Financial Data and Key Metrics Changes - Net sales for Q2 2020 were $8.5 million, representing a 36% decline from the prior year [8] - Gross profit declined by $1.6 million, or 76%, which was a greater decline than sales [8] - For the first six months, sales totaled $21.9 million, a decline of 21% [10] - The company reported an operating loss of $1.4 million for the first half, with 95% of that loss attributable to Q2 [10] - EBITDA for Q2 was negative, while EBITDA for the first six months was $894,000 [10] Business Line Data and Key Metrics Changes - The business is heavily concentrated on military aircraft components, with little change in demand for military products despite disruptions in commercial aerospace [7] - The backlog of firm orders remains at approximately $100 million, only marginally reduced [7] Market Data and Key Metrics Changes - The company faced significant impacts from COVID-19, including employee absenteeism and temporary shutdowns of subcontractors, which affected production and shipping [5][6] - Total manufacturing hours were 8,000 hours less than in Q2 2019, leading to under absorption of manufacturing overheads [9] Company Strategy and Development Direction - The company announced a major investment in equipment totaling about $2.5 million to accelerate production and enhance manufacturing capabilities [11] - The new machinery is expected to be operational by Q4 2020 and reflects the company's confidence in future demand [11] Management's Comments on Operating Environment and Future Outlook - Management noted that the workforce is stabilizing and absenteeism has returned to historical levels of 2% to 3% [15] - The company is optimistic about alleviating bottlenecks in production with new machinery, which will allow for increased efficiency and capability [22][25] Other Important Information - The company has maintained compliance with all loan covenants and expects to continue doing so [10] - There have been cancellations and reductions in commercial business, but military product production is being accelerated to fill gaps [7][28] Q&A Session Summary Question: Update on second quarter conditions and supplier stability - Management indicated that suppliers are stabilizing and returning to normal operations, with most of the workforce maintained [13][15] Question: Impact of new machinery on bottlenecks - The new equipment is expected to alleviate significant portions of current bottlenecks and enhance production capabilities [22][24] Question: Status of long-term agreement for thrust struts - Management confirmed a push out on order requirements but noted that there are no cancellations, and military product production is being accelerated to fill gaps [28][30]

UNITED STATES SECURITIES AND EXCHANGE COMMISSION Washington, D.C. 20549 FORM 10-Q ☒ Quarterly Report Pursuant To Section 13 or 15(d) of the Securities Exchange Act of 1934 For the quarterly period ended: June 30, 2020 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 No. 001-35927 AIR INDUSTRIES GROUP (Exact name of registrant as specified in its charter) 1460 Fifth Avenue, Bay Shore, New York 11706 ( ...

PART I. FINANCIAL INFORMATION [Financial Statements](index=4&type=section&id=Item%201.%20Financial%20Statements) This section presents the unaudited condensed consolidated financial statements for Q1 2020, detailing financial position, performance, and cash flows, along with explanatory notes [Condensed Consolidated Balance Sheets](index=5&type=section&id=Condensed%20Consolidated%20Balance%20Sheets) As of March 31, 2020, total assets increased to **$54.1 million** from **$51.1 million** at year-end 2019, driven by higher current assets including a new income tax receivable, while stockholders' equity improved to **$13.2 million** Condensed Consolidated Balance Sheet Data (in thousands) | Account | March 31, 2020 | December 31, 2019 | | :--- | :--- | :--- | | **Total Current Assets** | $41,794 | $38,245 | | **Total Assets** | $54,051 | $51,090 | | **Total Current Liabilities** | $19,546 | $20,079 | | **Total Liabilities** | $40,868 | $40,884 | | **Total Stockholders' Equity** | $13,183 | $10,206 | - A new Income Tax Receivable of **$1,416,000** was recorded on the balance sheet as of March 31, 2020, which was not present at the end of 2019[8](index=8&type=chunk) [Condensed Consolidated Statements of Operations](index=6&type=section&id=Condensed%20Consolidated%20Statements%20of%20Operations) For the first quarter of 2020, the company reported net income of **$1.06 million**, a significant turnaround from a net loss of **$0.92 million** in the same period of 2019, primarily driven by a **$1.41 million** income tax benefit and lower interest costs Condensed Consolidated Statements of Operations (in thousands) | Metric | Q1 2020 | Q1 2019 | | :--- | :--- | :--- | | Net Sales | $13,447 | $13,878 | | Gross Profit | $2,181 | $2,274 | | Loss from Operations | ($81) | ($63) | | Interest and Financing Costs | ($380) | ($963) | | Benefit from Income Taxes | ($1,414) | $0 | | **Net Income (Loss)** | **$1,058** | **($923)** | | **EPS - Diluted (Continuing