# Air Industries Group: Form 10-Q for the period ended Jun 30, 2025

- Company: [Air Industries Group](/companies/airi.md) (CIK 1009891)
- Form: 10-Q
- Filed: 2025-08-14
- Accepted by EDGAR: Aug 14, 2025, 13:46 ET
- Period: 2025-06-30
- Accession: 0001213900-25-076418
- Inline XBRL: yes
- Main document: https://www.sec.gov/Archives/edgar/data/1009891/000121390025076418/ea0252543-10q_airindus.htm
- All documents and exhibits: https://www.sec.gov/Archives/edgar/data/1009891/000121390025076418/

## Figures reported in this filing

Standardized XBRL line items for the period ended 2025-06-30.

| Line item | Period | Value | XBRL concept |
| --- | --- | ---: | --- |
| Revenue | 3 months, 2025-04-01 to 2025-06-30 | $12.7m | us-gaap:Revenues |
| Revenue | 6 months, 2025-01-01 to 2025-06-30 | $24.8m | us-gaap:Revenues |
| Cost of revenue | 3 months, 2025-04-01 to 2025-06-30 | $10.6m | us-gaap:CostOfRevenue |
| Cost of revenue | 6 months, 2025-01-01 to 2025-06-30 | $20.7m | us-gaap:CostOfRevenue |
| Gross profit | 3 months, 2025-04-01 to 2025-06-30 | $2.0m | us-gaap:GrossProfit |
| Gross profit | 6 months, 2025-01-01 to 2025-06-30 | $4.1m | us-gaap:GrossProfit |
| Operating income | 3 months, 2025-04-01 to 2025-06-30 | $8.0k | us-gaap:OperatingIncomeLoss |
| Operating income | 6 months, 2025-01-01 to 2025-06-30 | −$738.0k | us-gaap:OperatingIncomeLoss |
| Interest expense | 3 months, 2025-04-01 to 2025-06-30 | $360.0k | us-gaap:InterestExpense |
| Interest expense | 6 months, 2025-01-01 to 2025-06-30 | $705.0k | us-gaap:InterestExpense |
| Net income | 3 months, 2025-04-01 to 2025-06-30 | −$422.0k | us-gaap:NetIncomeLoss |
| Net income | 6 months, 2025-01-01 to 2025-06-30 | −$1.4m | us-gaap:NetIncomeLoss |
| Diluted EPS | 3 months, 2025-04-01 to 2025-06-30 | −$0.11 | us-gaap:EarningsPerShareDiluted |
| Diluted EPS | 6 months, 2025-01-01 to 2025-06-30 | −$0.38 | us-gaap:EarningsPerShareDiluted |
| Basic EPS | 3 months, 2025-04-01 to 2025-06-30 | −$0.11 | us-gaap:EarningsPerShareBasic |
| Basic EPS | 6 months, 2025-01-01 to 2025-06-30 | −$0.38 | us-gaap:EarningsPerShareBasic |
| Diluted shares (weighted) | 3 months, 2025-04-01 to 2025-06-30 | 3,731,335 shares | us-gaap:WeightedAverageNumberOfDilutedSharesOutstanding |
| Diluted shares (weighted) | 6 months, 2025-01-01 to 2025-06-30 | 3,699,084 shares | us-gaap:WeightedAverageNumberOfDilutedSharesOutstanding |
| Operating cash flow | 6 months, 2025-01-01 to 2025-06-30 | $1.9m | us-gaap:NetCashProvidedByUsedInOperatingActivities |
| Capital expenditure | 6 months, 2025-01-01 to 2025-06-30 | $2.1m | us-gaap:PaymentsToAcquirePropertyPlantAndEquipment |
| Cash and equivalents | at 2025-06-30 | $507.0k | us-gaap:Cash |
| Current assets | at 2025-06-30 | $38.1m | us-gaap:AssetsCurrent |
| Total assets | at 2025-06-30 | $50.4m | us-gaap:Assets |
| Current liabilities | at 2025-06-30 | $28.4m | us-gaap:LiabilitiesCurrent |
| Total liabilities | at 2025-06-30 | $35.1m | us-gaap:Liabilities |
| Long-term debt | at 2025-06-30 | $1.6m | us-gaap:LongTermDebtNoncurrent |
| Current portion of debt | at 2025-06-30 | $18.7m | us-gaap:LongTermDebtCurrent |
| Shareholders' equity | at 2025-06-30 | $15.3m | us-gaap:StockholdersEquity |

## Management's discussion and analysis

As filed, 28,224 characters.

