Person that is not a wholly owned Subsidiary immediately prior to such merger shall not be permitted unless also permitted by Section 6.04.

(b)     No Loan Party will, nor will it permit any Subsidiary to, engage to any material extent in any business other than businesses of the type conducted by the Borrowers and their Subsidiaries on the date hereof and businesses reasonably related thereto.

63

(c)     No Loan Party will, nor will it permit any Subsidiary to change its fiscal year or any fiscal quarter from the basis in effect on the Effective Date.

(d)     No Loan Party will change the accounting basis upon which its financial statements are prepared.

(e)     No Loan Party will, nor will it permit any Subsidiary to, consummate a Division as the Dividing Person, without the prior written consent of the Lender. Without limiting the foregoing, if any Loan Party that is a limited liability company consummates a Division (with or without the prior consent of Lender as required above), each Division Successor shall be required to comply with the obligations set forth in Section 5.14 and the other further assurances obligations set forth in the Loan Documents and become a Loan Party under this Agreement and the other Loan Documents.

SECTION 6.04. Investments, Loans, Advances, Guarantees and Acquisitions. No Loan Party will, nor will it permit any Subsidiary to, form any subsidiary after the Effective Date, or purchase, hold or acquire (including pursuant to any merger with any Person that was not a Loan Party and a wholly owned Subsidiary prior to such merger) any Equity Interests, evidences of indebtedness or other securities (including any option, warrant or other right to acquire any of the foregoing) of, make or permit to exist any loans or advances to, Guarantee any obligations of, or make or permit to exist any investment or any other interest in, any other Person, or purchase or otherwise acquire (in one transaction or a series of transactions) any assets of any other Person constituting a business unit (whether through purchase of assets, merger or otherwise), except:

(a)     Permitted Investments, subject to control agreements in favor of the Lender or otherwise subject to a perfected security interest in favor of the Lender.

(b)     investments in existence on the date hereof and described in Schedule 6.04.

(c)     investments by the Loan Parties and the Subsidiaries in Equity Interests in their respective Subsidiaries, provided that (i) any such Equity Interests held by a Loan Party shall be pledged pursuant to the Security Agreement (subject to the limitations applicable to Equity Interests of a foreign Subsidiary referred to in Section 5.14) and (ii) the aggregate amount of investments by Loan Parties in Subsidiaries that are not Loan Parties (together with outstanding intercompany loans permitted under Section 6.04(d) and outstanding Guarantees permitted under Section 6.04(e)) shall not exceed $200,000 at any time outstanding (in each case determined without regard to any write-downs or write-offs).

(d)     loans or advances made by any Loan Party to any Subsidiary and made by any Subsidiary to a Loan Party or any other Subsidiary, provided that (i) any such loans and advances made by a Loan Party shall be evidenced by a promissory note pledged pursuant to the Security Agreement and (ii) the amount of such loans and advances made by Loan Parties to Subsidiaries that are not Loan Parties (together with outstanding investments permitted under Section 6.04(c) and outstanding Guarantees permitted under Section 6.04(e)) shall not exceed $200,000 at any time outstanding (in each case determined without regard to any write-downs or write-offs).

(e)     Guarantees constituting Indebtedness permitted by Section 6.01, provided that the aggregate principal amount of Indebtedness of Subsidiaries that are not Loan Parties that is Guaranteed by any Loan Party (together with outstanding investments permitted under clause (ii) to the proviso to Section 6.04(c) and outstanding intercompany loans permitted under clause (ii) to the proviso to Section 6.04(d)) shall not exceed $200,000 at any time outstanding (in each case determined without regard to any write-downs or write-offs).

64

(f)     Permitted Acquisitions.

(g)     notes payable, or stock or other securities issued by Account Debtors to a Loan Party pursuant to negotiated agreements with respect to settlement of such Account Debtor’s Accounts in the ordinary course of business, consistent with past practices.

(h)     investments in the form of Swap Agreements permitted by Section 6.07.

(i)     investments of any Person existing at the time such Person becomes a Subsidiary of a Borrower or consolidates or merges with a Borrower or any party’s Subsidiary (including in connection with a Permitted Acquisition), so long as such investments were not made in contemplation of such Person becoming a Subsidiary or of such merger.

(j)     investments received in connection with the disposition of assets permitted by Section 6.05.

(k)     investments constituting deposits described in clauses (c) and (d) of the definition of the term “Permitted Encumbrances”.

(l)     the Air Enterprises Acquisition and the CAD Acquisition.

(m)     Permitted Joint Venture Investments.

SECTION 6.05. Asset Sales. No Loan Party will, nor will it permit any Subsidiary to, sell, transfer, lease or otherwise dispose of any asset, including any Equity Interest owned by it, nor will any Borrower permit any Subsidiary to issue any additional Equity Interest in such Subsidiary (other than to another Borrower or another Subsidiary in compliance with Section 6.04), except:

(a)     sales, transfers and dispositions of (i) Inventory in the ordinary course of business and (ii) used, obsolete, worn out or surplus Equipment or property in the ordinary course of business;

(b)     transfers and dispositions of assets by any Loan Party to any other Loan Party or any Subsidiary, provided that any such sales, transfers or dispositions involving a Subsidiary that is not a Loan Party shall be made in compliance with Section 6.09;

(c)     sales, transfers and dispositions of Accounts (excluding sales or dispositions in a factoring arrangement) in connection with the compromise, settlement or collection thereof;

(d)     sales, transfers and dispositions of Permitted Investments;

(e)     Sale and Leaseback Transactions permitted by Section 6.06;

(f)     dispositions resulting from any casualty or other insured damage to, or any taking under power of eminent domain or by condemnation or similar proceeding of, any property or asset of any Borrower or any Subsidiary; and

65

(g)     sales, transfers and other dispositions of assets (other than Equity Interests in a Subsidiary unless all Equity Interests in such Subsidiary are sold) that are not permitted by any other clause of this Section, provided that the aggregate fair market value of all assets sold, transferred or otherwise disposed of in reliance upon this paragraph (g) shall not exceed $1,000,000 during any fiscal year of the Company;

provided that all sales, transfers, leases and other dispositions permitted under this Section 6.05 (other than those permitted by paragraphs (b), (d) and (f) above) shall be made for fair value and for at least 75% cash consideration.

SECTION 6.06. Sale and Leaseback Transactions. No Loan Party will, nor will it permit any Subsidiary to, enter into any arrangement, directly or indirectly, whereby it shall sell or transfer any property, real or personal, used or useful in its business, whether now owned or hereafter acquired, and thereafter rent or lease such property or other property that it intends to use for substantially the same purpose or purposes as the property sold or transferred (a “Sale and Leaseback Transaction”), except for any such sale of any fixed or capital assets by any Borrower or any Subsidiary that is made for cash consideration in an amount not less than the fair value of such fixed or capital asset and is consummated within 90 days after such Borrower or such Subsidiary acquires or completes the construction of such fixed or capital asset.

SECTION 6.07. Swap Agreements. No Loan Party will, nor will it permit any Subsidiary to, enter into any Swap Agreement, except (a) Swap Agreements entered into to hedge or mitigate risks to which any Borrower or any Subsidiary has actual exposure (other than those in respect of Equity Interests of any Borrower or any Subsidiary), and (b) Swap Agreements entered into in order to effectively cap, collar or exchange interest rates (from floating to fixed rates, from one floating rate to another floating rate or otherwise) with respect to any interest-bearing liability or investment of any Borrower or any Subsidiary.

SECTION 6.08. Restricted Payments; Certain Payments of Indebtedness.

(a)     No Loan Party will, nor will it permit any Subsidiary to, declare or make, or agree to declare or make, directly or indirectly, any Restricted Payment, or incur any obligation (contingent or otherwise) to do so, except (i) each of the Borrowers may declare and pay dividends with respect to its common stock payable solely in additional shares of its common stock, and, with respect to its preferred stock, payable solely in additional shares of such preferred stock or in shares of its common stock, (ii) Subsidiaries may declare and pay dividends ratably with respect to their Equity Interests, and (iii) the Borrowers may make Restricted Payments, not exceeding $1,000,000 during any fiscal year of the Company, so long as no Event of Default exists both before and after giving effect to any such Restricted Payment.

(b)     Loan Party will, nor will it permit any Subsidiary to, make or agree to pay or make, directly or indirectly, any payment or other distribution (whether in cash, securities or other property) of or in respect of principal of or interest on any Indebtedness, or any payment or other distribution (whether in cash, securities or other property), including any sinking fund or similar deposit, on account of the purchase, redemption, retirement, acquisition, cancellation or termination of any Indebtedness, except:

(i)     payment of Indebtedness created under the Loan Documents;

(ii)     payment of regularly scheduled interest and principal payments as and when due in respect of any Indebtedness permitted under Section 6.01, other than payments in respect of the Subordinated Indebtedness (other than the FFC Subordinated Debt, the Roundball Subordinated Debt and the CAD Subordinated Debt) prohibited by the subordination provisions thereof;

66

(iii)     with respect to the FFC Subordinated Debt, commencing January 1, 2018, payments of regularly scheduled quarterly payments of principal and interest so long as the FFC Subordinated Payment Conditions are satisfied;

(iv)     with respect to the Roundball Subordinated Debt, commencing January 1, 2018, payments of regularly scheduled payments of interest so long as the Roundball Subordinated Payment Conditions are satisfied;

(v)     with respect to the CAD Subordinated Debt, payments of regularly scheduled payments of principal and interest so long as the CAD Subordinated Payment Conditions are satisfied;

(vi)     refinancings of Indebtedness to the extent permitted by Section 6.01; and

(vii)     payment of secured Indebtedness that becomes due as a result of the voluntary sale or transfer of the property or assets securing such Indebtedness to the extent such sale or transfer is permitted by the terms of Section 6.05.

SECTION 6.09. Transactions with Affiliates. No Loan Party will, nor will it permit any Subsidiary to, sell, lease or otherwise transfer any property or assets to, or purchase, lease or otherwise acquire any property or assets from, or otherwise engage in any other transactions with, any of its Affiliates, except (a) transactions that (i) are in the ordinary course of business and (ii) are at prices and on terms and conditions not less favorable to such Loan Party or such Subsidiary than could be obtained on an arm’s-length basis from unrelated third parties, (b) transactions between or among the Loan Parties not involving any other Affiliate, (c) any investment permitted by Sections 6.04(c) or 6.04(d), (d) any Indebtedness permitted under Section 6.01(c), (e) any Restricted Payment permitted by Section 6.08, (f) the payment of reasonable fees to directors of any Borrower or any Subsidiary who are not employees of such Borrower or any Subsidiary, and compensation and employee benefit arrangements paid to, and indemnities provided for the benefit of, directors, officers or employees of the Borrowers or their Subsidiaries in the ordinary course of business, and (g) any issuances of securities or other payments, awards or grants in cash, securities or otherwise pursuant to, or the funding of, employment agreements, stock options and stock ownership plans approved by a Borrower’s board of directors.

SECTION 6.10. Restrictive Agreements. No Loan Party will, nor will it permit any Subsidiary to, directly or indirectly enter into, incur or permit to exist any agreement or other arrangement that prohibits, restricts or imposes any condition upon (a) the ability of such Loan Party or any Subsidiary to create, incur or permit to exist any Lien upon any of its property or assets, or (b) the ability of any Subsidiary to pay dividends or other distributions with respect to any Equity Interests or to make or repay loans or advances to any Borrower or any other Subsidiary or to Guarantee Indebtedness of any Borrower or any other Subsidiary; provided that (i) the foregoing shall not apply to restrictions and conditions imposed by any Requirement of Law or by any Loan Document, (ii) the foregoing shall not apply to restrictions and conditions existing on the date hereof identified on Schedule 6.10 (but shall apply to any extension or renewal of, or any amendment or modification expanding the scope of, any such restriction or condition), (iii) the foregoing shall not apply to customary restrictions and conditions contained in agreements relating to the sale of a Subsidiary pending such sale, provided such restrictions and conditions apply only to the Subsidiary that is to be sold and such sale is permitted hereunder, (iv) clause (a) of the foregoing shall not apply to restrictions or conditions imposed by any agreement relating to secured Indebtedness permitted by this Agreement if such restrictions or conditions apply only to the property or assets securing such Indebtedness and (v) clause (a) of the foregoing shall not apply to customary provisions in leases and other contracts restricting the assignment thereof.

67

SECTION 6.11. Amendment of Material Documents. No Loan Party will, nor will it permit any Subsidiary to, amend, modify or waive any of its rights under (a)  any agreement relating to any Subordinated Indebtedness, including the FFC Subordinated Debt, the Roundball Subordinated Debt and the CAD Subordinated Debt, or (b) its charter, articles or certificate of organization or incorporation and bylaws or operating, management or partnership agreement, or other organizational or governing documents, (c) the Air Enterprises Acquisition Documents, to the extent any such amendment, modification or waiver would be adverse to the Lender, or (d) the CAD Acquisition Documents, to the extent any such amendment, modification or waiver would be adverse to the Lender.

SECTION 6.12. Financial Covenants.

(a)     Fixed Charge Coverage Ratio. The Company will not permit the Fixed Charge Coverage Ratio, for any period of four consecutive fiscal quarters ending on the last day of any fiscal quarter, to be less than 1.20 to 1.00.

(b)     Senior Funded Indebtedness to EBITDA Ratio. The Company will not permit the Senior Funded Indebtedness to EBITDA Ratio, on the last day of any fiscal quarter to be greater than 2.50 to 1.00 as of the fiscal quarter ending June 30, 2018 and on each fiscal quarter ending thereafter.

(C)     Total Funded Indebtedness to EBITDA Ratio. The Company will not permit the Total Funded Indebtedness to EBITDA Ratio, on the last day of any fiscal quarter to be greater than 3.75 to 1.00 as of the fiscal quarter ending June 30, 2018 and on each fiscal quarter ending thereafter.

SECTION 6.13. Excluded Subsidiary Restrictions.    Notwithstanding anything to the contrary contained in Article VI or elsewhere in this Agreement, without the Lender’s prior written consent, after the Second Amendment Effective Date, other than as expressly allowed in the definition of “Permitted Joint Venture Investment” (but subject to the limitation set forth in such definition) no Loan Party shall (a) make any loan or advance to, Guarantee any obligations of, or make any investments in or any additional capital contribution to, any Excluded Subsidiary, or (b) convey, sell, lease, transfer to, or dispose of, any of its assets to an Excluded Subsidiary.

ARTICLE VII

Events of Default

If any of the following events (“Events of Default”) shall occur:

(a)     the Borrowers shall fail to pay any principal of any Loan or any reimbursement obligation in respect of any LC Disbursement when and as the same shall become due and payable, whether at the due date thereof or at a date fixed for prepayment thereof or otherwise;

(b)     the Borrowers shall fail to pay any interest on any Loan or any fee or any other amount (other than an amount referred to in clause (a) of this Article) payable under this Agreement or any other Loan Document, when and as the same shall become due and payable, and such failure shall continue unremedied for a period of five (5) days;

68

(c)     any representation or warranty made or deemed made by or on behalf of any Loan Party or any Subsidiary in, or in connection with, this Agreement or any other Loan Document or any amendment or modification hereof or thereof or waiver hereunder or thereunder, or in any report, certificate, financial statement or other document furnished pursuant to or in connection with this Agreement or any other Loan Document or any amendment or modification hereof or thereof or waiver hereunder or thereunder, shall prove to have been materially incorrect when made or deemed made;

(d)     any Loan Party shall fail to observe or perform any covenant, condition or agreement contained in Section 5.02(a), 5.03 (with respect to a Loan Party’s existence) or 5.08 or in Article VI;

(e)     any Loan Party shall fail to observe or perform any covenant, condition or agreement contained in this Agreement (other than those specified in clause (a), (b) or (d)), and such failure shall continue unremedied for a period of (i) 5 days after the earlier of any Loan Party’s knowledge of such breach or notice thereof from the Lender if such breach relates to terms or provisions of Section 5.01, 5.02 (other than Section 5.02(a)), 5.03 through 5.07, 5.10, 5.11 or 5.13 of this Agreement or (ii) 15 days after the earlier of any Loan Party’s knowledge of such breach or notice thereof from the Lender if such breach relates to terms or provisions of any other Section of this Agreement;

(f)     any Loan Party or any Subsidiary shall fail to make any payment (whether of principal or interest and regardless of amount) in respect of any Material Indebtedness, when and as the same shall become due and payable;

(g)     (i) any default or event of default, or alleged default or event of default, occurs under the FFC Subordinated Debt Documents, the Roundball Subordinated Debt Documents or the CAD Subordinated Debt Documents which, in each case, shall not have been cured or waived within any applicable grace period, or (ii) any event or condition occurs that results in any Material Indebtedness becoming due prior to its scheduled maturity or that enables or permits (with or without the giving of notice, the lapse of time or both) the holder or holders of any Material Indebtedness or any trustee or agent on its or their behalf to cause any Material Indebtedness to become due, or to require the prepayment, repurchase, redemption or defeasance thereof, prior to its scheduled maturity; provided that this clause (g) shall not apply to secured Indebtedness that becomes due as a result of the voluntary sale or transfer of the property or assets securing such Indebtedness to the extent such sale or transfer is permitted by the terms of Section 6.05;

(h)     an involuntary proceeding shall be commenced or an involuntary petition shall be filed seeking (i) liquidation, reorganization or other relief in respect of a Loan Party or any Subsidiary or its debts, or of a substantial part of its assets, under any federal, state or foreign bankruptcy, insolvency, receivership or similar law now or hereafter in effect or (ii) the appointment of a receiver, trustee, custodian, sequestrator, conservator or similar official for any Loan Party or any Subsidiary or for a substantial part of its assets, and, in any such case, such proceeding or petition shall continue undismissed for sixty (60) days or an order or decree approving or ordering any of the foregoing shall be entered;

(i)     any Loan Party or any Subsidiary shall (i) voluntarily commence any proceeding or file any petition seeking liquidation, reorganization or other relief under any federal, state or foreign bankruptcy, insolvency, receivership or similar law now or hereafter in effect, (ii) consent to the institution of, or fail to contest in a timely and appropriate manner, any proceeding or petition described in clause (h) of this Article, (iii) apply for or consent to the appointment of a receiver, trustee, custodian, sequestrator, conservator or similar official for such Loan Party or Subsidiary of any Loan Party or for a substantial part of its assets, (iv) file an answer admitting the material allegations of a petition filed against it in any such proceeding, (v) make a general assignment for the benefit of creditors or (vi) take any action for the purpose of effecting any of the foregoing;

69

(j)     any Loan Party or any Subsidiary shall become unable, admit in writing its inability, or publicly declare its intention not to, or fail generally, to pay its debts as they become due;

(k)     one or more judgments for the payment of money in an aggregate amount in excess of $1,000,000 and not fully covered by insurance shall be rendered against any Loan Party, any Subsidiary or any combination thereof and the same shall remain undischarged for a period of thirty (30) consecutive days during which execution shall not be effectively stayed, or any action shall be legally taken by a judgment creditor to attach or levy upon any assets of any Loan Party or any Subsidiary to enforce any such judgment or any Loan Party or any Subsidiary shall fail within thirty (30) days to discharge one or more non-monetary judgments or orders which, individually or in the aggregate, could reasonably be expected to have a Material Adverse Effect, which judgments or orders, in any such case, are not stayed on appeal and being appropriately contested in good faith by proper proceedings diligently pursued;

(l)     an ERISA Event shall have occurred that, in the opinion of the Lender, when taken together with all other ERISA Events that have occurred, could reasonably be expected to result in liability of the Borrowers and their Subsidiaries in an aggregate amount exceeding (i) $200,000 in any year or (ii) $1,000,000 for all periods;

(m)     a Change in Control shall occur;

(n)     the occurrence of any “default”, as defined in any Loan Document (other than this Agreement), or the breach of any of the terms or provisions of any Loan Document (other than this Agreement), which default or breach continues beyond any period of grace therein provided;

(o)     the Loan Guaranty or any Obligation Guaranty shall fail to remain in full force or effect or any action shall be taken to discontinue or to assert the invalidity or unenforceability of the Loan Guaranty or any Obligation Guaranty, or any individual Guarantor dies or a guardian or conservator is appointed for any individual Guarantor or all or any portion of their property, or any Guarantor shall fail to comply with any of the terms or provisions of the Loan Guaranty or any Obligation Guaranty to which it is a party, or any Guarantor shall deny that it has any further liability under the Loan Guaranty or any Obligation Guaranty to which it is a party, or shall give notice to such effect, including, but not limited to notice of termination delivered pursuant to Section 9.08 or any notice of termination delivered pursuant to the terms of any Obligation Guaranty;

(p)     except as permitted by the terms of any Collateral Document, (i) any Collateral Document shall for any reason fail to create a valid security interest in any Collateral purported to be covered thereby, or (ii) any Lien securing any Secured Obligation shall cease to be a perfected, first priority Lien;

70

(q)     any Collateral Document shall fail to remain in full force or effect or any action shall be taken to discontinue or to assert the invalidity or unenforceability of any Collateral Document; or

(r)     any material provision of any Loan Document for any reason ceases to be valid, binding and enforceable in accordance with its terms (or any Loan Party shall challenge the enforceability of any Loan Document or shall assert in writing, or engage in any action or inaction that evidences its assertion, that any provision of any of the Loan Documents has ceased to be or otherwise is not valid, binding and enforceable in accordance with its terms); or

(s)     any Loan Party is criminally indicted or convicted under any law that may reasonably be expected to lead to a forfeiture of any property of such Loan Party having a fair market value in excess of $250,000;

then, and in every such event (other than an event with respect to the Borrowers described in clause (h) or (i) of this Article), and at any time thereafter during the continuance of such event, the Lender may, by notice to the Borrower Representative, take either or both of the following actions, at the same or different times:  (i) terminate the Commitment, whereupon the Commitment shall terminate immediately, and (ii) declare the Loans then outstanding to be due and payable in whole (or in part, but ratably as among the Classes of Loans and the Loans of each Class at the time outstanding, in which case any principal not so declared to be due and payable may thereafter be declared to be due and payable), whereupon the principal of the Loans so declared to be due and payable, together with accrued interest thereon and all fees and other obligations of the Borrowers accrued hereunder, shall become due and payable immediately, in each case without presentment, demand, protest or other notice of any kind, all of which are hereby waived by the Borrowers; and in the case of any event with respect to the Borrowers described in clause (h) or (i) of this Article, the Commitment shall automatically terminate and the principal of the Loans then outstanding, together with accrued interest thereon and all fees and other obligations of the Borrowers accrued hereunder, shall automatically become due and payable, in each case without presentment, demand, protest or other notice of any kind, all of which are hereby waived by the Borrowers. Upon the occurrence and during the continuance of an Event of Default, the Lender may increase the rate of interest applicable to the Loans and other Obligations as set forth in this Agreement and exercise any rights and remedies provided to the Lender under the Loan Documents or at law or equity, including all remedies provided under the UCC.

ARTICLE VIII 

Miscellaneous

SECTION 8.01. Notices.

(a)     Except in the case of notices and other communications expressly permitted to be given by telephone (and subject to paragraph (b) below), all notices and other communications provided for herein shall be in writing and shall be delivered by hand or overnight courier service, mailed by certified or registered mail or sent by fax, as follows:

(i) if to any Loan Party, to it in care of the Borrower Representative at:

10514 Dupont Avenue

Cleveland, Ohio 44108

Attention: Chief Financial Officer

Fax No: 216-761-9879

71

With copy to (which shall not constitute notice):

Calfee, Halter & Griswold LLP

The Calfee Building

1405 East Sixth Street

Cleveland, Ohio 44114

Attention: Terrence F. Doyle

Fax No: 216-241-0816

(ii) if to JPMorgan Chase Bank, N.A. at:

JPMorgan Chase Bank, N.A.

Middle Market Servicing

10 South Dearborn, Floor L2

Suite IL1-0480

Chicago, IL, 60603-2300

Attention: Wholesale Loan Operations

Fax No: (877) 242-0998

With a copy to:

JPMorgan Chase Bank, N.A. 

1300 East Ninth Street, Floor 13

Cleveland, Ohio 44114

Attention: Michael P. Lepro

Fax No: (216) 781-2271

All such notices and other communications (i) sent by hand or overnight courier service, or mailed by certified or registered mail, shall be deemed to have been given when received, (ii) sent by fax shall be deemed to have been given when sent, provided that if not given during normal business hours for the recipient, such notice or communication shall be deemed to have been given at the opening of business on the next Business Day of the recipient, or (iii) delivered through electronic communication to the extent provided in paragraph (b) below shall be effective as provided in such paragraph.

(b)     Notices and other communications to the Lender hereunder may be delivered or furnished by electronic communications (including e-mail and internet or intranet websites) pursuant to procedures approved by the Lender; provided that the foregoing shall not apply to notices pursuant to Article II or to compliance and no Default certificates delivered pursuant to Sections 5.01(c) and 5.01(d) unless otherwise agreed by the Lender. Each of the Lender or the Borrower Representative (on behalf of the Loan Parties) may, in its discretion, agree to accept notices and other communications to it hereunder by electronic communications pursuant to procedures approved by it; provided that approval of such procedures may be limited to particular notices or communications. All such notices and other communications (i) sent to an e-mail address shall be deemed received upon the sender’s receipt of an acknowledgement from the intended recipient (such as by the “return receipt requested” function, as available, return e-mail or other written acknowledgement), provided that if not given during the normal business hours of the recipient, such notice or communication shall be deemed to have been given at the opening of business on the next Business Day for the recipient, and (ii) posted to an Internet or intranet website shall be deemed received upon the deemed receipt by the intended recipient, at its e-mail address as described in the foregoing clause (i), of notification that such notice or communication is available and identifying the website address therefor; provided that, for both clauses (i) and (ii) above, if such notice, e-mail or other communication is not sent during the normal business hours of the recipient, such notice or communication shall be deemed to have been sent at the opening of business on the next Business Day of the recipient.

72

(c)     Any party hereto may change its address, facsimile number or e-mail address for notices and other communications hereunder by notice to the other parties hereto.

SECTION 8.02. Waivers; Amendments.