Ops)** | **$0.03** | **($0.03)** | [Condensed Consolidated Statements of Cash Flows](index=8&type=section&id=Condensed%20Consolidated%20Statements%20of%20Cash%20Flows) In Q1 2020, net cash used in operating activities was **$0.31 million**, a substantial improvement from **$1.73 million** used in Q1 2019, with overall cash and cash equivalents increasing by **$0.2 million** Summary of Cash Flows (in thousands) | Cash Flow Activity | Q1 2020 | Q1 2019 | | :--- | :--- | :--- | | Net Cash Used in Operating Activities | ($314) | ($1,728) | | Net Cash (Used in) Provided by Investing Activities | ($78) | $54 | | Net Cash Provided by Financing Activities | $592 | $104 | | **Net Increase (Decrease) in Cash** | **$200** | **($1,570)** | [Notes to Condensed Consolidated Financial Statements](index=11&type=section&id=Notes%20to%20Condensed%20Consolidated%20Financial%20Statements) The notes detail the company's business structure, accounting policies, and the financial impact of significant events, including COVID-19, discontinued operations, and customer concentration - The company has been deemed an essential business and has not curtailed operations due to COVID-19, but expects the pandemic to result in a reduction to 2020 revenue and operating margins, with no material financial impact in Q1 2020[19](index=19&type=chunk)[23](index=23&type=chunk) - In May 2020, subsequent to the quarter end, the company's subsidiaries entered into government-subsidized SBA loans totaling **$2.4 million** under the Paycheck Protection Program (PPP)[26](index=26&type=chunk) - The company has significant customer concentration, with **three customers** representing **79.9%** of total net sales for the three months ended March 31, 2020[31](index=31&type=chunk) - The company filed a net operating loss carryback claim of **$1,416,000** as a result of the CARES Act, which is reflected as an income tax benefit and a receivable[27](index=27&type=chunk)[102](index=102&type=chunk) [Management's Discussion and Analysis of Financial Condition and Results of Operations](index=26&type=section&id=Item%202.%20Management%27s%20Discussion%20and%20Analysis%20of%20Financial%20Condition%20and%20Results%20of%20Operations) Management discusses the business overview, COVID-19 impact, and provides a detailed analysis of Q1 2020 financial results, covering segment performance, liquidity, capital resources, and cash flows [Business Overview and COVID-19 Impact](index=26&type=section&id=Business%20Overview%20and%20COVID-19%20Impact) The company operates in aerospace and defense, with operations impacted by COVID-19, anticipating reduced 2020 revenue and margins despite being deemed an essential business - The company's products are used on high-profile military aircraft like the F-35, F-18, F-16, and UH-60 Blackhawk, as well as commercial airliners like the Boeing 777 and Airbus 380[112](index=112&type=chunk) - The company has been designated as part of the Defense Industrial Base critical infrastructure workforce, allowing continued operations during the pandemic[122](index=122&type=chunk) - In May 2020, the company secured **$2.4 million** in government-subsidized SBA loans to mitigate the impact of COVID-19[127](index=127&type=chunk) [Results of Operations](index=29&type=section&id=Results%20of%20Operations) Q1 2020 saw a **3.1%** decrease in net sales, stable gross profit margin, and a significant reduction in interest costs, leading to a net income of **$1.06 million** driven by a tax benefit Segment Net Sales (in thousands) | Segment | Q1 2020 | Q1 2019 | % Change | | :--- | :--- | :--- | :--- | | Complex Machining | $12,064 | $12,418 | -2.9% | | Turbine Engine Components | $1,383 | $1,460 | -5.3% | | **Consolidated** | **$13,447** | **$13,878** | **-3.1%** | - Interest and financing costs fell by **$583,000** (**60.5%**) year-over-year due to lower interest rates under the new SNB credit facility which replaced the previous PNC facility[144](index=144&type=chunk) - Net income improved by **$1.98 million** year-over-year, primarily due to the reduction in interest expense and the **$1.414 million** income tax benefit from the CARES Act[146](index=146&type=chunk) [Liquidity and Capital Resources](index=31&type=section&id=Liquidity%20and%20Capital%20Resources) The company's liquidity improved with a new SNB credit facility, post-quarter SBA loans, and an anticipated CARES Act tax refund, expected to cover foreseeable cash requirements - On December 31, 2019, the company entered into a new loan facility with SNB, providing a **$16 million** revolving line of credit and a **$3.8 million** term loan, which was used to repay the previous PNC facility[154](index=154&type=chunk) - As of March 31, 2020, total debt to SNB was **$17.2 million**, consisting of **$13.6 million** on the revolving credit line and **$3.6 million** on the term loan[158](index=158&type=chunk) Cash Flow Summary (in thousands) | Activity | Q1 2020 | Q1 2019 | | :--- | :--- | :--- | | Cash Used in Operating Activities | ($314) | ($1,728) | | Cash Used in Investing Activities | ($78) | $54 | | Cash Provided by Financing Activities | $592 | $104 | [Controls and Procedures](index=34&type=section&id=Item%204.