10-Q/A

UNITED STATES  

SECURITIES AND EXCHANGE COMMISSION

Washington, D.C. 20549

FORM 10-Q/A

x  Quarterly Report Pursuant To Section 13 or 15(d) of the Securities Exchange Act of 1934

For the quarterly period ended: March 31, 2018

or

o 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 of incorporation or organization)	(I.R.S. Employer Identification No.)

360 Motor Parkway, Suite 100, Hauppauge, New York 11788

(Address of principal executive offices)

(631) 881-4920

(Registrant’s telephone number, including area code)

Indicate by check mark whether the registrant (1) has filed all reports required to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during the past 12 months (or for such shorter period that the registrant was required to file such reports), and (2) has been subject to such filing requirements for the past 90 days. Yes x No o

Indicate by check mark whether the registrant has submitted electronically and posted on its corporate Web site, if any, every Interactive Data File required to be submitted and posted pursuant to Rule 405 of Regulation S-T (§232.405 of this chapter) during the preceding 12 months (or for such shorter period that the registrant was required to submit and post such files). Yes x No o

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

Large Accelerated Filer  o	Non-Accelerated Filer  o
Accelerated Filer  o (Do not check if smaller reporting company)	Smaller Reporting Company x

If an emerging growth company, indicate by check mark if the registrant has elected not to use the extended transition period for complying with any new or revised financial accounting standards provided pursuant to Section 7(a)(2)(B) of the Securities Act. o

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

There were a total of 26,205,341 shares of the registrant’s common stock outstanding as of May 10, 2018.

Explanatory Note

This amendment is being filed to correct errors in the XBRL presentation included in the original filing of this report.

PART II

OTHER INFORMATION

Item 6. Exhibits

Exhibit No.	Description
2.1	Agreement and Plan of Merger dated July 29, 2013 between Air Industries Group, Inc. and Air Industries Group (incorporated herein by reference to Exhibit 2.1 to the Company’s Current Report on Form 8-K filed August 30, 2013).
2.2	Articles of Merger between Air Industries Group and Air Industries Group, Inc. filed with the Secretary of State of Nevada on August 28, 2013 (incorporated herein by reference to Exhibit 3.2 to the Company’s Current Report on Form 8-K filed August 30, 2013).
2.3	Certificate of Merger between Air Industries Group and Air Industries Group, Inc. filed with the Secretary of State of Nevada on August 29, 2013 (incorporated herein by reference to Exhibit 3.3 to the Company’s Current Report on Form 8-K filed August 30, 2013).
3.1	Articles of Incorporation of Air Industries Group (incorporated herein by reference to Exhibit 3.1 to the Company's Current Report on Form 8-K filed August 30, 2013).
3.2	Certificate of Designation authorizing the issuance of the Series A Preferred Stock (incorporated herein by reference to exhibit 3.1 to the Company’s Current Report on Form 8-K filed on June 1, 2016).

3.3	Certificate of Amendment increasing number of authorized shares of preferred stock and Series A Preferred Stock (incorporated herein by reference to the Company’s Annual Report on Form 10-K for the year ended December 31, 2016 filed on April 19, 2017).
3.4	Amendment to Certificate of Designation (incorporated herein by reference to the Company’s Registration Statement on Form S-1 (Amendment No. 2) filed on June 19, 2017 declared effective on July 6, 2017).
3.5	Amended and Restated By-Laws of the Company (incorporated herein by reference to Exhibit 3.2 to the Company’s Annual Report on Form 10-K for the year ended December 31, 2014 filed on March 31, 2015).
10.32	Stock Purchase Agreement dated March 21, 2018 with CPI Aerostructures, Inc. (incorporated herein by reference to Exhibit 10.1 to the Company’s Current Report on Form 8-K  filed on March 23, 2018).
14.1	Code of Ethics (incorporated herein by reference to Exhibit 14.1 to the Company’s Annual Report on Form 10-K/A (Amendment No.2) for the year ended December 31, 2017 filed on April 30, 2018).

	Certifications
31.1	Certification of principal executive officer pursuant to Rule 13a-14 or Rule 15d-14 of Securities Exchange Act of 1934.
31.2	Certification of principal financial officer pursuant to Rule 13a-14 or Rule 15d-14 of the Exchange Act of 1934.
32.1	Certification of principal executive officer pursuant to Section 906 of Sarbanes-Oxley Act of 2002 (18 U.S.C. Section 1350).
32.2	Certification of principal financial officer pursuant to Section 906 of Sarbanes-Oxley Act of 2002 (18 U.S.C. Section 1350).

	XBRL Presentation
101.SCH	XBRL Taxonomy Extension Schema Document
101.CAL	XBRL Taxonomy Extension Calculation Linkbase Document
101.DEF	XBRL Taxonomy Extension Definition Linkbase Document
101.LAB	XBRL Taxonomy Extension Label  Linkbase Document
101.PRE	XBRL Taxonomy Extension Presentation Linkbase Document

SIGNATURES

Pursuant to the requirements of Section 13 or 15(d) of the Securities Exchange Act of 1934, the registrant has duly caused this amendment to this report to be signed on its behalf by the undersigned, thereunto duly authorized.

Dated: May 17, 2018

AIR INDUSTRIES GROUP
By:	/s/ Michael Recca
	Michael Recca Chief Financial Officer (principal financial and accounting officer)

EX-31.1

 Exhibit 31.1

CERTIFICATION OF PRINCIPAL EXECUTIVE OFFICER  

PURSUANT TO RULE 13a-14(a) UNDER THE EXCHANGE ACT

I, Luciano Melluzzo, certify that:

      1. I have reviewed this quarterly report on Form 10-Q/A of Air Industries Group;

      2. Based on my knowledge, this report does not contain any untrue statement of a material fact or omit to state a material fact necessary to make the statements made, in light of the circumstances under which such statements were made, not misleading with respect to the period covered by this report;

      3. Based on my knowledge, the financial statements, and other financial information included in this report, fairly present in all material respects the financial condition, results of operations and cash flows of the registrant as of, and for, the periods presented in this report;

      4. The registrant's other certifying officer and I are responsible for establishing and maintaining disclosure controls and procedures (as defined in Exchange Act Rules 13a-15(e) and 15d-15(e)) and internal control over financial reporting (as defined in Exchange Act Rules 13a-15(f) and 15d-15(f)) for the registrant and have:

            a) Designed such disclosure controls and procedures, or caused such disclosure controls and procedures to be designed under our supervision, to ensure that material information relating to the registrant, including its consolidated subsidiaries, is made known to us by others within those entities, particularly during the period in which this report is being prepared;

            b) Designed such internal control over financial reporting, or caused such internal control over financial reporting to be designed under our supervision, to provide reasonable assurance regarding the reliability of financial reporting and the preparation of financial statements for external purposes in accordance with generally accepted accounting principles;

            c) Evaluated the effectiveness of the registrant's disclosure controls and procedures and presented in this report our conclusions about the effectiveness of the disclosure controls and procedures, as of the end of the period covered by this report based on such evaluation; and

            d) Disclosed in this report any change in the registrant's internal control over financial reporting that occurred during the registrant's most recent fiscal quarter (the registrant's fourth fiscal quarter in the case of an annual report) that has materially affected, or is reasonably likely to materially affect, the registrant's internal control over financial reporting.

      5. The registrant's other certifying officer and I have disclosed, based on our most recent evaluation of internal control over financial reporting, to the registrant's auditors and the audit committee of registrant's board of directors (or persons performing the equivalent functions):

            a) All significant deficiencies and material weaknesses in the design or operation of internal control over financial reporting which are reasonably likely to adversely affect the registrant's ability to record, process, summarize and report financial information; and

            b) Any fraud, whether or not material, that involves management or other employees who have a significant role in the registrant's internal control over financial reporting.

Dated: May 17, 2018

/s/ Luciano Melluzzo

Luciano Melluzzo 

Chief Executive Officer (Principal Executive Officer)

EX-31.2

Exhibit 31.2

CERTIFICATION OF PRINCIPAL FINANCIAL OFFICER   

PURSUANT TO RULE 13a-14(a) UNDER THE EXCHANGE ACT

I, Michael E. Recca, certify that:

      1. I have reviewed this quarterly report on Form 10-Q/A of Air Industries Group;

      2. Based on my knowledge, this report does not contain any untrue statement of a material fact or omit to state a material fact necessary to make the statements made, in light of the circumstances under which such statements were made, not misleading with respect to the period covered by this report;

      3. Based on my knowledge, the financial statements, and other financial information included in this report, fairly present in all material respects the financial condition, results of operations and cash flows of the registrant as of, and for, the periods presented in this report;

      4. The registrant's other certifying officer and I are responsible for establishing and maintaining disclosure controls and procedures (as defined in Exchange Act Rules 13a-15(e) and 15d-15(e)) and internal control over financial reporting (as defined in Exchange Act Rules 13a-15(f) and 15d-15(f)) for the registrant and have:

            a) Designed such disclosure controls and procedures, or caused such disclosure controls and procedures to be designed under our supervision, to ensure that material information relating to the registrant, including its consolidated subsidiaries, is made known to us by others within those entities, particularly during the period in which this report is being prepared;

            b) Designed such internal control over financial reporting, or caused such internal control over financial reporting to be designed under our supervision, to provide reasonable assurance regarding the reliability of financial reporting and the preparation of financial statements for external purposes in accordance with generally accepted accounting principles;

            c) Evaluated the effectiveness of the registrant's disclosure controls and procedures and presented in this report our conclusions about the effectiveness of the disclosure controls and procedures, as of the end of the period covered by this report based on such evaluation; and

            d) Disclosed in this report any change in the registrant's internal control over financial reporting that occurred during the registrant's most recent fiscal quarter (the registrant's fourth fiscal quarter in the case of an annual report) that has materially affected, or is reasonably likely to materially affect, the registrant's internal control over financial reporting.