*The following discussion of our financial condition and results of operations should be read in conjunction with the unaudited condensed consolidated financial statements and notes to those statements included elsewhere in this Form 10-Q and with the audited consolidated financial statements and the notes thereto included in our Annual Report on Form 10-K, for the year ended December 31, 2024 (the “2024 Form 10-K”). This discussion contains forward-looking statements that involve risks and uncertainties. You should specifically consider the various risk factors identified in this report and our 2024 Form 10-K that could cause actual results to differ materially from those anticipated in these forward-looking statements.*

### Business Overview

We believe we are one of the leading manufacturers of precision components and assemblies for large aerospace and defense contractors. Our rich history dates to 1941, producing parts for World War II fighter aircraft. Since then, we have maintained an impeccable record with no known incidents of part failure leading to a fatal mission. We became a public company in 2005.

Our products include landing gear, flight controls, engine mounts and components for aircraft jet engines and ground turbines and other complex machines. The ultimate end-user for most of our products is the U.S. government, foreign governments, and commercial global airlines. Whether it is a small individual component for assembly by others or complete assemblies we manufacture ourselves, our high quality and extremely reliable products are used in mission critical operations that are essential for safety of military personnel and civilians.

Although our net sales are concentrated amongst a number of defense and aerospace prime contractors, we have cultivated long-standing relationships with a number of their subsidiaries and/or business units. Additionally, our net sales are generated across several high-profile platforms and programs including: the F-18 Hornet, the E-2 Hawkeye, the UH-60 Black Hawk Helicopters, Geared Turbo-Fan (“GTF”) Engines (used on smaller aircraft such as the Airbus A220 and Embraer E2), the CH-53 Helicopter, the F-35 Lighting II and the F-15 Eagle Tactical Fighter. In many cases, we are the sole or single supplier of certain parts and components and receive LTAs from our customers, both demonstrating their commitment to us.

Winning a new contract award is highly competitive. Our ability to win new contract awards generally requires us to deliver superior quality products, more quickly and with lower pricing than our competitors. Accordingly, we must continually invest in process improvements and capital equipment. Recent investments in new equipment have improved the productive capacity of our employees, increased our efficiency and speed, and expanded the size of products we can manufacture. We strategically operate two state-of-the-art manufacturing centers in the U.S. This allows for rigorous oversight of production and the adherence to stringent quality standards. Although there is currently a shortage of skilled workers, we maintain a highly trained and close-knit team of over 150 professionals committed to driving excellence and precision in every aspect of our operations.

Our period-to-period net sales and operating results are significantly impacted by timing. In addition, our gross profit is affected by a variety of factors, including the mix and complexity of products, production efficiencies, price competition and general business operating environments. In some cases, our gross profit is impacted by our ability to deliver replacement parts on short notice. Our operations have a large percentage of fixed factory overhead. As a result, our profit margins are highly variable with sales volumes.

For the past several years, despite facing significant financial and operational challenges, we have strategically invested substantial amounts in new capital equipment, tooling, and processes to bolster our competitive position. Additionally, we expanded our sales and marketing efforts, with a sharp focus on expanding relationships with existing customers and cultivating new ones. Fiscal 2024 marked a year of overall progress and positioning for growth. Beginning in July 2025, we reduced employment, cutting expenses by an estimated $1.0 million annually.