%20Controls%20and%20Procedures) Management concluded that disclosure controls and procedures were effective as of March 31, 2020, with no material changes to internal control over financial reporting during the quarter - The Chief Executive Officer and Chief Financial Officer concluded that the company's disclosure controls and procedures were effective as of the end of the period covered by the report[173](index=173&type=chunk) - There were no changes in internal control over financial reporting during the first quarter of 2020 that have materially affected, or are reasonably likely to materially affect, these controls[174](index=174&type=chunk) PART II. OTHER INFORMATION [Risk Factors](index=36&type=section&id=Item%201A.%20Risk%20Factors) This section supplements 2019 Form 10-K risk factors with a new risk concerning the COVID-19 pandemic's uncertain impact on operations, financial performance, and capital access - A new risk factor has been added regarding the COVID-19 pandemic, noting that its impact on future results of operations and overall financial performance remains uncertain[177](index=177&type=chunk) - Potential negative impacts from the pandemic include increased operating costs, forced closure or reduction of operations, supply chain disruptions, and difficulty accessing debt and equity capital[179](index=179&type=chunk)[180](index=180&type=chunk) [Unregistered Sales of Equity Securities and Use of Proceeds](index=36&type=section&id=Item%202.%20Unregistered%20Sales%20of%20Equity%20Securities%20and%20Use%20of%20Proceeds) The company confirms no unregistered sales of equity securities occurred during Q1 2020, except as previously disclosed in Exchange Act reports - The company did not issue or sell any unregistered equity securities during the period covered by this report, other than what was previously disclosed[182](index=182&type=chunk) [Exhibits](index=37&type=section&id=Item%206.%20Exhibits) This section lists exhibits filed with the Form 10-Q, including promissory notes for SBA loans obtained by the company's subsidiaries in May 2020 - Key exhibits filed with this report include three promissory notes dated in May 2020 between Sterling National Bank and the company's subsidiaries for the SBA loans[182](index=182&type=chunk)

Part I [Business](index=5&type=section&id=Item%201.%20Business) Air Industries Group is an aerospace and defense company designing and manufacturing flight-critical structural parts for military and commercial aircraft - The company manufactures and designs structural parts for high-profile military and commercial aircraft, including the UH-60 Black Hawk, F-35 Joint Strike Fighter, Boeing 777, and Airbus A380[13](index=13&type=chunk) - Operations are conducted through two segments: **Complex Machining** and **Turbine Engine Components**[15](index=15&type=chunk) - The company has recently repositioned its business by selling non-core assets and consolidating operations in Bay Shore, New York to focus on core competencies[14](index=14&type=chunk) - As of February 29, 2020, the company's 18-month firm funded backlog was approximately **$114.5 million**[25](index=25&type=chunk) - As of March 15, 2020, the company employed approximately **159 people**, with 101 in manufacturing[29](index=29&type=chunk) [Risk Factors](index=7&type=section&id=Item%201A.%20Risk%20Factors) The company faces significant business, indebtedness, and common stock-related risks, including pandemic impacts, customer concentration, and high leverage [Risks Related to Our Business](index=8&type=section&id=Risks%20Related%20to%20Our%20Business) - The **COVID-19 pandemic** is expected to have a highly negative impact on the general economy and may force the company to reduce or close operations[39](index=39&type=chunk)[40](index=40&type=chunk) - The company has a high customer concentration, with three customers accounting for approximately **76% of total sales in 2019**[46](index=46&type=chunk) - A significant portion of revenue is derived from components for a few specific aircraft platforms, including the **Sikorsky BlackHawk helicopter** and the **F-16 and F-18 fighter jets**[48](index=48&type=chunk) - A large percentage of revenue is derived from products for U.S. military aviation, making the company vulnerable to **reductions in government defense spending**[44](index=44&type=chunk) - The company faces a potential liability of approximately **$3.6 million** in a dispute with CPI Aerostructures, Inc[61](index=61&type=chunk)[62](index=62&type=chunk) [Risks Related to Our Indebtedness](index=13&type=section&id=Risks%20Related%20to%20Our%20Indebtedness) - The company has substantial indebtedness, with approximately **$16,343,000 outstanding** under its Loan Facility as of December 31, 2019, secured by substantially all of its assets[67](index=67&type=chunk) - A significant amount of subordinated convertible notes are payable on December 31, 2020, and an inability to pay or refinance this debt could **materially and adversely affect operations**[68](index=68&type=chunk) [Risks Related to our common stock](index=13&type=section&id=Risks%20Related%20to%20our%20common%20stock) - Ownership is highly concentrated, with two directors and their affiliates owning a significant number of shares, giving them **substantial influence over corporate actions**[73](index=73&type=chunk) - The common stock is listed on the NYSE American, but **trading volume has been limited**, which may impair a stockholder's ability to sell shares[76](index=76&type=chunk) - Failure to comply with the continuing listing standards of the NYSE American could result in the **delisting of the company's common stock**[74](index=74&type=chunk)[75](index=75&type=chunk) [Unresolved Staff Comments](index=16&type=section&id=Item%201B.