      5. The registrant's other certifying officer and I have disclosed, based on our most recent evaluation of internal control over financial reporting, to the registrant's auditors and the audit committee of registrant's board of directors (or persons performing the equivalent functions):

            a) All significant deficiencies and material weaknesses in the design or operation of internal control over financial reporting which are reasonably likely to adversely affect the registrant's ability to record, process, summarize and report financial information; and

            b) Any fraud, whether or not material, that involves management or other employees who have a significant role in the registrant's internal control over financial reporting.

Dated: May 17, 2018

/s/ Michael E. Recca

Michael E. Recca 

Chief Financial Officer (Principal Financial Officer) 

EX-32.1

Exhibit 32.1

CERTIFICATION OF PRINCIPAL EXECUTIVE OFFICER

PURSUANT TO

SECTION 906 OF THE SARBANES-OXLEY ACT OF 2002 

(18 U.S.C. SECTION 1350)

      In connection with the Quarterly Report of Air Industries Group, a Nevada corporation (the "Company"), on Form 10-Q/A for the period ended March 31, 2018, as filed with the Securities and Exchange Commission (the "Report"), Luciano Melluzzo, Chief Executive Officer of the Company, does hereby certify, pursuant to Section 906 of the Sarbanes-Oxley Act of 2002 (18 U.S.C. ss. 1350), that:

      (1) The Report fully complies with the requirements of section 13(a) or 15(d) of the Securities Exchange Act of 1934; and

      (2) The information contained in the Report fairly presents, in all material respects, the financial condition and result of operations of the Company.

Dated: May 17, 2018

/s/ Luciano Melluzzo

Luciano Melluzzo

Chief Executive Officer (Principal Executive Officer)

[A signed original of this written statement required by Section 906 has been provided to Air Industries Group and will be retained by Air Industries Group and furnished to the Securities and Exchange Commission or its staff upon request.]

EX-32.2

Exhibit 32.2

CERTIFICATION OF PRINCIPAL FINANCIAL OFFICER

PURSUANT TO

SECTION 906 OF THE SARBANES-OXLEY ACT OF 2002 

(18 U.S.C. SECTION 1350)

      In connection with the Quarterly Report of Air Industries Group, a Nevada corporation (the "Company"), on Form 10-Q/A for the period ended March 31, 2018, as filed with the Securities and Exchange Commission (the "Report"), Michael E. Recca, Chief Financial Officer of the Company, does hereby certify, pursuant to Section 906 of the Sarbanes-Oxley Act of 2002 (18 U.S.C. ss. 1350), that:

      (1) The Report fully complies with the requirements of section 13(a) or 15(d) of the Securities Exchange Act of 1934; and

      (2) The information contained in the Report fairly presents, in all material respects, the financial condition and result of operations of the Company.

Dated: May 17, 2018

/s/ Michael E. Recca

Michael E. Recca 

Chief Financial Officer (Principal Financial Officer)

[A signed original of this written statement required by Section 906 has been provided to Air Industries Group and will be retained by Air Industries Group and furnished to the Securities and Exchange Commission or its staff upon request.]

XML

Document and Entity Information - shares	3 Months Ended
	Mar. 31, 2018	May 10, 2018
Document And Entity Information
Entity Registrant Name	AIR INDUSTRIES GROUP
Entity Central Index Key	0001009891
Document Type	10-Q/A
Document Period End Date	Mar. 31, 2018
Amendment Flag	true
Amendment Description	To update financials.
Current Fiscal Year End Date	--12-31
Is Entity a Well-known Seasoned Issuer?	No
Is Entity a Voluntary Filer?	No
Is Entity's Reporting Status Current?	Yes
Entity Filer Category	Smaller Reporting Company
Entity Common Stock, Shares Outstanding		26,205,341
Document Fiscal Period Focus	Q1
Document Fiscal Year Focus	2018

XML

Condensed Consolidated Balance Sheets (Unaudited) - USD ($)	Mar. 31, 2018	Dec. 31, 2017
Current Assets
Cash and Cash Equivalents	$ 1,415,000	$ 630,000
Accounts Receivable, Net of Allowance for Doubtful Accounts of $763,000 and $494,000, respectively	6,749,000	5,464,000
Inventory	30,887,000	31,141,000
Prepaid Expenses and Other Current Assets	349,000	214,000
Prepaid Taxes	49,000	49,000
Assets Held for Sale	10,412,000	10,082,000
Total Current Assets	49,861,000	47,580,000
Property and Equipment, Net	9,529,000	10,050,000
Capitalized Engineering Costs - Net of Accumulated Amortization of $5,525,000 and $5,380,000, respectively	2,207,000	2,188,000
Deferred Financing Costs, Net, Deposits	737,000	665,000
Goodwill	272,000	272,000
TOTAL ASSETS	62,606,000	60,755,000
Current Liabilities
Notes Payable and Capitalized Lease Obligations - Current Portion	24,339,000	23,131,000
Notes Payable - Related Party - Current Portion	1,542,000	262,000
Accounts Payable and Accrued Expenses	10,750,000	10,872,000
Deferred Gain on Sale - Current Portion	38,000	38,000
Deferred Revenue	938,000	931,000
Liabilities Directly Associated with Assets Held for Sale	2,797,000	2,795,000
Income Taxes Payable	20,000	20,000
Total Current Liabilities	40,424,000	38,049,000
Long Term Liabilities
Notes Payable and Capitalized Lease Obligations - Net of Current Portion	1,533,000	1,798,000
Notes Payable – Related Party – Net of Current Portion	1,616,000	1,650,000
Deferred Gain on Sale - Net of Current Portion	285,000	295,000
Deferred Rent	1,189,000	1,197,000
TOTAL LIABILITIES	45,047,000	42,989,000
Commitments and Contingencies
Stockholders' Equity
Preferred Stock, par value $.001 - Authorized 3,000,000 shares, Designated as Series A Convertible Preferred Stock – par value $0.001, Authorized and outstanding: 0 at March 31, 2018 and December 31, 2017.	0	0
Common Stock - Par Value $.001 - Authorized 50,000,000 Shares, 26,205,341 and 25,213,805 Shares Issued and Outstanding as of March 31, 2018 and December 31, 2017, respectively	26,000	25,000
Additional Paid-In Capital	72,534,000	71,272,000
Accumulated Deficit	(55,001,000)	(53,531,000)
TOTAL STOCKHOLDERS' EQUITY	17,559,000	17,766,000
TOTAL LIABILITIES AND STOCKHOLDERS' EQUITY	$ 62,606,000	$ 60,755,000

XML

Condensed Consolidated Balance Sheets (Unaudited) (Parenthetical) - USD ($)	Mar. 31, 2018	Dec. 31, 2017
ASSETS
Allowance for Doubtful Accounts	$ 763,000	$ 494,000
Accumulated Amortization	$ 5,525,000	$ 5,380,000
Stockholders Equity
Preferred Stock par value	$ 0.001	$ 0.001
Preferred Stock Authorized	3,000,000	3,000,000
Common Stock par value	$ 0.001	$ 0.001
Common Stock Authorized	50,000,000	50,000,000
Common Stock Issued	26,205,341	25,213,805
Common Stock Outstanding	26,205,341	25,213,805
Series A Convertible Preferred Stock
Stockholders Equity
Preferred Stock par value	$ 0.001	$ 0.001
Preferred Stock Authorized	3,000,000	3,000,000
Preferred Stock, Issued	0	0
Preferred Stock, Outstanding	0	0

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Condensed Consolidated Statements of Operations (Unaudited) - USD ($)	3 Months Ended
	Mar. 31, 2018	Mar. 31, 2017
Income Statement [Abstract]
Net Sales	$ 12,242,000	$ 12,674,000
Cost of Sales	10,239,000	9,962,000
Gross Profit	2,003,000	2,712,000
Operating Expenses	(2,616,000)	(2,541,000)
(Loss) Income from Operations	(613,000)	171,000
Interest and Financing Costs	(777,000)	(893,000)
Gain on Sale of Subsidiary	0	451,000
Other Income (Expense), Net	16,000	(183,000)
Loss before Provision for Income Taxes	(1,374,000)	(454,000)
Provision for Income Taxes	2,000	0
Loss from Continuing Operations	(1,376,000)	(454,000)
Loss from Discontinued Operations, net of tax	(92,000)	(700,000)
Net Loss	$ (1,468,000)	$ (1,154,000)
Net Loss per share – Basic
Continuing Operations	$ (.05)	$ (.06)
Discontinued Operations	0.00	(.09)
Net Loss per share – Diluted
Continuing Operations	(.05)	(.06)
Discontinued Operations	$ 0.00	$ (.09)
Weighted Average Shares Outstanding – Basic	26,116,262	7,650,165
Weighted Average Shares Outstanding – Diluted	26,116,262	7,650,165