As a result of recent contract awards, as of June 30, 2025 we had total unfilled contract values amounting to $272.9 million (including our $128.5 million in backlog plus additional potential orders against LTA agreements previously awarded to us). Our backlog of firm orders and expected orders under LTA’s provide a firm foundation for future growth, and improving profitability. However, the long-lead times to receive raw materials and then manufacture the products means that significant improvement in sales and profitability will not be achieved during the balance of 2025. We expect that sales and profitability will begin to improve in early 2026 and continue to improve during the balance of the year.

### RESULTS OF OPERATIONS

### Selected Financial Information:

|  | Three Months Ending June 30, 2025 | 2025 Percentage of Net Sales | Three Months Ending June 30, 2024 | 2024 Percentage of Net Sales | Change 2025 vs 2024 | Percent Change 2025 vs 2024 |
| --- | ---: | ---: | ---: | ---: | ---: | ---: |
| Net sales | $12,659,000 | 100.0% | $13,572,000 | 100.0% | $(913,000) | -6.73% |
| Cost of sales | 10,631,000 | 84.0% | 10,928,000 | 80.5% | (297,000) | -2.72% |
| Gross profit | 2,028,000 | 16.0% | 2,644,000 | 19.5% | (616,000) | -23.30% |
| Operating expenses | 2,020,000 | 16.0% | 1,892,000 | 13.9% | 128,000 | 6.77% |
| Interest expense | 446,000 | 3.5% | 474,000 | 3.5% | (28,000) | -5.91% |
| Other income, net | 16,000 | 0.1% | 20,000 | 0.1% | (4,000) | -20.00% |
| Provision for income taxes | - | 0.0% | - | 0.0% | - | - |
| Net (loss) income | $(422,000) | -3.3% | $298,000 | 2.2% | $(720,000) | -241.61% |

|  | Six Months Ending June 30, 2025 | 2025 Percentage of Net Sales | Six Months Ending June 30, 2024 | 2024 Percentage of Net Sales | Change 2025 vs 2024 | Percent Change 2025 vs 2024 |
| --- | ---: | ---: | ---: | ---: | ---: | ---: |
| Net sales | $24,802,000 | 100.0% | $27,633,000 | 100.0% | $(2,831,000) | -10.24% |
| Cost of sales | 20,740,000 | 83.6% | 23,083,000 | 83.5% | (2,343,000) | -10.15% |
| Gross profit | 4,062,000 | 16.4% | 4,550,000 | 16.5% | (488,000) | -10.73% |
| Operating expenses | 4,800,000 | 19.4% | 4,057,000 | 14.7% | 743,000 | 18.31% |
| Interest expense | 890,000 | 3.6% | 936,000 | 3.4% | (46,000) | -4.91% |
| Other income, net | 218,000 | 0.9% | 35,000 | 0.1% | 183,000 | 522.86% |
| Provision for income taxes | - | 0.0% | - | 0.0% | - | - |
| Net loss | $(1,410,000) | -5.7% | $(408,000) | -1.5% | $(1,002,000) | 245.59% |

### Balance Sheet Data:

|  | June 30, 2025 | December 31, 2024 | Change | Percent Change |
| --- | ---: | ---: | ---: | ---: |
| Cash | $507,000 | $753,000 | (246,000) | -32.67% |
| Working capital | $9,766,000 | $11,776,000 | (2,010,000) | -17.07% |
| Total assets | $50,377,000 | $51,011,000 | (634,000) | -1.24% |
| Total stockholders' equity | $15,266,000 | $14,948,000 | 318,000 | 2.13% |

### Results of Operations for the three months ended June 30, 2025

***Net Sales:*** Net sales for the three months ended June 30, 2025 were $12,659,000, a decrease of $913,000, or 6.7%, compared with $13,572,000 that we achieved in the three months ended June 30, 2024. The period-over-period decrease in net sales was primarily due to overall changes in the mix of products delivered in response to customer orders.