%20Unresolved%20Staff%20Comments) The company reports no unresolved staff comments - The company reports no unresolved staff comments[84](index=84&type=chunk) [Properties](index=16&type=section&id=Item%202.%20Properties) The company consolidated its operations at its 5.4-acre corporate campus in Bay Shore, New York, while its Sterling subsidiary operates in Connecticut - The company's executive offices and the operations of NTW and AIM are located at a **5.4-acre corporate campus** in Bay Shore, New York[85](index=85&type=chunk) - The Sterling subsidiary operates in a **74,923 square foot facility** in Barkhamsted, Connecticut[86](index=86&type=chunk) [Legal Proceedings](index=16&type=section&id=Item%203.%20Legal%20Proceedings) The company is involved in several legal proceedings, most notably a dispute with CPI Aerostructures seeking approximately $4.2 million - The company is in a legal dispute with CPI Aerostructures regarding the sale of its subsidiary, Welding Metallurgy, Inc, with CPI seeking a judgment of around **$4,200,000**[91](index=91&type=chunk) - Contract Pharmacal Corp has filed an action seeking damages in excess of **$1,000,000** related to a sublease for a property formerly occupied by Welding Metallurgy, Inc[90](index=90&type=chunk) [Mine Safety Disclosures](index=17&type=section&id=Item%204.%20Mine%20Safety%20Disclosures) This section is not applicable to the company - The company has no mine safety disclosures to report[93](index=93&type=chunk) Part II [Market for Registrant's Common Equity, Related Stockholder Matters and Issuer Purchases of Equity Securities](index=17&type=section&id=Item%205.%20Market%20for%20Registrant's%20Common%20Equity%2C%20Related%20Stockholder%20Matters%20and%20Issuer%20Purchases%20of%20Equity%20Securities) The company's common stock (AIRI) is listed on the NYSE American with 247 stockholders of record as of March 20, 2020 - The company's common stock is listed on the NYSE American under the symbol **"AIRI"**[94](index=94&type=chunk) - As of March 20, 2020, there were **247 stockholders of record**[94](index=94&type=chunk) Securities Authorized for Issuance Under Equity Compensation Plans as of December 31, 2019 | Plan Category | Number of Securities to Be Issued Upon Exercise | Weighted Average Exercise Price | Number of Remaining Shares Available for Future Issuance | | :--- | :--- | :--- | :--- | | Equity compensation plans approved by security holders | 1,369,649 | $2.01 | 1,130,649 | | Equity compensation plans not approved by security holders | 2,182,902 | $2.90 | None | | **Total** | **3,552,551** | | **1,130,649** | [Selected Financial Data](index=18&type=section&id=Item%206.%20Selected%20Financial%20Data) This item is not required as the company is a smaller reporting company - This item is not required for smaller reporting companies[97](index=97&type=chunk) [Management's Discussion and Analysis of Financial Condition and Results of Operation](index=18&type=section&id=Item%207.%20Management's%20Discussion%20and%20Analysis%20of%20Financial%20Condition%20and%20Results%20of%20Operation) Financial performance improved in 2019 with a 22.6% increase in net sales and a narrowed operating loss, driven by restructuring and cost reductions [Results of Operations](index=21&type=section&id=Results%20of%20Operations) Consolidated Results of Operations (Continuing Operations) | Metric | 2019 | 2018 | | :--- | :--- | :--- | | Net Sales | $54,573,000 | $44,530,000 | | Gross Profit | $9,142,000 | $5,445,000 | | Loss from continuing operations | $(2,598,000) | $(8,551,000) | Segment Net Sales (2019 vs 2018) | Segment | 2019 Net Sales | 2018 Net Sales | % Change | | :--- | :--- | :--- | :--- | | Complex Machining | $48,226,000 | $39,745,000 | +21.3% | | Turbine Engine Components | $6,347,000 | $4,785,000 | +32.6% | - The increase in gross profit and margin was primarily due to **cost reduction measures**, operational consolidation, and better absorption of fixed charges over greater revenues[119](index=119&type=chunk) - The loss from continuing operations in 2018 was negatively impacted by a **$2,043,000 write-off** of capitalized engineering costs due to a change in accounting policy[123](index=123&type=chunk) [Liquidity and Capital Resources](index=24&type=section&id=Liquidity%20and%20Capital%20Resources) - On December 31, 2019, the company entered into a new loan