XML

Condensed Consolidated Statements of Cash Flows (Unaudited) - USD ($)	3 Months Ended
	Mar. 31, 2018	Mar. 31, 2017
CASH FLOWS FROM OPERATING ACTIVITIES
Net Loss	$ (1,468,000)	$ (1,154,000)
Adjustments to reconcile net loss to net cash provided by (used in) operating activities
Depreciation of property and equipment	681,000	722,000
Amortization of intangible assets	38,000	304,000
Amortization of capitalized engineering costs	145,000	81,000
Bad debt expense (recovery)	270,000	(14,000)
Non-cash employee compensation expense/(forfeiture of unamortized stock compensation)	83,000	(73,000)
Amortization of deferred financing costs	69,000	55,000
Deferred gain on sale of real estate	(10,000)	(10,000)
(Gain) loss on sale of subsidiary	0	(451,000)
Amortization of debt discount on convertible notes payable	275,000	176,000
Changes in Assets and Liabilities (Increase) Decrease in Operating Assets:
Accounts receivable	(1,025,000)	578,000
Inventory	(733,000)	1,719,000
Prepaid expenses and other current assets	(103,000)	(102,000)
Prepaid taxes	0	178,000
Deposits and other assets	(124,000)	(276,000)
Increase (Decrease) in Operating Liabilities:
Accounts payable and accrued expenses	(97,000)	(621,000)
Deferred rent	1,000	6,000
Deferred revenue	175,000	(224,000)
NET CASH (USED IN) PROVIDED BY OPERATING ACTIVITIES	(1,782,000)	900,000
CASH FLOWS FROM INVESTING ACTIVITIES
Capitalized engineering costs	(164,000)	(245,000)
Purchase of property and equipment	(144,000)	(89,000)
Proceeds from sale of subsidiary	0	4,260,000
NET CASH (USED IN) PROVIDED BY INVESTING ACTIVITIES	(308,000)	3,926,000
CASH FLOWS FROM FINANCING ACTIVITIES
Note payable - revolver, net	1,489,000	(5,545,000)
Payments of note payable – term notes	(369,000)	(2,069,000)
Proceeds from the issuance of common stock	1,065,000	0
Payments of capital lease obligations	(310,000)	(173,000)
Proceeds from notes payable issuances - related party	1,000,000	850,000
Proceeds from notes payable issuances - third party	0	1,850,000
NET CASH PROVIDED BY (USED IN) FINANCING ACTIVITIES	2,875,000	(5,087,000)
NET INCREASE (DECREASE) IN CASH AND CASH EQUIVALENTS	785,000	(261,000)
CASH AND CASH EQUIVALENTS AT BEGINNING OF YEAR	630,000	1,304,000
CASH AND CASH EQUIVALENTS AT END OF PERIOD	1,415,000	1,043,000
Supplemental cash flow information
Cash paid during the period for interest	390,000	643,000
Cash paid during the period for income taxes	2,000	0
Supplemental disclosure of non-cash transactions
Issuance of Convertible notes payable - related party	0	382,000
Classification of assets held for sale	2,000	0
Liabilities directly associated with assets held for sale	$ 330,000	$ 0

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FORMATION AND BASIS OF PRESENTATION

3 Months Ended

Mar. 31, 2018

LiabilitiesAssumed5

FORMATION AND BASIS OF PRESENTATION

Organization

On August 30, 2013, Air Industries Group, Inc. (“Air Industries Delaware”) changed its state of incorporation from Delaware to Nevada as a result of a merger with and into its newly formed wholly-owned subsidiary, Air Industries Group, a Nevada corporation (“Air Industries Nevada” or “AIRI”) and the surviving entity, pursuant to an Agreement and Plan of Merger. The reincorporation was approved by the stockholders of Air Industries Delaware at its 2013 Annual Meeting of Stockholders. Air Industries Nevada is deemed to be the successor.

The accompanying consolidated financial statements presented are those of AIRI, and its wholly-owned subsidiaries; Air Industries Machining Corp. (“AIM”), Welding Metallurgy, Inc. ("WMI" or “Welding”), Miller Stuart, Inc. (“Miller Stuart”), Nassau Tool Works, Inc. (“NTW”), Woodbine Products, Inc. (“Woodbine” or “WPI”), Decimal Industries, Inc. ("Decimal"), Eur-Pac Corporation (“Eur-Pac” or “EPC”), Electronic Connection Corporation (“ECC”), AMK Welding, Inc. (“AMK”), Air Realty Group, LLC ("Air Realty") The Sterling Engineering Corporation ("Sterling"), and Compac Development Corporation (“Compac”), (together, the “Company”).

Going Concern

The Company suffered losses from operations of $613,000 and $12,758,000 and net losses of $1,468,000 and $22,551,000 for the three months ended March 31, 2018 and the year ended December 31, 2017, respectively. The Company also had negative cash flows from operations for the three months ended March 31, 2018 and the years ended December 31, 2017 and 2016. In 2015, the Company ceased paying dividends on its common stock and in 2016 disposed of the real estate on which an operating subsidiary was located through a sale leaseback transaction. Since January 1, 2016, the Company has sold in excess of $31,000,000 in debt and equity securities to fund its operations. In January 2017, the Company sold one of its operating subsidiaries, AMK Welding Inc. On March 21, 2018, the Company entered into a Stock Purchase Agreement to sell a majority of its Aerostructures & Electronics segment. Furthermore, as of March 31, 2018 and December 31, 2017, the Company was not in compliance with financial covenants under its Amended and Restated Revolving Credit, Term Loan and Security Agreement with PNC Bank (the “Loan Facility”).

The continuation of the Company’s business is dependent upon its ability to achieve profitability and positive cash flow and, pending such achievement, future issuances of equity or other financing to fund ongoing operations. The consolidated financial statements do not include any adjustments that might be necessary if the Company is unable to continue as a going concern.

Basis of Presentation

The accompanying unaudited condensed consolidated financial statements of the Company have been prepared in accordance with U.S. generally accepted accounting principles for interim financial information and with Rule 8-03 of Regulation S-X. Accordingly, they do not include all of the information and footnotes required by generally accepted accounting principles for complete financial statements. In the opinion of management, all adjustments (consisting of normal recurring accruals) considered necessary for a fair presentation have been included. Operating results for the three months ended March 31, 2018 are not necessarily indicative of the results that may be expected for the year ending December 31, 2018. These unaudited condensed consolidated financial statements should be read in conjunction with the audited consolidated financial statements and footnotes thereto included in the Company’s Annual Report on Form 10-K for the year ended December 31, 2017, as filed with the Securities and Exchange Commission.

Reclassifications

Certain account balances in 2017 have been reclassified to conform to the current period presentation.

Sale of AMK

On January 27, 2017, the Company sold all of the outstanding shares of AMK to Meyer Tool, Inc., pursuant to a Stock Purchase Agreement dated January 27, 2017 for a purchase price of $4,500,000, net of a working capital adjustment of ($163,000), plus additional quarterly payments, not to exceed $ 1,500,000, equal to five percent (5%) of Net Revenues of AMK commencing April 1, 2017. The Company recorded a $200,000 gain on the sale of AMK. The gain on sale was the difference between the non-contingent payments and the carrying value of the disposed business. The Company has made an accounting policy decision to record the contingent consideration as it is determined to be realizable.

The proceeds of the sale of AMK were applied as follows: $1,700,000 to the payment of the Term Loan (as defined in the PNC Loan Agreement), $1,800,000 to the payment of outstanding Revolving Advances (as defined in the PNC Loan Agreement), and $500,000 to the payment of existing accounts payable. The remaining $500,000 was applied to outstanding accounts payable and reduced the amount of the Revolving Advance.

Sale of Welding Metallurgy Inc.

On March 21, 2018, the Company signed an agreement to sell all of the outstanding shares of WMI including its wholly owned subsidiaries Miller Stuart, Woodbine, Decimal and Compac Development Corp to CPI Aerostructures, Inc., pursuant to a Stock Purchase Agreement (SPA) for a purchase price of $9,000,000, subject to a customary working capital adjustment. The SPA also provides for contingent payments of up to an aggregate of $1,000,000 if WMI enters into specified agreements, long-term agreements with certain customers, by May 31, 2018 and July 31, 2018, respectively (the “Specified Dates”), which contingent payments are subject to reduction if subsequent to the Specified Dates WMI enters into those specified agreements by $100,000 for each calendar month after the Specified Date. The sale is subject to certain conditions, including CPI obtaining financing for the amount of the purchase price, and requires an escrow deposit of $2,000,000 to cover the working capital adjustment and our obligation to indemnify CPI against damages arising out of the breach of our representations and warranties and obligations under the SPA. It is anticipated that the sale will occur in May or June of 2018.

Subsequent Events

Management has evaluated subsequent events through the date of this filing.

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DISCONTINUED OPERATIONS

3 Months Ended

Mar. 31, 2018

Discontinued Operations Abstract

DISCONTINUED OPERATIONS

As discussed above, in March 2018, the Company entered into an agreement to sell WMI, Miller Stuart, WPI and Compac. As such, these businesses are reported as discontinued operations for the three months ended March 31, 2018 and 2017. As required, the Company has retrospectively recast its consolidated statements of operations and balance sheets for all periods presented. The Company has not segregated the cash flows of these businesses in the consolidated statements of cash flows. Management was also required to make certain assumptions and apply judgment to determine historical expenses related to the discontinued operations presented in prior periods. Unless noted otherwise, discussion in the Notes to Consolidated Financial Statements refers to the Company’s continuing operations.

At December 31, 2017, the Company has recorded a loss on impairment on intangible assets of $1,085,000 and a loss on assets held for sale of $1,563,000.

The following table presents a reconciliation of the major financial lines constituting the results of operations for discontinued operations to the net loss from discontinued operations presented separately in the consolidated statement of operations for the three months ended March 31, 2018 and March 31, 2017:

	Three Months Ended March 31,
	2018			2017
	(unaudited)			(unaudited)
Net revenue	$	2,543,000		$	3,479,000
Cost of goods sold		2,151,000			3,489,000
Gross profit		392,000			(10,000	)
Operating expenses:
Selling, general and administrative		485,000			680,000
Total operating expenses		(93,000	)		(690,000	)
Interest expense		-			(10,000	)
Other income (expense)		1,000			-
Loss from discontinued operations before income taxes		(92,000	)		(700,000	)
Provision for income taxes		—			-
Net loss from discontinued operations	$	(92,000	)	$	(700,000	)

Non-cash operating amounts for discontinued operations for the three months ended March 31, 2018 include depreciation of $42,000 and amortization of $38,000. Capital expenditures were $1,000. There were no other significant non-cash operating amounts or investing items of the discontinued operations for the period.

Non-cash operating amounts for discontinued operations for the three months ended March 31, 2017 include depreciation of $45,000 and amortization of $55,000. Capital expenditures were $-0-. There were no other significant non-cash operating amounts or investing items of the discontinued operations for the period.

See Note 6 for a reconciliation of the carrying amounts of major classes of assets and liabilities of the discontinued operations to the total assets and liabilities of the disposal group classified as held for sale that are presented separately in the consolidated balance sheets.