(a)     No failure or delay by the Lender in exercising any right or power hereunder or under any other Loan Document shall operate as a waiver thereof, nor shall any single or partial exercise of any such right or power, or any abandonment or discontinuance of steps to enforce such a right or power, preclude any other or further exercise thereof or the exercise of any other right or power. The rights and remedies of the Lender hereunder and under any other Loan Document are cumulative and are not exclusive of any rights or remedies that they would otherwise have. No waiver of any provision of any Loan Document or consent to any departure by any Loan Party therefrom shall in any event be effective unless the same shall be permitted by paragraph (b) of this Section, and then such waiver or consent shall be effective only in the specific instance and for the purpose for which given. Without limiting the generality of the foregoing, the making of a Loan or issuance of a Letter of Credit shall not be construed as a waiver of any Default, regardless of whether the Lender may have had notice or knowledge of such Default at the time.

(b)     Neither this Agreement nor any other Loan Document nor any provision hereof or thereof may be waived, amended or modified except (i) in the case of this Agreement, pursuant to an agreement or agreements in writing entered into by the Borrowers and the Lender or (ii) in the case of any other Loan Document, pursuant to an agreement or agreements in writing entered into by the Lender and the Loan Party or Loan Parties that are parties thereto.

SECTION 8.03. Expenses; Indemnity; Damage Waiver.

(a)     The Loan Parties, jointly and severally, shall pay all (i) reasonable and documented out-of-pocket expenses incurred by the Lender and its Affiliates, including the reasonable fees, charges and disbursements of counsel for the Lender (whether outside counsel or the allocated costs of its internal legal department), in connection with the credit facilities provided for herein, the preparation and administration of the Loan Documents and any amendments, modifications or waivers of the provisions of the Loan Documents (whether or not the transactions contemplated hereby or thereby shall be consummated), (ii) reasonable and documented out-of-pocket expenses incurred by the Lender in connection with the issuance, amendment, renewal or extension of any Letter of Credit or any demand for payment thereunder and (iii) reasonable and documented out-of-pocket expenses incurred by the Lender, including the fees, charges and disbursements of any counsel for the Lender (whether outside counsel or the allocated costs of its internal legal department), in connection with the enforcement, collection or protection of its rights in connection with the Loan Documents, including its rights under this Section, or in connection with the Loans made or Letters of Credit issued hereunder, including all such out-of-pocket expenses incurred during any workout, restructuring or negotiations in respect of such Loans or Letters of Credit. Expenses being reimbursed by the Loan Parties under this Section include, without limiting the generality of the foregoing, fees, costs and expenses incurred in connection with:

73

(A)     appraisals (subject to the limitations set forth in Section 5.11) and insurance reviews;

(B)     field examinations and the preparation of Reports based on the fees charged by a third party retained by the Lender or the internally allocated fees for each Person employed by the Lender with respect to each field examination (subject to the limitations set forth in Section 5.06);

(C)     background checks regarding senior management and/or key investors, as deemed necessary or appropriate in the sole discretion of the Lender;

(D)     Taxes, fees and other charges for (i) lien and title searches and title insurance and (ii) recording mortgages, filing financing statements and continuations, and other actions to perfect, protect, and continue the Lender’s Liens;

(E)     sums paid or incurred to take any action required of any Loan Party under the Loan Documents that such Loan Party fails to pay or take; and

(F)     forwarding loan proceeds, collecting checks and other items of payment, and establishing and maintaining the accounts and lock boxes, and costs and expenses of preserving and protecting the Collateral.

All of the foregoing fees, costs and expenses may be charged to the Borrowers as Revolving Loans or to another deposit account, all as described in Section 2.16(c).

(b)     The Loan Parties, jointly and severally, shall indemnify the Lender, and each Related Party of the Lender (each such Person being called an “Indemnitee”) against, and hold each Indemnitee harmless from, any and all losses, claims, damages, penalties, incremental taxes, liabilities and related expenses, including the reasonable and documented fees, charges and disbursements of any counsel for any Indemnitee, incurred by or asserted against any Indemnitee arising out of, in connection with, or as a result of (i) the execution or delivery of the Loan Documents or any agreement or instrument contemplated thereby, the performance by the parties hereto of their respective obligations thereunder or the consummation of the Transactions or any other transactions contemplated hereby, (ii) any Loan or Letter of Credit or the use of the proceeds therefrom (including any refusal by the Lender to honor a demand for payment under a Letter of Credit if the documents presented in connection with such demand do not strictly comply with the terms of such Letter of Credit), (iii) any actual or alleged presence or Release of Hazardous Materials on or from any property owned or operated by a Loan Party or a Subsidiary, or any Environmental Liability related in any way to a Loan Party or Subsidiary, (iv) the failure of a Loan Party to deliver to the Lender the required receipts or other required documentary evidence with respect to a payment made by such Loan Party for Taxes pursuant to Section 2.15, or (v) any actual or prospective claim, litigation, investigation or proceeding relating to any of the foregoing, whether or not such claim, litigation, investigation or proceeding is brought by any Loan Party or their respective equity holders, Affiliates, creditors or any other third Person and whether based on contract, tort or any other theory and regardless of whether any Indemnitee is a party thereto; provided that such indemnity shall not, as to any Indemnitee, be available to the extent that such losses, claims, damages, penalties, liabilities or related expenses are determined by a court of competent jurisdiction by final and nonappealable judgment to have resulted from the gross negligence or willful misconduct of such Indemnitee. This Section 8.03(b) shall not apply with respect to Taxes other than any Taxes that represent losses or damages arising from any non-Tax claim.

74

(c)     To the extent permitted by applicable law, no Loan Party shall assert, and each Loan Party hereby waives, any claim against any Indemnitee, (i) for any damages arising from the use by others of information or other materials obtained through telecommunications, electronic or other information transmission systems (including the Internet), or (ii) on any theory of liability, for special, indirect, consequential or punitive damages (as opposed to direct or actual damages) arising out of, in connection with, or as a result of, this Agreement, any other Loan Document, or any agreement or instrument contemplated hereby or thereby, the Transactions, any Loan or Letter of Credit or the use of the proceeds thereof; provided that, nothing in this paragraph (c) shall relieve any Loan Party of any obligation it may have to indemnify an Indemnitee against special, indirect, consequential or punitive damages asserted against such Indemnitee by a third party.

(d)     All amounts due under this Section shall be payable promptly after written demand therefor.

SECTION 8.04. Successors and Assigns.

(a)     The provisions of this Agreement shall be binding upon and inure to the benefit of the parties hereto and their respective successors and assigns permitted hereby (including any Affiliate of the Lender that issues any Letter of Credit), except that no Borrower may assign or otherwise transfer any of its rights or obligations hereunder without the prior written consent of the Lender (and any attempted assignment or transfer by a Borrower without such consent shall be null and void). Nothing in this Agreement, expressed or implied, shall be construed to confer upon any Person (other than the parties hereto, their respective successors and assigns permitted hereby (including any Affiliate of the Lender that issues any Letter of Credit), Participants (to the extent provided in paragraph (c) of this Section) and, to the extent expressly contemplated hereby, the Related Parties of the Lender) any legal or equitable right, remedy or claim under or by reason of this Agreement.

(b)     The Lender may assign to one or more assignees all or a portion of its rights and obligations under this Agreement (including all or a portion of its Commitment and the Loans at the time owing to it) with the prior written consent (such consent not to be unreasonably withheld) of the Borrower Representative, provided that the Borrower Representative shall be deemed to have consented to any such assignment unless it shall object thereto by written notice to the Lender within five (5) Business Days after having received notice thereof, and provided further that no consent of the Borrower Representative shall be required for an assignment to an Affiliate of the Lender, an Approved Fund or, if an Event of Default has occurred and is continuing, any other assignee;

For the purposes of this Section 8.04(b), the term “Approved Fund” has the following meaning:

“Approved Fund” means any Person (other than a natural person) that is engaged in making, purchasing, holding or investing in bank loans and similar extensions of credit in the ordinary course of its business and that is administered or managed by (a) the Lender, (b) an Affiliate of the Lender or (c) an entity or an Affiliate of an entity that administers or manages the Lender.

(c)     The Lender may, without the consent of the Borrowers, sell participations to one or more banks or other entities (a “Participant”) in all or a portion of the Lender’s rights and obligations under this Agreement (including all or a portion of its Commitment and Letters of Credit and the Loans owing to it); provided that (i) the Lender’s obligations under this Agreement shall remain unchanged; (ii) the Lender shall remain solely responsible to the other parties hereto for the performance of such obligations; and (iii) the Borrowers shall continue to deal solely and directly with the Lender in connection with the Lender’s rights and obligations under this Agreement. Each Borrower agrees that each Participant shall be entitled to the benefits of Sections 2.13, 2.14 and 2.15 (subject to the requirements and limitations therein) to the same extent as if it were the Lender and had acquired its interest by assignment pursuant to paragraph (b) of this Section; provided that such Participant shall not be entitled to receive any greater payment under Section 2.13 or 2.15, with respect to any participation, than its participating Lender would have been entitled to receive, except to the extent such entitlement to receive a greater payment results from a Change in Law that occurs after the Participant acquired the applicable participation.

75

To the extent permitted by law, each Participant also shall be entitled to the benefits of Section 8.08 as though it were the Lender. If the Lender shall sell a participation, it shall, acting solely for this purpose as an agent of the Borrowers, maintain a register on which it enters the name and address of each Participant and the principal amounts (and stated interest) of each Participant’s interest in the Loans or other obligations under this Agreement or any other Loan Document (the “Participant Register”); provided that the Lender shall have no obligation to disclose all or any portion of the Participant Register (including the identity of any Participant or any information relating to a Participant’s interest in any Commitment, Loans, Letters of Credit or its other obligations under any Loan Document) to any Person except to the extent that such disclosure is necessary to establish that such Commitment, Loan, Letter of Credit or other obligation is in registered form under Section 5f.103-1(c) of the U.S. Treasury Regulations. The entries in the Participant Register shall be conclusive absent manifest error, and the Lender shall treat each Person whose name is recorded in the Participant Register as the owner of such participation for all purposes of this Agreement notwithstanding any notice to the contrary.

(d)     The Lender may at any time pledge or assign a security interest in all or any portion of its rights under this Agreement to secure obligations of the Lender, including without limitation any pledge or assignment to secure obligations to a Federal Reserve Bank, and this Section shall not apply to any such pledge or assignment of a security interest; provided that no such pledge or assignment of a security interest shall release the Lender from any of its obligations hereunder or substitute any such pledgee or assignee for the Lender as a party hereto.

SECTION 8.05. Survival. All covenants, agreements, representations and warranties made by the Loan Parties in the Loan Documents and in the certificates or other instruments delivered in connection with or pursuant to this Agreement or any other Loan Document shall be considered to have been relied upon by the other parties hereto and shall survive the execution and delivery of the Loan Documents and the making of any Loans and issuance of any Letters of Credit, regardless of any investigation made by any such other party or on its behalf and notwithstanding that the Lender may have had notice or knowledge of any Default or incorrect representation or warranty at the time any credit is extended hereunder, and shall continue in full force and effect as long as the principal of or any accrued interest on any Loan or any fee or any other amount payable under this Agreement is outstanding and unpaid or any Letter of Credit is outstanding and so long as the Commitment has not expired or terminated. The provisions of Sections 2.13, 2.14, 2.15 and Section 8.03 shall survive and remain in full force and effect regardless of the consummation of the transactions contemplated hereby, the repayment of the Loans, the expiration or termination of the Letters of Credit and the Commitment or the termination of this Agreement or any other Loan Document or any provision hereof or thereof.

SECTION 8.06. Counterparts; Integration; Effectiveness; Electronic Execution.

(a)     This Agreement may be executed in counterparts (and by different parties hereto on different counterparts), each of which shall constitute an original, but all of which when taken together shall constitute a single contract. This Agreement, the other Loan Documents and any separate letter agreements with respect to fees payable to the Lender constitute the entire contract among the parties relating to the subject matter hereof and supersede any and all previous agreements and understandings, oral or written, relating to the subject matter hereof. Except as provided in Section 4.01, this Agreement shall become effective when it shall have been executed by the Lender and when the Lender shall have received counterparts hereof which, when taken together, bear the signatures of each of the other parties hereto, and thereafter shall be binding upon and inure to the benefit of the parties hereto and their respective successors and assigns.

76

(b)     Delivery of an executed counterpart of a signature page of this Agreement by fax, emailed pdf. or any other electronic means that reproduces an image of the actual executed signature page shall be effective as delivery of a manually executed counterpart of this Agreement. The words “execution,” “signed,” “signature,” “delivery,” and words of like import in or relating to any document to be signed in connection with this Agreement and the transactions contemplated hereby or thereby shall be deemed to include Electronic Signatures, deliveries or the keeping of records in electronic form, each of which shall be of the same legal effect, validity or enforceability as a manually executed signature, physical delivery thereof or the use of a paper-based recordkeeping system, as the case may be, to the extent and as provided for in any applicable law, including the Federal Electronic Signatures in Global and National Commerce Act, the New York State Electronic Signatures and Records Act, or any other similar state laws based on the Uniform Electronic Transactions Act.

SECTION 8.07. Severability. Any provision of any Loan Document held to be invalid, illegal or unenforceable in any jurisdiction shall, as to such jurisdiction, be ineffective to the extent of such invalidity, illegality or unenforceability without affecting the validity, legality and enforceability of the remaining provisions thereof; and the invalidity of a particular provision in a particular jurisdiction shall not invalidate such provision in any other jurisdiction.

SECTION 8.08. Right of Setoff. If an Event of Default shall have occurred and be continuing, the Lender and each of its Affiliates is hereby authorized at any time and from time to time, to the fullest extent permitted by law, to set off and apply any and all deposits (general or special, time or demand, provisional or final) at any time held and other obligations at any time owing by the Lender or any Affiliate to or for the credit or the account of any Loan Party against any of and all the Secured Obligations, irrespective of whether or not the Lender shall have made any demand under the Loan Documents and although such obligations may be unmatured. The rights of the Lender under this Section are in addition to other rights and remedies (including other rights of setoff) which the Lender may have.

SECTION 8.09. Governing Law; Jurisdiction; Consent to Service of Process.

(a)     The Loan Documents (other than those containing a contrary express choice of law provision) shall be governed by and construed in accordance with the internal laws of the State of Ohio, but giving effect to federal laws applicable to national banks.

(b)     Each Loan Party hereby irrevocably and unconditionally submits, for itself and its property, to the nonexclusive jurisdiction of any U.S. federal or Ohio State court sitting in Cleveland, Ohio in any action or proceeding arising out of or relating to any Loan Documents, or for recognition or enforcement of any judgment, and each of the parties hereto hereby irrevocably and unconditionally agrees that all claims in respect of any such action or proceeding may be heard and determined in such state court or, to the extent permitted by law, in such federal court. Each of the parties hereto agrees that a final judgment in any such action or proceeding shall be conclusive and may be enforced in other jurisdictions by suit on the judgment or in any other manner provided by law. Nothing in this Agreement or any other Loan Document shall affect any right that the Lender may otherwise have to bring any action or proceeding relating to this Agreement or any other Loan Document against any Loan Party or its properties in the courts of any jurisdiction.

77

(c)     Each Loan Party hereby irrevocably and unconditionally waives, to the fullest extent it may legally and effectively do so, any objection which it may now or hereafter have to the laying of venue of any suit, action or proceeding arising out of or relating to this Agreement or any other Loan Document in any court referred to in paragraph (b) of this Section. Each of the parties hereto hereby irrevocably waives, to the fullest extent permitted by law, the defense of an inconvenient forum to the maintenance of such action or proceeding in any such court.

(d)     Each party to this Agreement irrevocably consents to service of process in the manner provided for notices in Section 8.01. Nothing in this Agreement or any other Loan Document will affect the right of any party to this Agreement to serve process in any other manner permitted by law.

SECTION 8.10. WAIVER OF JURY TRIAL. EACH PARTY HERETO HEREBY WAIVES, TO THE FULLEST EXTENT PERMITTED BY APPLICABLE LAW, ANY RIGHT IT MAY HAVE TO A TRIAL BY JURY IN ANY LEGAL PROCEEDING DIRECTLY OR INDIRECTLY ARISING OUT OF OR RELATING TO THIS AGREEMENT, ANY OTHER LOAN DOCUMENT OR THE TRANSACTIONS CONTEMPLATED HEREBY OR THEREBY (WHETHER BASED ON CONTRACT, TORT OR ANY OTHER THEORY). EACH PARTY HERETO (A) CERTIFIES THAT NO REPRESENTATIVE OR OTHER AGENT (INCLUDING ANY ATTORNEY) OF ANY OTHER PARTY HAS REPRESENTED, EXPRESSLY OR OTHERWISE, THAT SUCH OTHER PARTY WOULD NOT, IN THE EVENT OF LITIGATION, SEEK TO ENFORCE THE FOREGOING WAIVER AND (B) ACKNOWLEDGES THAT IT AND THE OTHER PARTIES HERETO HAVE BEEN INDUCED TO ENTER INTO THIS AGREEMENT BY, AMONG OTHER THINGS, THE MUTUAL WAIVERS AND CERTIFICATIONS IN THIS SECTION.

SECTION 8.11. Headings. Article and Section headings and the Table of Contents used herein are for convenience of reference only, are not part of this Agreement and shall not affect the construction of, or be taken into consideration in interpreting, this Agreement.

SECTION 8.12. Confidentiality. The Lender agrees to maintain the confidentiality of the Information (as defined below), except that Information may be disclosed (a) to its and its Affiliates’ directors, officers, employees and agents, including accountants, legal counsel and other advisors (it being understood that the Persons to whom such disclosure is made will be informed of the confidential nature of such Information and instructed to keep such Information confidential), (b) to the extent requested by any Governmental Authority (including any self-regulatory authority, such as the National Association of Insurance Commissioners), (c) to the extent required by any Requirement of Law or by any subpoena or similar legal process, (d) to any other party to this Agreement, (e) in connection with the exercise of any remedies hereunder or under any other Loan Document or any suit, action or proceeding relating to this Agreement or any other Loan Document or the enforcement of rights hereunder or thereunder, (f) subject to an agreement containing provisions substantially the same as those of this Section, to (x) any assignee of or Participant in, or any prospective assignee of or Participant in, any of its rights or obligations under this Agreement or (y) any actual or prospective counterparty (or its advisors) to any swap or derivative transaction relating to the Loan Parties and their obligations, (g) with the consent of the Borrower Representative, or (h) to the extent such Information (x) becomes publicly available other than as a result of a breach of this Section or (y) becomes available to the Lender on a non-confidential basis from a source other than the Borrowers. For the purposes of this Section, “Information” means all information received from the Loan Parties relating to the Loan Parties or their business, other than any such information that is available to the Lender on a non-confidential basis prior to disclosure by the Loan Parties; provided that, in the case of information received from the Borrowers after the date hereof, such information is clearly identified at the time of delivery as confidential. Any Person required to maintain the confidentiality of Information as provided in this Section shall be considered to have complied with its obligation to do so if such Person has exercised the same degree of care to maintain the confidentiality of such Information as such Person would accord to its own confidential information.

78

SECTION 8.13. Nonreliance; Violation of Law. The Lender hereby represents that it is not relying on or looking to any margin stock (as defined in Regulation U of the Board) for the repayment of the Borrowings provided for herein. Anything contained in this Agreement to the contrary notwithstanding, the Lender shall not be obligated to extend credit to the Borrowers in violation of any Requirement of Law.

SECTION 8.14. USA PATRIOT Act. The Lender is subject to the requirements of the USA PATRIOT Act and hereby notifies each Loan Party that pursuant to the requirements of the USA PATRIOT Act, it is required to obtain, verify and record information that identifies such Loan Party, which information includes the name and address of such Loan Party and other information that will allow the Lender to identify such Loan Party in accordance with the USA PATRIOT Act.

SECTION 8.15. Disclosure. Each Loan Party hereby acknowledges and agrees that the Lender and/or its Affiliates from time to time may hold investments in, make other loans to or have other relationships with, any of the Loan Parties and their respective Affiliates.

SECTION 8.16. Interest Rate Limitation. Notwithstanding anything herein to the contrary, if at any time the interest rate applicable to any Loan, together with all fees, charges and other amounts which are treated as interest on such Loan under applicable law (collectively the “Charges”), shall exceed the maximum lawful rate (the “Maximum Rate”) which may be contracted for, charged, taken, received or reserved by the Lender holding such Loan in accordance with applicable law, the rate of interest payable in respect of such Loan hereunder, together with all Charges payable in respect thereof, shall be limited to the Maximum Rate and, to the extent lawful, the interest and Charges that would have been payable in respect of such Loan but were not payable as a result of the operation of this Section shall be cumulated and the interest and Charges payable to the Lender in respect of other Loans or periods shall be increased (but not above the Maximum Rate therefor) until such cumulated amount, together with interest thereon at the Federal Funds Effective Rate to the date of repayment, shall have been received by the Lender.

SECTION 8.17. Marketing Consent. The Borrowers hereby authorize the Lender, at its sole expense, but without any prior approval by any Borrower, to include the Borrowers’ names and logos in advertising slicks posted on the Lender’s internet site, in pitchbooks or sent in mailings to prospective customers and to give such other publicity to this Agreement as it may from time to time determine in its sole discretion. Notwithstanding the foregoing, the Lender shall not publish any Borrower’s name in a newspaper or magazine without obtaining the Borrowers’ prior written approval. The foregoing authorization shall remain in effect unless the Borrower Representative notifies the Lender in writing that such authorization is revoked.

SECTION 8.18. Confession of Judgement. THE LOAN PARTIES HEREBY AUTHORIZE ANY ATTORNEY-AT-LAW TO APPEAR IN ANY COURT OF RECORD IN ANY COUNTY IN THE STATE OF OHIO OR ELSEWHERE WHERE A LOAN PARTY HAS A PLACE OF BUSINESS, SIGNED THIS AGREEMENT OR CAN BE FOUND, AFTER THE LENDER DECLARES A DEFAULT AND ACCELERATES THE BALANCES DUE UNDER THIS AGREEMENT, TO WAIVE THE ISSUANCE OF SERVICE OF PROCESS AND CONFESS JUDGMENT AGAINST THE LOAN PARTIES IN FAVOR OF THE LENDER FOR THE AMOUNTS THEN APPEARING DUE, TOGETHER WITH THE COSTS OF SUIT, AND THEREUPON TO RELEASE ALL ERRORS AND WAIVE ALL RIGHT OF APPEAL AND STAY OF EXECUTION. THE LOAN PARTIES AGREE AND CONSENT THAT THE ATTORNEY CONFESSING JUDGMENT ON BEHALF OF THE LOAN PARTIES HEREUNDER MAY ALSO BE COUNSEL TO THE LENDER OR ANY OF ITS RESPECTIVE AFFILIATES, WAIVES ANY CONFLICT OF INTEREST WHICH MIGHT OTHERWISE ARISE, AND CONSENTS TO THE LENDER PAYING SUCH CONFESSING ATTORNEY A LEGAL FEE OR ALLOWING SUCH ATTORNEY’S FEES TO BE PAID FROM ANY PROCEEDS OF COLLECTION OF THIS AGREEMENT OR COLLATERAL SECURITY THEREFOR.

79

ARTICLE IX

Loan Guaranty 

SECTION 9.01. Guaranty. Each Loan Guarantor (other than those that have delivered a separate Guaranty) hereby agrees that it is jointly and severally liable for, and, as a primary obligor and not merely as surety, absolutely and unconditionally and irrevocably guarantees to the Secured Parties, the prompt payment when due, whether at stated maturity, upon acceleration or otherwise, and at all times thereafter, of the Secured Obligations and all reasonable and documented costs and expenses including, without limitation, all court costs and reasonable attorneys’ and paralegals’ fees (including allocated reasonable and documented costs of in-house counsel and paralegals) and expenses paid or incurred by the Lender in endeavoring to collect all or any part of the Secured Obligations from, or in prosecuting any action against, any Borrower, any Loan Guarantor or any other guarantor of all or any part of the Secured Obligations (such costs and expenses, together with the Secured Obligations, collectively the “Guaranteed Obligations”); provided, however, that the definition of “Guaranteed Obligations” shall not create any guarantee by any Loan Guarantor of (or grant of security interest by any Loan Guarantor to support, as applicable) any Excluded Swap Obligations of such Loan Guarantor for purposes of determining any obligations of any Loan Guarantor). Each Loan Guarantor further agrees that the Guaranteed Obligations may be extended or renewed in whole or in part without notice to or further assent from it, and that it remains bound upon its guarantee notwithstanding any such extension or renewal. All terms of this Loan Guaranty apply to and may be enforced by or on behalf of any domestic or foreign branch or Affiliate of the Lender that extended any portion of the Guaranteed Obligations.

SECTION 9.02. Guaranty of Payment. This Loan Guaranty is a guaranty of payment and not of collection. Each Loan Guarantor waives any right to require the Lender to sue any Borrower, any Loan Guarantor, any other guarantor of, or any other Person obligated for all or any part of the Guaranteed Obligations (each, an “Obligated Party”), or otherwise to enforce its payment against any collateral securing all or any part of the Guaranteed Obligations.

SECTION 9.03. No Discharge or Diminishment of Loan Guaranty.

(a)     Except as otherwise provided for herein, the obligations of each Loan Guarantor hereunder are unconditional and absolute and not subject to any reduction, limitation, impairment or termination for any reason (other than the indefeasible payment in full in cash of the Guaranteed Obligations), including: (i) any claim of waiver, release, extension, renewal, settlement, surrender, alteration, or compromise of any of the Guaranteed Obligations, by operation of law or otherwise; (ii) any change in the corporate existence, structure or ownership of any Borrower or any other Obligated Party liable for any of the Guaranteed Obligations; (iii) any insolvency, bankruptcy, reorganization or other similar proceeding affecting any Obligated Party, or their assets, or any resulting release or discharge of any obligation of any Obligated Party; or (iv) the existence of any claim, setoff or other rights which any Loan Guarantor may have at any time against any Obligated Party, the Lender or any other Person, whether in connection herewith or in any unrelated transactions.

