Air Industries (AIRI) - 2021 Q3 - Quarterly Report

PART I. FINANCIAL INFORMATION Item 1. Financial Statements The company's financial statements for the period ended September 30, 2021, reflect increased revenue, improved profitability, and positive operating cash flow Condensed Consolidated Balance Sheets Condensed Consolidated Balance Sheet Highlights (Unaudited) | Account | Sep 30, 2021 ($) | Dec 31, 2020 ($) | Change ($) | | :--- | :--- | :--- | :--- | | Total Current Assets | $40,944,000 | $43,611,000 | -$2,667,000 | | Total Assets | $53,521,000 | $57,777,000 | -$4,256,000 | | Total Current Liabilities | $23,942,000 | $27,327,000 | -$3,385,000 | | Total Liabilities | $37,874,000 | $42,668,000 | -$4,794,000 | | Total Stockholders' Equity | $15,647,000 | $15,109,000 | +$538,000 | Condensed Consolidated Statements of Operations Statement of Operations Summary (Unaudited) | Metric | Three Months Ended Sep 30, 2021 ($) | Three Months Ended Sep 30, 2020 ($) | Nine Months Ended Sep 30, 2021 ($) | Nine Months Ended Sep 30, 2020 ($) | | :--- | :--- | :--- | :--- | :--- | | Net Sales | $14,354,000 | $13,662,000 | $43,519,000 | $35,603,000 | | Gross Profit | $2,014,000 | $1,656,000 | $6,414,000 | $4,451,000 | | Income (Loss) from Operations | $177,000 | $(240,000) | $644,000 | $(1,613,000) | | Net (Loss) Income | $(66,000) | $(477,000) | $21,000 | $(1,003,000) | | Net (Loss) Income per share - Basic | $(0.00) | $(0.02) | $0.00 | $(0.03) | Condensed Consolidated Statements of Stockholders' Equity - Total stockholders' equity increased from $15,109,000 at the beginning of 2021 to $15,647,000 as of September 30, 2021, driven by stock compensation, common stock issued for director fees, and a small net income for the nine-month period[17] Condensed Consolidated Statements of Cash Flows Cash Flow Summary for the Nine Months Ended September 30 (Unaudited) | Activity | 2021 ($) | 2020 ($) | | :--- | :--- | :--- | | Net Cash Provided By (Used In) Operating Activities | $2,514,000 | $(3,184,000) | | Net Cash Used In Investing Activities | $(983,000) | $(1,471,000) | | Net Cash (Used In) Provided By Financing Activities | $(3,344,000) | $4,821,000 | | Net (Decrease) Increase in Cash | $(1,813,000) | $166,000 | | Cash and Cash Equivalents at End of Period | $692,000 | $1,460,000 | - The significant improvement in cash from operations in 2021 was primarily driven by a decrease in inventory and positive net income, compared to a net loss and inventory increase in the prior year period[19] Notes to Condensed Consolidated Financial Statements - Management believes the company has adequate cash to support operations through at least November 30, 2022, citing improved operating income, sales forecasts, and existing backlog[28] - The company has significant customer concentration risk, with three customers accounting for 75.5% of total sales for the nine months ended September 30, 2021[33] - As of September 30, 2021, total debt to Sterling National Bank (SNB) was $17.87 million, consisting of a $13.46 million revolving line of credit and a $4.41 million term loan[74] - The company is involved in a lawsuit with Contract Pharmacal Corp., which is seeking damages of $700,000, though management disputes the claims and has not accrued a loss as the outcome is not currently estimable[91] Management's Discussion and Analysis of Financial Condition and Results of Operations Management attributes sales growth to increased production and improved business conditions, leading to higher gross profit, net income, and enhanced liquidity Business Overview - The company is an aerospace and defense manufacturer specializing in flight safety structural parts (landing gear, engine mounts) and turbine engine components[102] - Key products are used on high-profile military and commercial aircraft such as the UH-60 Blackhawk, F-35, F-18, F-16, and Boeing 777[102] - The company's current focus is on maintaining profitability, achieving positive cash flows, and meeting customer needs, supported by recent capital investments in new equipment[104] Results of Operations Q3 2021 vs Q3 2020 Performance | Metric | Q3 2021 ($) | Q3 2020 ($) | Change | | :--- | :--- | :--- | :--- | | Net Sales | $14,354,000 | $13,662,000 | +5.1% | | Gross Profit | $2,014,000 | $1,656,000 | +21.6% | | Net Loss | $(66,000) | $(477,000) | +86.2% | Nine Months 2021 vs 2020 Performance | Metric | 9M 2021 ($) | 9M 2020 ($) | Change | | :--- | :--- | :--- | :--- | | Net Sales | $43,519,000 | $35,603,000 | +22.2% | | Gross Profit | $6,414,000 | $4,451,000 | +44.1% | | Net Income (Loss) | $21,000 | $(1,003,000) | N/A | - The increase in gross profit margin for both the three and nine-month periods was attributed to better absorption of manufacturing overhead resulting from higher sales volumes[119][126] Liquidity and Capital Resources - In 2020, the company improved liquidity through government programs, including receiving and subsequently having $2.4 million in SBA loans forgiven, deferring $627,000 in payroll taxes, and receiving a $1.4 million NOL tax refund[130][131][133] - Cash from operating activities for the nine months ended Sep 30, 2021, was $2.51 million, a significant turnaround from a use of $3.18 million in the same period of 2020[142] - Cash used in financing activities was $3.34 million, primarily due to net repayments on the SNB revolving loan ($2.19 million) and term note ($1.15 million)[147] Critical Accounting Policies and Estimates - The company identifies several critical accounting policies requiring significant management judgment, including liquidity, inventory valuation, revenue recognition, income taxes, stock-based compensation, and goodwill[150] Item 4. Controls and Procedures Management, including the CEO and CFO, concluded the company's disclosure controls and procedures were effective, with no material changes to internal controls - The CEO and CFO concluded that the company's disclosure controls and procedures were effective as of September 30, 2021[155] - There were no changes in internal control over financial reporting during the quarter that materially affected, or are reasonably likely to materially affect, these controls[155] PART II. OTHER INFORMATION Item 1A. Risk Factors The company highlights ongoing uncertainty from the COVID-19 pandemic and other macroeconomic events, which could materially impact its business and financial position - The primary supplemental risk factor discussed is the continued uncertainty surrounding the COVID-19 pandemic and its potential to disrupt business operations, supply chains, and overall financial performance[158] Item 6. Exhibits This section lists all exhibits filed with the Form 10-Q, including organizational documents, Sarbanes-Oxley certifications, and XBRL data - The report lists various exhibits filed, including CEO and CFO certifications under Sarbanes-Oxley (Exhibits 31.1, 31.2, 32.1, 32.2) and XBRL interactive data files[160]