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SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES

3 Months Ended

Mar. 31, 2018

Accounting Policies [Abstract]

SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES

Principal Business Activity

The Company through its AIM subsidiary is primarily engaged in manufacturing aircraft structural parts, and assemblies for prime defense contractors in the aerospace industry in the United States. NTW is a manufacturer of aerospace components, principally landing gear for F-16 and F-18 fighter aircraft. Welding Metallurgy is a specialty welding and products provider whose significant customers include the world's largest aircraft manufacturers, subcontractors, and original equipment manufacturers. Miller Stuart is a manufacturer of aerospace components whose customers include major aircraft manufacturers and the US Military. Miller Stuart specializes in electromechanical systems, harness and cable assemblies, electronic equipment and printed circuit boards. Woodbine is a manufacturer of aerospace components whose customers include major aircraft component suppliers. Eur-Pac specializes in military packaging and supplies. Eur- Pac’s primary business is “kitting” of supplies for all branches of the United States Defense Department including ordnance parts, hose assemblies, hydraulic, mechanical and electrical assemblies. Compac specializes in the manufacture of RFI/EMI (Radio Frequency Interference Electro-Magnetic Interference) shielded enclosures for electronic components. The Company’s customers consist mainly of publicly traded companies in the aerospace industry.

If the sale of WMI closes, the Company will be more focused on complex machined products for aircraft landing gear and jet turbines.

Inventory Valuation

For annual periods, the Company values inventory at the lower of cost on a first-in-first out basis or market. The Company does not take physical inventories at interim quarterly reporting periods. As such, approximately 50% of the inventory value at March 31, 2018 has been estimated using a gross profit percentage based on sales of previous periods to the net sales of the current period, as management believes that the gross profit percentage on these items are materially consistent from period to period. The remainder of the inventory value at March 31, 2018 is estimated based on the Company's standard cost perpetual inventory system, as management believes the perpetual system computed value for these items provides a better estimate of value for that inventory. Adjustments to reconcile the annual physical inventory to the Company’s books are treated as changes in accounting estimates and are recorded in the fourth quarter. Inventories consist of the following at:

	March 31,			December 31,
	2018			2017
	(unaudited)
Raw Materials	$	5,290,000		$	5,346,000
Work In Progress		19,065,000			19,947,000
Finished Goods		10,930,000			10,122,000
Inventory Reserve		(4,398,000	)		(4,274,000	)
Total Inventory	$	30,887,000		$	31,141,000

Credit and Concentration Risks

There were three customers that represented 73.1% of total sales, and three customers that represented 60.3% of total sales for the three months ended March 31, 2018 and 2017, respectively. This is set forth in the table below.

Customer	Percentage of Sales
	March 2018	March 2017
	(Unaudited)	(Unaudited)
1	34.5	18.9
2	28.6	21.5
3	10.0	*
4	**	19.9

*Customer was less than 10% of sales at March 31, 2017.

**Customer was less than 10% of sales at March 31, 2018. 

There were three customers that represented 71.9% of gross accounts receivable and three customers that represented 68.7% of gross accounts receivable at March 31, 2018 and December 31, 2017, respectively. This is set forth in the table below.

Customer	Percentage of Receivables
	March 2018	December 2017
	(Unaudited)
1	43.2	41.9
2	16.3	14.6
3	12.4	*
4	**	12.2

*Customer was less than 10% of gross accounts receivable at December 31, 2017.

**Customer was less than 10% of gross accounts receivable at March 31, 2018.

During the year, the Company had occasionally maintained balances in its bank accounts that were in excess of the FDIC limit. The Company has not experienced any losses on these accounts.

The Company has several key sole-source suppliers of various parts that are important for one or more of its products. These suppliers are its only source for such parts and, therefore, in the event any of them were to go out of business or be unable to provide parts for any reason, its business could be severely harmed.

Earnings per share

Basic earnings per share is computed by dividing the net income applicable to common stockholders by the weighted-average number of shares of common stock outstanding for the period. Potentially dilutive shares, using the treasury stock method, are included in the diluted per-share calculations for all periods when the effect of their inclusion is dilutive.

The following is a reconciliation of the denominators of basic and diluted earnings per share computations:

Three Months Ended

	March 31, 2018 (Unaudited)		March 31, 2017 (Unaudited)
Weighted average shares outstanding used to compute basic earnings per share		26,116,262		7,650,165
Effect of dilutive stock options and warrants		—		—
Weighted average shares outstanding and dilutive securities used to compute dilutive earnings per share		26,116,262		7,650,165

The following securities have been excluded from the calculation as the exercise price was greater than the average market price of the common shares:

Three Months Ended

	March 31, 2018		March 31, 2017
	(Unaudited)		(Unaudited)
Stock Options		354,000		513,000
Warrants		1,480,000		520,000
		1,834,000		1,033,000

The following securities have been excluded from the calculation even though the exercise price was less than the average market price of the common shares because the effect of including these potential shares was anti-dilutive due to the net loss incurred during that period:

	March 31, 2018		March 31, 2017
	(Unaudited)		(Unaudited)
Convertible Preferred Stock		-		2,517,000
Stock Options		695,000		3,000
Warrants		480,000		321,000
		1,175,000		2,841,000

Stock-Based Compensation

The Company accounts for stock-based compensation in accordance with FASB ASC 718, "Compensation – Stock Compensation." Under the fair value recognition provision of the ASC, stock-based compensation cost is estimated at the grant date based on the fair value of the award. The Company estimates the fair value of stock options and warrants granted using the Black-Scholes-Merton option pricing model. Stock based compensation amounted to $83,000 and $73,000 for the three months ended March 31, 2018 and 2017, respectively, and was included in operating expenses on the accompanying Condensed Consolidated Statements of Income.

Goodwill

Goodwill represents the excess of the acquisition cost of businesses over the fair value of the identifiable net assets acquired. The goodwill amount of $272,000 at March 31, 2018 and December 31, 2017 relates to the acquisitions of NTW $163,000 and ECC $109,000.

Goodwill is not amortized, but is tested at least annually for impairment, or if circumstances occur that more likely than not reduce the fair value of the reporting unit below its carrying amount.

The Company has determined that there has been no impairment of goodwill at March 31, 2018.

Recently Issued Accounting Pronouncements

On May 28, 2014, the FASB issued ASU No. 2014-09, Revenue from Contracts with Customers. ASU 2014-09 supersedes existing revenue recognition guidance, including ASC 605-35, Revenue Recognition - Construction-Type and Production-Type Contracts, and outlines a single set of comprehensive principles for recognizing revenue under U.S. GAAP. Among other things, it requires companies to identify contractual performance obligations and determine whether revenue should be recognized at a point in time or over time. On July 9, 2015, the FASB approved a one year deferral of the effective date of ASU 2014-09 to annual reporting periods beginning after December 15, 2017. We intend to adopt the New Revenue Standard effective January 1, 2018.

The new guidance allows for two transition methods in application - (i) retrospective to each prior reporting period presented, or (ii) prospective with the cumulative effect of adoption recognized on January 1, 2018 (also known as the modified retrospective approach). The Company is still assessing which transition method to adopt. This guidance requires additional disclosures of the amount by which each financial statement line item affected in the current reporting period during 2019 as compared to the guidance that was in effect before the change, and an explanation of the reasons for the significant changes.

The Company currently recognizes the majority of its revenues based on shipment of products (at a point in time). Currently, some contracts the Company enters into with customers are accounted for on a percentage of completion basis. For contracts with a significant amount of development and/or requiring the delivery of a minimal number of units, revenue and profit are recognized using the percentage-of-completion cost-to-cost method to measure progress. For contracts that require the Company to produce a substantial number of similar items without a significant level of development, the Company currently records revenue and profit using the percentage-of-completion units-of-delivery method as the basis for measuring progress on the contract.

Under ASC 606, revenue will be recognized as the customer obtains control of the goods and services promised in the contract (i.e., performance obligations). We may also have more performance obligations in our contracts under ASC 606, which may impact the timing of recording sales and operating profit, including those where sales recognition is deferred pending the incurrence of costs.

The Company has not completed its assessment of the effects of the new revenue standard, and has not determined whether adopting ASU 2014-09 will have a material effect on its consolidated financial statements.

In February 2016, the FASB issued ASU No. 2016-02, “Leases (Topic 842).” Among other things, in the amendments in ASU 2016-02, lessees will be required to recognize the following for all leases (with the exception of short-term leases) at the commencement date: (1) A lease liability, which is a lessee‘s obligation to make lease payments arising from a lease, measured on a discounted basis; and (2) A right-of-use asset, which is an asset that represents the lessee’s right to use, or control the use of, a specified asset for the lease term. Under the new guidance, lessor accounting is largely unchanged. Certain targeted improvements were made to align, where necessary, lessor accounting with the lessee accounting model and Topic 606, Revenue from Contracts with Customers. The amendments in this ASU are effective for fiscal years beginning after December 15, 2018, including interim periods within those fiscal years. Early application is permitted upon issuance. Lessees (for capital and operating leases) and lessors (for sales-type, direct financing, and operating leases) must apply a modified retrospective transition approach for leases existing at, or entered into after, the beginning of the earliest comparative period presented in the financial statements. The modified retrospective approach would not require any transition accounting for leases that expired before the earliest comparative period presented. Lessees and lessors may not apply a full retrospective transition approach. The Company is currently assessing the impact that ASU 2016-02 will have on its consolidated financial statements. The Company has been gathering the lease agreement data and has begun to analyze the financial impact to the consolidated financial statements.

In April 2016, the FASB issued ASU 2016-10 Revenue from Contracts with Customers (Topic 606) (“ASU 2016-10”). The core principle of the guidance in Topic 606 is that an entity should recognize revenue to depict the transfer of promised goods or services to customers in an amount that reflects the consideration to which the entity expects to be entitled in exchange for those goods or services. The amendments in ASU 2016-10 affect the guidance in ASU 2014-09, Revenue from Contracts with Customers, which is not yet effective. The effective date and transition requirements of ASU 2016-10 are the same as the effective date and transition requirements of ASU 2014-09. They are effective prospectively for reporting periods beginning after December 15, 2017 and early adoption is not permitted. The Company is currently assessing the impact of the adoption of these amendments on its consolidated financial statements.