facility with Sterling National Bank (SNB), which provides a **$16 million revolving loan** and a **$3.8 million term loan**[126](index=126&type=chunk)[127](index=127&type=chunk)[130](index=130&type=chunk) - The company has financed operations in part through private placements of debt and equity securities, with **substantial investments from directors Michael and Robert Taglich**[133](index=133&type=chunk) - In January 2019, Michael and Robert Taglich each purchased **$1,000,000 of 7% senior subordinated convertible promissory notes** due December 31, 2020[136](index=136&type=chunk) Summary of Cash Flows (in thousands) | Activity | 2019 | 2018 | | :--- | :--- | :--- | | Cash used in Operating Activities | $(888) | $(2,336) | | Cash (used in) provided by Investing Activities | $(764) | $3,685 | | Cash provided by Financing Activities | $934 | $33 | [Critical Accounting Policies](index=29&type=section&id=Critical%20Accounting%20Policies) - Management has evaluated conditions and believes that projected positive cash flows for 2020 **alleviate substantial doubt** about the company's ability to continue as a going concern[163](index=163&type=chunk)[243](index=243&type=chunk) - As of December 31, 2018, the company changed its policy to expense pre-production engineering costs as incurred, writing off the entire capitalized balance of **$2,043,000** in 2018[169](index=169&type=chunk) - The company adopted FASB ASC 606 "Revenue from Contracts with Customers" using the modified retrospective approach, which **did not have a material impact** on revenue recognition timing[171](index=171&type=chunk)[172](index=172&type=chunk) - Goodwill is tested for impairment annually; **no impairment was recorded for continuing operations in 2019**[183](index=183&type=chunk)[310](index=310&type=chunk)[311](index=311&type=chunk) [Quantitative and Qualitative Disclosure About Market Risk](index=33&type=section&id=Item%207A.%20Quantitative%20and%20Qualitative%20Disclosure%20About%20Market%20Risk) Disclosure for this item is not required for smaller reporting companies - Disclosure for this item is not required for smaller reporting companies[188](index=188&type=chunk) [Financial Statements and Supplementary Data](index=33&type=section&id=Item%208.%20Financial%20Statements%20and%20Supplementary%20Data) This section refers to the Consolidated Financial Statements which begin on page F-1 of the report - The financial statements required by this item begin on page F-1 of the report[188](index=188&type=chunk) [Changes in and Disagreements with Accountants on Accounting and Financial Disclosure](index=33&type=section&id=Item%209.%20Changes%20in%20and%20Disagreements%20with%20Accountants%20on%20Accounting%20and%20Financial%20Disclosure) The company reports no changes in or disagreements with its accountants - The company reports no changes in or disagreements with accountants on accounting and financial disclosure[188](index=188&type=chunk) [Controls and Procedures](index=33&type=section&id=Item%209A.%20Controls%20and%20Procedures) Management concluded that the company's disclosure controls and internal control over financial reporting were effective as of December 31, 2019 - The CEO and CFO concluded that the company's disclosure controls and procedures were **effective** as of December 31, 2019[189](index=189&type=chunk) - Management concluded that the company's internal controls over financial reporting were **effective** as of December 31, 2019[195](index=195&type=chunk) - In 2019, changes to internal controls included disposing of certain subsidiaries, acquiring new consolidation software, and hiring a new Chief Accounting Officer to address previously identified deficiencies[197](index=197&type=chunk) [Other Information](index=34&type=section&id=Item%209B.%20Other%20Information) The company reports no other information - The company reports no other information[198](index=198&type=chunk) Part III [Directors, Executive Officers, and Corporate Governance](index=35&type=section&id=Item%2010.%20Directors%2C%20Executive%20Officers%2C%20and%20Corporate%20Governance) This section lists key personnel, with most other required information incorporated by reference from the company's forthcoming proxy statement - Most information required by this item is **incorporated by reference** from the company's definitive proxy statement[199](index=199&type=chunk) Directors and Executive Officers | Name | Age | Position | | :--- | :--- | :--- | | Luciano (Lou) Melluzzo | 55 | President and Chief Executive Officer | | Michael E. Recca | 69 | Chief Financial Officer | | Michael N. Taglich | 54 | Chairman of the Board | | Robert F. Taglich | 53 | Director | | David J. Buonanno | 64 | Director | | Peter D. Rettaliata | 69 | Director | | Robert C. Schroeder | 53 | Director | | Michael Brand | 62 | Director | | Michael D. Porcelain | 51 | Director | [Executive Compensation](index=37&type=section&id=Item%2011.