80

(b)     The obligations of each Loan Guarantor hereunder are not subject to any defense or setoff, counterclaim, recoupment, or termination whatsoever by reason of the invalidity, illegality, or unenforceability of any of the Guaranteed Obligations or otherwise, or any provision of applicable law or regulation purporting to prohibit payment by any Obligated Party, of the Guaranteed Obligations or any part thereof.

(c)     Further, the obligations of any Loan Guarantor hereunder are not discharged or impaired or otherwise affected by: (i) the failure of the Lender to assert any claim or demand or to enforce any remedy with respect to all or any part of the Guaranteed Obligations; (ii) any waiver or modification of or supplement to any provision of any agreement relating to the Guaranteed Obligations; (iii) any release, non-perfection, or invalidity of any indirect or direct security for the obligations of any Borrower for all or any part of the Guaranteed Obligations or any obligations of any other Obligated Party liable for any of the Guaranteed Obligations; (iv) any action or failure to act by the Lender with respect to any collateral securing any part of the Guaranteed Obligations; or (v) any default, failure or delay, willful or otherwise, in the payment or performance of any of the Guaranteed Obligations, or any other circumstance, act, omission or delay that might in any manner or to any extent vary the risk of such Loan Guarantor or that would otherwise operate as a discharge of any Loan Guarantor as a matter of law or equity (other than the indefeasible payment in full in cash of the Guaranteed Obligations).

SECTION 9.04. Defenses Waived. To the fullest extent permitted by applicable law, each Loan Guarantor hereby waives any defense based on or arising out of any defense of any Borrower or any Loan Guarantor or the unenforceability of all or any part of the Guaranteed Obligations from any cause, or the cessation from any cause of the liability of any Borrower, any Loan Guarantor or any other Obligated Party, other than the indefeasible payment in full in cash of the Guaranteed Obligations. Without limiting the generality of the foregoing, each Loan Guarantor irrevocably waives acceptance hereof, presentment, demand, protest and, to the fullest extent permitted by law, any notice not provided for herein, as well as any requirement that at any time any action be taken by any Person against any Obligated Party, or any other Person. Each Loan Guarantor confirms that it is not a surety under any state law and shall not raise any such law as a defense to its obligations hereunder. The Lender may, at its election, foreclose on any Collateral held by it by one or more judicial or nonjudicial sales, accept an assignment of any such Collateral in lieu of foreclosure or otherwise act or fail to act with respect to any collateral securing all or a part of the Guaranteed Obligations, compromise or adjust any part of the Guaranteed Obligations, make any other accommodation with any Obligated Party or exercise any other right or remedy available to it against any Obligated Party, without affecting or impairing in any way the liability of such Loan Guarantor under this Loan Guaranty, except to the extent the Guaranteed Obligations have been fully and indefeasibly paid in cash. To the fullest extent permitted by applicable law, each Loan Guarantor waives any defense arising out of any such election even though that election may operate, pursuant to applicable law, to impair or extinguish any right of reimbursement or subrogation or other right or remedy of any Loan Guarantor against any Obligated Party or any security.

SECTION 9.05. Rights of Subrogation. No Loan Guarantor will assert any right, claim or cause of action, including, without limitation, a claim of subrogation, contribution or indemnification that it has against any Obligated Party, or any collateral, until the Loan Parties and the Loan Guarantors have fully performed all their obligations to the Lender.

81

SECTION 9.06. Reinstatement; Stay of Acceleration. If at any time any payment of any portion of the Guaranteed Obligations (including a payment effected through exercise of a right of setoff) is rescinded or must otherwise be restored or returned upon the insolvency, bankruptcy, or reorganization of any Borrower or otherwise (including pursuant to any settlement entered into by a Secured Party in its discretion), each Loan Guarantor’s obligations under this Loan Guaranty with respect to that payment shall be reinstated at such time as though the payment had not been made and whether or not the Lender is in possession of this Loan Guaranty. If acceleration of the time for payment of any of the Guaranteed Obligations is stayed upon the insolvency, bankruptcy or reorganization of any Borrower, all such amounts otherwise subject to acceleration under the terms of any agreement relating to the Guaranteed Obligations shall nonetheless be payable by the Loan Guarantors forthwith on demand by the Lender.

SECTION 9.07. Information. Each Loan Guarantor assumes all responsibility for being and keeping itself informed of the Borrowers’ financial condition and assets, and of all other circumstances bearing upon the risk of nonpayment of the Guaranteed Obligations and the nature, scope and extent of the risks that each Loan Guarantor assumes and incurs under this Loan Guaranty, and agrees that the Lender shall not have any duty to advise any Loan Guarantor of information known to it regarding those circumstances or risks.

SECTION 9.08. Termination. The Lender may continue to make loans or extend credit to the Borrowers based on this Loan Guaranty until five (5) days after it receives written notice of termination from any Loan Guarantor. Notwithstanding receipt of any such notice, each Loan Guarantor will continue to be liable to the Lender for any Guaranteed Obligations created, assumed or committed to prior to the fifth day after receipt of the notice, and all subsequent renewals, extensions, modifications and amendments with respect to, or substitutions for, all or any part of such Guaranteed Obligations. Nothing in this Section 9.08 shall be deemed to constitute a waiver of, or eliminate, limit, reduce or otherwise impair any rights or remedies the Lender may have in respect of, any Default or Event of Default that shall exist under Article VII hereof as a result of any such notice of termination.

SECTION 9.09. Taxes. Each payment of the Guaranteed Obligations will be made by each Loan Guarantor without withholding for any Taxes, unless such withholding is required by law. If any Loan Guarantor determines, in its sole discretion exercised in good faith, that it is so required to withhold Taxes, then such Loan Guarantor may so withhold and shall timely pay the full amount of withheld Taxes to the relevant Governmental Authority in accordance with applicable law. If such Taxes are Indemnified Taxes, then the amount payable by such Loan Guarantor shall be increased as necessary so that, net of such withholding (including such withholding applicable to additional amounts payable under this Section), the Lender receives the amount it would have received had no such withholding been made.

SECTION 9.10. Maximum Liability. Notwithstanding any other provision of this Loan Guaranty, the amount guaranteed by each Loan Guarantor hereunder shall be limited to the extent, if any, required so that its obligations hereunder shall not be subject to avoidance under Section 548 of the Bankruptcy Code or under any applicable state Uniform Fraudulent Transfer Act, Uniform Fraudulent Conveyance Act or similar statute or common law. In determining the limitations, if any, on the amount of any Loan Guarantor’s obligations hereunder pursuant to the preceding sentence, it is the intention of the parties hereto that any rights of subrogation, indemnification or contribution which such Loan Guarantor may have under this Loan Guaranty, any other agreement or applicable law shall be taken into account.

82

SECTION 9.11. Contribution.

(a)     To the extent that any Loan Guarantor shall make a payment under this Loan Guaranty (a “Guarantor Payment”) which, taking into account all other Guarantor Payments then previously or concurrently made by any other Loan Guarantor, exceeds the amount which otherwise would have been paid by or attributable to such Loan Guarantor if each Loan Guarantor had paid the aggregate Guaranteed Obligations satisfied by such Guarantor Payment in the same proportion as such Loan Guarantor’s “Allocable Amount” (as defined below) (as determined immediately prior to such Guarantor Payment) bore to the aggregate Allocable Amounts of each of the Loan Guarantors as determined immediately prior to the making of such Guarantor Payment, then, following indefeasible payment in full in cash of the Guarantor Payment and the Guaranteed Obligations (other than Unliquidated Obligations that have not yet arisen), and the Commitment and all Letters of Credit have terminated or expired or, in the case of all Letters of Credit, are fully collateralized on terms reasonably acceptable to the Lender, and this Agreement, the Swap Agreement Obligations and the Banking Services Obligations have terminated, such Loan Guarantor shall be entitled to receive contribution and indemnification payments from, and be reimbursed by, each other Loan Guarantor for the amount of such excess, pro rata based upon their respective Allocable Amounts in effect immediately prior to such Guarantor Payment.

(b)     As of any date of determination, the “Allocable Amount” of any Loan Guarantor shall be equal to the excess of the fair saleable value of the property of such Loan Guarantor over the total liabilities of such Loan Guarantor (including the maximum amount reasonably expected to become due in respect of contingent liabilities, calculated, without duplication, assuming each other Loan Guarantor that is also liable for such contingent liability pays its ratable share thereof), giving effect to all payments made by other Loan Guarantors as of such date in a manner to maximize the amount of such contributions.

(c)     This Section 9.11 is intended only to define the relative rights of the Loan Guarantors, and nothing set forth in this Section 9.11 is intended to or shall impair the obligations of the Loan Guarantors, jointly and severally, to pay any amounts as and when the same shall become due and payable in accordance with the terms of this Loan Guaranty.

(d)     The parties hereto acknowledge that the rights of contribution and indemnification hereunder shall constitute assets of the Loan Guarantor or Loan Guarantors to which such contribution and indemnification is owing.

(e)     The rights of the indemnifying Loan Guarantors against other Loan Guarantors under this Section 9.11 shall be exercisable upon the full and indefeasible payment of the Guaranteed Obligations in cash (other than Unliquidated Obligations that have not yet arisen) and the termination or expiry (or, in the case of all Letters of Credit, full cash collateralization), on terms reasonably acceptable to the Lender, of the Commitment and all Letters of Credit issued hereunder and the termination of this Agreement, the Swap Agreement Obligations and the Banking Services Obligations.

SECTION 9.12. Liability Cumulative. The liability of each Loan Party as a Loan Guarantor under this Article IX is in addition to and shall be cumulative with all liabilities of each Loan Party to the Lender under this Agreement and the other Loan Documents to which such Loan Party is a party or in respect of any obligations or liabilities of the other Loan Parties, without any limitation as to amount, unless the instrument or agreement evidencing or creating such other liability specifically provides to the contrary.

SECTION 9.13. Keepwell. Each Qualified ECP Guarantor hereby jointly and severally absolutely, unconditionally and irrevocably undertakes to provide such funds or other support as may be needed from time to time by each other Loan Party to honor all of its obligations under this Guarantee in respect of a Swap Obligation (provided, however, that each Qualified ECP Guarantor shall only be liable under this Section 9.13 for the maximum amount of such liability that can be hereby incurred without rendering its obligations under this Section 9.13 or otherwise under this Loan Guaranty voidable under applicable law relating to fraudulent conveyance or fraudulent transfer, and not for any greater amount). Except as otherwise provided herein, the obligations of each Qualified ECP Guarantor under this Section 9.13 shall remain in full force and effect until the termination of all Swap Obligations. Each Qualified ECP Guarantor intends that this Section 9.13 constitute, and this Section 9.13 shall be deemed to constitute, a “keepwell, support, or other agreement” for the benefit of each other Loan Party for all purposes of Section 1a(18)(A)(v)(II) of the Commodity Exchange Act.

83

ARTICLE X

The Borrower Representative.

SECTION 10.01. Appointment; Nature of Relationship. Hickok is hereby appointed by each of the Borrowers as its contractual representative (herein referred to as the “Borrower Representative” hereunder and under each other Loan Document, and each of the Borrowers irrevocably authorizes the Borrower Representative to act as the contractual representative of such Borrower with the rights and duties expressly set forth herein and in the other Loan Documents. The Borrower Representative agrees to act as such contractual representative upon the express conditions contained in this Article X. Additionally, the Borrowers hereby appoint the Borrower Representative as their agent to receive all of the proceeds of the Loans in the Funding Account(s), at which time the Borrower Representative shall promptly disburse such Loans to the appropriate Borrower(s), provided that, in the case of a Revolving Loan, such amount shall not exceed Availability. The Lender, and its respective officers, directors, agents or employees, shall not be liable to the Borrower Representative or any Borrower for any action taken or omitted to be taken by the Borrower Representative or the Borrowers pursuant to this Section 10.01.

SECTION 10.02. Powers. The Borrower Representative shall have and may exercise such powers under the Loan Documents as are specifically delegated to the Borrower Representative by the terms of each thereof, together with such powers as are reasonably incidental thereto. The Borrower Representative shall have no implied duties to the Borrowers, or any obligation to the Lender to take any action thereunder except any action specifically provided by the Loan Documents to be taken by the Borrower Representative.

SECTION 10.03. Employment of Agents. The Borrower Representative may execute any of its duties as the Borrower Representative hereunder and under any other Loan Document by or through authorized officers.

SECTION 10.04. Notices. Each Borrower shall immediately notify the Borrower Representative of the occurrence of any Default or Event of Default hereunder, refer to this Agreement, describe such Default or Event of Default, and state that such notice is a “notice of default”. In the event that the Borrower Representative receives such a notice, the Borrower Representative shall give prompt notice thereof to the Lender. Any notice provided to the Borrower Representative hereunder shall constitute notice to each Borrower on the date received by the Borrower Representative.

SECTION 10.05. Successor Borrower Representative. Upon the prior written consent of the Lender, the Borrower Representative may resign at any time, such resignation to be effective upon the appointment of a successor Borrower Representative.

SECTION 10.06. Execution of Loan Documents. The Borrowers hereby empower and authorize the Borrower Representative, on behalf of the Borrowers, to execute and deliver to the Lender the Loan Documents and all related agreements, certificates, documents, or instruments as shall be necessary or appropriate to effect the purposes of the Loan Documents, including the Compliance Certificates. Each Borrower agrees that any action taken by the Borrower Representative or the Borrowers in accordance with the terms of this Agreement or the other Loan Documents, and the exercise by the Borrower Representative of its powers set forth therein or herein, together with such other powers that are reasonably incidental thereto, shall be binding upon all of the Borrowers.

84

SECTION 10.07. Reporting. Each Borrower hereby agrees that such Borrower shall furnish promptly after each fiscal month to the Borrower Representative any certificate or report required hereunder or requested by the Borrower Representative on which the Borrower Representative shall rely to prepare the Compliance Certificate required pursuant to the provisions of this Agreement.

[Signature Page Follows]

85

IN WITNESS WHEREOF, the parties hereto have caused this Agreement to be duly executed by their respective authorized officers as of the day and year first above written.

WARNING -- BY SIGNING THIS PAPER YOU GIVE UP YOUR RIGHT TO NOTICE AND COURT TRIAL. IF YOU DO NOT PAY ON TIME A COURT JUDGMENT MAY BE TAKEN AGAINST YOU WITHOUT YOUR PRIOR KNOWLEDGE AND THE POWERS OF A COURT CAN BE USED TO COLLECT FROM YOU REGARDLESS OF ANY CLAIMS YOU MAY HAVE AGAINST THE CREDITOR WHETHER FOR RETURNED GOODS, FAULTY GOODS, FAILURE ON HIS PART TO COMPLY WITH THE AGREEMENT, OR ANY OTHER CAUSE.

HICKOK INCORPORATED

By:

Name: Kelly J. Marek

Title: Vice President Finance and CFO

STATE OF	)
	) SS:
COUNTY OF	)

Before me, a Notary Public in and for said County and State, personally appeared the above-named Kelly J. Marek, the Vice President Finance and CFO of HICKOK INCORPORATED, who did respectively acknowledge that he/she signed the foregoing instrument that the same was his/her free act and deed on behalf of said company.

IN WITNESS WHEREOF, I have hereunto set my hand and official seal at _____________________, ____________, this ________ day of June 2017.

Notary Public

My commission expires:

[Signature page – Credit Agreement – Chase/Hickok et . al]

WARNING -- BY SIGNING THIS PAPER YOU GIVE UP YOUR RIGHT TO NOTICE AND COURT TRIAL. IF YOU DO NOT PAY ON TIME A COURT JUDGMENT MAY BE TAKEN AGAINST YOU WITHOUT YOUR PRIOR KNOWLEDGE AND THE POWERS OF A COURT CAN BE USED TO COLLECT FROM YOU REGARDLESS OF ANY CLAIMS YOU MAY HAVE AGAINST THE CREDITOR WHETHER FOR RETURNED GOODS, FAULTY GOODS, FAILURE ON HIS PART TO COMPLY WITH THE AGREEMENT, OR ANY OTHER CAUSE.

HICKOK ACQUISITION A LLC, which will be

changing its name on or about the date hereof to Air

Enterprises LLC

By:

Name: Kelly J. Marek

Title: Secretary and Treasurer

STATE OF	)
	) SS:
COUNTY OF	)

Before me, a Notary Public in and for said County and State, personally appeared the above-named Kelly J. Marek, the Secretary and Treasurer of HICKOK ACQUISITION A LLC, who did respectively acknowledge that he/she signed the foregoing instrument that the same was his/her free act and deed on behalf of said company.

IN WITNESS WHEREOF, I have hereunto set my hand and official seal at _____________________, ____________, this ________ day of June 2017.

Notary Public

My commission expires:

[Signature page continued – Credit Agreement – Chase/Hickok et . al]

WARNING -- BY SIGNING THIS PAPER YOU GIVE UP YOUR RIGHT TO NOTICE AND COURT TRIAL. IF YOU DO NOT PAY ON TIME A COURT JUDGMENT MAY BE TAKEN AGAINST YOU WITHOUT YOUR PRIOR KNOWLEDGE AND THE POWERS OF A COURT CAN BE USED TO COLLECT FROM YOU REGARDLESS OF ANY CLAIMS YOU MAY HAVE AGAINST THE CREDITOR WHETHER FOR RETURNED GOODS, FAULTY GOODS, FAILURE ON HIS PART TO COMPLY WITH THE AGREEMENT, OR ANY OTHER CAUSE.

SUPREME ELECTRONICS CORP.

By:

Name: Kelly J. Marek

Title: Secretary and Treasurer

STATE OF	)
	) SS:
COUNTY OF	)

Before me, a Notary Public in and for said County and State, personally appeared the above-named Kelly J. Marek, the Secretary and Treasurer of SUPREME ELECTRONICS CORP., who did respectively acknowledge that he/she signed the foregoing instrument that the same was his/her free act and deed on behalf of said company.

IN WITNESS WHEREOF, I have hereunto set my hand and official seal at _____________________, ____________, this ________ day of June 2017.

Notary Public

My commission expires:

[Signature page continued – Credit Agreement – Chase/Hickok et . al]

WARNING -- BY SIGNING THIS PAPER YOU GIVE UP YOUR RIGHT TO NOTICE AND COURT TRIAL. IF YOU DO NOT PAY ON TIME A COURT JUDGMENT MAY BE TAKEN AGAINST YOU WITHOUT YOUR PRIOR KNOWLEDGE AND THE POWERS OF A COURT CAN BE USED TO COLLECT FROM YOU REGARDLESS OF ANY CLAIMS YOU MAY HAVE AGAINST THE CREDITOR WHETHER FOR RETURNED GOODS, FAULTY GOODS, FAILURE ON HIS PART TO COMPLY WITH THE AGREEMENT, OR ANY OTHER CAUSE.

FEDERAL HOSE MANUFACTURING LLC

By:

Name: Kelly J. Marek

Title: Secretary and Treasurer

STATE OF	)
	) SS:
COUNTY OF	)

Before me, a Notary Public in and for said County and State, personally appeared the above-named Kelly J. Marek, the Secretary and Treasurer of FEDERAL HOSE MANUFACTURING LLC, who did respectively acknowledge that he/she signed the foregoing instrument that the same was his/her free act and deed on behalf of said company.

IN WITNESS WHEREOF, I have hereunto set my hand and official seal at _____________________, ____________, this ________ day of June 2017.

Notary Public

My commission expires:

[Signature page continued – Credit Agreement – Chase/Hickok et . al]

WARNING -- BY SIGNING THIS PAPER YOU GIVE UP YOUR RIGHT TO NOTICE AND COURT TRIAL. IF YOU DO NOT PAY ON TIME A COURT JUDGMENT MAY BE TAKEN AGAINST YOU WITHOUT YOUR PRIOR KNOWLEDGE AND THE POWERS OF A COURT CAN BE USED TO COLLECT FROM YOU REGARDLESS OF ANY CLAIMS YOU MAY HAVE AGAINST THE CREDITOR WHETHER FOR RETURNED GOODS, FAULTY GOODS, FAILURE ON HIS PART TO COMPLY WITH THE AGREEMENT, OR ANY OTHER CAUSE.

WAEKON CORPORATION

By:

Name: Kelly J. Marek

Title: Secretary and Treasurer

STATE OF	)
	) SS:
COUNTY OF	)

Before me, a Notary Public in and for said County and State, personally appeared the above-named Kelly J. Marek, the Secretary and Treasurer of WAEKON CORPORATION, who did respectively acknowledge that he/she signed the foregoing instrument that the same was his/her free act and deed on behalf of said company.

IN WITNESS WHEREOF, I have hereunto set my hand and official seal at _____________________, ____________, this ________ day of June 2017.

Notary Public

My commission expires:

[Signature page continued – Credit Agreement – Chase/Hickok et . al]

WARNING -- BY SIGNING THIS PAPER YOU GIVE UP YOUR RIGHT TO NOTICE AND COURT TRIAL. IF YOU DO NOT PAY ON TIME A COURT JUDGMENT MAY BE TAKEN AGAINST YOU WITHOUT YOUR PRIOR KNOWLEDGE AND THE POWERS OF A COURT CAN BE USED TO COLLECT FROM YOU REGARDLESS OF ANY CLAIMS YOU MAY HAVE AGAINST THE CREDITOR WHETHER FOR RETURNED GOODS, FAULTY GOODS, FAILURE ON HIS PART TO COMPLY WITH THE AGREEMENT, OR ANY OTHER CAUSE.

HICKOK OPERATING LLC

By:

Name: Kelly J. Marek

Title: Secretary and Treasurer

STATE OF	)
	) SS:
COUNTY OF	)

Before me, a Notary Public in and for said County and State, personally appeared the above-named Kelly J. Marek, the Secretary and Treasurer of HICKOK OPERATING LLC who did respectively acknowledge that he/she signed the foregoing instrument that the same was his/her free act and deed on behalf of said company.

IN WITNESS WHEREOF, I have hereunto set my hand and official seal at _____________________, ____________, this ________ day of June 2017.

Notary Public

My commission expires:

[Signature page continued – Credit Agreement – Chase/Hickok et . al]

JPMORGAN CHASE BANK, N.A.
By:
Name:	Michael P. Lepro
Title:	Authorized Officer

[Signature page continued – Credit Agreement – Chase/Hickok et . al]

SCHEDULE 3.05

Properties, etc.

SCHEDULE 3.06

Disclosed Matters

SCHEDULE 3.12

Material Agreements

SCHEDULE 3.14

Insurance

SCHEDULE 3.15

Capitalization and Subsidiaries

SCHEDULE 3.22

Affiliate Transactions

SCHEDULE 4.01

Customer Consents

SCHEDULE 6.01

Existing Indebtedness

SCHEDULE 6.02

Existing Liens

SCHEDULE 6.04

Existing Investments

SCHEDULE 6.10

Existing Restrictions

EXHIBIT A

OPINION OF COUNSEL FOR THE LOAN PARTIES

[FINAL UNSIGNED FORM TO BE ATTACHED]

EXHIBIT B

[RESERVED]

EXHIBIT C

COMPLIANCE CERTIFICATE

To: JPMorgan Chase Bank, N.A.

This Compliance Certificate (“Certificate”), for the period ended _______ __, 201_, is furnished pursuant to that certain Credit Agreement dated as of June 1, 2017 (as amended, modified, renewed or extended from time to time, the “Agreement”) among CRAWFORD UNITED CORPORATION (f/k/a Hickok Incorporated), an Ohio corporation (“Hickok”), CRAWFORD AE LLC, an Ohio limited liability company (f/k/a Hickok Acquisition AE LLC which was f/k/a Air Enterprises LLC which was f/k/a Hickok Acquisition A LLC) (“Hickok Air Enterprises”), SUPREME ELECTRONICS CORP., a Mississippi corporation (“Supreme”), FEDERAL HOSE MANUFACTURING LLC, an Ohio limited liability company (“Federal”), DATA GENOMIX LLC (f/k/a Hickok Operating LLC), an Ohio limited liability company (“Data”), WAEKON CORPORATION, an Ohio corporation (“Waekon”), CAD ENTERPRISES, INC., an Arizona corporation (“CAD”), CRAWFORD UNITED ACQUISITION COMPANY, LLC, an Ohio limited liability company (“Crawford Acquisition” and together with Hickok, Hickok Air Enterprises, Supreme, Federal, Data, Waekon and CAD, collectively, the “Borrowers”, and each individually a “Borrower”), the other Loan Parties, and JPMorgan Chase Bank, N.A., as Lender. Unless otherwise defined herein, capitalized terms used in this Certificate have the meanings ascribed thereto in the Agreement.

THE UNDERSIGNED HEREBY CERTIFIES THAT:

1.     I am the                       of the Borrower Representative and I am authorized to deliver this Certificate on behalf of the Borrowers and their Subsidiaries in my capacity as an officer of the Borrower Representative;

2.     I have reviewed the terms of the Agreement and I have made, or have caused to be made under my supervision, a detailed review of the compliance of the Borrowers and their Subsidiaries with the Agreement during the accounting period covered by the attached financial statements (the “Relevant Period”);

3.     The attached financial statements of the Borrowers and, as applicable, their Subsidiaries and/or Affiliates for the Relevant Period: (a) have been prepared on an accounting basis (the “Accounting Method”) consistent with the requirements of the Agreement and, except as may have been otherwise expressly agreed to in the Agreement, in accordance with GAAP consistently applied, and (b) to the extent that the attached are not the Borrowers’ annual fiscal year end statements, are subject to normal year-end audit adjustments and the absence of footnotes;

4.      The examinations described in paragraph 2 did not disclose and I have no knowledge of, except as set forth below, (a) the existence of any condition or event which constitutes a Default or an Event of Default under the Agreement or any other Loan Document during or at the end of the Relevant Period or as of the date of this Certificate or (b) any change in the Accounting Method or in the application thereof that has occurred since the date of the annual financial statements delivered to the Lender in connection with the closing of the Agreement or subsequently delivered as required in the Agreement;

5.     I hereby certify that, except as set forth below, no Loan Party has changed (i) its name, (ii) its chief executive office, (iii) its principal place of business, (iv) the type of entity it is or (v) its state of incorporation or organization without having given the Lender the notice required by Section 4.15 of the Security Agreement;

C-1

6. The representations and warranties of the Loan Parties set forth in the Loan Documents are true and correct in all material respects as of the date hereof, except (i) to the extent that any such representation or warranty specifically refers to an earlier date, in which case it is true and correct in all material respects only as of such earlier date, and (ii) that any representation or warranty which is subject to any materiality qualifier is true and correct in all respects;

7. Schedule I attached hereto sets forth financial data and computations evidencing the Borrowers’ compliance with certain covenants of the Agreement, all of which data and computations are true, complete and correct; and

Described below are the exceptions, if any, referred to in paragraph 4 hereof by listing, in detail, the (i) nature of the condition or event, the period during which it has existed and the action which the Borrowers have taken, are taking, or propose to take with respect to each such condition or event or (ii) change in the Accounting Method or the application thereof and the effect of such change on the attached financial statements:

The foregoing certifications, together with the computations set forth in Schedule I and Schedule II hereto and the financial statements delivered with this Certificate in support hereof, are made and delivered this      day of               ,        .