In May 2016, the FASB issued Accounting Standards Update No. 2016-12, Revenue from Contracts with Customers (Topic 606): Narrow -Scope Improvements and Practical Expedients. The amendments do not change the core revenue recognition principle in Topic 606. The amendments provide clarifying guidance in certain narrow areas and add some practical expedients. These amendments are effective at the same date that Topic 606 is effective. Topic 606 is effective for public entities for annual reporting periods beginning after December 15, 2017, including interim reporting periods therein (i.e., January 1, 2018, for a calendar year entity). Topic 606 is effective for nonpublic entities one year later. The Company is currently assessing the impact of the adoption of the amendments to Topic 606 and these amendments on its consolidated financial statements.

In September 2017, the FASB issued ASU 2017-13, “Revenue Recognition (Topic 605), Revenue from Contracts with Customers (Topic 606), Leases (Topic 840), and Leases (Topic 842),” which provides additional implementation guidance on the previously issued ASU 2016-02 Leases (Topic 842). The revenue standard is effective for annual periods beginning after December 15, 2017. ASU 2016-02 requires a lessee to recognize assets and liabilities on the balance sheet for leases with lease terms greater than 12 months. ASU 2016-02 is effective for fiscal years, and interim periods within those years, beginning after December 15, 2018, and early adoption is permitted. The Company is currently assessing the impact of the adoption of this guidance on its consolidated financial statements.

In February 2018, the FASB issued Accounting Standards Update No. 2018-02, Income Statement – Reporting Comprehensive Income (Topic 220): Reclassification of Certain Tax Effects from Accumulated Other Comprehensive Income. This update will be effective for all interim and annual reporting periods beginning after December 15, 2018. The Company is currently assessing the impact of the adoption of these amendments on its consolidated financial statements.

In March 2018, the FASB issued Accounting Standards Update No. 2018-05, Income Taxes (Topic 740): Amendments to SEC Paragraphs Pursuant to SEC Staff Accounting Bulletin No. 118 (“ASU 2018-05”). ASU 2018-05 adds various SEC paragraphs pursuant to the issuance of the December 2017 SEC Staff Accounting Bulletin No. 118, Income Tax Accounting Implications of the Tax Cuts and Jobs Act (“SAB No. 118”), which was effective immediately. SAB No.118 provides for a provisional one year measurement period for entities to finalize their accounting for certain income tax effects related to the Tax Cuts and Jobs Act. The adoption of ASU 2018-05 had no material impact on the Company’s consolidated financial statements as of and for the three months ended March 31, 2018. See Note 10, Income Taxes, for disclosures related to this amended guidance.

The Company does not believe that any other recently issued, but not yet effective, accounting standards if currently adopted would have a material effect on the accompanying consolidated financial statements.

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PROPERTY AND EQUIPMENT

3 Months Ended

Mar. 31, 2018

Property, Plant and Equipment [Abstract]

PROPERTY AND EQUIPMENT

The components of property and equipment at March 31, 2018 and December 31, 2017 consisted of the following:

	March 31,			December 31,
	2018			2017
Land	$	300,000		$	300,000
Buildings and Improvements		1,650,000			1,650,000		31.5 years
Machinery and Equipment		11,570,000			11,554,000		5 - 8 years
Capital Lease Machinery and Equipment		6,534,000			6,534,000		5 - 8 years
Tools and Instruments		8,677,000			8,538,000		1.5 - 7 years
Automotive Equipment		172,000			172,000		5 years
Furniture and Fixtures		316,000			311,000		5 - 8 years
Leasehold Improvements		528,000			528,000		Term of Lease
Computers and Software		406,000			406,000		4 - 6 years
Total Property and Equipment		30,153,000			29,993,000
Less: Accumulated Depreciation		(20,624,000	)		(19,943,000	)
Property and Equipment, net	$	9,529,000		$	10,050,000

Depreciation expense for the three months ended March 31, 2018 and 2017 was approximately $681,000 and $722,000, respectively. Assets held under capitalized lease obligations are depreciated over the shorter of their related lease terms or their estimated productive lives. Depreciation of assets under capital leases is included in depreciation expense for 2018 and 2017. Accumulated depreciation on these assets was approximately $3,919,000 and $3,595,000 as of March 31, 2018 and December 31, 2017, respectively.

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INTANGIBLE ASSETS

3 Months Ended

Mar. 31, 2018

Goodwill and Intangible Assets Disclosure [Abstract]

INTANGIBLE ASSETS

The expense for amortization of the intangibles for the three months ended March 31, 2017 was approximately $254,000. As of December 31, 2017 Intangible Assets had been fully amortized.

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ASSETS HELD FOR SALE AND LIABILITES DIRECLTY ASSOCIATED

3 Months Ended

Mar. 31, 2018

Assets Held For Sale And Liabilites Direclty Associated

ASSETS HELD FOR SALE AND LIABILITES DIRECLTY ASSOCIATED

WMI

As discussed in Note 1, on March 21, 2018, the Company signed a Stock Purchase Agreement to sell all of the outstanding shares of WMI to CPI for a purchase price of $9,000,000, subject to a working capital adjustment, and a contingent payment of $1,000,000. At March 31, 2018 and December 31, 2017, the Company reclassified its assets held for sale and the liabilities directly associated to these assets. The components of these assets and liabilities are as follows:

Components of Assets Held for Sale and Liabilities Directly Associated

Assets Held for Sale	March 31, 2018			December 31, 2017
Accounts Receivable, net of allowance for doubtful accounts	$	1,687,000		$	2,217,000
Inventory, net of reserves		9,052,000			8,065,000
Prepaid and other assets		436,000			485,000
Property and equipment, net of accumulated depreciation		837,000			878,000
Impairment of Assets Held for Sale		(1,600,000	)		(1,563,000	)
Assets Held for Sale	$	10,412,000		$	10,082,000
Accounts payable and accrued expenses		1,966,000			2,138,000
Deferred Revenue		689,000			521,000
Notes Payable & Capital lease obligations		8,000			11,000
Deferred rent		134,000			125,000
Liabilities directly associated to Assets Held for Sale	$	2,797,000		$	2,795,000

Additionally, WMI's operations were previously reported in the Company's Aerostructures & Electronics segment. The amounts below represent WMI's operations that have been excluded from this segment for the three months ended March 31, 2018 and 2017, respectively:

Segment Data
Aerostructures & Electronics		2018			2017
Net Sales	$	2,543,000		$	3,479,000
Gross Profit (Loss)		392,000			(10,000	)
Pre Tax (Loss) Income		(92,000	)		(700,000	)
Assets		10,412,000			15,409,000

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NOTES PAYABLE AND CAPITAL LEASE OBLIGATIONS

3 Months Ended

Mar. 31, 2018

Notes and Loans Payable [Abstract]

NOTES PAYABLE AND CAPITAL LEASE OBLIGATIONS

Notes payable and capital lease obligations consist of the following:

	March 31,			December 31,
	2018			2017
	(unaudited)
Revolving credit note payable to PNC Bank N.A. ("PNC")	$	17,944,000		$	16,455,000
Term loans, PNC		3,102,000			3,471,000
Capital lease obligations		2,763,000			3,073,000
Related party notes payable, net of debt discount		3,158,000			1,912,000
Convertible notes payable - third parties, net of debt discount		2,063,000			1,930,000
Subtotal		29,030,000			26,841,000
Less:  Current portion of notes and capital obligations		(25,881,000	)		(23,393,000	)
Notes payable and capital lease obligations, net of current portion	$	3,149,000		$	3,448,000

PNC Bank N.A. ("PNC")

The Company has a Loan Facility with PNC secured by substantially all of its assets. The Loan Facility, which was to have expired on April 30, 2018, has been extended until May 31, 2018, and the Company is in negotiations with PNC for a further extension which the Company expects will include certain modifications to the terms of the Loan Facility.

The Loan Facility has been amended many times during its term. The Loan Facility was amended in June 2016 (the “Twelfth Amendment”) and September 2016 (the “Thirteenth Amendment”). In connection with the Twelfth Amendment, the Company paid PNC a fee of $100,000 and reimbursed it for the fees and expenses of its counsel. The Twelfth Amendment provides for a $33,000,000 revolving loan. In addition, in the Twelfth Amendment the four term loans (Term Loan A, Term Loan B, Term Loan C and Term Loan D) then outstanding were consolidated into a single term loan with the initial principal amount of $7,387,854. Further, in the Twelfth Amendment the Company acknowledged that there were then outstanding excess advances under the revolving loan in the amount of $12,500,000.

Under the terms of the Loan Facility, as amended, the revolving loan now bears interest at (a) the sum of the Alternate Base Rate plus one and three- quarters of one percent (1.75%) with respect to Domestic Rate Loans; and (b) the sum of the LIBOR Rate plus four and one-half of one percent (4.50%) with respect to LIBOR Rate Loans. The amount outstanding under the revolving loan, inclusive of the excess advance, was $17,944,000 and $16,455,000, as of March 31, 2018 and December 31, 2017, respectively. Because the revolving loans contain a subjective acceleration clause which could permit PNC to require repayment prior to maturity, all of the loans outstanding with PNC are classified with the current portion of notes and capital lease obligations.

The Loan Facility was further amended pursuant to the Thirteenth Amendment, to modify the advance rate with respect to our inventory to be the lesser of (i) 75% of the eligible inventory, an increase from 50%, and (ii) 90% of the liquidation value of the eligible inventory, an increase from 85%, subject to the inventory sublimit of $12,500,000 and such reserves as PNC may deem proper. In addition, in the Thirteenth Amendment the lender waived any default resulting from the Company’s obligation to comply with the minimum EBITDA (as defined in the Loan Facility) covenant for the period ended June 30, 2016, consented to the issuance of the Company’s 12% Subordinated Convertible Notes and the amendment to the Company’s Articles of Incorporation to increase the authorized number of shares of Preferred Stock and Series A Preferred Stock.