%20Executive%20Compensation) Information required by this Item is incorporated by reference from the company's definitive proxy statement - Information regarding executive compensation is **incorporated by reference** from the company's proxy statement[213](index=213&type=chunk) [Security Ownership of Certain Beneficial Owners and Management and Related Stockholder Matters](index=37&type=section&id=Item%2012.%20Security%20Ownership%20of%20Certain%20Beneficial%20Owners%20and%20Management%20and%20Related%20Stockholder%20Matters) Information required by this Item is incorporated by reference from the company's definitive proxy statement - Information regarding security ownership is **incorporated by reference** from the company's proxy statement[214](index=214&type=chunk) [Certain Relationships and Related Transactions and Director Independence](index=37&type=section&id=Item%2013.%20Certain%20Relationships%20and%20Related%20Transactions%20and%20Director%20Independence) Information required by this Item is incorporated by reference from the company's definitive proxy statement - Information regarding related transactions and director independence is **incorporated by reference** from the company's proxy statement[215](index=215&type=chunk) [Principal Accountant Fees and Services](index=37&type=section&id=Item%2014.%20Principal%20Accountant%20Fees%20and%20Services) Information required by this Item is incorporated by reference from the company's definitive proxy statement - Information regarding principal accountant fees and services is **incorporated by reference** from the company's proxy statement[216](index=216&type=chunk) Part IV [Exhibits and Financial Statement Schedules](index=38&type=section&id=Item%2015.%20Exhibits%20and%20Financial%20Statement%20Schedules) This section lists all exhibits filed as part of the annual report, including key agreements, corporate documents, and required certifications - The report includes a comprehensive list of exhibits, such as the Loan and Security Agreement with Sterling National Bank, the Stock Purchase Agreement with CPI Aerostructures, and various convertible note agreements with related parties[218](index=218&type=chunk)[219](index=219&type=chunk)[220](index=220&type=chunk) [Consolidated Financial Statements](index=45&type=section&id=Consolidated%20Financial%20Statements) The audited financial statements for 2019 and 2018 show a net loss of $2.7 million in 2019, an improvement from an $11.0 million loss in 2018 [Report of Independent Registered Public Accounting Firm](index=45&type=section&id=Report%20of%20Independent%20Registered%20Public%20Accounting%20Firm) - The auditor, Rotenberg Meril Solomon Bertiger & Guttilla, P.C., issued an **unqualified opinion**, stating that the financial statements present fairly the financial position of the company[226](index=226&type=chunk) [Financial Statement Tables](index=46&type=section&id=Financial%20Statement%20Tables) Consolidated Balance Sheet Data (as of December 31) | Metric | 2019 | 2018 | | :--- | :--- | :--- | | Total Current Assets | $38,245,000 | $38,048,000 | | Total Assets | $51,090,000 | $47,756,000 | | Total Current Liabilities | $32,622,000 | $29,007,000 | | Total Liabilities | $40,884,000 | $36,150,000 | | Total Stockholders' Equity | $10,206,000 | $11,606,000 | Consolidated Statement of Operations Data (for the year ended December 31) | Metric | 2019 | 2018 | | :--- | :--- | :--- | | Net Sales | $54,573,000 | $44,530,000 | | Gross Profit | $9,142,000 | $5,445,000 | | Loss from Continuing Operations | $(2,598,000) | $(8,551,000) | | Net Loss | $(2,732,000) | $(10,992,000) | | Net Loss per share - basic | $(0.09) | $(0.32) | [Notes to Consolidated Financial Statements](index=52&type=section&id=Notes%20to%20Consolidated%20Financial%20Statements) - Management believes that improved financial performance and a new credit facility have **alleviated substantial doubt** about the company's ability to continue as a going concern[242](index=242&type=chunk)[243](index=243&type=chunk)[244](index=244&type=chunk) - The results of the sold WMI Group and closed EPC and ECC subsidiaries are reported as discontinued operations, with a loss from discontinued operations of **$134,000 in 2019** and **$2,441,000 in 2018**[263](index=263&type=chunk)[265](index=265&type=chunk) - On January 1, 2019, the company adopted the new lease accounting standard, ASC 842, resulting in the recognition of operating lease right-of-use assets of **$4.4 million** and related lease liabilities[248](index=248&type=chunk)[251](index=251&type=chunk) - As of December 31, 2019, related party notes payable, primarily to directors Michael and Robert Taglich and their affiliates, totaled **$6.9 million**[330](index=330&type=chunk)[361](index=361&type=chunk)

Air Industries Group (NYSE:AIRI) Q4 2019 Earnings Conference Call March 25, 2020 8:30 AM ET Company Participants Luciano Melluzzo - President and Chief Executive Officer Michael Recca - Chief Financial Officer Conference Call Participants John Nobile - Taglich Brothers, Inc. Operator Good day, and welcome to the Air Industries Conference Call. Today’s conference is being recorded. Air Industries Group’s Safe Harbor statement. Except for the historical information contained herein, the matters discussed in t ...