CRAWFORD UNITED CORPORATION,

as the Borrower Representative

By:

Name:

Title:

C-2

Schedule I to Compliance Certificate

Compliance as of _________, ____ with

Provisions of        and          of the Agreement

EXHIBIT D

JOINDER AGREEMENT

THIS JOINDER AGREEMENT (this “Agreement”), dated as of [____], 20[__] is entered into between ________________________________, a _________________ (the “New Subsidiary”) and JPMORGAN CHASE BANK, N.A. (the “Lender”) under that certain Credit Agreement dated as of June 1, 2017 (as the same may be amended, modified, extended or restated from time to time, the “Credit Agreement”) among CRAWFORD UNITED CORPORATION (f/k/a Hickok Incorporated), an Ohio corporation (“Hickok”), CRAWFORD AE LLC, an Ohio limited liability company (f/k/a Hickok Acquisition AE LLC which was f/k/a Air Enterprises LLC which was f/k/a Hickok Acquisition A LLC) (“Hickok Air Enterprises”), SUPREME ELECTRONICS CORP., a Mississippi corporation (“Supreme”), FEDERAL HOSE MANUFACTURING LLC, an Ohio limited liability company (“Federal”), DATA GENOMIX LLC (f/k/a Hickok Operating LLC), an Ohio limited liability company (“Data”), WAEKON CORPORATION, an Ohio corporation (“Waekon”), CAD ENTERPRISES, INC., an Arizona corporation (“CAD”), CRAWFORD UNITED ACQUISITION COMPANY, LLC, an Ohio limited liability company (“Crawford Acquisition” and together with Hickok, Hickok Air Enterprises, Supreme, Federal, Data, Waekon and CAD, collectively, the “Borrowers”, and each individually a “Borrower”), the other Loan Parties party thereto, and the Lender. All capitalized terms used herein and not otherwise defined herein shall have the meanings set forth in the Credit Agreement.

The New Subsidiary and the Lender, hereby agree as follows:

1.     The New Subsidiary hereby acknowledges, agrees and confirms that, by its execution of this Agreement, the New Subsidiary will be deemed to be a Loan Party under the Credit Agreement and a [“Loan Guarantor”] for all purposes of the Credit Agreement and shall have all of the obligations of a Loan Party and a [Loan Guarantor] thereunder as if it had executed the Credit Agreement. The New Subsidiary hereby ratifies, as of the date hereof, and agrees to be bound by, all of the terms, provisions and conditions contained in the Credit Agreement, including without limitation (a) all of the representations and warranties of the Loan Parties set forth in Article III of the Credit Agreement, (b) all of the covenants set forth in Articles V and VI of the Credit Agreement and (c) all of the guaranty obligations set forth in Article IX of the Credit Agreement. Without limiting the generality of the foregoing terms of this paragraph 1, the New Subsidiary, subject to the limitations set forth in Section 9.10 and 9.13 of the Credit Agreement, hereby guarantees, jointly and severally with the other Loan Guarantors, to the Lender, as provided in Article IX of the Credit Agreement, the prompt payment and performance of the Guaranteed Obligations in full when due (whether at stated maturity, as a mandatory prepayment, by acceleration or otherwise) strictly in accordance with the terms thereof and agrees that if any of the Guaranteed Obligations are not paid or performed in full when due (whether at stated maturity, as a mandatory prepayment, by acceleration or otherwise), the New Subsidiary will, jointly and severally together with the other [Loan Guarantors], promptly pay and perform the same, without any demand or notice whatsoever, and that in the case of any extension of time of payment or renewal of any of the Guaranteed Obligations, the same will be promptly paid in full when due (whether at extended maturity, as a mandatory prepayment, by acceleration or otherwise) in accordance with the terms of such extension or renewal.

2.     If required, the New Subsidiary is, simultaneously with the execution of this Agreement, executing and delivering such Collateral Documents (and such other documents and instruments) as requested by the Lender in accordance with the Credit Agreement.

D-1

3.     The address of the New Subsidiary for purposes of Section 8.01 of the Credit Agreement is as follows:

4.     The New Subsidiary hereby waives acceptance by the Lender of the guaranty by the New Subsidiary upon the execution of this Agreement by the New Subsidiary.

5.     This Agreement may be executed in any number of counterparts, each of which when so executed and delivered shall be an original, but all of which together shall constitute one and the same instrument.

6.     THIS AGREEMENT AND THE RIGHTS AND OBLIGATIONS OF THE PARTIES HEREUNDER SHALL BE GOVERNED BY AND CONSTRUED AND INTERPRETED IN ACCORDANCE WITH THE LAWS OF THE STATE OF OHIO.

IN WITNESS WHEREOF, the New Subsidiary has caused this Agreement to be duly executed by its authorized officer, and the Lender, has caused the same to be accepted by its authorized officer, as of the day and year first above written.

[NEW SUBSIDIARY]

By:

Name:

Title:

Acknowledged and accepted:

JPMORGAN CHASE BANK, N.A.

By:

Name:

Title:

D-2

EXHIBIT E

CapEx Draw Request

[Date]

To:         JPMorgan Chase Bank, N.A.

The undersigned, HICKOK INCORPORATED, an Ohio corporation (“Borrower Representative”), refers to the Credit Agreement dated as of June 1, 2017 (as amended, restated, supplemented or otherwise modified from time to time, the “Credit Agreement”, the terms defined herein being used herein as therein defined), among the Borrower Representative, HICKOK AE LLC, an Ohio limited liability company (f/k/a Air Enterprises LLC which was f/k/a Hickok Acquisition A LLC), SUPREME ELECTRONICS CORP., a Mississippi corporation, FEDERAL HOSE MANUFACTURING LLC, an Ohio limited liability company, HICKOK OPERATING LLC, an Ohio limited liability company, WAEKON CORPORATION, an Ohio corporation, CAD ENTERPRISES, INC., an Arizona corporation (collectively, the “Borrowers”), and JPMORGAN CHASE BANK, N.A. (the “Lender”), and hereby gives you notice, irrevocably, pursuant to Section 2.03(b) of the Credit Agreement, that the Borrowers hereby request one or more CapEx Loans under the Credit Agreement, and in that connection sets forth in the schedule attached hereto the information relating to each such CapEx Loan (collectively, the “Borrowing”) as required by Section 2.03(b) of the Credit Agreement.

The undersigned hereby requests that a CapEx Loan in the amount of $____________ in connection with the new machinery and/or equipment on the attached Schedule 1 be made on _______________, 201___ (such date must be a Business Day).

The name of the Borrower purchasing the equipment is: __________________________.     

Wiring instructions, if required, are set forth on Schedule 2.

The Borrowing shall be a (check one): ___ CBFR Borrowing or ___ Eurodollar Borrowing.

In the case of a Eurodollar Borrowing, the initial Interest Period to be applicable thereto is one month.

The undersigned hereby certifies that (a) the Borrowing requested hereby does not exceed 100% of the hard costs of the new machinery and/or equipment described on Schedule 1 and a true, correct and complete copy of such invoice is attached hereto; (b) the machinery and/or equipment has previously been paid for in full by Borrowers; and (c) the other provisions of Section 5.08 are satisfied.

Very truly yours,

HICKOK INCORPORATED, as Borrower Representative

By:

Name:

Title:

E-1

SCHEDULE 1 TO CAPEX DRAW REQUEST

Loans on CapEx Invoices
Hard Cost*	Advance    Rate	Permitted Loan	Less Prior Loans for Deposits on Same CapEx	CapEx Loan Requested	Cumulative CapEx Loans**
0	80%	0	0	0	0
0	80%	0	0	0	0
0	80%	0	0	0	0
0	80%	0	0	0	0
0	80%	0	0	0	0
0	80%	0	0	0	0
0	80%	0	0	0	0
0	80%	0	0	0	0
0	80%	0	0	0	0
0		0	0	0	0%

*See attached supporting documentation.

**Not to exceed 80% of hard costs

2

SCHEDULE 2 TO CAPEX DRAW REQUEST

Breakdown of Wires

3

CREDIT AGREEMENT – CHASE/HICKOK ET. AL.

4

EX-11

Exhibit 11

CRAWFORD UNITED
CONSOLIDATED STATEMENT OF COMPUTATION OF EARNINGS
PER COMMON SHARE AND SHARE EQUIVALENTS

Years Ended,	December 31, 2019		December 31, 2018
NET INCOME
Net income applicable to common shares for basic earnings per share	$	6,979,863	$	3,613,710
Net Income applicable to common shares for diluted earnings per share	$	6,979,863	$	3,613,710
SHARES OUTSTANDING
Weighted average shares for basic earnings per share		2,849,239		2,799,706
Net effect of dilutive options available under convertible note - based on the treasury stock method using year-end market price, if higher than average market price		428,618		381,866
Total shares for diluted earnings per share		3,277,857		3,181,572
Basic Earnings Per Common Share	$	2.45	$	1.29
Diluted Earnings Per Common Share	$	2.13	$	1.14

* Net effect of stock options was antidilutive for the period.

EX-14

Exhibit 14

CRAWFORD UNITED

FINANCIAL CODE OF ETHICS
FOR THE
CHIEF EXECUTIVE OFFICER AND
SPECIFIED FINANCIAL OFFICERS

This Crawford United Financial Code of Ethics applies to Crawford United’s principal executive officer, principal financial officer, principal accounting officer or controller or persons performing similar functions. Crawford United expects all of its employees to act with personal and professional integrity in all aspects of their employment, to comply with all applicable laws, rules and regulations, to deter wrongdoing and to abide by Crawford United’s other policies and procedures that govern the conduct of Crawford United employees. This Financial Code of Ethics is intended to supplement Crawford United’s other policies and procedures.

You shall:

(1)    Engage in and promote honest and ethical conduct, including the ethical handling of actual or apparent conflicts of interest between personal and professional relationships;

(2)    Produce full, fair, accurate, timely, and understandable disclosure in reports and documents that Crawford United files with, or submits to, the Securities and Exchange Commission and other regulators and in other public communications made by Crawford United;

(3)    Comply with applicable governmental laws, rules and regulations, as well as the rules and regulations of self-regulatory organizations of which Crawford United is a member;
 
(4)    Promptly report any possible violation of this Financial Code of Ethics to the Chairman of the Audit Committee; and

(5)    Take all reasonable measures to protect the confidentiality of non-public, proprietary information about Crawford United and its customers obtained or created in connection with your activities and to prevent the unauthorized disclosure of such information unless required by applicable law or regulation or legal or regulatory process.

You understand that you are prohibited from directly or indirectly taking any action to fraudulently influence, coerce, manipulate or mislead Crawford United’s independent public accountants for the purpose of rendering the financial statements of Crawford United misleading.

You further understand that you will be held accountable for your adherence to this Financial Code of Ethics. Your failure to observe the terms of this Financial Code of Ethics may result in disciplinary action. Violations of this Financial Code of Ethics also may constitute violations of law and may result in civil and criminal penalties for you and/or Crawford United.
 

EX-21

Exhibit 21

CRAWFORD UNITED

Subsidiaries of Registrant

COMPANY NAME	STATE OF INCORPORATION
Crawford AE LLC	Ohio
CAD Enterprises, Inc.	Arizona
Data Genomix LLC	Ohio
Federal Hose Manufacturing LLC	Ohio
Marine Products International LLC	Ohio
Supreme Electronics Corp.*	Mississippi
Waekon Corporation*	Ohio

*inactive

EX-23

Exhibit 23

CONSENT OF INDEPENDENT REGISTERED PUBLIC ACCOUNTING FIRM

We hereby consent to the incorporation by reference in the Registration Statements on Form S-8 (Nos. 33-68196, 333-63597 and 333-125672) of Crawford United Corporation (the "Company") of our report dated March 12, 2020, relating to the consolidated financial statements and financial statement schedules, which appear in this Form 10-K.

/s/ MEADEN & MOORE, LTD.

Meaden & Moore, Ltd.   

Cleveland, Ohio

March 12, 2020

EX-31.1

Exhibit 31.1

RULE 13a-14(a)/15d-14(a) CERTIFICATION

I, Brian E. Powers, certify that:

1. I have reviewed this annual report on Form 10-K of Crawford United (the "registrant");

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 controls 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 fourth fiscal quarter that has materially affected, or is reasonably likely to materially affect, the registrant's internal control over financial reporting; and

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 the 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.

By:

/s/ Brian E. Powers

Brian E. Powers

Chief Executive Officer

March 13, 2020

EX-31.2

Exhibit 31.2

RULE 13a-14(a)/15d-14(a) CERTIFICATION

I, Kelly J. Marek, certify that:

1. I have reviewed this annual report on Form 10-K of Crawford United (the "registrant");

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 controls 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 fourth fiscal quarter that has materially affected, or is reasonably likely to materially affect, the registrant's internal control over financial reporting; and

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 the 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.

By:

/s/ Kelly J, Marek

Kelly J. Marek

Vice President, Finance
and Chief Financial Officer

March 13, 2020

EX-32.1

Exhibit 32.1

CERTIFICATION PURSUANT TO

18 U.S.C. SECTION 1350,

AS ADOPTED PURSUANT TO

SECTION 906 OF THE SARBANES-OXLEY ACT OF 2002

In connection with the Annual Report of Crawford United (the "Company") on Form 10-K for the period ending December 31, 2019 as filed with the Securities and Exchange Commission on the date hereof (the "Report"), I, Brian Powers, Chief Executive Officer of the Company, certify, pursuant to 18 U.S.C. section 1350, as adopted pursuant to section 906 of the Sarbanes-Oxley Act of 2002, 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 results of operations of the Company.

/s/ Brian E. Powers

Brian E. Powers

Chief Executive Officer

March 13, 2020

EX-32.2

Exhibit 32.2

CERTIFICATION PURSUANT TO

18 U.S.C. SECTION 1350,

AS ADOPTED PURSUANT TO

SECTION 906 OF THE SARBANES-OXLEY ACT OF 2002

In connection with the Annual Report of Crawford United (the "Company") on Form 10-K for the period ending December 31, 2019 as filed with the Securities and Exchange Commission on the date hereof (the "Report"), I, Kelly J. Marek, Chief Financial Officer of the Company, certify, pursuant to 18 U.S.C. section 1350, as adopted pursuant to section 906 of the Sarbanes-Oxley Act of 2002, 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 results of operations of the Company.

/s/ Kelly J. Marek

Kelly J. Marek

Chief Financial Officer

March 13, 2020

XML

Note 13 - Earnings Per Common Share - Summary of Earnings Per Share Calculation (Details) - USD ($)	3 Months Ended								12 Months Ended
	Dec. 31, 2019	Sep. 30, 2019	Jun. 30, 2019	Mar. 31, 2019	Dec. 31, 2018	Sep. 30, 2018	Jun. 30, 2018	Mar. 31, 2018	Dec. 31, 2019	Dec. 31, 2018
Income available to common stockholders									$ 6,979,863	$ 3,613,710
Weighted Average Shares of Common Stock Outstanding (in shares)									2,849,239	2,799,706
Net Income Per Common Share - Basic (in dollars per share)	$ 0.58	$ 0.59	$ 0.66	$ 0.63	$ 0.50	$ 0.55	$ 0.14	$ 0.13	$ 2.45	$ 1.29
Options and warrants under convertible note (in shares)									428,618	381,866
Weighted Average Shares of Common Stock Outstanding - Diluted (in shares)									3,277,857	3,181,572
Income available to common stockholders									$ 6,979,863	$ 3,613,710
Net Income Per Common Share - Diluted (in dollars per share)	$ 0.51	$ 0.52	$ 0.57	$ 0.55	$ 0.43	$ 0.48	$ 0.13	$ 0.11	$ 2.13	$ 1.14

XML

Note 12 - Income Taxes (Details Textual) - USD ($) $ in Thousands	Dec. 31, 2019	Dec. 31, 2018
SEC Schedule, 12-09, Valuation Allowance, Operating Loss Carryforward [Member]
Tax Credit Carryforward, Valuation Allowance	$ 47	$ 47
Valuation Allowance, Reserve for Uncertain Tax Position [Member]
Tax Credit Carryforward, Valuation Allowance	$ 400	$ 400

XML

Note 16 - Dispositions (Details Textual) - Certain Assets from Test and Measurement business segment Sold Under an Asset Purchase Agreement to Hickock Waekon, LLC [Member] $ in Millions	Jun. 01, 2018 USD ($) shares
Disposal Group, Including Discontinued Operation, Consideration	$ 1.6
Disposal Group, Excluding Discontinued Operation, Net Assets Sold	2.7
Disposal Group, Not Discontinued Operation, Gain (Loss) on Disposal	$ (1.2)
Director and His Affiliate [Member] | Common Class A [Member]
Disposal Group, Excluding Discontinued Operation, Consideration, Shares | shares	21,413
Director and His Affiliate [Member] | Common Class B [Member]
Disposal Group, Excluding Discontinued Operation, Consideration, Shares | shares	176,768

XML

Note 4 - Inventory - Inventory (Details) - USD ($)	Dec. 31, 2019	Dec. 31, 2018
Raw materials and component parts	$ 2,945,427	$ 2,313,664
Work-in-process	2,800,699	1,209,117
Finished products	2,183,170	2,201,693
Total Inventory	7,929,296	5,724,474
Less: Inventory reserves	250,606	226,492
Net Inventory	$ 7,678,690	$ 5,497,982

XML

Note 5 - Goodwill and Other Intangible Assets, Net - Future Amortization Expense (Details)	Dec. 31, 2019 USD ($)
2020	$ 379,030
2021	379,030
2022	355,697
2023	339,030
2024	$ 339,030

XML

Note 2 - Summary of Significant Accounting Policies (Tables)

12 Months Ended

Dec. 31, 2019

Notes Tables

Property, Plant and Equipment Estimated Useful Lives [Table Text Block]

Class	Method	Estimated Useful Lives (years)
Buildings & Improvements	Straight-line	10	to	40
Machinery and equipment	Straight-line	3	to	20
Tools and dies	Straight-line		3

XML

Note 17 - Segment and Related Information

12 Months Ended

Dec. 31, 2019

Notes to Financial Statements

Segment Reporting Disclosure [Text Block]

  

17.

SEGMENT AND RELATED INFORMATION

  

The Company operates

three

reportable business segments: (

1

) Aerospace Components, (

2

) Commercial Air Handling, (

3

) and Industrial Hose.  The Company operated the Test and Measurement business segment through

June 1, 2018,

at which time it was sold to Hickok Waekon, LLC. The Company's management evaluates segment performance based primarily on operating income. Certain corporate costs are allocated to the segments and interest expense directly related to financing the acquisition of a business is allocated to that segment, respectively.  Intangible assets are allocated to each segment and the related amortization of these assets are recorded in selling, general and administrative expenses.

Aerospace Components:

The Aerospace Components segment was added

July 1, 2018,

when the Company purchased all of the issued and outstanding shares of capital stock of CAD Enterprises, Inc. (“CAD”) in Phoenix, Arizona. This segment manufactures precision components primarily for customers in the aerospace industry.  This segment provides complete end-to-end engineering, machining, grinding, welding, brazing, heat treat and assembly solutions.  Utilizing state-of-the-art machining and welding technologies, this segment is an industry leader in providing complex components produced from nickel-based superalloys and stainless steels.  Our quality certifications include ISO

9001:2015/AS9100D,

as well as Nadcap accreditation for Fluorescent Penetrant Inspection (FPI), Heat Treating/Braze, Non-Conventional Machining EDM, TIG/E-Beam welding.

Commercial Air Handling:

The Commercial Air Handling segment was added

June 1, 2017,

when the Company purchased certain assets and assumed certain liabilities of Air Enterprises Acquisition LLC in Akron, Ohio. The acquired business, which operates under the name Air Enterprises, is an industry leader in designing, manufacturing and installing large-scale commercial, institutional, and industrial custom air handling solutions. Its customers are typically in the health care, education, pharmaceutical and industrial manufacturing markets in the United States. This segment also sells to select international markets. The custom air handling units are constructed of non-corrosive aluminum, resulting in sustainable, long-lasting, and energy efficient solutions with life expectancies of

50

years or more. These products are distributed through a network of sales representatives, based on relationships with health care networks, building contractors and engineering firms. The custom air handling equipment is designed, manufactured and installed under the brand names FactoryBilt® and SiteBilt®. FactoryBilt® air handling solutions are designed, fabricated and assembled in a vertically integrated process entirely within the Akron, Ohio facility. SiteBilt® air handling solutions are designed and fabricated in Akron, but are then crated and shipped to the field and assembled on-site.

Industrial Hose:

 

The Industrial Hose segment was added

July 1, 2016,

when the Company purchased the assets of the Federal Hose Manufacturing, LLC in Painesville, Ohio. This business segment includes the manufacture of flexible interlocking metal hoses and the distribution of silicone and hydraulic hoses. Metal hoses are sold primarily to major heavy-duty truck manufacturers and major aftermarket suppliers in North America. Metal hoses are also sold into the agricultural, industrial and petrochemical markets. Silicone hoses are distributed to a number of industries in North America, including agriculture and general industrial markets.

Test and Measurement:

 

The Test and Measurement segment is the legacy business that was started in

1910

when the Company was founded, and was sold

June 1, 2018.

This business segment included electronic testing products designed and manufactured for the automotive and trucking industries and included indicators and gauges for the locomotive and aircraft industries. The automotive diagnostic products are sold to original equipment manufacturers and to the aftermarket under several brand names and through a variety of distribution methods. In the aircraft industry, primary customers are manufacturers of commercial, military and personal airplanes. In the locomotive industry, indicators and gauges are sold to manufacturers and servicers of railroad equipment and locomotives.

Corporate and Other:

 

Corporate costs

not

allocated to the

three

primary business segments are aggregated with the results of DG, acquired in

April 2019.

	Year Ended December 31, 2019
	Commercial Air Handling		Aerospace Components		Industrial Hose		Corporate and Other			Consolidated
Sales	$	51,564,344	$	30,126,438	$	7,171,164	$	836,581		$	89,698,527
Gross Profit		12,350,412		5,015,003		1,970,149		239,071			19,574,635
Operating Income		7,141,097		2,876,304		859,114		(365,849	)		10,510,666
Pretax Income		7,140,398		2,073,239		635,995		(430,142	)		9,419,490
Net Income		5,291,035		1,536,270		471,272		(318,714	)		6,979,863

	Year Ended December 31, 2018
	Commercial Air Handling		Aerospace Components		Industrial Hose		Corporate and Other			Consolidated
Sales		41,833,444		14,397,557		6,942,886		3,204,419			66,378,306
Gross Profit		11,046,113		1,653,123		1,813,752		790,979			15,303,967
Operating Income		6,409,687		807,860		820,881		(723,969	)		7,314,459
Pretax Income		6,328,158		630,966		619,909		(2,297,303	)		5,281,730
Net Income		4,746,119		473,225		464,461		(2,070,095	)		3,613,710

Geographical Information

Included in the consolidated financial statements are the following amounts related to geographic locations:

	Year Ended December 31, 2019		Year Ended December 31, 2018
United States of America	$	89,370,005	$	64,874,554
Canada		283,011		351,211
China		23,134		-
Mexico		-		53,246
Poland		1,750		10,299
Peru		12,202		-
Other		8,425		1,088,996
	$	89,698,527	$	66,378,306

All export sales to foreign countries are made in US Dollars.

XML

Note 8 - Notes Payable (Tables)

12 Months Ended

Dec. 31, 2019

Notes Tables

Schedule of Long-term Debt Instruments [Table Text Block]

	December 31, 2019		December 31, 2018
In connection with the Federal Hose acquisition, the Company entered into a promissory note on July 1, 2016 for a $2,000,000 loan due to First Francis Company, payable in quarterly installments beginning on October 31, 2016.	$	1,302,776	$	1,485,061
In connection with the Federal Hose acquisition, the Company entered into a promissory note on July 1, 2016 for a $2,768,662 loan due to First Francis Company, payable in quarterly installments beginning on October 31, 2016.		1,248,380		2,157,004
In connection with the CAD acquisition, the Company entered into a promissory note on July 1, 2018 for a $9,000,000 loan due to the Loudermilks, payable in quarterly installments beginning September 30, 2018.		7,875,000		9,000,000
Total notes payable		10,426,156		12,642,065
Less current portion		2,749,459		1,555,663
Notes payable – non-current portion	$	7,676,697	$	11,086,402

Notes Payable [Member]

Notes Tables

Schedule of Maturities of Long-term Debt [Table Text Block]

	Related Party Note s		Seller Note
2020	$	499,459	$	2,250,000
2021		533,479		2,250,000
2022		1,518,218		2,250,000
2023		-		1,125,000
2024		-		-
Total principal payments	$	2,551,156	$	7,875,000

XML

Note 15 - Acquisitions (Tables)

12 Months Ended

Dec. 31, 2019

CAD Enterprises, Inc. [Member]

Notes Tables

Schedule of Recognized Identified Assets Acquired and Liabilities Assumed [Table Text Block]

Cash	$	790,417
Accounts Receivable		2,221,635
Inventory		2,098,732
Fixed Assets		10,867,500
Prepaid and Other Assets		35,264
Intangibles Assets		3,000,000
Goodwill		7,326,289
Total Assets Acquired	$	26,339,837
Accounts Payable	$	1,846,247
Accrued Payroll and related expenses		224,139
Accrued Expense		518,816
Deferred Income Taxes		2,750,635
Total Liabilities Assumed	$	5,339,837
Net Assets Acquired	$	21,000,000

XML

Document And Entity Information - USD ($)	12 Months Ended
	Dec. 31, 2019	Feb. 28, 2020	Jun. 30, 2019
Document Information [Line Items]
Entity Registrant Name	CRAWFORD UNITED Corp
Entity Central Index Key	0000047307
Trading Symbol	crawa
Current Fiscal Year End Date	--12-31
Entity Filer Category	Non-accelerated Filer
Entity Current Reporting Status	Yes
Entity Voluntary Filers	No
Entity Well-known Seasoned Issuer	No
Entity Emerging Growth Company	false
Entity Small Business	true
Entity Interactive Data Current	Yes
Entity Public Float			$ 17,679,384
Entity Shell Company	false
Document Type	10-K
Document Period End Date	Dec. 31, 2019
Document Fiscal Year Focus	2019
Document Fiscal Period Focus	FY
Amendment Flag	false
Title of 12(g) Security	Class A Common Shares, without par value
Common Class B [Member]
Document Information [Line Items]
Entity Common Stock, Shares Outstanding (in shares)		771,848
Common Class A [Member]
Document Information [Line Items]
Entity Common Stock, Shares Outstanding (in shares)		2,537,629

XML

Note 9 - Leases

12 Months Ended

Dec. 31, 2019

Notes to Financial Statements

Lessee, Operating and Finance Leases [Text Block]

9.