The repayment terms of the Term Loan provided for in the Twelfth Amendment consist of sixty (60) consecutive monthly principal installments, the first fifty-nine (59) of which shall be in the amount of $123,133 commencing on the first business day of July, 2016, and continuing on the first business day of each month thereafter, with a sixtieth (60th) and final payment of any unpaid balance of principal and interest payable on the last business day of June, 2021.

At the closing of the Twelfth Amendment, the Company paid $1,500,000 to reduce the outstanding excess under the revolving loan from $12,500,000 to $11,000,000. It also agreed that the excess advances will be paid down by $100,000 each week commencing the second week after the closing of the Twelfth Amendment.

To the extent that the Company disposes of collateral used to secure the Loan Facility, other than inventory, the Company must promptly repay the draws on the credit facility in the amount equal to the net proceeds of such sale.

The terms of the Loan Facility require that among other things, the Company maintain a specified Fixed Charge Coverage Ratio and maintain a minimum EBITDA. In addition, the Company is limited in the amount of capital expenditures it can make. The Company also is limited as to the amount of dividends it can pay its shareholders, as defined in the Loan Facility.

On June 19, 2017, we entered into the Fifteenth Amendment to the Loan Facility, which waived the failure to comply with the minimum EBITDA covenant for the periods ended December 31, 2016 and March 31, 2017 and the Capital Expenditures covenant for the period ended December 31, 2016. The amendment also requires that we maintain at all times a Fixed Charge Coverage Ratio, tested quarterly on a consolidated basis beginning September 30, 2017, as follows: (i) 1.00 to 1.00 for the quarter ending September 30, 2017, tested based upon the prior three (3) months, (ii) 1.05 to 1.00 for the quarter ending December 31, 2017, tested based upon the prior six (6) months and (iii) 1.05 to 1.00 for the quarter ending March 31, 2018, tested based upon the prior nine months and that we maintain EBITDA of not less than $345,000 for the period ending September 30, 2017. The amendment also provided that we were not required to maintain a Fixed Charge Coverage Ratio and that no testing was required to the Fixed Charge Coverage Ratio for the periods ending December 31, 2016 and June 30, 2017 and that we are not required to maintain a Fixed Charge Coverage Ratio and that no testing will be required of the Fixed Charge Coverage Ratio for the period ending June 30, 2017. On March 31, 2018 and December 31, 2017, the Company was not in compliance with our Fixed Charge Coverage Ratio covenant. The failure to satisfy the foregoing covenants would constitute a default under the Loan Facility and PNC at its option could give notice to the Company that all amounts under the Loan Facility are immediately due and payable, and accordingly all amounts due under the loan facility have been classified as current, as of March 31, 2018 and December 31, 2017. In addition, the amendment reduced the weekly payments we are required to make to reduce our $2,244,071 over-advance under the revolving credit facility as of June 19, 2017 from $100,000 to $25,000 per week during the period commencing May 22, 2017 through and including July 10, 2017. At December 31, 2017, the over-advance had been paid in full. We paid $50,000 to PNC in connection with the amendment and reimbursed PNC’s counsel fees.

As of March 31, 2018, our debt to PNC in the amount of $21,046,000 consisted of the revolving credit loan in the amount of $17,944,000 and the term loan in the amount of $3,102,000. As of December 31, 2017, our debt to PNC in the amount of $19,926,000 consisted of the revolving credit note due to PNC in the amount of $16,455,000 and the term loan due to PNC in the amount of $3,471,000.

Each day, the Company’s cash collections are swept directly by the bank to reduce the revolving loans and the Company then borrows according to a borrowing base formula. The Company's receivables are payable directly into a lockbox controlled by PNC (subject to the terms of the Loan Facility). PNC may use some elements of subjective business judgment in determining whether a material adverse change has occurred in the Company's condition, results of operations, assets, business, properties or prospects allowing it to demand repayment of the Loan Facility.

As of March 31, 2018 the future minimum principal payments for the term loans are as follows:

For the twelve months ending	Amount
March 31, 2019	$	1,478,000
March 31, 2020		1,478,000
March 31, 2021		146,000
March 31, 2022		—
March 31, 2023		—
Thereafter		—
PNC Term Loans payable		3,102,000
Less: Current portion		(3,102,000	)
Long-term portion	$	—

Interest expense related to these credit facilities amounted to approximately $342,000 and $720,000 for the three months ended March 31, 2018 and 2017, respectively.

Capital Leases Payable – Equipment

The Company is committed under several capital leases for manufacturing and computer equipment. All leases have bargain purchase options exercisable at the termination of each lease. Capital lease obligations totaled $2,763,000 and $3,073,000 as of March 31, 2018 and December 31, 2017, respectively, with various interest rates ranging from approximately 4% to 14%.

As of March 31, 2018, the aggregate future minimum lease payments, including imputed interest, with remaining terms of greater than one year are as follows:

For the twelve months ending	Amount
March 31, 2019	$	1,392,000
March 31, 2020		1,193,000
March 31, 2021		316,000
March 31, 2022		36,000
March 31, 2023		1,000
Thereafter		—
Total future minimum lease payments		2,938,000
Less: imputed interest		(175,000	)
Less: current portion		(1,274,000	)
Total Long Term Portion	$	1,489,000

Related Party Notes Payable

Taglich Brothers, Inc. is a corporation co-founded by two directors of the Company, Michael and Robert Taglich. In addition, a third director of the Company is a vice president of Taglich Brothers, Inc.

Taglich Brothers, Inc. has acted as placement agent for various debt and equity financing transactions and has received cash and equity compensation for their services. In addition, Michael and Robert Taglich have also invested in the Company through various debt and equity financings.

From November 23, 2016 through March 21, 2017, the Company received gross proceeds of $1,950,000 from Robert and Michael Taglich, from the sale of an equal principal amount of our 8% Subordinated Convertible Notes (the “8% Notes”). See “Private Placements of 8% Subordinated Convertible Notes” below.

In November 2017, Michael Taglich and Robert Taglich purchased 144,927 shares and 72,463 shares, respectively, of common stock, together with warrants to purchase an additional 48,000 shares and 24,000 shares, respectively, of common stock, for a purchase price of $200,000 and $100,000, respectively, in a private placement of the Company’s equity securities completed in January 2018 from which the Company received gross proceeds of $2,000,000. Taglich Brothers, Inc., which as placement agent for the sale of the shares and warrants, received a placement agent fee equal to $160,000 (8% of the amounts invested), payable at the Company’s option, in cash or additional shares of common stock and warrants having the same terms and conditions as the shares and warrants issued in the offering. See Note 8 below.

On March 29, 2018 and April 4, 2018, Michael Taglich and Robert Taglich advanced $1,000,000 and $100,000, respectively, to the Company. The terms of such advances require approval of PNC. Subject to the consent of PNC and completion of documentation, the Company agreed with Michael and Robert Taglich that each of them will receive a promissory note with a principal amount equal to the amount advanced to the Company (a “Note”) bearing interest, payable monthly, at the rate of 1% per month, except that interest accrued prior to the sale of WMI may be paid in kind. The Note and all interest accrued will be payable on June 1, 2019. The Company will exercise reasonable efforts to cause the Notes to be secured by a lien on its assets and, in all events, repayment of the Notes will be subordinate to our obligations to PNC. In addition to his Note, each of Michael and Robert Taglich will receive a number of shares equal to the result obtained by dividing .3 times the amount advanced by the closing price of the Company’s common stock immediately prior to the documentation of this transaction. Taglich Brothers has acted as placement agent in connection with the investment of $1,100,000 by Michael and Robert Taglich and may seek additional investors for up to $150,000 on the terms set forth above. For such services they are to be paid a commission in the aggregate amount of 3% of the amount invested which may be paid in kind.

Related party advances and notes payable, net of debt discounts to Michael and Robert Taglich, and their affiliated entities, totaled $3,158,000 and $1,912,000, as of March 31, 2018 and December 31, 2017, respectively.

Private Placements of 8% Subordinated Convertible Notes

From November 23, 2016 through March 21, 2017, the Company received gross proceeds of $4,775,000, of which $1,950,000 were received from Robert and Michael Taglich, from the sale of an equal principal amount of our 8% Subordinated Convertible Notes (the “8% Notes”), together with warrants to purchase a total of 383,080 shares of our common stock, in private placement transactions with accredited investors (the “8% Note Offerings”). In connection with the offering of the 8% Notes, the Company issued 8% Notes in the aggregate principal amount of $382,000 to Taglich Brothers, Inc., placement agent for the 8% Note Offerings, in lieu of payment of cash compensation for sales commissions, together with warrants to purchase a total of 180,977 shares of our common stock. Payment of the principal and accrued interest on the 8% Notes are junior and subordinate in right of payment to our indebtedness under the Loan Facility.

Interest on the 2018 Notes is payable on the outstanding principal amount thereof at the annual rate of 8%, payable quarterly commencing February 28, 2017, in cash, or at our option, in additional 2018 Notes, provided that if accrued interest payable on $1,269,000 principal amount of the 2018 Notes issued in December 2016 is paid in additional 2018 Notes, interest for that quarterly interest payment shall be calculated at the rate of 12% per annum. Upon the occurrence and continuation of an event of default, interest shall accrue at the rate of 12% per annum.

During the three months ended March 31, 2018, we issued $97,920 principal amount of 8% Notes in lieu of cash payment of accrued interest. As of March 31, 2018, we had outstanding $5,254,000 principal amount of 8% Notes, of which $2,847,000 principal amount is due on November 30, 2018 and $2,407,000 principal amount is due on February 28, 2019.

The outstanding principal amount plus accrued interest on the 8% Notes is convertible at the option of the holder into shares of common stock conversion prices ranging from $2.25 to $4.45 per share, subject to certain anti-dilution and other adjustments, including stock splits, and in the event of certain fundamental transactions such as mergers and other business combinations.