[PART I. FINANCIAL INFORMATION](index=5&type=section&id=PART%20I.%20FINANCIAL%20INFORMATION) This section presents the company's unaudited financial statements, management's analysis of operations and liquidity, and assessment of internal controls [Item 1. Financial Statements](index=5&type=section&id=Item%201.%20Financial%20Statements) This section presents the unaudited condensed consolidated financial statements, accompanied by notes detailing accounting policies, debt, and a going concern warning [Condensed Consolidated Financial Statements](index=6&type=section&id=Condensed%20Consolidated%20Financial%20Statements) The financial statements reflect increased net sales and a shift to net income for Q3 2019, alongside balance sheet changes and improved operating cash flow for the nine-month period Financial Metric (in thousands USD) | Financial Metric | Three Months Ended Sep 30, 2019 | Three Months Ended Sep 30, 2018 | Nine Months Ended Sep 30, 2019 | Nine Months Ended Sep 30, 2018 | | :--- | :--- | :--- | :--- | :--- | | **Net Sales** | $14,000 | $10,700 | $41,200 | $33,600 | | **Gross Profit** | $3,000 | $1,400 | $7,400 | $4,900 | | **Income (Loss) from Operations** | $1,200 | ($800) | $1,300 | ($2,000) | | **Net Income (Loss)** | $200 | ($3,100) | ($1,500) | ($4,400) | | **EPS (Diluted)** | $0.01 (Continuing Ops) | ($0.06) (Continuing Ops) | ($0.05) (Continuing Ops) | ($0.16) (Continuing Ops) | Balance Sheet Item (in thousands USD) | Balance Sheet Item | September 30, 2019 (Unaudited) | December 31, 2018 | | :--- | :--- | :--- | | **Total Current Assets** | $37,700 | $38,000 | | **Total Assets** | $50,800 | $47,800 | | **Total Current Liabilities** | $33,000 | $29,000 | | **Total Liabilities** | $40,200 | $36,200 | | **Total Stockholders' Equity** | $10,600 | $11,600 | Cash Flow Activity (Nine Months Ended Sep 30, in thousands USD) | Cash Flow Activity (Nine Months Ended Sep 30) | 2019 (Unaudited) | 2018 (Unaudited) | | :--- | :--- | :--- | | **Net Cash from Operating Activities** | $300 | ($2,900) | | **Net Cash used in Investing Activities** | ($400) | ($1,000) | | **Net Cash (used in) provided by Financing Activities** | ($1,600) | $4,200 | | **Net (Decrease) Increase in Cash** | ($1,700) | $300 | [Notes to Condensed Consolidated Financial Statements](index=13&type=section&id=Notes%20to%20Condensed%20Consolidated%20Financial%20Statements) These notes provide critical context to the financial statements, detailing significant accounting policies, debt, customer concentration, and a going concern warning - The company's ability to continue as a going concern is in **substantial doubt** due to a history of operating losses, negative cash flows, and significant reliance on debt and equity infusions to maintain operations[16](index=16&type=chunk)[17](index=17&type=chunk) - On January 1, 2019, the company adopted the new lease accounting standard, ASC 842, which resulted in the recognition of **$4.4 million** in operating lease right-of-use assets and corresponding lease liabilities on the balance sheet[24](index=24&type=chunk)[25](index=25&type=chunk)[27](index=27&type=chunk) - The company faces significant customer concentration risk, with three customers (Sikorsky Aircraft, Goodrich Landing Gear Systems, and Rohr) accounting for **73.4%** of total sales for the nine months ended September 30, 2019[50](index=50&type=chunk)[51](index=51&type=chunk) - The company is involved in a significant legal dispute with CPI Aerostructures regarding a working capital adjustment from the 2018 sale of the WMI Group, with CPI seeking approximately **$4.2 million**[113](index=113&type=chunk) Segment Performance (Nine Months Ended Sep 30, 2019, in thousands USD) | Segment Performance (Nine Months Ended Sep 30, 2019) | Net Sales | Gross Profit | Pretax Income (Loss) | | :--- | :--- | :--- | :--- | | **Complex Machining** | $36,400 | $7,100 | $4,800 | | **Turbine Engine Components** | $4,800 | $400 | ($300) | | **Corporate** | — | — | ($5,800) | [Management's Discussion and Analysis of Financial Condition and Results of Operations](index=30&type=section&id=Item%202.%20Management%27s%20Discussion%20and%20Analysis%20of%20Financial%20Condition%20and%20Results%20of%20Operations) Management discusses operational repositioning, highlighting significant sales growth and improved gross margins, while acknowledging high leverage and ongoing going concern risks [Results of Operations](index=31&type=section&id=Results%20of%20Operations) The company achieved significant net sales and gross profit growth for both the third quarter and nine-month period, driven by increased sales volume and cost reduction efforts Metric (Three Months Ended Sep 30, in thousands USD) | Metric | Three Months Ended Sep 30, 2019 | Three Months Ended Sep 30, 2018 | % Change | | :--- | :--- | :--- | :--- | | **Net Sales** | $14,000 | $10,700 | +30.4% | | **Gross Profit** | $3,000 | $1,400 | +116.8% | | **Gross Margin** | 21.2% | 12.7% | +8.5 p.p. | | **Net Income (Loss)** | $200 | ($3,100) | N/A | Metric (Nine Months Ended Sep 30, in thousands USD) | Metric | Nine Months Ended Sep 30, 2019 | Nine Months Ended Sep 30, 2018 | % Change | | :--- | :--- | :--- | :--- | | **Net Sales** | $41,200 | $33,600 | +22.7% | | **Gross Profit** | $7,400 | $4,900 | +52.7% | | **Gross Margin** | 18.0% | 14.5% | +3.5 p.p. | | **Net Loss** | ($1,500) | ($4,400) | N/A | - Consolidated operating expenses decreased by **17.2%** in Q3 2019 and **14.5%** in the nine-month period year-over-year, primarily due to cost reduction efforts, including the consolidation of corporate offices and NTW operations into the Bay Shore location[148](index=148&type=chunk)[156](index=156&type=chunk) [Liquidity and Capital Resources](index=35&type=section&id=Liquidity%20and%20Capital%20Resources) The company's liquidity remains