     LEASES 

On

January 1, 2019,

the Company adopted ASU

2016

-

02

“Leases (Topic

842

),” a new standard related to leases to increase transparency and comparability among organizations by requiring the recognition of lease assets and lease liabilities on the balance sheet. Most prominent among the amendments is the recognition of assets and liabilities by lessees for those leases classified as operating leases under previous U.S. GAAP.

The Company has operating leases for facilities, vehicles and equipment. These leases have remaining terms of

2

years to

15

years, some of which include options to extended the leases for up to

10

years.  Lease expense for the year ended

December 31, 2019

was approximately

$1.6

million.  Lease expense for operating leases under the prior leasing standards for the year ended

December 31, 2018

was approximately

$1.3

million.

Supplemental balance sheet information related to leases:

	December 31, 2019
Operating leases:
Operating lease right-of-use assets	$	9,224,840
Other current liabilities		850,664
Operating lease liabilities		8,513,448
Total operating lease liabilities	$	9,364,112
Weighted Average Remaining Lease Term
Operating Leases (in years)		11.0
Weighted Average Discount Rate
Operating Leases		5.0	%

Future minimum lease payments at

December 31, 2019

were as follows:

	Operating Leases
Year Ending December 31,
2020	$	1,301,166
2021		1,269,036
2022		1,271,491
2023		1,268,341
2024		1,285,820
Thereafter		5,601,342
Total future minimum lease payments	$	11,997,169
Less: imputed interest		(2,633,084	)
Total	$	9,364,112

Commitments and Contingencies

From time to time, the Company is involved in legal matters arising in the ordinary course of business. While the Company believes that such matters are currently

not

material, there can be

no

assurance that matters arising in the ordinary course of business for which the Company is, or could be, involved in litigation, will

not

have an adverse effect on its business, financial condition or results of operations. 

XML

Note 5 - Goodwill and Other Intangible Assets, Net

12 Months Ended

Dec. 31, 2019

Notes to Financial Statements

Goodwill and Intangible Assets Disclosure [Text Block]

5.

     GOODWILL AND OTHER INTANGIBLE ASSETS

Intangible assets relate to the purchase of businesses. Goodwill represents the excess of cost over the fair value of identifiable assets acquired. Goodwill is

not

amortized, but is reviewed on an annual basis for impairment. Amortization of other intangible assets is calculated on a straight-line basis over periods ranging from

one

year to

15

years. Intangible assets consist of the following:

	December 31, 2019		December 31, 2018
Customer Intangibles	$	4,970,000	$	4,970,000
Non-Compete Agreements		200,000		200,000
Trademarks		340,000		340,000
Total Other Intangibles		5,510,000		5,510,000
Less: Accumulated Amortization		1,559,162		1,177,798
Other Intangibles, Net	$	3,950,838	$	4,332,202

Intangible amortization expense was as follows:

	December 31, 2019		December 31, 2018
Accumulated amortization at the beginning of the period	$	1,177,798	$	613,601
Amortization expense		381,364		564,197
Accumulated amortization at end of period	$	1,559,162	$	1,177,798

Intangible amortization for the next

five

years is as follows:

	Amortization in future periods
2020	$	379,030
2021		379,030
2022		355,697
2023		339,030
2024		339,030

XML

Consolidated Statements of Stockholders' Equity - USD ($)	Common Stock Including Additional Paid in Capital [Member] Common Class A [Member]	Common Stock Including Additional Paid in Capital [Member] Common Class B [Member]	Treasury Stock [Member] Common Class A [Member]	Treasury Stock [Member] Common Class B [Member]	Treasury Stock [Member]	Common Stock Outstanding [Member] Common Class A [Member]	Common Stock Outstanding [Member] Common Class B [Member]	Common Stock [Member] Common Class A [Member]	Common Stock [Member] Common Class B [Member]	Additional Paid-in Capital [Member]	Retained Earnings [Member]	Total
Balance at Dec. 31, 2017					$ (264,841)			$ 2,246,367	$ 710,272	$ 1,741,901	$ 5,964,082	$ 10,397,781
Share-based compensation expense								394,933				394,933
Repurchase of Class B Shares					(1,640,939)							(1,640,939)
Net Income											3,613,710	3,613,710
Balance at Dec. 31, 2018					(1,905,780)			2,641,300	710,272	1,741,901	9,577,792	12,765,485
Balance (in shares) at Dec. 31, 2017	2,130,681	779,283	15,795	667		2,114,886	778,616
Stock Awards (in shares)	30,333					30,333
Repurchase of shares (in shares)			21,413	181,768		(21,413)	(181,768)
Balance (in shares) at Dec. 31, 2018	2,161,014	779,283	37,208	182,435		2,123,806	596,848
Share-based compensation expense								348,877				348,877
Net Income											6,979,863	6,979,863
Warrant exercise								250,000				250,000
Note conversion								359,629	755,250			1,114,879
Cumulative effect of accounting change related to lease standard											(30,572)	(30,572)
Balance at Dec. 31, 2019					$ (1,905,780)			$ 3,599,806	$ 1,465,522	$ 1,741,901	$ 16,527,083	$ 21,428,532
Stock Awards (in shares)	41,000					41,000
Warrant exercise (in shares)	100,000					100,000
Note conversion (in shares)	251,489	175,000				251,489	175,000
Balance (in shares) at Dec. 31, 2019	2,553,503	954,283	37,208	182,435		2,516,295	771,848

XML

Note 13 - Earnings Per Common Share

12 Months Ended

Dec. 31, 2019

Notes to Financial Statements

Earnings Per Share [Text Block]

13.

     EARNINGS PER COMMON SHARE

 

The following table sets forth the computation of basic and diluted earnings per share.

	Years Ended
	2019		2018
Net Income Per Common Share - Basic
Income available to common stockholders	$	6,979,863	$	3,613,710
Weighted Average Shares of Common Stock Outstanding		2,849,239		2,799,706
Net Income Per Common Share - Basic	$	2.45	$	1.29
Effect of Dilutive Securities
Weighted Average Shares of Common Stock Outstanding - Basic		2,849,239		2,799,706
Options and warrants under convertible note		428,618		381,866
Weighted Average Shares of Common Stock Outstanding - Diluted		3,277,857		3,181,572
Net Income Per Common Share – Diluted
Income available to common stockholders	$	6,979,863	$	3,613,710
Weighted Average Shares of Common Stock Outstanding - Diluted		3,277,857		3,181,572
Net Income Per Common Share - Diluted	$	2.13	$	1.14

Included in the computation of diluted earnings per for fiscal ended

December 31, 2019

and

December 31, 2018

were options, warrants and underlying shares related to the convertible notes. 

XML

Note 3 - Accounts Receivable

12 Months Ended

Dec. 31, 2019

Notes to Financial Statements

Loans, Notes, Trade and Other Receivables Disclosure [Text Block]

3.

  

 

ACCOUNTS RECEIVABLE

The Company establishes an allowance for doubtful accounts based upon factors surrounding the credit risk of specific customers, historical trends and other information. The reserve for doubtful accounts was

$18,325

and

$35,000

at

December 31, 2019

and

2018,

respectively.

XML

Note 17 - Segment and Related Information (Details Textual)	12 Months Ended
	Dec. 31, 2019
Number of Reportable Segments	3

XML

Note 19 - Subsequent Events (Details Textual) $ in Millions	Jan. 02, 2020 USD ($)
Subsequent Event [Member] | Assets Acquisition of MPI Products, Inc. [Member]
Business Combination, Consideration Transferred, Total	$ 9.4

XML

Note 9 - Leases - Lease Assets and Liabilities (Details) - USD ($)	Dec. 31, 2019	Dec. 31, 2018
Operating lease right-of-use assets	$ 9,224,840
Operating Leases (in years) (Year)	11 years
Operating Leases	5.00%
Other Current Liabilities [Member]
Other current liabilities	$ 850,664
Operating Lease Liabilities [Member]
Operating lease liabilities	8,513,448
Other Current Liabilities and Operating Lease Liabilities [Member]
Total operating lease liabilities	$ 9,364,112

XML

Note 8 - Notes Payable - Notes Payable (Details) - USD ($)	Dec. 31, 2019	Dec. 31, 2018
Less current portion	$ 2,749,459	$ 1,755,663
Notes payable – non-current portion	7,676,697	11,086,402
Notes Payable [Member]
Notes payable	10,426,156	12,642,065
Notes payable	10,426,156	12,642,065
Less current portion	2,749,459	1,555,663
Notes payable – non-current portion	7,676,697	11,086,402
Notes Payable [Member] | Related Party Notes, One [Member] | First Francis [Member]
Notes payable	1,302,776	1,485,061
Notes payable	1,302,776	1,485,061
Notes Payable [Member] | Related Party Notes, Two [Member] | First Francis [Member]
Notes payable	1,248,380	2,157,004
Notes payable	1,248,380	2,157,004
Notes Payable [Member] | Seller Note [Member]
Notes payable	7,875,000	9,000,000
Notes payable	$ 7,875,000	$ 9,000,000

XML

Note 9 - Leases (Tables)

12 Months Ended

Dec. 31, 2019

Notes Tables

Lessee, Operating and Finance Lease, Assets and Liabilities [Table Text Block]

	December 31, 2019
Operating leases:
Operating lease right-of-use assets	$	9,224,840
Other current liabilities		850,664
Operating lease liabilities		8,513,448
Total operating lease liabilities	$	9,364,112
Weighted Average Remaining Lease Term
Operating Leases (in years)		11.0
Weighted Average Discount Rate
Operating Leases		5.0	%

Lessee, Operating Lease, Liability, Maturity [Table Text Block]

	Operating Leases
Year Ending December 31,
2020	$	1,301,166
2021		1,269,036
2022		1,271,491
2023		1,268,341
2024		1,285,820
Thereafter		5,601,342
Total future minimum lease payments	$	11,997,169
Less: imputed interest		(2,633,084	)
Total	$	9,364,112

XML

Note 17 - Segment and Related Information (Tables)

12 Months Ended

Dec. 31, 2019

Notes Tables

Schedule of Segment Reporting Information, by Segment [Table Text Block]

	Year Ended December 31, 2019
	Commercial Air Handling		Aerospace Components		Industrial Hose		Corporate and Other			Consolidated
Sales	$	51,564,344	$	30,126,438	$	7,171,164	$	836,581		$	89,698,527
Gross Profit		12,350,412		5,015,003		1,970,149		239,071			19,574,635
Operating Income		7,141,097		2,876,304		859,114		(365,849	)		10,510,666
Pretax Income		7,140,398		2,073,239		635,995		(430,142	)		9,419,490
Net Income		5,291,035		1,536,270		471,272		(318,714	)		6,979,863

	Year Ended December 31, 2018
	Commercial Air Handling		Aerospace Components		Industrial Hose		Corporate and Other			Consolidated
Sales		41,833,444		14,397,557		6,942,886		3,204,419			66,378,306
Gross Profit		11,046,113		1,653,123		1,813,752		790,979			15,303,967
Operating Income		6,409,687		807,860		820,881		(723,969	)		7,314,459
Pretax Income		6,328,158		630,966		619,909		(2,297,303	)		5,281,730
Net Income		4,746,119		473,225		464,461		(2,070,095	)		3,613,710

Schedule of Revenue from External Customers and Long-Lived Assets, by Geographical Areas [Table Text Block]

	Year Ended December 31, 2019		Year Ended December 31, 2018
United States of America	$	89,370,005	$	64,874,554
Canada		283,011		351,211
China		23,134		-
Mexico		-		53,246
Poland		1,750		10,299
Peru		12,202		-
Other		8,425		1,088,996
	$	89,698,527	$	66,378,306

XML

Note 12 - Income Taxes

12 Months Ended

Dec. 31, 2019

Notes to Financial Statements

Income Tax Disclosure [Text Block]

12.

INCOME TAXES

 

A reconciliation of the provision of income taxes to the statutory federal income tax rate is as follows:

	Year			Year
	December 31, 2019			December 31, 2018
Income Before Provision for Income Taxes	$	9,419,490		$	5,281,730
Statutory rate		21	%		21	%
Tax at statutory rate		1,978,092			1,109,163
State taxes, net of federal benefit		551,179			79,165
Permanent differences		23,889			196,142
Return to Provision Adjustments and Other		(113,533	)		283,550
Provision for income taxes	$	2,439,627		$	1,668,020

Deferred tax assets (liabilities) consist of the following: 

	December 31, 2019			December 31, 2018
Inventories	$	164,768		$	145,844
Bad debts		4,659			8,773
Accrued liabilities		279,508			281,475
Prepaid expense		(116,524	)		(95,371	)
Depreciation and amortization		(2,798,040	)		(2,928,232	)
Research and development and other credit carryforwards		556,387			1,266,043
Right of use lease accounting		(19,600	)		-
Directors stock option plan		163,427			62,134
Total deferred tax liability		(1,765,415	)		(1,259,334	)
Valuation allowance		(47,319	)		(47,319	)
Reserve for uncertain tax positions		(395,000	)		(395,000	)
Total reserves & allowances		(442,319	)		(442,319	)
Net deferred tax liability, net of reserves	$	(2,207,734	)	$	(1,701,653	)

Valuation Allowance

The Company has a valuation allowance for deferred tax assets based upon certain credits that

may

not

be fully utilized in the future. The Company believes the valuation allowance of

$47

thousand at

December 31, 2019

and

2018,

respectively, is adequate.

Reserve for Uncertain Tax Positions

The Company has a reserve of unrecognized tax benefits related to exposures in accordance with ASC

740.

The Company believes the valuation allowance of

$0.4

million at

December 31, 2019

and

2018,

respectively, is adequate. Due to the uncertainties involved with this significant estimate, it is reasonably possible that the Company’s estimate

may

change in the near term.
 

Tax Credits

and Net Operating losses

:

At

December 31, 2019,

the Company has state net operating losses (NOLs) and research and development (R&D) and other credit carryforwards for tax purposes which expire as follows: 

Tax Year Expires	State NOLs		R& D & Other Credits
2020		-		3,000
2021		-		3,000
2022		-		3,000
2023		-		3,000
2024		-		3,000
2025		-		3,000
2026		-		72,216
2027		-		152,732
2028		-		68,676
2029		191,519		31,081
2030		414,231		44,712
2031		641,229		59,085
2032		-		71,062
2033		532,837		73,198
2034		285,607		76,429
2035		-		73,315
2036 and beyond		-		-
	$	2,065,423	$	740,506

XML

Note 2 - Summary of Significant Accounting Policies

12 Months Ended

Dec. 31, 2019

Notes to Financial Statements

Significant Accounting Policies [Text Block]

2.

   SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES

New Accounting Standards Adopted

In

February 2016,

the FASB issued ASU

2016

-

02

“Leases (Topic

842

),” a new standard related to leases to increase transparency and comparability among organizations by requiring the recognition of lease assets and lease liabilities on the balance sheet. Most prominent among the amendments is the recognition of assets and liabilities by lessees for those leases classified as operating leases under previous U.S. GAAP. Under the new standard, disclosures are required to meet the objective of enabling users of financial statements to assess the amount, timing, and uncertainty of cash flows arising from leases. The new standard requires a modified retrospective transition for capital or operating leases existing at or entered into after the beginning of the earliest comparative period presented in the financial statements, but it does

not

require transition accounting for leases that expire prior to the date of initial application. The new standard was effective for fiscal years and interim periods within those years, beginning on or after

December 15, 2018.

The adoption of this new standard on

January 1, 2019

resulted in assets of

$9.7

million recorded as Operating Right of Use Assets, net, and additional lease liabilities of

$9.8

million.  The Company also recorded an adjustment to retained earnings resulting from the cumulative effect of the change in accounting of (

$0.1

) million.  See Note

9

for further information.

New Accounting Standards

Not

Yet Adopted

In

January 2017,

FASB issued ASU

2017

-

04,

"Intangibles-Goodwill and Other (Topic

350

): Simplifying the Test for Goodwill Impairment." ASU

2017

-

04

eliminates the

second

step in the goodwill impairment test which requires an entity to determine the implied fair value of the reporting unit’s goodwill. Instead, an entity should perform its annual or interim goodwill impairment test by comparing the fair value of a reporting unit with its carrying value and recognize an impairment charge for the amount by which the carrying amount exceeds the reporting unit’s fair value,

not

to exceed the total amount of goodwill allocated to the reporting unit. The standard, which should be applied prospectively, is effective for fiscal years beginning after

December 15, 2019.

Early adoption is permitted. We are currently evaluating the impact of the adoption of ASU

2017

-

04

on our consolidated financial statements. We do

not

expect the adoption of this guidance to have a material impact on our consolidated financial statements.

In

June 2016,

the FASB issued ASU

2016

-

13,

Financial Instruments-Credit Losses. The standard requires a financial asset (including trade receivables) measured at amortized cost basis to be presented at the net amount expected to be collected. Thus, the income statement will reflect the measurement of credit losses for newly-recognized financial assets as well as the expected increases or decreases of expected credit losses that have taken place during the period. This standard will be effective for fiscal years beginning after

December 15, 2019.

The Company is currently in the process of evaluating the impact of adoption of this ASU on the consolidated financial statements. We do

not

expect the adoption of this guidance to have a material impact on our consolidated financial statements. 

Concentration of Credit Risk

The Company sells its products and services primarily to customers in the United States of America and to a lesser extent overseas. All sales are made in U.S. dollars. The Company extends normal credit terms to its customers. For the year ended

December 31, 2019,

sales to

three

customers in the Commercial Air Handling segment were

12%

of consolidated sales of the Company, while

one

customer in the Aerospace Components segment accounted for

29%

of consolidated sales. For the year ended

December 31, 2018,

there were sales to

one

customer in the Aerospace segment that were greater than

18%

of the consolidated sales of the company.

Use of Estimates in the Preparation of Financial Statements

The preparation of financial statements in conformity with generally accepted accounting principles requires management to make estimates and assumptions that

may

affect the reported amounts of certain assets and liabilities and disclosure of contingencies at the date of the financial statements, and the reported amounts of revenue and expenses during the reporting period. Actual results could differ from those estimates.

Fair Value of Financial Instruments

Accounting for "Financial Instruments" requires the Company to disclose estimated fair values of financial instruments. Financial instruments held by the Company include, among others, accounts receivable, accounts payable, and convertible notes payable. The carrying amounts reported in the consolidated balance sheet for assets and liabilities qualifying as financial instruments is a reasonable estimate of fair value.

Revenue Recognition

The Company recognizes revenue under ASC

606,

“Revenue from Contracts with Customers”. The core principle of the revenue standard is that a company should recognize revenue to depict the transfer of promised goods or services to customers in an amount that reflects the consideration to which the company expects to be entitled in exchange for those goods or services. The Company applies the following standards and recognizes revenue when (

1

) it has a firm contract and the parties are committed to perform their respective obligations, (

2

) the product has been shipped to and accepted by the customer or the service has been provided, (

3

) the sales price is fixed or determinable and (

4

) amounts are reasonably assured of collection, including the consideration of the customer’s ability and intention to pay when the amount is due.  The Company primarily receives fixed consideration for sales of product.  The Company does

not

have any significant financing components as payment is received at or shortly after the point of sale. Costs incurred to obtain a contract will be expensed as incurred when the amortization period is less than a year.  Shipping and handling amounts paid by customers are included in revenue. Sales tax and other similar taxes are excluded from revenue.

Construction Contracts

The Company recognizes revenue on construction contracts over time; as performance obligations are satisfied, due to the continuous transfer of control to the customer.  The customer typically controls the work in process, as evidenced by the contract.  The Company’s construction contracts are generally accounted for as a single performance obligation, since the Company is providing a significant service of integrating components into a single project.  The Company recognizes revenue using a cost-based input method, by which actual costs incurred relative to total estimated contract costs determine, as a percentage, progress toward contract completion.  This percentage is applied to the transaction price to determine the amount of revenue to recognize.  The Company believes the cost-based input method is the best depiction of performance, because it directly measures the value of the services transferred to the customer. Revenues on uninstalled materials are recognized when control is transferred to the customer, which does

not

necessarily equate to when the cost is incurred.

The payment terms of the Company’s construction contracts from time to time require the customer to make advance payments as well as interim payments as work progresses.  The advance payment generally is

not

considered a significant financing component as the Company expect to recognize those amounts in revenue within a year of receipt as work progresses on the related performance obligation. 

Contract Estimates

Due to the nature of the Company’s performance obligations, the estimation of total revenue and cost at completion is subject to many variables and requires significant judgment. Since a significant change in

one

or more of these variables could affect the profitability of contracts, the Company reviews and updates contract-related estimates regularly through a review process in which the Company reviews the progress and execution of performance obligations and the estimated cost at completion.

The Company recognizes adjustments in estimated profit on contracts under the cumulative catch-up method.  Under this method, the impact of the adjustment on profit recorded to date is recognized in the period the adjustment is identified.  Revenue and profit in future periods of contract performance is recognized using the adjusted estimate.  If at any time the estimate of contract profitability indicates an anticipated loss on the contract, a provision for the entire loss is recognized in the period it is identified.

Contract Modifications

Contract modifications are routine in the performance of the Company’s contracts.  Contracts are often modified to account for changes in the contract specifications or requirements.  In most instances, contract modifications are for goods or services that are

not

distinct, and, therefore, are accounted for as part of the existing contract.

Variable Consideration

The nature of the Company’s contracts can give rise to several types of variable consideration, including claims, unpriced change orders, and liquidated damages and penalties.  The Company recognizes revenue for variable consideration when it is probable that a significant reversal in the amount of cumulative revenue recognized will

not

occur.  The Company estimates the amount of revenue to be recognized on variable consideration using the expected value (i.e., the sum of a probability-weighted amount) or the most likely amount method, whichever is expected to better predict the amount.

Estimates of variable consideration and determination of whether to include estimated amounts in the transaction price are based largely on assessment of legal enforceability, past performance, and all information (historical, current, and forecasted) that is reasonably available to the Company.

Cost and Expense Recognition

Contract costs include all direct labor, materials, subcontractor, and equipment costs, and those indirect costs related to contract performance, such as indirect labor, tools and supplies. For construction contracts, costs are generally recognized as incurred. 

Unearned Revenue

Unearned revenue consists of customer deposits and contract liabilities related to the Commercial Air Handling segment.

Disaggregation of  Revenue

Revenue earned over time was

$51.6

million and

$41.8

million for the years ended

December 31, 2019

and

2018.

  Revenue earned at a  point in time was

$38.1

million and

$24.6

million for the years ended

December 31, 2019

and

2018.

Deferred Commissions

Commissions are earned based on the status of the contract. Commissions are paid upon receipt of payment for units shipped.

Product Warranties

The Company provides a warranty for its custom air handling business covering parts for

12

months from startup or

18

months from shipment, whichever comes first. The warranty reserve is maintained at a level which, in management’s judgment, is adequate to absorb potential warranties incurred. The amount of the reserve is based on management’s knowledge of the contracts and historical trends. Because of the uncertainties involved in the contracts, it is reasonably possible that management’s estimates

may

change in the near term. However, the amount of change that is reasonably possible cannot be precisely estimated at this time.

Product Development Costs

Product development costs, which include engineering production support for the test and measurement business segment, are expensed as incurred.

Cash and Cash Equivalents

The Company considers all highly liquid debt instruments purchased with a maturity of

three

months or less to be cash equivalents. From time to time the Company maintains cash balances in excess of the FDIC limits.

Accounts Receivable

The Company establishes an allowance for doubtful accounts based upon factors surrounding the credit risk of specific customers, historical trends and other information.

Inventory

Inventory is valued at the lower of cost (

first

-in,

first

-out) or net realizable value. The Company establishes reserves for excess and obsolete inventory based upon historical inventory usage trends and other information.

Property, Plant and Equipment

Property, plant and equipment are carried at cost. Maintenance and repair costs are expensed as incurred. Additions and betterments are capitalized. The depreciation policy of the Company is generally as follows:

Class	Method	Estimated Useful Lives (years)
Buildings & Improvements	Straight-line	10	to	40
Machinery and equipment	Straight-line	3	to	20
Tools and dies	Straight-line		3

Valuation of Long-Lived Assets

Long-lived assets such as property, plant and equipment and software are reviewed for impairment whenever events or changes in circumstances indicate that the carrying amount

may

not

be recoverable. If the total of the expected future undiscounted cash flows is less than the carrying amount of the asset, a loss is recognized for the difference between the fair value and carrying value of the asset.

Shipping and Handling Costs

Shipping and handling costs are classified as cost of product sold.

Income Taxes

The provision for income taxes is computed on domestic financial statement income. Where transactions are included in the determination of taxable income in a different year, deferred income tax accounting is used.