The composition of customers that exceeded 10% of our net sales for the three months ended June 30, 2025 and 2024 are shown below:

| Customer | Percentage of Net Sales 2025 | 2024 |
| --- | ---: | ---: |
| RTX (a) | 44.3% | 25.2% |
| Lockheed Martin | 27.5% | 25.4% |
| Northrop | 8.0% | 30.5% |

(a) RTX includes Collins Landing Systems and Collins Aerostructures

The composition of our net sales by platform or program profiles for the three months ended June 30, 2025 and 2024 are shown below:

| Platform or Program | Percentage of Net Sales 2025 | 2024 |
| --- | ---: | ---: |
| Geared Turbo-Fan Engine | 37.0% | 20.2% |
| UH-60 Black Hawk Helicopter | 13.9% | 18.1% |
| CH-53 Helicopter | 16.7% | 5.4% |
| E-2D Hawkeye | 10.5% | 32.8% |
| F-35 Lightning II | 5.7% | 2.8% |
| F-18 Hornet | 0.2% | 1.0% |
| All other platforms | 16.0% | 19.7% |
| Total | 100.0% | 100.0% |

Period-to-period changes in customer mix and related platforms and programs are largely attributable to customer requirements, availability of parts, production capacity and timing.

***Gross Profit:*** Gross profit for the three months ended June 30, 2025, was $2,028,000 as compared to $2,644,000 for the three months ended June 30, 2024. Our gross profit percentage for the three months ended June 30, 2025 decreased to 16.0% from the 19.5% for the three months ended June 30, 2024. The decrease in margin can be attributed to changes in the sales across our major platforms, shifts in product mix, and underutilization of personnel.

***Operating Expenses***: Operating expenses was $2,020,000, for the three months ended June 30, 2025, an increase of $128,000, from $1,892,000 for the three months ended June 30, 2024. As a percentage of consolidated net sales, operating expenses increased to 16.0%, compared to the 13.9% achieved during the three months ended June 30, 2024. The dollar increase was primarily driven by $153,000 in stock compensation expense offset by our allowance for credit loss. We continue to look for ways to reduce our costs and improve our operating performance and financial results.

***Interest Expense:*** Interest expense (which includes amortization of deferred financing costs) was $446,000 during the three months ended June 30, 2025, a decrease of $28,000 or 5.9% from $474,000 during the three months ended June 30, 2024. The decrease is primarily attributable to lower borrowing levels during a portion of the period and a decrease in the average interest rate on outstanding debt pursuant to our Current Credit Facility which decreased to 6.85% in 2025 as compared to 7.85% in 2024.

***Net (Loss) Income:*** Net loss for the three months ended June 30, 2025 was $422,000, compared to a net income of $298,000 for the three months ended June 30, 2024, for the reasons discussed above.

### Results of Operations for the six months ended June 30, 2025

***Net Sales:*** Net sales for the six months ended June 30, 2025 were $24,802,000, a decrease of $2,831,000, or 10.2%, compared with $27,633,000 that we achieved in the six months ended June 30, 2024. The period-over-period decrease in net sales was primarily due to overall changes in the mix of products delivered in response to customer orders.

The composition of customers that exceeded 10% of our net sales for the six months ended June 30, 2025 and 2024 are shown below:

| Customer | Percentage of Net Sales 2025 | 2024 |
| --- | ---: | ---: |
| RTX (a) | 36.7% | 29.3% |
| Lockheed Martin | 33.4% | 25.6% |
| Northrop | 8.1% | 20.6% |

(a) RTX includes Collins Landing Systems and Collins Aerostructures

The composition of our net sales by platform or program profiles for the six months ended June 30, 2025 and 2024 are shown below:

| Platform or Program | Percentage of Net Sales 2025 | 2024 |
| --- | ---: | ---: |
| Geared Turbo-Fan Engine | 31.0% | 19.6% |
| UH-60 Black Hawk Helicopter | 20.9% | 22.4% |
| CH-53 Helicopter | 13.6% | 3.7% |
| E-2D Hawkeye | 10.3% | 27.9% |
| F-35 Lightning II | 4.3% | 4.0% |
| F-18 Hornet | 1.6% | 4.0% |
| All other platforms | 18.3% | 18.4% |
| Total | 100.0% | 100.0% |

***Gross Profit:*** Gross profit for the six months ended June 30, 2025, was $4,062,000 as compared to $4,550,000 for the six months ended June 30, 2024. Our gross profit percentage for the six months ended June 30, 2025 decreased slightly to 16.4% from 16.5% for the six months ended June 30, 2024. The decrease in margin can be attributable to changes in the sales across our major platforms, shifts in product mix, and underutilization of personnel.