An event of default under the 8% Notes will occur (i) if the Company fails to make any payment under the 8% Notes within ten days after the date first due, or (ii) if the Company files a petition in bankruptcy or under any similar insolvency law, makes an assignment for the benefit of its creditors, or if any voluntary petition in bankruptcy or under any similar insolvency law is filed against the Company and such petition is not dismissed within sixty (60) days after the filing thereof. Upon the occurrence and continuation of an event of default, holders of a majority of the outstanding principal amount of the 8% Notes then outstanding, upon notice to the Company and the holders of the Senior Indebtedness (as defined in the 8% Notes), may demand immediate payment of the unpaid principal amount of the 8% Notes, together with accrued interest thereon and all other amounts payable under the 8% Notes, subject to the subordination provisions of the 8% Notes.

The exercise price of the warrants issued in connection with the 8% Note Offerings ranges from $3.00 to $4.53 per share, subject to certain anti-dilution and other adjustments, including stock splits, distributions in respect of the common stock and in the event of certain fundamental transactions such as mergers and other business combinations, and may be exercised on a cashless basis for a lesser number of shares depending upon prevailing market prices at the time of exercise. Of these warrants, 320,702 warrants may be exercised until November 30, 2021 and 243,307 warrants may be exercised until January 31, 2022.

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STOCKHOLDERS' EQUITY

3 Months Ended

Mar. 31, 2018

Stockholders' Equity

STOCKHOLDERS' EQUITY

Common Stock

Sale of Unregistered Equity Securities

On November 29, 2017, Air Industries Group (the “Company”) entered into a Placement Agency Agreement with Taglich Brothers, Inc. as placement agent (the “Placement Agent”), pursuant to which the Placement Agent agreed to offer on behalf of the Company, on a best efforts basis, up to 1,600,000 shares of the Company’s common stock (the “Shares”) to accredited investors (the “Offering”), together with five-year warrants to purchase 24,000 shares of common stock (the “Warrants”) for each $100,000 of shares purchased, in a private placement exempt from the registration requirements of the Securities Act.

On January 9, 2018 the Company issued and sold to 35 accredited investors an aggregate of 852,000 Shares and Warrants to purchase an additional 255,600 shares of common stock, for gross proceeds of $1,065,000 pursuant to the Offering. The purchase price for the Shares and Warrants was $1.25 per Share. The Company had previously sold a total of 725,390 Shares and Warrants to purchase an additional 224,400 shares of common stock for gross proceeds of $935,000 on November 29, 2017, December 5, 2017 and December 29, 2017 pursuant to the Offering.

The Warrants have an exercise price of $1.50 per share, subject to certain anti-dilution and other adjustments, including stock splits, and in the event of certain fundamental transactions such as mergers and other business combinations, and may be exercised on a cashless basis for a lesser number of shares depending upon prevailing market prices at the time of exercise. The Warrants may be exercised until November 30, 2022.

In connection with the Offering, Taglich Brothers, Inc., a related party, which acted as placement agent for the sale of the Shares and Warrants, is entitled to a placement agent fee equal to $104,000 (8% of the amounts invested), payable at the Company’s option, in cash or additional shares of common stock and warrants having the same terms and conditions as the Shares and Warrants. Michael Taglich and Robert Taglich, directors of the Company, are principals of Taglich Brothers, Inc. The placement agent fee was $85,200 and $0 for the three months ended March 31, 2018 and 2017, respectively. 

If prior to July 1, 2018, the Company should complete a placement of shares of its common stock or securities convertible into or exercisable for shares of its common stock at an effective price or conversion rate (the “Subsequent Price”) less than $1.25 per share of common stock, there shall be issued to the purchasers in the Offering, such additional number of shares of common stock as would have been received had the Purchase Price thereunder been equal to the greater of the Subsequent Price and $1.00 per share, provided further that no adjustment shall be made for those subscribers who are officers, directors or otherwise deemed to be affiliates of the Company under the rules of the NYSE American. If the Company shall complete more than one placements of shares of its common stock or securities convertible into or exercisable for shares of its common stock prior to July 1, 2018, the Subsequent Price will be the lowest of the prices at which such offerings are completed.

The Offering commenced November 29, 2017 and was completed in four closings for gross proceeds of $2,000,000 as follows:

		Shares		Warrants
Date	Total Investment	# of shares	Price	# of warrants	Ex Price
11/29/2017	$300,000	217,390	$1.38	72,000	$1.50
12/5/2017	400,000	320,000	$1.25	96,000	$1.50
12/29/2017	235,000	188,000	$1.25	56,400	$1.50
Subtotal- 2017	935,000	725,390		224,400
1/9/2018	1,065,000	852,000	$1.25	255,600	$1.50
Total Offering	$2,000,000	1,577,390		480,000

During the three months ended March 31, 2018, the Company issued 123,456 shares of common stock in lieu of cash payment for various services provided to the Company.

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COMMITMENTS AND CONTINGENCIES

3 Months Ended

Mar. 31, 2018

Commitments And Contingencies

COMMITMENTS AND CONTINGENCIES

Loss Contingencies

During 2016, a number of actions were commenced against the Company by vendors, landlords and former landlords, including a third party claim as a result of an injury suffered on a portion of a leased property not occupied by the Company. As certain of these claims represent amounts included in accounts payable they are not specifically discussed herein.

Westbury Park Associates, LLC commenced an action on or about January 11, 2017 against Air Industries Group in the NYS Supreme Court, County of Suffolk, seeking the recovery of approximately $31,000 for past rent arrears, and for an unidentified sum representing all additional rent due under an alleged commercial lease through the end of its term, plus attorney’s fees. The Company believes that it has a meritorious defense, and there was no lease on the property and that its subsidiary Compac Development Corp was a hold-over tenant occupying the space on month-to-month tenancy.

An employee of the Company commenced an action against, among others, Rechler Equity B-2, LLC and Air Industries Group, in the Supreme Court State of New York, Suffolk County, seeking compensation in an undetermined amount for injuries suffered while leaving the premises occupied by Welding Metallurgy, Inc. Rechler Equity B-2, LLC, has served a Third Party Complaint in this action against Air Industries Group, Inc. and Welding Metallurgy, Inc. The action remains in the early pleading stage. The Company believes it is not liable to the employee and any amount it might have to pay would be covered by insurance.

An employee of the Company commenced an action against, among others, Sterling Engineering and Air Industries Group, in Connecticut Commission on Human Rights and Opportunities, seeking lost wages in an undetermined amount for the employee’s termination. The action remains in the early pleading stage. The Company believes it is not liable to the employee and any amount it might have to pay would be covered by insurance.

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INCOME TAXES

3 Months Ended

Mar. 31, 2018

Income Tax Disclosure [Abstract]

INCOME TAXES

The Tax Cuts and Jobs Act (the “Tax Act”) was enacted on December 22, 2017, and permanently reduces the U.S. federal corporate rate from 35% to 21%, effective January 1, 2018.

SAB No. 118 allows a company to record a provisional amount when it does not have the necessary information available, prepared, or analyzed in reasonable detail to complete its accounting for the change in the tax law during the measurement period. As of March 31, 2018, the Company has not completed it accounting for the tax effects of the enactment of the Tax Act; however, the Company has made a reasonable estimate of the effects on its existing deferred tax balances. The Company is still analyzing the Tax Act and refining its calculations, which could potentially impact the measurement of its tax balances. The Company expects to complete its analysis within the measurement period.

The Company recorded no Federal income tax benefit for the three months ended March 31, 2018. A tax benefit of approximately $407,000 would have been recorded for the three months ended March 31, 2018, had there not been a full valuation allowance recorded against incremental deferred tax assets created during the period. In determining the estimated annual effective income tax rate, the Company analyzes various factors, including projections of our annual earnings and taxing jurisdictions in which the earnings will be generated, the impact of state and local income taxes, their ability to use tax credits and net operating loss carry forwards, and available tax planning alternatives. As of March 31, 2018 and December 31, 2017, the Company provided a valuation allowance against its net deferred tax assets since the Company believes it is more likely than not that its deferred tax assets will not be realized. 

The provision for (benefit from) income taxes as of March 31, is set forth below:

	2018		2017
	(unaudited)		(unaudited)
Current
Federal	$	-	$	—
State		2,000		-
Prior Year Under accrual
Federal		—		-
State		-		—
Total Current Expense		2,000		-
Deferred Tax Benefit		—		-
Valuation Allowance		—		-
Net Provision for (Benefit from) Income Taxes	$	2,000	$	-

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SEGMENT REPORTING

3 Months Ended

Mar. 31, 2018

Segment Reporting [Abstract]

SEGMENT REPORTING

In accordance with FASB ASC 280, “Segment Reporting” ("ASC 280"), the Company discloses financial and descriptive information about its reportable operating segments. Operating segments are components of an enterprise about which separate financial information is available and regularly evaluated by the chief operating decision maker in deciding how to allocate resources and in assessing performance.

The Company follows ASC 280, which establishes standards for reporting information about operating segments in annual and interim financial statements, and requires that companies report financial and descriptive information about their reportable segments based on a management approach. ASC 280 also establishes standards for related disclosures about products and services, geographic areas and major customers.

The Company currently divides its operations into three operating segments: Complex Machining which consists of AIM and NTW; Aerostructures and Electronics which consists of WMI, WPI, MSI, Eur-Pac, ECC, and Compac; and Turbine Engine Components which consists of AMK and Sterling. Along with our operating subsidiaries, we report the results of our corporate division as an independent segment.

The accounting policies of each of the segments are the same as those described in the Summary of Significant Accounting Policies. The Company evaluates performance based on revenue, gross profit contribution and assets employed. Corporate level operating costs are allocated to segments. These costs include corporate costs such as legal, audit, tax and other professional fees including those related to being a public company.

Given the pending sale of WMI, in the future, the Company may change its reportable operating segments.