The provision for income taxes is determined using the asset and liability approach of accounting for income taxes. Under this approach, deferred taxes represent the future tax consequences expected to occur when the reported amounts of assets and liabilities are recovered or paid. The provision for income taxes represents income taxes paid or payable for the current year plus any change in deferred taxes during the year. Deferred taxes result from differences between the tax basis of assets and liabilities and their reported amounts in the consolidated financial statements and are adjusted for changes in tax rates and tax laws when changes are enacted. Valuation allowances are recorded to reduce deferred tax assets when it is more likely than

not

that a tax benefit will

not

be realized.

Income per Common Share

Income per common share information is computed on the weighted average number of shares outstanding during each period.

XML

Note 8 - Notes Payable

12 Months Ended

Dec. 31, 2019

Notes to Financial Statements

Debt Disclosure [Text Block]

8.

     NOTES PAYABLE

Convertible Notes Payable

On

December 30, 2011,

management entered into a Convertible Loan Agreement (“Convertible Loan”) with Roundball, LLC (“Roundball”). The Convertible Loan provides approximately

$467,000

of liquidity to meet on- going working capital requirements of the Company and allows

$250,000

of borrowing on the agreement at the Company's discretion at an interest rate of

0.25%.

Roundball, a major shareholder of the Company, is an affiliate of Steven Rosen and Matthew Crawford, Directors of the Company.

There have been several amendments to the original agreement over the years for the purpose of extending the existing terms of the Convertible Loan. On

December 29, 2018,

management entered into Amendment

No.

7

of the Convertible Loan Agreement with Roundball. The amended Convertible Loan:

● Continues to provide approximately $467,000 of liquidity to meet on going working capital requirements;

● Continues to allow $250,000 of borrowing on the agreement at the Company's discretion at an interest rate of 0.34%;

● Expand the rights available to Roundball under the Roundball Option to include the option, exercisable by Roundball in its sole discretion, and subject to requisite shareholder approval thereof and the terms and conditions set forth therein, to purchase up to 75,000 shares of Class B Common Stock of the Company at the Conversion Price; and

● Extends the due date of the loan agreement from December 30, 2018 to December 30, 2019.

As part of the Convertible Loan, the parties entered into a Warrant Agreement, dated 

December 30, 2012 (

as amended to date, the “Warrant Agreement”), whereby the Company issued a warrant to Roundball to purchase, at its option, up to

100,000

shares of Class A Common Stock of the Company at an exercise price of

$2.50

per share, subject to certain anti-dilution and other adjustments. The Warrant Agreement, as amended, expired

December 30, 2019.

On

December 11, 2019,

Roundball provided notice to the Company of its exercise of the Conversion Option and exercised the Warrants.  On

December 18, 2019,

the Company issued

75,000

Class B Shares and

251,489

shares of the Company’s Class A common stock (the “Class A Shares”) to Roundball following the Company’s receipt on

December 11, 2019,

of a notice from Roundball of its exercise of the Conversion Option in respect of

$466,880

of the principal and interest amount outstanding under the Promissory Note between the Company and Roundball, thereupon retiring all outstanding debt incurred and accrued interest under the Promissory Note.

On

December 11, 2019,

Roundball exercised the Warrants for

100,000

of the Company’s Class A Shares at an exercise price of

$2.50

per share, resulting in an aggregate exercise price of

$250,000.

The outstanding balance on the Convertible Loan as of

December 31, 2019

and

2018,

respectively was

$0

and

$200,000.

 

Notes Payable – Related Party

The Company has

two

separate outstanding promissory notes with First Francis Company Inc. (“First Francis”), which were originally issued in

July 2016

in connection with the acquisition of Federal Hose Manufacturing (“Federal Hose”) and which were amended in

July 2018

in connection with acquisition of CAD. The

first

promissory note was issued with original principal in the amount of

$2,000,000,

and the

second

was issued with original principal in the amount of

$2,768,662.

The promissory notes each have an interest rate of

6.25%

per annum, which was increased from

4.0%

per annum as part of the

July 2018

amendments to the Credit Agreement. In addition, the promissory note with original principal amount of

$2,768,662

was amended in

July 2018

to provide for a conversion option commencing

July 5, 2019

which allows First Francis to convert the promissory note, in whole in part with respect to a maximum amount of

$648,000,

into shares of the Company’s Class B common stock at the price of

$6.48

per share (subject to adjustment), subject to shareholder approval which was obtained on

May 10, 2019. 

On

July 9, 2019,

First Francis exercised its option to convert

$648,000

of existing indebtedness into

100,000

Class B Common Shares of the Company. First Francis is owned by Matthew Crawford, who serves on the Board of Directors of the Company, and Edward Crawford, who served on the Board of Directors of the Company until

June 17, 2019.  

Notes Payable – Seller Note

Effective

July 1, 2018,

the Company completed the acquisition of all of the issued and outstanding shares of capital stock of CAD.  Upon the closing of the transaction, the CAD shares were transferred and assigned to the Company in consideration of the payment by the Company of an aggregate purchase price of

$21

million,

$12

million of which was payable in cash at closing, with the remainder paid in the form of a subordinated promissory note issued by the Company in favor of a Seller (the “Seller Note), which is subject to certain post-closing adjustments based on working capital, indebtedness and selling expenses, as specified in the Share Purchase Agreement entered into in connection with the acquisition (the “Share Purchase Agreement”).   The Seller Note bears interest at a rate of

four

percent (

4%

) per annum and is payable in full

no

later than

June 30, 2023 (

the “Maturity Date”).  The Maturity Date, with respect to any then-outstanding portion of the original principal amount which is subject to an indemnification claim by the Company (asserted in accordance with the terms of the Share Purchase Agreement) pending as of the date thereof, will be automatically extended until such time as any claim relating to such disputed amount is

no

longer pending, pursuant to the terms of the Seller Note and subject to additional conditions set forth therein and in the Share Purchase Agreement. The Company is

not

permitted to prepay any amounts due and owing under the Seller Note.  Payment of the Seller Note is secured by a

second

-priority security interest in the assets of the Company.   Interest accrued on the original principal amount becomes due and payable in arrears beginning

September 30, 2018,

and subsequent interest is due on the

first

day of each calendar quarter thereafter up to and including

June 30, 2019. 

The Company is required to make quarterly principal payments, the amount of which will be calculated based on a

four

(

4

) year amortization schedule, beginning on

September 30, 2019

and continuing on the last day of each calendar quarter thereafter up to and including the Maturity Date.

Notes Payable

Notes payable consist of the following:

	December 31, 2019		December 31, 2018
In connection with the Federal Hose acquisition, the Company entered into a promissory note on July 1, 2016 for a $2,000,000 loan due to First Francis Company, payable in quarterly installments beginning on October 31, 2016.	$	1,302,776	$	1,485,061
In connection with the Federal Hose acquisition, the Company entered into a promissory note on July 1, 2016 for a $2,768,662 loan due to First Francis Company, payable in quarterly installments beginning on October 31, 2016.		1,248,380		2,157,004
In connection with the CAD acquisition, the Company entered into a promissory note on July 1, 2018 for a $9,000,000 loan due to the Loudermilks, payable in quarterly installments beginning September 30, 2018.		7,875,000		9,000,000
Total notes payable		10,426,156		12,642,065
Less current portion		2,749,459		1,555,663
Notes payable – non-current portion	$	7,676,697	$	11,086,402

Principal payments on the notes payable are as follows for the years ended

December 31:

	Related Party Note s		Seller Note
2020	$	499,459	$	2,250,000
2021		533,479		2,250,000
2022		1,518,218		2,250,000
2023		-		1,125,000
2024		-		-
Total principal payments	$	2,551,156	$	7,875,000

XML

Note 4 - Inventory

12 Months Ended

Dec. 31, 2019

Notes to Financial Statements

Inventory Disclosure [Text Block]

4.

    INVENTORY

Inventory is valued at the lower of cost (

first

-in,

first

-out) or net realizable value and consist of the following:

	December 31, 2019		December 31, 2018
Raw materials and component parts	$	2,945,427	$	2,313,664
Work-in-process		2,800,699		1,209,117
Finished products		2,183,170		2,201,693
Total Inventory		7,929,296		5,724,474
Less: Inventory reserves		250,606		226,492
Net Inventory	$	7,678,690	$	5,497,982

XML

Consolidated Statements of Income - USD ($)	12 Months Ended
	Dec. 31, 2019	Dec. 31, 2018
Total sales	$ 89,698,527	$ 66,378,306
Cost of Sales	70,123,892	51,074,339
Gross Profit	19,574,635	15,303,967
Operating Expenses:
Product development costs		220,418
Selling, general and administrative expenses	9,063,969	7,769,090
Operating Income	10,510,666	7,314,459
Other (Income) and Expenses:
Interest charges	1,056,843	749,021
Loss on disposal of operations		1,160,574
Other (income) expense, net	34,333	123,134
Total Other (Income) and Expenses	1,091,176	2,032,729
Income before Provision for Income Taxes	9,419,490	5,281,730
Provision for Income Taxes:
Current	1,890,912	543,031
Deferred	548,715	1,124,989
Total Provision for Income Taxes	2,439,627	1,668,020
Net Income	$ 6,979,863	$ 3,613,710
Net Income per Common Share - Basic (in dollars per share)	$ 2.45	$ 1.29
Net Income per Common Share - Diluted (in dollars per share)	$ 2.13	$ 1.14
Weighted Average Shares of Common Stock Outstanding – Basic (in shares)	2,849,239	2,799,706
Weighted Average Shares of Common Stock Outstanding - Diluted (in shares)	3,277,857	3,181,572

XML

Note 17 - Segment and Related Information - Information by Industry Segment (Details) - USD ($)	3 Months Ended								12 Months Ended
	Dec. 31, 2019	Sep. 30, 2019	Jun. 30, 2019	Mar. 31, 2019	Dec. 31, 2018	Sep. 30, 2018	Jun. 30, 2018	Mar. 31, 2018	Dec. 31, 2019	Dec. 31, 2018
Sales	$ 21,103,124	$ 22,244,681	$ 24,514,636	$ 21,836,087	$ 21,135,277	$ 19,771,137	$ 13,593,192	$ 11,878,700	$ 89,698,527	$ 66,378,306
Gross Profit	4,530,251	4,987,563	5,226,933	4,829,888	4,348,726	4,450,389	3,486,578	3,018,441	19,574,635	15,303,967
Operating Income	2,589,263	2,558,779	2,791,553	2,571,071	2,383,150	2,471,279	1,816,945	643,085	10,510,666	7,314,459
Pretax Income									9,419,490	5,281,730
Net Income	$ 1,708,058	$ 1,694,868	$ 1,831,479	$ 1,745,458	$ 1,348,254	$ 1,497,079	$ 394,625	$ 373,752	6,979,863	3,613,710
Commercial Air Handling [Member]
Sales									51,564,344	41,833,444
Gross Profit									12,350,412	11,046,113
Operating Income									7,141,097	6,409,687
Pretax Income									7,140,398	6,328,158
Net Income									5,291,035	4,746,119
Aerospace [Member]
Sales									30,126,438	14,397,557
Gross Profit									5,015,003	1,653,123
Operating Income									2,876,304	807,860
Pretax Income									2,073,239	630,966
Net Income									1,536,270	473,225
Industrial Hose [Member]
Sales									7,171,164	6,942,886
Gross Profit									1,970,149	1,813,752
Operating Income									859,114	820,881
Pretax Income									635,995	619,909
Net Income									471,272	464,461
Corporate and Other [Member]
Sales									836,581	3,204,419
Gross Profit									239,071	790,979
Operating Income									(365,849)	(723,969)
Pretax Income									(430,142)	(2,297,303)
Net Income									$ (318,714)	$ (2,070,095)

XML

Note 9 - Leases (Details Textual) - USD ($) $ in Millions	12 Months Ended
	Dec. 31, 2019	Dec. 31, 2018
Lessee, Operating and Finance Lease, Renewal Term	10 years
Operating Lease, Expense	$ 1.6
Operating Leases, Rent Expense, Total		$ 1.3
Minimum [Member]
Operating and Finance Lease, Remaining Term	2 years
Maximum [Member]
Operating and Finance Lease, Remaining Term	15 years

XML

Note 8 - Notes Payable (Details Textual)								12 Months Ended
	Dec. 18, 2019 USD ($) shares	Dec. 11, 2019 USD ($) $ / shares shares	Jul. 09, 2019 USD ($) shares	Dec. 29, 2018 USD ($)	Jul. 05, 2018 USD ($) $ / shares	Jul. 01, 2018 USD ($)	Jun. 03, 2016	Dec. 31, 2019 USD ($)	Dec. 31, 2018 USD ($)	Jul. 01, 2016 USD ($)	Dec. 30, 2012 $ / shares shares	Dec. 30, 2011 USD ($)
Stock Issued During Period, Value, Warrant Exercised								$ 250,000
Convertible Notes Payable, Total								0	$ 200,000
Payments to Acquire Businesses, Gross								50,001	11,209,583
CAD Enterprises, Inc. [Member]
Business Combination, Consideration Transferred, Total					$ 21,000,000	$ 21,000,000
Payments to Acquire Businesses, Gross					$ 12,000,000	$ 12,000,000
Roundball LLC [Member] | Common Class A [Member]
Stock Issued During Period, Shares, Warrant Exercised | shares		100,000
Shares Issued, Price Per Share | $ / shares		$ 2.50
Stock Issued During Period, Value, Warrant Exercised		$ 250,000
Exercise of Conversion Option Under Promissory Note for Class B Shares [Member]
Debt Conversion, Converted Instrument, Shares Issued | shares	75,000
Exercise of Conversion Option Under Promissory Note for Class A Shares [Member]
Debt Conversion, Converted Instrument, Shares Issued | shares	251,489
Exercise of Conversion Option Under Promissory Note [Member]
Debt Conversion, Original Debt, Amount	$ 466,880
Conversion of Promissory Note 2 Due to First Francis into Class B Common Stock [Member]
Debt Conversion, Converted Instrument, Shares Issued | shares			100,000
Debt Conversion, Original Debt, Amount			$ 648,000
Seller Note [Member] | CAD Enterprises, Inc. [Member]
Debt Instrument, Interest Rate, Stated Percentage					4.00%
Seller Note [Member] | Notes Payable [Member]
Debt Instrument, Face Amount								9,000,000	9,000,000
Roundball LLC [Member] | Amendment No. 7 [Member] | Common Class B [Member]
Debt Instrument, Convertible, Number of Equity Instruments				75,000
Roundball LLC [Member] | Amendment No. 1 [Member] | Warrant to Purchase Class A Common Stock [Member]
Class of Warrant or Right, Number of Securities Called by Warrants or Rights | shares											100,000
Class of Warrant or Right, Exercise Price of Warrants or Rights | $ / shares											$ 2.50
First Francis [Member] | Related Party Notes, One [Member] | Notes Payable [Member]
Debt Instrument, Face Amount								2,000,000	2,000,000	$ 2,000,000
First Francis [Member] | Related Party Notes, Two [Member] | Notes Payable [Member]
Debt Instrument, Face Amount								$ 2,768,662	$ 2,768,662	$ 2,768,662
First Francis [Member] | Related Party Notes [Member] | Notes Payable [Member]
Debt Instrument, Interest Rate, Stated Percentage					6.25%
Line of Credit Facility, Interest Rate During Period							4.00%
Debt Instrument, Convertible Option, Maximum Debt Convertible					$ 648,000
Debt Instrument, Convertible, Stock Price Trigger | $ / shares					$ 6.48
Director [Member] | Roundball LLC [Member] | Convertible Notes Payable [Member]
Working Capital Funding				$ 467,000								$ 467,000
Line of Credit Facility, Maximum Borrowing Capacity				$ 250,000								$ 250,000
Debt Instrument, Interest Rate, Stated Percentage				0.34%								0.25%

XML

Note 15 - Acquisitions - Summary Assets Acquired and Liabilities Assumed of CAD Enterprises (Details) - USD ($)	Dec. 31, 2019	Dec. 31, 2018	Jul. 01, 2018
Goodwill	$ 9,791,745	$ 9,582,202
CAD Enterprises, Inc. [Member]
Cash			$ 790,417
Accounts Receivable			2,221,635
Inventory			2,098,732
Fixed Assets			10,867,500
Prepaid and Other Assets			35,264
Intangibles Assets			3,000,000
Goodwill			7,326,289
Total Assets Acquired			26,339,837
Accounts Payable			1,846,247
Accrued Payroll and related expenses			224,139
Accrued Expense			518,816
Deferred Income Taxes			2,750,635
Total Liabilities Assumed			5,339,837
Net Assets Acquired			$ 21,000,000

XML

Note 12 - Income Taxes - Net Operating Loss and Tax Credit Carryforwards (Details)	Dec. 31, 2019 USD ($)
State and Local Jurisdiction [Member]
Net Operating Loss	$ 2,065,423
State and Local Jurisdiction [Member] | Research & Development & Other Tax Credits [Member]
Net Operating Loss	740,506
Expires in Tax Year 2020 [Member] | Research & Development & Other Tax Credits [Member]
Net Operating Loss	3,000
Expires in Tax Year 2020 [Member] | State and Local Jurisdiction [Member]
Net Operating Loss
Expires in Tax Year 2021 [Member] | Research & Development & Other Tax Credits [Member]
Net Operating Loss	3,000
Expires in Tax Year 2021 [Member] | State and Local Jurisdiction [Member]
Net Operating Loss
Expires in Tax Year 2022 [Member] | Research & Development & Other Tax Credits [Member]
Net Operating Loss	3,000
Expires in Tax Year 2022 [Member] | State and Local Jurisdiction [Member]
Net Operating Loss
Expires in Tax Year 2023 [Member] | Research & Development & Other Tax Credits [Member]
Net Operating Loss	3,000
Expires in Tax Year 2023 [Member] | State and Local Jurisdiction [Member]
Net Operating Loss
Expires in Tax Year 2024 [Member] | Research & Development & Other Tax Credits [Member]
Net Operating Loss	3,000
Expires in Tax Year 2024 [Member] | State and Local Jurisdiction [Member]
Net Operating Loss
Expires in Tax Year 2025 [Member] | Research & Development & Other Tax Credits [Member]
Net Operating Loss	3,000
Expires in Tax Year 2025 [Member] | State and Local Jurisdiction [Member]
Net Operating Loss
Expires in Tax Year 2026 [Member] | Research & Development & Other Tax Credits [Member]
Net Operating Loss	72,216
Expires in Tax Year 2026 [Member] | State and Local Jurisdiction [Member]
Net Operating Loss
Expires in Tax Year 2027 [Member] | Research & Development & Other Tax Credits [Member]
Net Operating Loss	152,732
Expires in Tax Year 2027 [Member] | State and Local Jurisdiction [Member]
Net Operating Loss
Expires in Tax Year 2028 [Member] | Research & Development & Other Tax Credits [Member]
Net Operating Loss	68,676
Expires in Tax Year 2028 [Member] | State and Local Jurisdiction [Member]
Net Operating Loss
Expires in Tax Year 2029 [Member] | Research & Development & Other Tax Credits [Member]
Net Operating Loss	31,081
Expires in Tax Year 2029 [Member] | State and Local Jurisdiction [Member]
Net Operating Loss	191,519
Expires in Tax Year 2030 [Member] | Research & Development & Other Tax Credits [Member]
Net Operating Loss	44,712
Expires in Tax Year 2030 [Member] | State and Local Jurisdiction [Member]
Net Operating Loss	414,231
Expires in Tax Year 2031 [Member] | Research & Development & Other Tax Credits [Member]
Net Operating Loss	59,085
Expires in Tax Year 2031 [Member] | State and Local Jurisdiction [Member]
Net Operating Loss	641,229
Expires in Tax Year 2032 [Member] | Research & Development & Other Tax Credits [Member]
Net Operating Loss	71,062
Expires in Tax Year 2032 [Member] | State and Local Jurisdiction [Member]
Net Operating Loss
Expires in Tax Year 2033 [Member] | Research & Development & Other Tax Credits [Member]
Net Operating Loss	73,198
Expires in Tax Year 2033 [Member] | State and Local Jurisdiction [Member]
Net Operating Loss	532,837
Expires in Tax Year 2034 [Member] | Research & Development & Other Tax Credits [Member]
Net Operating Loss	76,429
Expires in Tax Year 2034 [Member] | State and Local Jurisdiction [Member]
Net Operating Loss	285,607
Expires in Tax Year 2035 [Member] | Research & Development & Other Tax Credits [Member]
Net Operating Loss	73,315
Expires in Tax Year 2035 [Member] | State and Local Jurisdiction [Member]
Net Operating Loss
Expires in Tax Year 2036 and Beyond [Member] | Research & Development & Other Tax Credits [Member]
Net Operating Loss
Expires in Tax Year 2036 and Beyond [Member] | State and Local Jurisdiction [Member]
Net Operating Loss

XML

Note 11 - Stock Compensation (Details Textual) - USD ($)	1 Months Ended	3 Months Ended	12 Months Ended
	May 31, 2019	Dec. 31, 2019	Dec. 31, 2019	Dec. 31, 2018
Directors Plans [Member]
Share-based Compensation Arrangement by Share-based Payment Award, Award Vesting Period		3 years
Share-based Compensation Arrangement by Share-based Payment Award, Fair Value Assumptions, Expected Term		10 years
Share-based Payment Arrangement, Expense			$ 348,877	$ 394,933
Common Class A [Member]
Common Stock, Capital Shares Reserved for Future Issuance		1,045,848	1,045,848	832,233
Common Class A [Member] | Omnibus 2013 Equity Plan [Member]
Common Stock, Capital Shares Reserved for Future Issuance		400,000	400,000	150,000
Share-based Compensation Arrangement by Share-based Payment Award, Number of Additional Shares Authorized	250,000
Share-based Compensation Arrangement by Share-based Payment Award, Equity Instruments Other than Options, Grants in Period			12,000	30,333
Common Class A [Member] | Directors Plans [Member]
Share-based Compensation Arrangement by Share-based Payment Award, Options, Outstanding, Number, Ending Balance		5,000	5,000

XML

Note 5 - Goodwill and Other Intangible Assets, Net (Details Textual)	12 Months Ended
	Dec. 31, 2019
Minimum [Member]
Finite-Lived Intangible Asset, Useful Life	1 year
Maximum [Member]
Finite-Lived Intangible Asset, Useful Life	15 years

XML

Note 6 - Property, Plant and Equipment, Net - Schedule of Property, Plant, and Equipment (Details) - USD ($)	Dec. 31, 2019	Dec. 31, 2018	Dec. 31, 2017
Property Plant and Equipment, Gross	$ 16,016,325	$ 15,310,248
Less: Accumulated Depreciation	3,622,153	2,006,133	$ 4,242,913
Property Plant & Equipment, Net	12,394,172	13,304,115
Land [Member]
Property Plant and Equipment, Gross	228,872	257,205
Building and Building Improvements [Member]
Property Plant and Equipment, Gross	1,837,009	1,709,165
Machinery and Equipment [Member]
Property Plant and Equipment, Gross	$ 13,950,444	$ 13,343,878

XML

Significant Accounting Policies (Policies)

12 Months Ended

Dec. 31, 2019

Accounting Policies [Abstract]

New Accounting Pronouncements, Policy [Policy Text Block]

New Accounting Standards Adopted

In

February 2016,

the FASB issued ASU

2016

-

02

“Leases (Topic

842

),” a new standard related to leases to increase transparency and comparability among organizations by requiring the recognition of lease assets and lease liabilities on the balance sheet. Most prominent among the amendments is the recognition of assets and liabilities by lessees for those leases classified as operating leases under previous U.S. GAAP. Under the new standard, disclosures are required to meet the objective of enabling users of financial statements to assess the amount, timing, and uncertainty of cash flows arising from leases. The new standard requires a modified retrospective transition for capital or operating leases existing at or entered into after the beginning of the earliest comparative period presented in the financial statements, but it does

not

require transition accounting for leases that expire prior to the date of initial application. The new standard was effective for fiscal years and interim periods within those years, beginning on or after

December 15, 2018.

The adoption of this new standard on

January 1, 2019

resulted in assets of

$9.7

million recorded as Operating Right of Use Assets, net, and additional lease liabilities of

$9.8

million.  The Company also recorded an adjustment to retained earnings resulting from the cumulative effect of the change in accounting of (

$0.1

) million.  See Note

9

for further information.

New Accounting Standards

Not

Yet Adopted

In

January 2017,

FASB issued ASU

2017

-

04,

"Intangibles-Goodwill and Other (Topic

350

): Simplifying the Test for Goodwill Impairment." ASU

2017

-

04

eliminates the

second

step in the goodwill impairment test which requires an entity to determine the implied fair value of the reporting unit’s goodwill. Instead, an entity should perform its annual or interim goodwill impairment test by comparing the fair value of a reporting unit with its carrying value and recognize an impairment charge for the amount by which the carrying amount exceeds the reporting unit’s fair value,

not

to exceed the total amount of goodwill allocated to the reporting unit. The standard, which should be applied prospectively, is effective for fiscal years beginning after

December 15, 2019.

Early adoption is permitted. We are currently evaluating the impact of the adoption of ASU

2017

-

04

on our consolidated financial statements. We do

not

expect the adoption of this guidance to have a material impact on our consolidated financial statements.

In

June 2016,

the FASB issued ASU

2016

-

13,

Financial Instruments-Credit Losses. The standard requires a financial asset (including trade receivables) measured at amortized cost basis to be presented at the net amount expected to be collected. Thus, the income statement will reflect the measurement of credit losses for newly-recognized financial assets as well as the expected increases or decreases of expected credit losses that have taken place during the period. This standard will be effective for fiscal years beginning after

December 15, 2019.

The Company is currently in the process of evaluating the impact of adoption of this ASU on the consolidated financial statements. We do

not

expect the adoption of this guidance to have a material impact on our consolidated financial statements. 

Concentration Risk, Credit Risk, Policy [Policy Text Block]

Concentration of Credit Risk

The Company sells its products and services primarily to customers in the United States of America and to a lesser extent overseas. All sales are made in U.S. dollars. The Company extends normal credit terms to its customers. For the year ended

December 31, 2019,

sales to

three

customers in the Commercial Air Handling segment were

12%

of consolidated sales of the Company, while

one

customer in the Aerospace Components segment accounted for

29%

of consolidated sales. For the year ended

December 31, 2018,

there were sales to

one

customer in the Aerospace segment that were greater than

18%

of the consolidated sales of the company.