***Operating Expenses***: Operating expenses was $4,800,000, for the six months ended June 30, 2025, an increase of $743,000, from $4,057,000 for the six months ended June 30, 2024. As a percentage of consolidated net sales, operating expenses increased to 19.4%, compared to the 14.7% incurred during the six months ended June 30, 2024. The dollar increase was primarily driven by increases in stock compensation expense, and costs associated with the continued improvement of our information technology system and hardening our cyber-security defenses. We continue to look for ways to reduce our costs and improve our operating performance and financial results.

***Interest Expense:*** Interest expense (which includes amortization of deferred financing costs) was $890,000 during the six months ended June 30, 2025, a decrease of $46,000 or 4.9% from $936,000 during the six months ended June 30, 2024. The decrease is primarily attributable to lower borrowing levels during a portion of the period and a decrease in the average interest rate on outstanding debt pursuant to our Current Credit Facility which decreased to 6.85% in 2025 as compared to 7.85% in 2024.

***Net Loss:*** Net Loss for the six months ended June 30, 2025 was $1,410,000, compared to a net loss of $408,000 for the six months ended June 30, 2024, for the reasons discussed above.

### LIQUIDITY AND CAPITAL RESOURCES

As of June 30, 2025, we have debt service requirements related to:

1\) Outstanding indebtedness under our Current Credit Facility of $18,474,000 (consisting of a Revolving Loan of $12,094,000 and a Term Loan of $6,380,000). This debt matures on December 30, 2025, and requires us to make monthly payments on the Term Loan of approximately $87,000 until the loan matures.

2\) Related Party Notes of approximately $4,871,000. This debt matures on July 1, 2026. Pursuant to the Current Credit Facility we were permitted to make principal payments against this debt prior to June 30, 2025 with money raised pursuant to the sale of our securities under our Registration Statement on Form S-3 declared effective December 19, 2024.

3\) Various equipment leases and contractual obligations related to our business, including advances under our Solar Facility for the installation of solar energy systems including the replacement of the existing roof at our Sterling Facility.

Under the terms of the Current Credit Facility, as amended, we are required to meet a prescribed Fixed Charge Coverage Ratio (as defined) that is determined at the end of each fiscal quarter. This ratio is a financial metric that we use to measure our ability to cover fixed charges such as interest and lease expenses as divided by EBITDA (as defined in the Current Credit Facility) which represents net income (loss) before interest, taxes, depreciation and amortization. As of June 30, 2025, the Company is required to meet a Fixed Charge Coverage Ratio on a rolling twelve month basis of 1.05x. As of June 31, 2025, the Company was not in compliance with this ratio having only attained a ratio of 0.76x.

The Current Credit Facility expires on December 30, 2025. In addition, we are in default under the Current Credit Facility due to our failure to meet the Fixed Charge Coverage Ratio required for the period ended June 30, 2025. We are required to maintain a collection account with our lender into which substantially all cash receipts are remitted. As a result of our failure to meet the Fixed Charge Coverage Ratio for the period ended June 30, 2025, our lender could choose to exercise its rights under the Current Credit Facility, for example, increase the rate of interest or refuse to make loans under the revolving portion of the Current Credit Facility and keep the funds remitted to the collection account. If the lender were to raise the rate of interest, it would adversely impact our operating results. If the lender were to cease making new loans under the revolving facility, we would lack the funds to continue operations. The Current Credit Facility expiration date, our failure to meet the Fixed Charge Coverage Ratio and the rights granted to the lender, raise substantial doubt about our ability to continue as a going concern for the one year commencing as of the date of filing this report.