constrained by high leverage and reliance on its PNC Bank facility and related-party financing, despite recent liquidity-enhancing transactions and covenant compliance - The company is **highly leveraged** and relies on its Loan Facility with PNC Bank and debt/equity from principal stockholders to support operations, with the PNC facility maturing on December 31, 2019[158](index=158&type=chunk)[164](index=164&type=chunk) - As of September 30, 2019, the company was in **compliance** with the minimum EBITDA covenants required by its PNC Loan Facility[165](index=165&type=chunk) - In January 2019, the company raised **$2.0 million** by issuing 7% senior subordinated convertible notes to directors Michael and Robert Taglich to meet conditions for extending its PNC loan maturity[172](index=172&type=chunk) - The company sold its rights to **$1.1 million** in future payments from the sale of its AMK subsidiary for an immediate cash payment of **$0.8 million** in January 2019 to increase liquidity[178](index=178&type=chunk) - Management explicitly states that historical losses and reliance on external financing raise **substantial doubt** about the company's ability to continue as a going concern[189](index=189&type=chunk)[190](index=190&type=chunk) [Controls and Procedures](index=43&type=section&id=Item%204.%20Controls%20and%20Procedures) Management concluded that disclosure controls and procedures were ineffective due to material weaknesses in inventory, financial closing, and accounting personnel, with remediation plans contingent on financial ability - The CEO and CFO concluded that the company's disclosure controls and procedures were **not effective** as of the end of the reporting period[219](index=219&type=chunk) - Material weaknesses were identified in several areas, including: inventory control systems, the quarterly closing process, accounting for complex or non-standard transactions, and a lack of sufficient accounting personnel[219](index=219&type=chunk) - Planned remediation efforts include supplementing the accounting staff with experienced professionals and using third-party consultants, contingent on the company's financial ability[220](index=220&type=chunk) [PART II. OTHER INFORMATION](index=43&type=section&id=PART%20II.%20OTHER%20INFORMATION) This section details legal proceedings, risk factors, equity security sales, and a comprehensive list of exhibits [Legal Proceedings](index=43&type=section&id=Item%201.%20Legal%20Proceedings) This section details an ongoing legal dispute with CPI Aerostructures regarding a working capital adjustment from a prior sale, where CPI seeks approximately $4.2 million - The company is in a legal dispute with CPI Aerostructures over the final working capital adjustment from the sale of the WMI Group[222](index=222&type=chunk) - An independent expert determined the working capital deficit to be approximately **$4.1 million**, and CPI has filed a motion seeking a judgment of about **$4.2 million**, with **$2.0 million** to be satisfied from funds in escrow[223](index=223&type=chunk)[224](index=224&type=chunk) - The company believes the expert's determination is void and intends to "contest vigorously" CPI's claim, though it has agreed to release **$0.6 million** from the escrow for undisputed items[225](index=225&type=chunk) [Risk Factors](index=44&type=section&id=Item%201A.%20Risk%20Factors) This section does not introduce any new risk factors, instead incorporating by reference the risks and uncertainties previously disclosed in the company's 2018 Annual Report on Form 10-K - The report refers to the risk factors disclosed in the company's 2018 Annual Report on Form 10-K and does not present any new or updated risks[226](index=226&type=chunk) [Sales of Unregistered Equity Securities](index=44&type=section&id=Item%202.%20Sales%20of%20Unregistered%20Equity%20Securities) The company reports that it did not issue or sell any unregistered equity securities during the third quarter of 2019, other than what may have been previously disclosed in its other SEC filings - No unregistered equity securities were sold during the period covered by this report, except as previously disclosed in other Exchange Act reports[227](index=227&type=chunk) [Exhibits](index=44&type=section&id=Item%206.%20Exhibits) This section provides a list of all exhibits filed with the Form 10-Q, including corporate governance documents, certifications by officers, and interactive data files - The report includes standard exhibits such as CEO and CFO certifications pursuant to Rule 13a-14 and Section 906 of the Sarbanes-Oxley Act, as well as XBRL data files[227](index=227&type=chunk)

UNITED STATES SECURITIES AND EXCHANGE COMMISSION Washington, D.C. 20549 FORM 10-Q ☒ Quarterly Report Pursuant To Section 13 or 15(d) of the Securities Exchange Act of 1934 For the quarterly period ended: June 30, 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 No. 001-35927 AIR INDUSTRIES GROUP (Exact name of registrant as specified in its charter) Nevada 80-0948413 (State or other jurisdiction ...

UNITED STATES SECURITIES AND EXCHANGE COMMISSION Washington, D.C. 20549 FORM 10-Q ☒ Quarterly Report Pursuant To Section 13 or 15(d) of the Securities Exchange Act of 1934 For the quarterly period ended: March 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 No. 001-35927 AIR INDUSTRIES GROUP (Exact name of registrant as specified in its charter) Nevada 80-0948413 (State or other jurisdictio ...

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, 2018 ☐ Transition Report Under Section 13 or 15(d) of the Securities Exchange Act of 1934 For the transition period from ______ to_______ Commission File No. 001-35927 AIR INDUSTRIES GROUP (Name of small business issuer in its charter) Nevada 80-0948413 (State or other jurisdiction of incorporation or ...