Use of Estimates, Policy [Policy Text Block]

Use of Estimates in the Preparation of Financial Statements

The preparation of financial statements in conformity with generally accepted accounting principles requires management to make estimates and assumptions that

may

affect the reported amounts of certain assets and liabilities and disclosure of contingencies at the date of the financial statements, and the reported amounts of revenue and expenses during the reporting period. Actual results could differ from those estimates.

Fair Value Measurement, Policy [Policy Text Block]

Fair Value of Financial Instruments

Accounting for "Financial Instruments" requires the Company to disclose estimated fair values of financial instruments. Financial instruments held by the Company include, among others, accounts receivable, accounts payable, and convertible notes payable. The carrying amounts reported in the consolidated balance sheet for assets and liabilities qualifying as financial instruments is a reasonable estimate of fair value.

Revenue [Policy Text Block]

Revenue Recognition

The Company recognizes revenue under ASC

606,

“Revenue from Contracts with Customers”. The core principle of the revenue standard is that a company should recognize revenue to depict the transfer of promised goods or services to customers in an amount that reflects the consideration to which the company expects to be entitled in exchange for those goods or services. The Company applies the following standards and recognizes revenue when (

1

) it has a firm contract and the parties are committed to perform their respective obligations, (

2

) the product has been shipped to and accepted by the customer or the service has been provided, (

3

) the sales price is fixed or determinable and (

4

) amounts are reasonably assured of collection, including the consideration of the customer’s ability and intention to pay when the amount is due.  The Company primarily receives fixed consideration for sales of product.  The Company does

not

have any significant financing components as payment is received at or shortly after the point of sale. Costs incurred to obtain a contract will be expensed as incurred when the amortization period is less than a year.  Shipping and handling amounts paid by customers are included in revenue. Sales tax and other similar taxes are excluded from revenue.

Construction Contracts

The Company recognizes revenue on construction contracts over time; as performance obligations are satisfied, due to the continuous transfer of control to the customer.  The customer typically controls the work in process, as evidenced by the contract.  The Company’s construction contracts are generally accounted for as a single performance obligation, since the Company is providing a significant service of integrating components into a single project.  The Company recognizes revenue using a cost-based input method, by which actual costs incurred relative to total estimated contract costs determine, as a percentage, progress toward contract completion.  This percentage is applied to the transaction price to determine the amount of revenue to recognize.  The Company believes the cost-based input method is the best depiction of performance, because it directly measures the value of the services transferred to the customer. Revenues on uninstalled materials are recognized when control is transferred to the customer, which does

not

necessarily equate to when the cost is incurred.

The payment terms of the Company’s construction contracts from time to time require the customer to make advance payments as well as interim payments as work progresses.  The advance payment generally is

not

considered a significant financing component as the Company expect to recognize those amounts in revenue within a year of receipt as work progresses on the related performance obligation. 

Contract Estimates

Due to the nature of the Company’s performance obligations, the estimation of total revenue and cost at completion is subject to many variables and requires significant judgment. Since a significant change in

one

or more of these variables could affect the profitability of contracts, the Company reviews and updates contract-related estimates regularly through a review process in which the Company reviews the progress and execution of performance obligations and the estimated cost at completion.

The Company recognizes adjustments in estimated profit on contracts under the cumulative catch-up method.  Under this method, the impact of the adjustment on profit recorded to date is recognized in the period the adjustment is identified.  Revenue and profit in future periods of contract performance is recognized using the adjusted estimate.  If at any time the estimate of contract profitability indicates an anticipated loss on the contract, a provision for the entire loss is recognized in the period it is identified.

Contract Modifications

Contract modifications are routine in the performance of the Company’s contracts.  Contracts are often modified to account for changes in the contract specifications or requirements.  In most instances, contract modifications are for goods or services that are

not

distinct, and, therefore, are accounted for as part of the existing contract.

Variable Consideration

The nature of the Company’s contracts can give rise to several types of variable consideration, including claims, unpriced change orders, and liquidated damages and penalties.  The Company recognizes revenue for variable consideration when it is probable that a significant reversal in the amount of cumulative revenue recognized will

not

occur.  The Company estimates the amount of revenue to be recognized on variable consideration using the expected value (i.e., the sum of a probability-weighted amount) or the most likely amount method, whichever is expected to better predict the amount.

Estimates of variable consideration and determination of whether to include estimated amounts in the transaction price are based largely on assessment of legal enforceability, past performance, and all information (historical, current, and forecasted) that is reasonably available to the Company.

Cost and Expense Recognition

Contract costs include all direct labor, materials, subcontractor, and equipment costs, and those indirect costs related to contract performance, such as indirect labor, tools and supplies. For construction contracts, costs are generally recognized as incurred. 

Revenue from Contract with Customer [Policy Text Block]

Unearned Revenue

Unearned revenue consists of customer deposits and contract liabilities related to the Commercial Air Handling segment.

Disaggregation of Revenue [Policy Text Block]

Disaggregation of  Revenue

Revenue earned over time was

$51.6

million and

$41.8

million for the years ended

December 31, 2019

and

2018.

  Revenue earned at a  point in time was

$38.1

million and

$24.6

million for the years ended

December 31, 2019

and

2018.

Revenue Recogniztion, Deferred Commissions, Policy [Policy Text Block]

Deferred Commissions

Commissions are earned based on the status of the contract. Commissions are paid upon receipt of payment for units shipped.

Standard Product Warranty, Policy [Policy Text Block]

Product Warranties

The Company provides a warranty for its custom air handling business covering parts for

12

months from startup or

18

months from shipment, whichever comes first. The warranty reserve is maintained at a level which, in management’s judgment, is adequate to absorb potential warranties incurred. The amount of the reserve is based on management’s knowledge of the contracts and historical trends. Because of the uncertainties involved in the contracts, it is reasonably possible that management’s estimates

may

change in the near term. However, the amount of change that is reasonably possible cannot be precisely estimated at this time.

Research, Development, and Computer Software, Policy [Policy Text Block]

Product Development Costs

Product development costs, which include engineering production support for the test and measurement business segment, are expensed as incurred.

Cash and Cash Equivalents, Policy [Policy Text Block]

Cash and Cash Equivalents

The Company considers all highly liquid debt instruments purchased with a maturity of

three

months or less to be cash equivalents. From time to time the Company maintains cash balances in excess of the FDIC limits.

Receivable [Policy Text Block]

Accounts Receivable

The Company establishes an allowance for doubtful accounts based upon factors surrounding the credit risk of specific customers, historical trends and other information.

Inventory, Policy [Policy Text Block]

Inventory

Inventory is valued at the lower of cost (

first

-in,

first

-out) or net realizable value. The Company establishes reserves for excess and obsolete inventory based upon historical inventory usage trends and other information.

Property, Plant and Equipment, Policy [Policy Text Block]

Property, Plant and Equipment

Property, plant and equipment are carried at cost. Maintenance and repair costs are expensed as incurred. Additions and betterments are capitalized. The depreciation policy of the Company is generally as follows:

Class	Method	Estimated Useful Lives (years)
Buildings & Improvements	Straight-line	10	to	40
Machinery and equipment	Straight-line	3	to	20
Tools and dies	Straight-line		3

Impairment or Disposal of Long-Lived Assets, Including Intangible Assets, Policy [Policy Text Block]

Valuation of Long-Lived Assets

Long-lived assets such as property, plant and equipment and software are reviewed for impairment whenever events or changes in circumstances indicate that the carrying amount

may

not

be recoverable. If the total of the expected future undiscounted cash flows is less than the carrying amount of the asset, a loss is recognized for the difference between the fair value and carrying value of the asset.

Cost of Goods and Service Sold, Shipping and Handling Cost, Policy [Policy Text Block]

Shipping and Handling Costs

Shipping and handling costs are classified as cost of product sold.

Income Tax, Policy [Policy Text Block]

Income Taxes

The provision for income taxes is computed on domestic financial statement income. Where transactions are included in the determination of taxable income in a different year, deferred income tax accounting is used.

The provision for income taxes is determined using the asset and liability approach of accounting for income taxes. Under this approach, deferred taxes represent the future tax consequences expected to occur when the reported amounts of assets and liabilities are recovered or paid. The provision for income taxes represents income taxes paid or payable for the current year plus any change in deferred taxes during the year. Deferred taxes result from differences between the tax basis of assets and liabilities and their reported amounts in the consolidated financial statements and are adjusted for changes in tax rates and tax laws when changes are enacted. Valuation allowances are recorded to reduce deferred tax assets when it is more likely than

not

that a tax benefit will

not

be realized.

Earnings Per Share, Policy [Policy Text Block]

Income per Common Share

Income per common share information is computed on the weighted average number of shares outstanding during each period.

XML

Note 16 - Dispositions

12 Months Ended

Dec. 31, 2019

Notes to Financial Statements

Disposal Groups, Including Discontinued Operations, Disclosure [Text Block]

16.

DISPOSITIONS

  

Effective

June 1, 2018,

the Company completed the sale (the “Sale”) of certain assets comprising its Test and Measurement business segment (the “Test and Measurement Segment”) to Hickok Waekon, LLC, an Ohio limited liability company (“Buyer”), pursuant to an Asset Purchase Agreement (the “Purchase Agreement”) by and among Buyer, the Company, Supreme Electronics Corp., a Mississippi corporation and wholly-owned subsidiary of the Company (“Supreme”), Waekon Corporation, an Ohio corporation and wholly-owned subsidiary of the Company (“Waekon Corporation”), and Robert L. Bauman, who was a director of the Company. Prior to the effectiveness of the Sale, Supreme and Waekon Corporation owned certain of the assets used in the operation of the Test and Measurement Segment and were primarily responsible for the operation thereof.

Upon the closing of the Sale, all of the issued and outstanding shares of capital stock of the Company then-owned, directly or indirectly, by Mr. Bauman or his affiliate, equaling approximately

21,413

shares of Class A Common Stock of the Company and

176,768

shares of Class B Common Stock of the Company, were transferred and assigned to the Company. The shares constituted the consideration received by the Company in the Sale.  Based upon the share price at closing, the value of the proceeds received was approximately

$1.6

million.  The net assets sold were approximately

$2.7

million.  The Company recorded a loss on sale of approximately

$1.2

million.

XML

Consolidated Balance Sheets - USD ($)	Dec. 31, 2019	Dec. 31, 2018
CURRENT ASSETS:
Cash and cash equivalents	$ 2,232,499	$ 5,057,626
Accounts receivable less allowance for doubtful accounts	14,001,795	9,835,262
Contract assets	2,422,379	2,083,349
Inventory less allowance for obsolete inventory	7,678,690	5,497,982
Prepaid expenses and other current assets	703,002	818,609
Total Current Assets	27,038,365	23,292,828
PROPERTY, PLANT AND EQUIPMENT:
Land and improvements	228,872	257,205
Buildings and leasehold improvements	1,837,009	1,709,165
Machinery and equipment	13,950,444	13,343,878
Total property, plant and equipment	16,016,325	15,310,248
Less accumulated depreciation	3,622,153	2,006,133
Property, Plant and Equipment, Net	12,394,172	13,304,115
Operating right of use assets, net	9,224,840
OTHER ASSETS:
Goodwill	9,791,745	9,582,202
Intangibles, net of accumulated amortization	3,950,838	4,332,202
Other non-current assets	88,046	95,263
Total Non-Current Other Assets	13,830,629	14,009,667
Total Assets	62,488,006	50,606,610
CURRENT LIABILITIES:
Notes payable - current	2,749,459	1,755,663
Bank debt - current	1,333,333	1,333,333
Leases payable	850,664	13,800
Accounts payable	6,071,522	5,169,819
Unearned revenue	1,998,578	5,257,797
Accrued expenses	3,281,445	3,325,337
Total Current Liabilities	16,285,001	16,855,749
LONG-TERM LIABILITIES:
Notes payable	7,676,697	11,086,402
Bank debt	6,376,594	8,194,679
Leases payable	8,513,448	2,642
Deferred income taxes	2,207,734	1,701,653
Total Long-Term Liabilities	24,774,473	20,985,376
STOCKHOLDERS' EQUITY
Preferred 1,000,000 shares authorized, no shares outstanding
Contributed capital	1,741,901	1,741,901
Treasury shares	(1,905,780)	(1,905,780)
Retained earnings	16,527,083	9,577,792
Total Stockholders' Equity	21,428,532	12,765,485
Total Liabilities and Stockholders' Equity	62,488,006	50,606,610
Common Class A [Member]
STOCKHOLDERS' EQUITY
Common stock	3,599,806	2,641,300
Common Class B [Member]
STOCKHOLDERS' EQUITY
Common stock	$ 1,465,522	$ 710,272

XML

Note 10 - Shareholders' Equity

12 Months Ended

Dec. 31, 2019

Notes to Financial Statements

Stockholders' Equity Note Disclosure [Text Block]

10.

SHAREHOLDERS’ EQUITY

There are

10,000,000

Class A Shares and

2,500,000

Class B Shares authorized, as well as

1,000,000

Serial Preferred Shares.

Unissued shares of Class A common stock (

1,045,848

and

832,233

 shares at

December 31, 2019

and

2018,

respectively) are reserved for the share-for-share conversion rights of the Class B common stock, stock options under the Directors Plans, conversion rights of the Convertible Promissory Note and available warrants. The Class A shares have

one

vote per share and the Class B shares have

three

votes per share, except under certain circumstances such as voting on voluntary liquidation, sale of substantially all the assets, etc. Dividends up to

$0.10

per year, noncumulative, must be paid on Class A shares before any dividends are paid on Class B shares.

XML

Note 6 - Property, Plant and Equipment, Net

12 Months Ended

Dec. 31, 2019

Notes to Financial Statements

Property, Plant and Equipment Disclosure [Text Block]

 

6.

      PROPERTY, PLANT AND EQUIPMENT, NET

Property, plant and equipment are recorded at cost and depreciated over their useful lives. Maintenance and repair costs are expenses as incurred. Property, plant and equipment are as follows:

	December 31, 2019		December 31, 2018
Land	$	228,872	$	257,205
Buildings and Improvements		1,837,009		1,709,165
Machinery & Equipment		13,950,444		13,343,878
Total Property, Plant & Equipment		16,016,325		15,310,248
Less: Accumulated Depreciation		3,622,153		2,006,133
Property Plant & Equipment, Net	$	12,394,172	$	13,304,115

Depreciation expense and other adjustments to accumulated depreciation expense are as follows:

	December 31, 2019			December 31, 2018
Accumulated depreciation, beginning balance	$	2,006,133		$	4,242,913
Depreciation expense		1,645,829			1,042,312
Disposals		(29,809	)		(3,279,092	)
Accumulated depreciation ending balance	$	3,622,153		$	2,006,133

XML

Consolidated Statements of Cash Flow - USD ($)	12 Months Ended
	Dec. 31, 2019	Dec. 31, 2018
Cash Flows from Operating Activities
Net Income	$ 6,979,863	$ 3,613,710
Adjustments to reconcile net income to net cash provided by operating activities:
Depreciation and amortization	2,054,721	1,606,509
Loss on disposal of assets	10,544	10,750
Loss on disposal of operations		1,160,574
Non-cash share-based compensation expense	348,877	394,933
Deferred income taxes	548,715	1,124,910
Changes in assets and liabilities:
Decrease (Increase) in accounts receivable	(4,164,533)	761,496
Decrease (Increase) in inventories	(2,180,708)	(1,681,250)
Decrease (Increase) in contract assets	(339,030)	(477,358)
Decrease (Increase) in prepaid expenses & other assets	125,324	(697,202)
Increase (Decrease) in accounts payable	747,632	1,578,467
Increase (Decrease) in accrued expenses	32,328	282,079
Increase (Decrease) in unearned revenue	(3,269,190)	2,656,442
Total adjustments	(6,085,320)	6,720,350
Net Cash Provided by Operating Cash Activities	894,543	10,334,060
Cash Flows from Investing Activities
Cash paid for acquisition	(50,001)	(11,209,583)
Capital expenditures	(746,430)	(479,880)
Net Cash Used in Investing Activities	(796,431)	(11,689,463)
Cash Flows from Financing Activities
Payments on related party notes	(1,592,298)	(362,427)
Borrowings on convertible notes	266,880
Payments on bank debt	(4,385,211)	(9,823,106)
Borrowings on bank debt	2,539,598	14,186,750
Payments on capital lease	(11,158)	(32,298)
Proceeds from options and warrants	258,950
Net Cash Provided by (Used in) Financing Activities	(2,923,239)	3,968,919
Net Increase (decrease) in cash and cash equivalents	(2,825,127)	2,613,516
Cash and cash equivalents at beginning of year	5,057,626	2,444,110
Cash and cash equivalents at end of year	2,232,499	5,057,626
Supplemental disclosures of cash flow information
Interest paid	949,280	783,739
Income taxes paid	1,815,482	205,514
Non-cash proceeds received for Class A and Class B Shares in exchange for the sale of certain assets		1,640,939
Non-cash seller notes issued for acquisition		9,000,000
Conversion of debt to equity	$ 848,000

XML

Note 2 - Summary of Significant Accounting Policies (Details Textual)	3 Months Ended								12 Months Ended
	Dec. 31, 2019 USD ($)	Sep. 30, 2019 USD ($)	Jun. 30, 2019 USD ($)	Mar. 31, 2019 USD ($)	Dec. 31, 2018 USD ($)	Sep. 30, 2018 USD ($)	Jun. 30, 2018 USD ($)	Mar. 31, 2018 USD ($)	Dec. 31, 2019 USD ($)	Dec. 31, 2018 USD ($)
Revenue from Contract with Customer, Including Assessed Tax	$ 21,103,124	$ 22,244,681	$ 24,514,636	$ 21,836,087	$ 21,135,277	$ 19,771,137	$ 13,593,192	$ 11,878,700	$ 89,698,527	$ 66,378,306
Transferred over Time [Member]
Revenue from Contract with Customer, Including Assessed Tax									51,600,000	41,800,000
Transferred at Point in Time [Member]
Revenue from Contract with Customer, Including Assessed Tax									38,100,000	24,600,000
Commercial Air Handling [Member]
Revenue from Contract with Customer, Including Assessed Tax									51,564,344	41,833,444
Aerospace [Member]
Revenue from Contract with Customer, Including Assessed Tax									$ 30,126,438	$ 14,397,557
Customer Concentration Risk [Member] | Revenue Benchmark [Member] | Commercial Air Handling [Member]
Number of Customers									3
Customer Concentration Risk [Member] | Revenue Benchmark [Member] | Commercial Air Handling [Member] | Three Customers [Member]
Concentration Risk, Percentage									12.00%
Customer Concentration Risk [Member] | Revenue Benchmark [Member] | Aerospace [Member]
Number of Customers									1	1
Customer Concentration Risk [Member] | Revenue Benchmark [Member] | Aerospace [Member] | One Customer [Member]
Concentration Risk, Percentage									29.00%	18.00%

XML

Note 7 - Bank Debt (Tables)

12 Months Ended

Dec. 31, 2019

Notes Tables

Schedule of Debt [Table Text Block]

	December 31, 201 9		December 31, 2018
Term Debt	$	4,111,111	$	5,444,444
Revolving Debt		3,722,995		4,184,158
Total Bank Debt		7,834,106		9,628,602
Less: Current Portion		1,333,333		1,333,333
Non-Current Bank Debt		6,500,773		8,295,269
Less: Unamortized Debt Costs		124,179		100,590
Net Non-Current Bank Debt	$	6,376,594	$	8,194,679

Term Debt [Member]

Notes Tables

Schedule of Maturities of Long-term Debt [Table Text Block]

	Term Loan
2020	$	1,333,333
2021		1,333,333
2022		1,444,445
Total principal payments	$	4,111,111

XML

Note 13 - Earnings Per Common Share (Tables)

12 Months Ended

Dec. 31, 2019

Notes Tables

Schedule of Earnings Per Share, Basic and Diluted [Table Text Block]

	Years Ended
	2019		2018
Net Income Per Common Share - Basic
Income available to common stockholders	$	6,979,863	$	3,613,710
Weighted Average Shares of Common Stock Outstanding		2,849,239		2,799,706
Net Income Per Common Share - Basic	$	2.45	$	1.29
Effect of Dilutive Securities
Weighted Average Shares of Common Stock Outstanding - Basic		2,849,239		2,799,706
Options and warrants under convertible note		428,618		381,866
Weighted Average Shares of Common Stock Outstanding - Diluted		3,277,857		3,181,572
Net Income Per Common Share – Diluted
Income available to common stockholders	$	6,979,863	$	3,613,710
Weighted Average Shares of Common Stock Outstanding - Diluted		3,277,857		3,181,572
Net Income Per Common Share - Diluted	$	2.13	$	1.14

XML

Note 8 - Notes Payable - Notes Payable (Details) (Parentheticals) - Notes Payable [Member] - USD ($)	Dec. 31, 2019	Dec. 31, 2018	Jul. 01, 2016
Related Party Notes, One [Member] | First Francis [Member]
Notes payable, face value	$ 2,000,000	$ 2,000,000	$ 2,000,000
Related Party Notes, Two [Member] | First Francis [Member]
Notes payable, face value	2,768,662	2,768,662	$ 2,768,662
Seller Note [Member]
Notes payable, face value	$ 9,000,000	$ 9,000,000

XML

Note 7 - Bank Debt - Summary of Loan Balances (Details) - USD ($)	Dec. 31, 2019	Dec. 31, 2018
Bank Debt [Member]
Total Bank Debt	$ 7,834,106	$ 9,628,602
Less: Current Portion	1,333,333	1,333,333
Non-Current Bank Debt	6,500,773	8,295,269
Less: Unamortized Debt Costs	124,179	100,590
Net Non-Current Bank Debt	6,376,594	8,194,679
Term Debt [Member]
Total Bank Debt	4,111,111
Term Debt [Member] | Bank Debt [Member]
Total Bank Debt	4,111,111	5,444,444
Line of Credit [Member] | Bank Debt [Member]
Total Bank Debt	$ 3,722,995	$ 4,184,158

XML

Note 9 - Leases - Future Minimum Lease Payments (Details)	Dec. 31, 2019 USD ($)
2020	$ 1,301,166
2021	1,269,036
2022	1,271,491
2023	1,268,341
2024	1,285,820
Thereafter	5,601,342
Total future minimum lease payments	11,997,169
Less: imputed interest	(2,633,084)
Other Current Liabilities and Operating Lease Liabilities [Member]
Total	$ 9,364,112

XML

Note 18 - Quarterly Data (Unaudited) - Summary of Quarterly Data (Unaudited) (Details) - USD ($)	3 Months Ended								12 Months Ended
	Dec. 31, 2019	Sep. 30, 2019	Jun. 30, 2019	Mar. 31, 2019	Dec. 31, 2018	Sep. 30, 2018	Jun. 30, 2018	Mar. 31, 2018	Dec. 31, 2019	Dec. 31, 2018
Sales	$ 21,103,124	$ 22,244,681	$ 24,514,636	$ 21,836,087	$ 21,135,277	$ 19,771,137	$ 13,593,192	$ 11,878,700	$ 89,698,527	$ 66,378,306
Gross Profit	4,530,251	4,987,563	5,226,933	4,829,888	4,348,726	4,450,389	3,486,578	3,018,441	19,574,635	15,303,967
Operating Income	2,589,263	2,558,779	2,791,553	2,571,071	2,383,150	2,471,279	1,816,945	643,085	10,510,666	7,314,459
Net Income	$ 1,708,058	$ 1,694,868	$ 1,831,479	$ 1,745,458	$ 1,348,254	$ 1,497,079	$ 394,625	$ 373,752	$ 6,979,863	$ 3,613,710
Net Income Per Common Share - Basic (in dollars per share)	$ 0.58	$ 0.59	$ 0.66	$ 0.63	$ 0.50	$ 0.55	$ 0.14	$ 0.13	$ 2.45	$ 1.29
Net Income Per Common Share - Diluted (in dollars per share)	$ 0.51	$ 0.52	$ 0.57	$ 0.55	$ 0.43	$ 0.48	$ 0.13	$ 0.11	$ 2.13	$ 1.14

XML

Note 7 - Bank Debt (Details Textual) - USD ($)			12 Months Ended
	Jul. 05, 2019	Jul. 05, 2018	Dec. 31, 2019	Sep. 30, 2019	Dec. 31, 2018
Line of Credit Facility, Remaining Borrowing Capacity			$ 16,300,000		$ 7,800,000
J P Morgan Chase Bank [Member] | Term Debt [Member]
Line of Credit Facility, Maximum Borrowing Capacity				$ 20,000,000
Long-term Debt, Total		$ 6,000,000
Debt Instrument, Periodic Payment, Total			$ 111,111
J P Morgan Chase Bank [Member] | Term Debt [Member] | Prime Rate [Member]
Debt Instrument, Basis Spread on Variable Rate		0.25%
J P Morgan Chase Bank [Member] | Term Debt [Member] | London Interbank Offered Rate (LIBOR) [Member]
Debt Instrument, Basis Spread on Variable Rate		2.25%
J P Morgan Chase Bank [Member] | Revolving Credit Facility [Member]
Line of Credit Facility, Maximum Borrowing Capacity		$ 12,000,000
Line of Credit Facility, Percent of Eligible Accounts		80.00%
Line of Credit Facility, Percent of Eligible Progress Billing Accounts		50.00%
Line of Credit Facility, Percent of Eligible Inventory		50.00%
Line of Credit Facility, Commitment Fee Percentage		0.25%
J P Morgan Chase Bank [Member] | Revolving Credit Facility [Member] | Prime Rate [Member]
Debt Instrument, Basis Spread on Variable Rate	0.25%
J P Morgan Chase Bank [Member] | Revolving Credit Facility [Member] | London Interbank Offered Rate (LIBOR) [Member]
Debt Instrument, Basis Spread on Variable Rate	1.75%
J P Morgan Chase Bank [Member] | Letter of Credit [Member]
Line of Credit Facility, Maximum Borrowing Capacity		$ 3,000,000
J P Morgan Chase Bank [Member] | Credit Line for Capital Expenditures [Member]
Line of Credit Facility, Maximum Borrowing Capacity		$ 1,000,000
J P Morgan Chase Bank [Member] | Credit Line for Capital Expenditures [Member] | Maximum [Member]
Debt Instrument, Term	5 years

XML

Note 3 - Accounts Receivable (Details Textual) - USD ($)	Dec. 31, 2019	Dec. 31, 2018
Accounts Receivable, Allowance for Credit Loss, Ending Balance	$ 18,325	$ 35,000

XML

Note 5 - Goodwill and Other Intangible Assets, Net - Accumulated Amortization (Details) - USD ($)	12 Months Ended
	Dec. 31, 2019	Dec. 31, 2018
Accumulated amortization at the beginning of the period	$ 1,177,798	$ 613,601
Amortization expense	381,364	564,197
Accumulated amortization at end of period	$ 1,559,162	$ 1,177,798

XML

Note 14 - Employee Benefit Plans (Details Textual) - USD ($)	12 Months Ended
	Dec. 31, 2019	Dec. 31, 2018
Defined Contribution Plan, Employer Discretionary Contribution Amount	$ 315,090	$ 183,996

XML

Note 12 - Income Taxes - Income Tax Reconciliation (Details) - USD ($)	12 Months Ended
	Dec. 31, 2019	Dec. 31, 2018
Income Before Provision for Income Taxes	$ 9,419,490	$ 5,281,730
Statutory rate	21.00%	21.00%
Tax at statutory rate	$ 1,978,092	$ 1,109,163
State taxes, net of federal benefit	551,179	79,165
Permanent differences	23,889	196,142
Return to Provision Adjustments and Other	(113,533)	283,550
Provision for income taxes	$ 2,439,627	$ 1,668,020

XML

Note 18 - Quarterly Data (Unaudited)

12 Months Ended

Dec. 31, 2019

Notes to Financial Statements

Quarterly Financial Information [Text Block]

18.