The following is a brief discussion of the recent amendments to the Current Credit Facility (all of which have been filed with the SEC):

- On May 31, 2024, we entered into a Seventh Amendment that waived the default caused by our failure to achieve the required Fixed Charge Coverage Ratio of the Sixth Amendment. This amendment further revised our Financial Covenants. For the six months ending June 30, 2024 our EBITDA shall not be less than $740,000; for the nine months ending September 30, 2024 our EBITDA shall not be less than $1,500,000; for the twelve months ending December 31, 2024 our EBITDA shall not be less than $2,800,000. For the rolling twelve month period ending March 31, 2025, we are required to achieve a Fixed Charge Coverage Ratio of 1.05x. Beginning with the rolling twelve month period ending June 30, 2025 and going forward we are required to achieve a Fixed Charge Coverage Ratio of 1.25x. All other covenants remain unchanged. Additionally, this amendment increased the Term Loan by approximately $1,000,000 to $5,700,000, with monthly principal installments in the amount of $68,000. In connection with these changes, the Company paid an amendment fee of $20,000.
- On January 30, 2025, we entered into an Eighth Amendment to provide for an additional Term Loan in the amount of $1,640,000 for the acquisition of equipment. The monthly principal installments on this additional Term Loan are $19,524. This amendment further revised our Financial Covenants. For the rolling twelve-month period ending March 31, 2025 and June 30, 2025, we are required to achieve a Fixed Charge Coverage Ratio of 1.05x. Beginning with the rolling twelve-month period ending September 30, 2025 and going forward the Company is required to achieve a Fixed Charge Coverage Ratio of 1.25x. All other covenants remain unchanged. In connection with these changes, the Company paid an amendment fee of $20,000.

In addition to required Term Loan payments of approximately $1,011,000 in fiscal 2025, we may have to make additional payments. For so long as the Term Loan under the Current Credit Facility remains outstanding, if Excess Cash Flow (as defined) is a positive amount for any fiscal year, we are obligated to pay an amount equal to the lesser of (i) twenty-five percent (25%) of the Excess Cash Flow and (ii) the outstanding principal balance of the Term Loan. Such payment shall be applied to the outstanding principal balance of the Term loan, on or prior to the April 15 immediately following such fiscal year. For the fiscal year ended December 31, 2024, based on the calculation, a payment was not required.

In addition to the outstanding indebtedness under the Current Credit Facility and Related Party Notes, we have various equipment leases and contractual obligations of an ongoing nature which we service in the ordinary course out of our cash flow from operations.

Our material cash requirements are for debt service, capital expenditures and working capital. We have historically met these requirements with funds provided by a combination of cash generated from operating activities and cash generated from equity and debt financings. Although navigating the current business landscape remains challenging and it is difficult to predict period-to-period financial performance, based on the amounts recently raised pursuant to our ATM, our current revenue visibility and the strength of our backlog, we believe we have sufficient liquidity to meet our financial obligations for the next twelve months from the date of issuance of our condensed consolidated financial statements included in this Quarterly Report. Our ability to do so, however, is dependent upon our ability to continue to borrow under our Current Credit Facility and extend the maturity dates of the Current Credit Facility and our subordinated debt. We have begun negotiations with both our lender under the Current Credit Facility and the holders of our subordinated debt in an effort to extend the maturity date of their loans. On August 4, 2025, we received a notice from our lender under the Current Credit Facility citing our default of the FCCR covenant and reserving its rights and remedies.

While we are focused on our business, we will explore our options to raise additional capital or borrow additional funds on terms which we believe are favorable. Additional issuances of equity or convertible debt securities to raise capital or increases in the rates of interest payable to our current lenders or issuances of equity securities to obtain their agreements to extend their debt will likely increase our interest expense and result in dilution to our current shareholders. Further, as part of a refinancing we might be required to agree to more restrictive business or financial covenants. We could be required to issue equity securities at prices we believe are below what we believe to be the true value which could cause the price of our common stock to decrease. Further, such securities might have rights, preferences or privileges senior to our common stock. Additional borrowings would likely require the consent of our lender under the Current Credit Facility, could require that we grant the lenders a security interest or other rights that impede our ability to operate as we deem best for our shareholders. Further, any default under a loan agreement could result in an action which could force us to seek bankruptcy protection. Additional financing may not be available upon acceptable terms, or at all.

Our ability to obtain funds through the issuance of debt or equity is dependent upon the state of the financial markets at such time as we may seek to raise funds. The state of the capital markets may be adversely impacted by various risks and uncertainties, including, but not limited to future and current impacts of global events such as public health crises, ongoing or new conflicts, banking crises, increases in inflation, the imposition of tariffs and shifts in government alliances and other risks detailed in the risk factors detailed in our Annual Report on Form 10-K for the year ended December 31, 2024.

As of June 30, 2025, the amount outstanding under our Revolving Line of Credit was $12,094,000, leaving $7,906,000 of availability to support our growth, subject to having the requisite collateral and maintaining compliance with the terms of the Credit Facility.

During the three months ended June 30, 2025 in an At The Market (“ATM”) offering pursuant to a Registration Statement declared effective on December 19, 2024, we sold 97,866 shares for gross proceeds of $340,000. In July we sold an additional 905,787 shares for gross proceeds of $3,623,000. Since initiating the ATM in December 2024, we have sold a total of 1,330,444 shares for gross proceeds of $5,375,000.

### Cash Flow

The following table summarizes our net cash flow from operating, investing and financing activities for the periods indicated below (in thousands):

| Cash provided by (used in) | Six months ended June 30, 2025 | 2024 |
| --- | ---: | ---: |
| Operating activities | $1,870 | $334 |
| Investing activities | (2,113) | (1,224) |
| Financing activities | (3) | 791 |
| Net decrease in cash | $(246) | $(99) |

### Cash Provided by Operating Activities

For the six months ended June 30, 2025, we generated $1,870,000 of cash flows from operations as compared to $334,000 for the six months ended June 30, 2024. The increase was due primarily to collections of accounts receivable and an increase in non-cash expenses partially offset by the net loss and an increase in inventory.

For the six months ended June 30, 2024, we generated $334,000 of cash flows from operations as compared to $1,406,000 for the six months ended June 30, 2023. The reduction was due primarily to the net loss and the use of a portion of customer deposits which had been advanced in 2023 for the procurement of long lead time raw materials expected to be utilized during 2024.

### Cash Used in Investing Activities

During the first half of 2025, we continued to make investments to enhance our competitiveness and market position. Cash used in investing activities of $2,113,000 and $1,224,000, during the six months ended June 30, 2025 and 2024, respectively, was for new machinery and equipment. Investments in 2025 and 2024 increased our production efficiency and speed, while enabling us to maintain closer tolerances. They also expanded the size of products we can manufacture.

During fiscal 2025, we will only make investments in capital equipment necessary to maintain our competitiveness or enhance our ability to produce products subject to funded orders. We expect to invest approximately an additional $400,000 during the remainder of 2025 principally for tooling required to produce product.

### Cash (Used in) Provided by Financing Activities

For the six months ended June 30, 2025, cash used in financing activities was $3,000. During this period, we obtained cash by increasing our borrowings under our Current Credit Facility by $344,000 (consisting of a net decrease in Revolving Loan borrowings of $811,000 and a net increase in our Term Loan of $1,155,000) and issuing stock for cash in the amount of $1,185,000. We used cash by paying $1,291,000 of subordinated notes - related party, $109,000 pursuant to financing lease obligations and $5,000 on a loan payable and $127,000 for taxes related to the net share settlement of equity awards.

For the six months ended June 30, 2024, cash provided by financing activities was $791,000. During this period, we increased borrowings under our Current Credit Facility by $887,000 (consisting of a net increase in Revolving Loan borrowings of $343,000, and a net increase of $544,000 in the Term Loan). We also made payments of $92,000 pursuant to financing lease obligations and $4,000 on a loan payable.