QUARTERLY DATA (UNAUDITED)

The following table presents the Company’s unaudited quarterly consolidated income statement data for the years ended

December 31, 2019

and

2018.

These quarterly results include all adjustments consisting of normal recurring adjustments that the Company considers necessary for the fair presentation for the quarters presented and are

not

necessarily indicative of the operating results for any future period.

	Year Ended December 31, 2019
	March 31,		June 30,		September 30,		December 31,
	2019		2019		2019		2019
Sales	$	21,836,087	$	24,514,636	$	22,244,681	$	21,103,124
Gross Profit		4,829,888		5,226,933		4,987,563		4,530,251
Operating Income		2,571,071		2,791,553		2,558,779		2,589,263
Net Income		1,745,458		1,831,479		1,694,868		1,708,058
Net Income per Common Share:
Basic	$	0.63	$	0.66	$	0.59	$	0.58
Diluted	$	0.55	$	0.57	$	0.52	$	0.51

	Year Ended December 31, 2018
	March 31,		June 30,		September 30,		December 31,
	2018		2018		2018		2018
Sales	$	11,878,700	$	13,593,192	$	19,771,137	$	21,135,277
Gross Profit		3,018,441		3,486,578		4,450,389		4,348,726
Operating Income		643,085		1,816,945		2,471,279		2,383,150
Net Income		373,752		394,625		1,497,079		1,348,254
Net Income per Common Share:
Basic	$	0.13	$	0.14	$	0.55	$	0.50
Diluted	$	0.11	$	0.13	$	0.48	$	0.43

XML

Note 14 - Employee Benefit Plans

12 Months Ended

Dec. 31, 2019

Notes to Financial Statements

Pension and Other Postretirement Benefits Disclosure [Text Block]

14.

     EMPLOYEE BENEFIT PLANS

 

The Company has a

401

(k) Savings and Retirement Plans covering all full-time employees, except for employees of CAD Enterprises, Inc. (“CAD”). The employees of CAD are covered by a separate

401

(k) Savings and Retirement Plan that was in place at the time of acquisition

July 1, 2018.

Company contributions for each of these plans, including matching of employee contributions, are at the Company's discretion.

For the years ended

December 31, 2019

and

December 31, 2018,

the Company made matching contributions to the plans in the amount of

$315,090

and

$183,996

respectively. The Company does

not

provide any other postretirement benefits to its employees.

XML

Note 4 - Inventory (Tables)

12 Months Ended

Dec. 31, 2019

Notes Tables

Schedule of Inventory, Current [Table Text Block]

	December 31, 2019		December 31, 2018
Raw materials and component parts	$	2,945,427	$	2,313,664
Work-in-process		2,800,699		1,209,117
Finished products		2,183,170		2,201,693
Total Inventory		7,929,296		5,724,474
Less: Inventory reserves		250,606		226,492
Net Inventory	$	7,678,690	$	5,497,982

XML

Note 2 - Summary of Significant Accounting Policies - Property, Plant and Equipment Useful Lives (Details)	12 Months Ended
	Dec. 31, 2019
Building and Building Improvements [Member] | Minimum [Member]
Property, Plant and Equipment Useful Lives (Year)	10 years
Building and Building Improvements [Member] | Maximum [Member]
Property, Plant and Equipment Useful Lives (Year)	40 years
Machinery and Equipment [Member] | Minimum [Member]
Property, Plant and Equipment Useful Lives (Year)	3 years
Machinery and Equipment [Member] | Maximum [Member]
Property, Plant and Equipment Useful Lives (Year)	20 years
Tools, Dies and Molds [Member]
Property, Plant and Equipment Useful Lives (Year)	3 years

XML

Note 5 - Goodwill and Other Intangible Assets, Net - Summary of Intangible Assets (Details) - USD ($)	Dec. 31, 2019	Dec. 31, 2018	Dec. 31, 2017
Customer Intangibles	$ 5,510,000	$ 5,510,000
Less: Accumulated Amortization	1,559,162	1,177,798	$ 613,601
Other Intangibles, Net	3,950,838	4,332,202
Customer-Related Intangible Assets [Member]
Customer Intangibles	4,970,000	4,970,000
Noncompete Agreements [Member]
Customer Intangibles	200,000	200,000
Trademarks [Member]
Customer Intangibles	$ 340,000	$ 340,000

XML

Note 6 - Property, Plant and Equipment, Net - Accumulated Depreciation (Details) - USD ($)	12 Months Ended
	Dec. 31, 2019	Dec. 31, 2018
Accumulated depreciation, beginning balance	$ 2,006,133	$ 4,242,913
Depreciation expense	1,645,829	1,042,312
Disposals	(29,809)	(3,279,092)
Accumulated depreciation ending balance	$ 3,622,153	$ 2,006,133

XML

Note 15 - Acquisitions (Details Textual) - USD ($)			12 Months Ended
	Jul. 05, 2018	Jul. 01, 2018	Dec. 31, 2019	Dec. 31, 2018
Payments to Acquire Businesses, Gross			$ 50,001	$ 11,209,583
Business Combination, Acquisition Related Costs			$ 74,117	$ 268,607
CAD Enterprises, Inc. [Member]
Business Combination, Consideration Transferred, Total	$ 21,000,000	$ 21,000,000
Payments to Acquire Businesses, Gross	$ 12,000,000	$ 12,000,000

XML

Note 12 - Income Taxes - Deferred Tax Assets (Liabilities) (Details) - USD ($)	Dec. 31, 2019	Dec. 31, 2018
Inventories	$ 164,768	$ 145,844
Bad debts	4,659	8,773
Accrued liabilities	279,508	281,475
Prepaid expense	(116,524)	(95,371)
Depreciation and amortization	(2,798,040)	(2,928,232)
Research and development and other credit carryforwards	556,387	1,266,043
Right of use lease accounting	(19,600)
Directors stock option plan	163,427	62,134
Total deferred tax liability	(1,765,415)	(1,259,334)
Valuation allowance	(47,319)	(47,319)
Reserve for uncertain tax positions	(395,000)	(395,000)
Total reserves & allowances	(442,319)	(442,319)
Net deferred tax liability, net of reserves	$ (2,207,734)	$ (1,701,653)

XML

Note 5 - Goodwill and Other Intangible Assets, Net (Tables)

12 Months Ended

Dec. 31, 2019

Notes Tables

Schedule of Finite-Lived Intangible Assets [Table Text Block]

	December 31, 2019		December 31, 2018
Customer Intangibles	$	4,970,000	$	4,970,000
Non-Compete Agreements		200,000		200,000
Trademarks		340,000		340,000
Total Other Intangibles		5,510,000		5,510,000
Less: Accumulated Amortization		1,559,162		1,177,798
Other Intangibles, Net	$	3,950,838	$	4,332,202

Finite-lived Intangible Assets Amortization Expense [Table Text Block]

	December 31, 2019		December 31, 2018
Accumulated amortization at the beginning of the period	$	1,177,798	$	613,601
Amortization expense		381,364		564,197
Accumulated amortization at end of period	$	1,559,162	$	1,177,798

Schedule of Finite-Lived Intangible Assets, Future Amortization Expense [Table Text Block]

	Amortization in future periods
2020	$	379,030
2021		379,030
2022		355,697
2023		339,030
2024		339,030

XML

Note 19 - Subsequent Events

12 Months Ended

Dec. 31, 2019

Notes to Financial Statements

Subsequent Events [Text Block]

19.

SUBSEQUENT EVENTS

Effective

January 2, 2020,

the Company, completed the acquisition (the “Transaction”) of substantially all of the assets (the “Assets”) of MPI Products, Inc. (dba Marine Products International), an Ohio corporation and supplier of marine hose and marine accessories to boat builders and distributors (the “Seller”), pursuant to an Asset Purchase Agreement (the “Asset Purchase Agreement”) entered into as of

January 1, 2020

by and among the Company, the Seller, the seller parties named therein (the “Seller Parties”) and the Seller Parties’ representative named therein (the “Sellers’ Representative”). Upon the closing of the Transaction, the Assets were transferred and assigned to the Company in consideration of the payment by the Company of an aggregate purchase price of

$9.4

million, payable at closing, which is subject to certain post-closing adjustments based on working capital, indebtedness and selling expenses, as specified in the Asset Purchase Agreement, plus the assumption of specified liabilities of the Seller.

XML

Note 15 - Acquisitions

12 Months Ended

Dec. 31, 2019

Notes to Financial Statements

Mergers, Acquisitions and Dispositions Disclosures [Text Block]

15.

  ACQUISITIONS

Effective

July 1, 2018,

the Company completed the acquisition of all of the issued and outstanding shares of capital stock of CAD Enterprises, Inc., pursuant to the Share Purchase Agreement. Upon the closing of the transaction, the acquired shares were transferred and assigned to the Company in consideration of the payment by the Company of an aggregate purchase price of

$21

million,

$12

million of which was payable in cash at closing, with the remainder paid in the form of the Seller Note, which is subject to certain post-closing adjustments based on working capital, indebtedness and selling expenses, as specified in the Share Purchase Agreement. 

CAD manufactures high end components for the aerospace industry and has

one

operating location in Phoenix, Arizona. The purchase price was assigned to the book value of the net assets acquired with the excess over the book value assigned to intangible assets and goodwill and has been allocated to the following accounts:

Cash	$	790,417
Accounts Receivable		2,221,635
Inventory		2,098,732
Fixed Assets		10,867,500
Prepaid and Other Assets		35,264
Intangibles Assets		3,000,000
Goodwill		7,326,289
Total Assets Acquired	$	26,339,837
Accounts Payable	$	1,846,247
Accrued Payroll and related expenses		224,139
Accrued Expense		518,816
Deferred Income Taxes		2,750,635
Total Liabilities Assumed	$	5,339,837
Net Assets Acquired	$	21,000,000

On

April 19, 2019,

the Company, completed the acquisition of substantially all of the assets of Data Genomix, Inc., an Ohio corporation (“DG”), pursuant to the terms of an Asset Purchase Agreement (the “Asset Purchase Agreement”) entered into by and between Hickok Operating LLC, an Ohio limited liability company and wholly-owned subsidiary of the Company (“Hickok Operating”), and DG on the date thereof. DG is in the business of developing and commercializing marketing and data analytic technology applications, which applications include, but are

not

limited to topplr, anglrjobs, anglrlegal and anglrads.

Acquisition related costs are included in Other Expense, Net in the consolidated statements of income. Acquisition related costs were

$74,117

and

$268,607

for the years ended

December 31, 2019

and

December 31, 2018,

respectively. Also, see Note

7,

Bank Debt and Note

8,

Notes Payable regarding further information regarding the acquisitions and the loan agreements and notes issued in connection with such acquisitions.

XML

Consolidated Balance Sheets (Parentheticals) - $ / shares $ / shares in Thousands	Dec. 31, 2019	Dec. 31, 2018
Preferred stock, shares authorized (in shares)	1,000,000	1,000,000
Preferred stock, shares outstanding (in shares)	0	0
Common Class A [Member]
Class of common stock, par value (in dollars per share)	$ 0	$ 0
Class of common stock, shares authorized (in shares)	10,000,000	10,000,000
Class of common stock, shares issued (in shares)	2,553,503	2,161,014
Treasury shares, issued (in shares)	37,208	37,208
Common Class B [Member]
Class of common stock, par value (in dollars per share)	$ 0	$ 0
Class of common stock, shares authorized (in shares)	2,500,000	2,500,000
Class of common stock, shares issued (in shares)	954.283	779,283
Treasury shares, issued (in shares)	182,435	182,435

XML

Note 11 - Stock Compensation

12 Months Ended

Dec. 31, 2019

Notes to Financial Statements

Share-based Payment Arrangement [Text Block]

11.

STOCK COMPENSATION

 

The Company's

2013

Omnibus Equity Plan (the “Plan”) was approved and adopted by an affirmative vote of a majority of the Company's Class A and Class B Shareholders and provides for the grant of the following types of incentive awards: stock options, stock appreciation rights, restricted shares, restricted share units, performance shares and Class A Common Shares. Those who will be eligible for awards under the Plan include employees who provide services to the Company and its affiliates, executive officers, non-employee Directors and consultants designated by the Compensation Committee. Under the Plan,

150,000

Class A Common Shares were initially reserved for issuance. The Plan was materially revised in

2019

to increase the maximum number of the Company’s Class A Common Shares, without par value, available for issuance to

400,000,

providing an additional

250,000

Class A Common Shares under the Plan. This change to the Plan was approved in connection with the Company’s

2019

Annual Meeting of Shareholders. The Class A Common Shares

may

be either authorized, but unissued, common shares or treasury shares. The Company granted

12,000

and

30,333

restricted stock awards under the Plan during the fiscal years ended

December 31, 2019

and

December 31, 2018,

respectively. Approximately

274,000

Class A Common Shares remain available for issuance under the Plan.

The Company's expired Outside Directors Stock Option Plans (collectively the "Directors Plans"), provided for the automatic grant of options to purchase up to

5,000

shares of Class A Common Stock over a

three

-year period to members of the Board of Directors who were

not

employees of the Company, at the fair market value on the date of grant. The options are exercisable for up to

10

years. All options granted under the Directors Plans became fully exercisable on

March 8, 2015.

Non-cash compensation expense related to stock option plans was

$348,877

and

$394,933

for the years ended

December 31, 2019

and

December 31, 2018,

respectively. 

XML

Note 7 - Bank Debt

12 Months Ended

Dec. 31, 2019

Notes to Financial Statements

Long-term Debt [Text Block]

7.

 

    

BANK DEBT

The Company entered into a Credit Agreement on

June 1, 2017

with JPMorgan Chase Bank, N.A. as lender, which was subsequently amended in connection with funding the acquisition of CAD Enterprises, Inc. (“CAD”) on

July 5, 2018 (

as amended, the “Credit Agreement”). As amended, the Credit Agreement is comprised of a revolving facility in the amount of

$12,000,000,

subject to a borrowing base (determined based on

80%

of Eligible Accounts, plus

50%

of Eligible Progress Billing Accounts, plus

50%

of Eligible Inventory, minus Reserves, each as defined in the Credit Agreement) and a term A loan in the amount of

$6,000,000.

Outstanding borrowings on the term A loan are payable in consecutive monthly installments, which currently amount to

$111,111

per month. The Credit Agreement was amended on

September 30, 2019

to expand the revolving loan amount from

$12,000,000

to

$20,000,000,

subject to a borrowing base, and to extend the maturity of revolving facility from

June 1, 2021

to

June 1, 2024.

The Credit Agreement was amended on

December 30, 2019

to eliminate the borrowing base.

The revolving facility under the Credit Agreement includes a

$3

million sublimit for the issuance of letters of credit thereunder.  [The Credit Agreement also provides for a separate credit line for borrowings of up to an aggregate of

$1,000,000

for capital expenditures until

July 5, 2019,

at which time any outstanding capital expenditure borrowings will be converted into a term loan maturing at the earlier of

five

years after such conversion or the termination of the revolving credit facility.]

2

  The Company did

not

borrow from this credit line prior to its expiration. Interest for borrowings under the revolving facility accrues at a per annum rate equal to Prime Rate or LIBOR plus applicable margins of (i) (

0.25%

) for Prime Rate loans and (ii)

1.75%

for LIBOR loans. The maturity date of the revolving facility is

June 1, 2024.

Interest for borrowings under the term A loan accrues at a per annum rate equal to Prime Rate or LIBOR plus applicable margins of (i)

0.25%

for Prime Rate loans and (ii)

2.25%

for LIBOR loans. The maturity date of the term A loan is

December 1, 2022.

The Credit Agreement includes a commitment fee on the unused portion of the revolving facility of

0.25%

per annum payable quarterly. The obligations of the Company and other borrowers under the Credit Agreement are secured by a blanket lien on all the assets of the Company and its subsidiaries. The Credit Agreement also includes customary representations and warranties and applicable reporting requirements and covenants. The financial covenants under the Credit Agreement include a minimum fixed charge coverage ratio, a maximum senior funded debt to EBITDA ratio and a maximum total funded debt to EBITDA ratio.

Bank debt balances consist of the following:

	December 31, 201 9		December 31, 2018
Term Debt	$	4,111,111	$	5,444,444
Revolving Debt		3,722,995		4,184,158
Total Bank Debt		7,834,106		9,628,602
Less: Current Portion		1,333,333		1,333,333
Non-Current Bank Debt		6,500,773		8,295,269
Less: Unamortized Debt Costs		124,179		100,590
Net Non-Current Bank Debt	$	6,376,594	$	8,194,679

Minimum principal payments due on the term loan until maturity are:

	Term Loan
2020	$	1,333,333
2021		1,333,333
2022		1,444,445
Total principal payments	$	4,111,111

The Company had

$16.3

million and

$7.8

million available to borrow on the revolving credit facility at

December 31, 2019

and

2018,

respectively.  

XML

Note 1 - Basis of Presentation

12 Months Ended

Dec. 31, 2019

Notes to Financial Statements

Basis of Accounting [Text Block]

1.

   BASIS OF PRESENTATION

The accompanying consolidated financial statements have been prepared in accordance with generally accepted accounting principles for financial information and with the instructions to Form

10

-K and Article

8

of Regulation S-

X.

In the opinion of management, all adjustments (consisting of normal recurring accruals) considered necessary for a fair presentation have been included.

Principles of Consolidation

The consolidated financial statements include the accounts of Crawford United and its wholly-owned domestic subsidiaries. Significant intercompany transactions and balances have been eliminated in the financial statements.

Reclassifications

Certain prior year amounts were reclassified to conform to the current year’s presentation. These reclassifications have

no

effect on the financial position or results of operations reported as of and for the periods presented.

XML

Note 6 - Property, Plant and Equipment, Net (Tables)

12 Months Ended

Dec. 31, 2019

Notes Tables

Property, Plant and Equipment [Table Text Block]

	December 31, 2019		December 31, 2018
Land	$	228,872	$	257,205
Buildings and Improvements		1,837,009		1,709,165
Machinery & Equipment		13,950,444		13,343,878
Total Property, Plant & Equipment		16,016,325		15,310,248
Less: Accumulated Depreciation		3,622,153		2,006,133
Property Plant & Equipment, Net	$	12,394,172	$	13,304,115

Schedules of Accumulated Depreciation, Depletion and Amortization, Property, Plant, and Equipment [Table Text Block]

	December 31, 2019			December 31, 2018
Accumulated depreciation, beginning balance	$	2,006,133		$	4,242,913
Depreciation expense		1,645,829			1,042,312
Disposals		(29,809	)		(3,279,092	)
Accumulated depreciation ending balance	$	3,622,153		$	2,006,133

XML

Note 12 - Income Taxes (Tables)

12 Months Ended

Dec. 31, 2019

Notes Tables

Schedule of Effective Income Tax Rate Reconciliation [Table Text Block]

	Year			Year
	December 31, 2019			December 31, 2018
Income Before Provision for Income Taxes	$	9,419,490		$	5,281,730
Statutory rate		21	%		21	%
Tax at statutory rate		1,978,092			1,109,163
State taxes, net of federal benefit		551,179			79,165
Permanent differences		23,889			196,142
Return to Provision Adjustments and Other		(113,533	)		283,550
Provision for income taxes	$	2,439,627		$	1,668,020

Schedule of Deferred Tax Assets and Liabilities [Table Text Block]

	December 31, 2019			December 31, 2018
Inventories	$	164,768		$	145,844
Bad debts		4,659			8,773
Accrued liabilities		279,508			281,475
Prepaid expense		(116,524	)		(95,371	)
Depreciation and amortization		(2,798,040	)		(2,928,232	)
Research and development and other credit carryforwards		556,387			1,266,043
Right of use lease accounting		(19,600	)		-
Directors stock option plan		163,427			62,134
Total deferred tax liability		(1,765,415	)		(1,259,334	)
Valuation allowance		(47,319	)		(47,319	)
Reserve for uncertain tax positions		(395,000	)		(395,000	)
Total reserves & allowances		(442,319	)		(442,319	)
Net deferred tax liability, net of reserves	$	(2,207,734	)	$	(1,701,653	)

Summary of Operating Loss Carryforwards [Table Text Block]

Tax Year Expires	State NOLs		R& D & Other Credits
2020		-		3,000
2021		-		3,000
2022		-		3,000
2023		-		3,000
2024		-		3,000
2025		-		3,000
2026		-		72,216
2027		-		152,732
2028		-		68,676
2029		191,519		31,081
2030		414,231		44,712
2031		641,229		59,085
2032		-		71,062
2033		532,837		73,198
2034		285,607		76,429
2035		-		73,315
2036 and beyond		-		-
	$	2,065,423	$	740,506

XML

Note 18 - Quarterly Data (Unaudited) (Tables)

12 Months Ended

Dec. 31, 2019

Notes Tables

Quarterly Financial Information [Table Text Block]

	Year Ended December 31, 2019
	March 31,		June 30,		September 30,		December 31,
	2019		2019		2019		2019
Sales	$	21,836,087	$	24,514,636	$	22,244,681	$	21,103,124
Gross Profit		4,829,888		5,226,933		4,987,563		4,530,251
Operating Income		2,571,071		2,791,553		2,558,779		2,589,263
Net Income		1,745,458		1,831,479		1,694,868		1,708,058
Net Income per Common Share:
Basic	$	0.63	$	0.66	$	0.59	$	0.58
Diluted	$	0.55	$	0.57	$	0.52	$	0.51

	Year Ended December 31, 2018
	March 31,		June 30,		September 30,		December 31,
	2018		2018		2018		2018
Sales	$	11,878,700	$	13,593,192	$	19,771,137	$	21,135,277
Gross Profit		3,018,441		3,486,578		4,450,389		4,348,726
Operating Income		643,085		1,816,945		2,471,279		2,383,150
Net Income		373,752		394,625		1,497,079		1,348,254
Net Income per Common Share:
Basic	$	0.13	$	0.14	$	0.55	$	0.50
Diluted	$	0.11	$	0.13	$	0.48	$	0.43

XML

Note 10 - Shareholders' Equity (Details Textual)	Dec. 31, 2019 $ / shares shares	Dec. 31, 2018 shares
Preferred Stock, Shares Authorized	1,000,000	1,000,000
Common Class A [Member]
Common Stock, Shares Authorized	10,000,000	10,000,000
Common Stock, Capital Shares Reserved for Future Issuance	1,045,848	832,233
Common Stock, Voting Rights, per Share	1
Common Class A [Member] | Minimum [Member]
Dividends Payable, Amount Per Share | $ / shares	$ 0.10
Common Class B [Member]
Common Stock, Shares Authorized	2,500,000	2,500,000
Common Stock, Voting Rights, per Share	3

XML

Note 8 - Notes Payable - Principal Payments on Notes Payable (Details) - Notes Payable [Member]	Dec. 31, 2019 USD ($)
Related Party Notes [Member]
2020	$ 499,459
2021	533,479
2022	1,518,218
2023
2024
Total principal payments	2,551,156
Seller Note [Member]
2020	2,250,000
2021	2,250,000
2022	2,250,000
2023	1,125,000
2024
Total principal payments	$ 7,875,000

XML

Note 7 - Bank Debt - Minimum Principal Payments (Details) - Term Debt [Member]	Dec. 31, 2019 USD ($)
2020	$ 1,333,333
2021	1,333,333
2022	1,444,445
Total principal payments	$ 4,111,111

XML

Note 17 - Segment and Related Information - Geographical Information (Details) - USD ($)	3 Months Ended								12 Months Ended
	Dec. 31, 2019	Sep. 30, 2019	Jun. 30, 2019	Mar. 31, 2019	Dec. 31, 2018	Sep. 30, 2018	Jun. 30, 2018	Mar. 31, 2018	Dec. 31, 2019	Dec. 31, 2018
Sales	$ 21,103,124	$ 22,244,681	$ 24,514,636	$ 21,836,087	$ 21,135,277	$ 19,771,137	$ 13,593,192	$ 11,878,700	$ 89,698,527	$ 66,378,306
UNITED STATES
Sales									89,370,005	64,874,554
CANADA
Sales									283,011	351,211
CHINA
Sales									23,134
MEXICO
Sales										53,246
POLAND
Sales									1,750	10,299
PERU
Sales									12,202
Other Foreign Countries [Member]
Sales									$ 8,425	$ 1,088,996