### OFF-BALANCE SHEET ARRANGEMENTS

We did not have any off-balance sheet arrangements as of June 30, 2025.

### Critical Accounting Estimates

A critical accounting estimate is one that is both important to the portrayal of a company’s financial condition and results of operations and requires management’s most difficult, subjective or complex judgements, often as a result of the need to make estimates about the effect of matters that are inherently uncertain.

Use of Estimates. The preparation of financial statements in accordance with generally accepted accounting principles in the U.S. requires us to make estimates and assumptions that affect the reported amounts of assets and liabilities and disclosures of contingent assets and liabilities at the date of the financial statements and the reported amounts of revenues and expenses during the reporting period. The financial statements include estimates based on currently available information and our judgment as to the outcome of future conditions and circumstances. Significant estimates in these financial statements include, inventory valuation, useful lives and impairment of long-lived assets, income tax provision, and allowance for credit losses. Changes in the status of certain facts or circumstances could result in material changes to the estimates used in the preparation of the financial statements and actual results could differ from the estimates and assumptions.

There have been no material changes to the Company’s critical accounting estimates as compared to the estimates described in the 2024 Annual Report which we believe are the most critical to our business and understanding of our results of operations and affect the more significant judgments and estimates that we use in preparation of our condensed consolidated financial statements.

## Controls and procedures

As filed, 2,794 characters.

### Evaluation of Disclosure Controls and Procedures

Our management, with the participation of our Chief Executive Officer (“CEO”) and Chief Financial Officer (“CFO”), evaluated the effectiveness of our disclosure controls and procedures as defined in Rule 13a-15(e) and 15d-15(e) under the Securities Exchange Act of 1934, as amended (the “Exchange Act”), as of June 30, 2025.Our disclosure controls and procedures are designed to provide reasonable assurance that information we are required to disclose in the reports we file or submit under the Exchange Act is accumulated and communicated to our management, including our CEO and CFO, as appropriate to allow timely decisions regarding required disclosures, and is recorded, processed, summarized, and reported within the time periods specified in the SEC’s rules and forms. Based on this evaluation, and as a result of the material weakness described below, our CEO and CFO have concluded that our disclosure controls and procedures were not effective as of June 30, 2025.

As reported in our 2024 Form 10-K, in connection with their review of our internal controls as of and for the year ended December 31, 2024, our management identified a material weakness in our internal controls over financial reporting related to our IT systems which has yet to be remediated. During fiscal 2024, we implemented new controls and procedures to eliminate this weakness but additional enhancements and more formalized documentation are still required. Tests of such controls and procedures are ongoing and the material weakness noted will only be deemed to have been remediated after the new controls and procedures have been in place for a sufficient period and management has concluded through appropriate testing that the controls are operating effectively. As such, we consider this material weakness to not be remediated as of June 30, 2025. Based on this evaluation and as a result of this material weakness, we have concluded that our disclosure controls and procedures were not effective as of June 30, 2025. For more information, see Item 9A. Controls and Procedures, included in our Annual Report on Form 10-K.

During 2025, the Company is continuing to test such controls and procedures designed to remediate the aforementioned material weakness.

### Changes in Internal Control over Financial Reporting

Other than as described above, there have not been any changes in our internal control over financial reporting, as such term is defined in Rules 13a-15(f) and 15d-15(f) under the Exchange Act, during our most recently completed fiscal quarter which is the subject of this report that have materially affected, or are reasonably likely to materially affect, our internal control over financial reporting.

### PART II

### OTHER INFORMATION

## Risk factors

As filed, 347 characters.

Investors are encouraged to consider the risks described in our 2024 Form 10-K, our Management’s Discussion and Analysis of Financial Condition and Results of Operations contained in this Report and other information publicly disclosed or contained in documents we file with the Securities and Exchange Commission before purchasing our securities.

Filed Aug 14, 2025.
Source: SEC EDGAR, the filing index for accession 0001213900-25-076418. Last ingested by Listed: Nov 6, 2026, 11:05 ET. No prices; not investment advice.