Financial information about the Company’s reporting segments for the three months ended March 31, 2018 and 2017 are as follows: 

	Three Months Ended March 31,
	2018			2017
COMPLEX MACHINING
Net Sales	$	10,627,000		$	9,891,000
Gross Profit		2,023,000			2,900,000
Pre Tax Income		116,000			1,085,000
Assets		45,014,000			41,940,000
AEROSTRUCTURES & ELECTRONICS
Net Sales		333,000			841,000
Gross Profit		28,000			36,000
Pre Tax Loss		(472,000	)		(579,000	)
Assets		930,000			4,260,000
TURBINE ENGINE COMPONENTS
Net Sales		1,282,000			1,942,000
Gross Loss		(48,000	)		(224,000	)
Pre Tax Loss		(457,000	)		(827,000	)
Assets		6,009,000			11,233,000
CORPORATE
Net Sales		—			—
Gross Profit		—			—
Pre Tax Loss		(561,000	)		(133,000	)
Assets		241,000			785,000
CONSOLIDATED
Net Sales		12,242,000			12,674,000
Gross Profit		2,003,000			2,712,000
Pre Tax Loss		(1,374,000	)		(454,000	)
Provision for Income Taxes		2,000			-
Loss from Discontinued Operations		(92,000	)		(700,000	)
Assets Held for Sale		10,412,000			15,409,000
Net Loss		(1,468,000	)		(1,154,000	)
Assets	$	62,606,000		$	73,627,000

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SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (Policies)

3 Months Ended

Mar. 31, 2018

Accounting Policies [Abstract]

Principal Business Activity

The Company through its AIM subsidiary is primarily engaged in manufacturing aircraft structural parts, and assemblies for prime defense contractors in the aerospace industry in the United States. NTW is a manufacturer of aerospace components, principally landing gear for F-16 and F-18 fighter aircraft. Welding Metallurgy is a specialty welding and products provider whose significant customers include the world's largest aircraft manufacturers, subcontractors, and original equipment manufacturers. Miller Stuart is a manufacturer of aerospace components whose customers include major aircraft manufacturers and the US Military. Miller Stuart specializes in electromechanical systems, harness and cable assemblies, electronic equipment and printed circuit boards. Woodbine is a manufacturer of aerospace components whose customers include major aircraft component suppliers. Eur-Pac specializes in military packaging and supplies. Eur- Pac’s primary business is “kitting” of supplies for all branches of the United States Defense Department including ordnance parts, hose assemblies, hydraulic, mechanical and electrical assemblies. Compac specializes in the manufacture of RFI/EMI (Radio Frequency Interference Electro-Magnetic Interference) shielded enclosures for electronic components. The Company’s customers consist mainly of publicly traded companies in the aerospace industry.

If the sale of WMI closes, the Company will be more focused on complex machined products for aircraft landing gear and jet turbines.

Inventory Valuation

For annual periods, the Company values inventory at the lower of cost on a first-in-first out basis or market. The Company does not take physical inventories at interim quarterly reporting periods. As such, approximately 50% of the inventory value at March 31, 2018 has been estimated using a gross profit percentage based on sales of previous periods to the net sales of the current period, as management believes that the gross profit percentage on these items are materially consistent from period to period. The remainder of the inventory value at March 31, 2018 is estimated based on the Company's standard cost perpetual inventory system, as management believes the perpetual system computed value for these items provides a better estimate of value for that inventory. Adjustments to reconcile the annual physical inventory to the Company’s books are treated as changes in accounting estimates and are recorded in the fourth quarter. Inventories consist of the following at:

	March 31,			December 31,
	2018			2017
	(unaudited)
Raw Materials	$	5,290,000		$	5,346,000
Work In Progress		19,065,000			19,947,000
Finished Goods		10,930,000			10,122,000
Inventory Reserve		(4,398,000	)		(4,274,000	)
Total Inventory	$	30,887,000		$	31,141,000

Credit and Concentration Risks

There were three customers that represented 73.1% of total sales, and three customers that represented 60.3% of total sales for the three months ended March 31, 2018 and 2017, respectively. This is set forth in the table below.

Customer	Percentage of Sales
	March 2018	March 2017
	(Unaudited)	(Unaudited)
1	34.5	18.9
2	28.6	21.5
3	10.0	*
4	**	19.9

*Customer was less than 10% of sales at March 31, 2017.

**Customer was less than 10% of sales at March 31, 2018. 

There were three customers that represented 71.9% of gross accounts receivable and three customers that represented 68.7% of gross accounts receivable at March 31, 2018 and December 31, 2017, respectively. This is set forth in the table below.

Customer	Percentage of Receivables
	March 2018	December 2017
	(Unaudited)
1	43.2	41.9
2	16.3	14.6
3	12.4	*
4	**	12.2

*Customer was less than 10% of gross accounts receivable at December 31, 2017.

**Customer was less than 10% of gross accounts receivable at March 31, 2018.

During the year, the Company had occasionally maintained balances in its bank accounts that were in excess of the FDIC limit. The Company has not experienced any losses on these accounts.

The Company has several key sole-source suppliers of various parts that are important for one or more of its products. These suppliers are its only source for such parts and, therefore, in the event any of them were to go out of business or be unable to provide parts for any reason, its business could be severely harmed.

Earnings per share

Basic earnings per share is computed by dividing the net income applicable to common stockholders by the weighted-average number of shares of common stock outstanding for the period. Potentially dilutive shares, using the treasury stock method, are included in the diluted per-share calculations for all periods when the effect of their inclusion is dilutive.

The following is a reconciliation of the denominators of basic and diluted earnings per share computations:

Three Months Ended

	March 31, 2018 (Unaudited)		March 31, 2017 (Unaudited)
Weighted average shares outstanding used to compute basic earnings per share		26,116,262		7,650,165
Effect of dilutive stock options and warrants		—		—
Weighted average shares outstanding and dilutive securities used to compute dilutive earnings per share		26,616,262		7,650,165

The following securities have been excluded from the calculation as the exercise price was greater than the average market price of the common shares:

Three Months Ended

	March 31, 2018		March 31, 2017
	(Unaudited)		(Unaudited)
Stock Options		354,000		513,000
Warrants		1,480,000		520,000
		1,834,000		1,033,000

The following securities have been excluded from the calculation even though the exercise price was less than the average market price of the common shares because the effect of including these potential shares was anti-dilutive due to the net loss incurred during that period:

	March 31, 2018		March 31, 2017
	(Unaudited)		(Unaudited)
Convertible Preferred Stock		-		2,517,000
Stock Options		695,000		3,000
Warrants		480,000		321,000
		1,175,000		2,841,000

Stock-Based Compensation

The Company accounts for stock-based compensation in accordance with FASB ASC 718, "Compensation – Stock Compensation." Under the fair value recognition provision of the ASC, stock-based compensation cost is estimated at the grant date based on the fair value of the award. The Company estimates the fair value of stock options and warrants granted using the Black-Scholes-Merton option pricing model. Stock based compensation amounted to $83,000 and $73,000 for the three months ended March 31, 2018 and 2017, respectively, and was included in operating expenses on the accompanying Condensed Consolidated Statements of Income.

Goodwill

Goodwill represents the excess of the acquisition cost of businesses over the fair value of the identifiable net assets acquired. The goodwill amount of $272,000 March 31, 2018 and December 31, 2017 relates to the acquisitions of NTW $163,000 and ECC $109,000.

Goodwill is not amortized, but is tested at least annually for impairment, or if circumstances occur that more likely than not reduce the fair value of the reporting unit below its carrying amount.

The Company has determined that there has been no impairment of goodwill at March 31, 2018.

Recently Issued Accounting Pronouncements

On May 28, 2014, the FASB issued ASU No. 2014-09, Revenue from Contracts with Customers. ASU 2014-09 supersedes existing revenue recognition guidance, including ASC 605-35, Revenue Recognition - Construction-Type and Production-Type Contracts, and outlines a single set of comprehensive principles for recognizing revenue under U.S. GAAP. Among other things, it requires companies to identify contractual performance obligations and determine whether revenue should be recognized at a point in time or over time. On July 9, 2015, the FASB approved a one year deferral of the effective date of ASU 2014-09 to annual reporting periods beginning after December 15, 2017. We intend to adopt the New Revenue Standard effective January 1, 2018.

The new guidance allows for two transition methods in application - (i) retrospective to each prior reporting period presented, or (ii) prospective with the cumulative effect of adoption recognized on January 1, 2018 (also known as the modified retrospective approach). The Company is still assessing which transition method to adopt. This guidance requires additional disclosures of the amount by which each financial statement line item affected in the current reporting period during 2019 as compared to the guidance that was in effect before the change, and an explanation of the reasons for the significant changes.

The Company currently recognizes the majority of its revenues based on shipment of products (at a point in time). Currently, some contracts the Company enters into with customers are accounted for on a percentage of completion basis. For contracts with a significant amount of development and/or requiring the delivery of a minimal number of units, revenue and profit are recognized using the percentage-of-completion cost-to-cost method to measure progress. For contracts that require the Company to produce a substantial number of similar items without a significant level of development, the Company currently records revenue and profit using the percentage-of-completion units-of-delivery method as the basis for measuring progress on the contract.

Under ASC 606, revenue will be recognized as the customer obtains control of the goods and services promised in the contract (i.e., performance obligations). We may also have more performance obligations in our contracts under ASC 606, which may impact the timing of recording sales and operating profit, including those where sales recognition is deferred pending the incurrence of costs.

The Company has not completed its assessment of the effects of the new revenue standard, and has not determined whether adopting ASU 2014-09 will have a material effect on its consolidated financial statements.

In February 2016, the FASB issued ASU No. 2016-02, “Leases (Topic 842).” Among other things, in the amendments in ASU 2016-02, lessees will be required to recognize the following for all leases (with the exception of short-term leases) at the commencement date: (1) A lease liability, which is a lessee‘s obligation to make lease payments arising from a lease, measured on a discounted basis; and (2) A right-of-use asset, which is an asset that represents the lessee’s right to use, or control the use of, a specified asset for the lease term. Under the new guidance, lessor accounting is largely unchanged. Certain targeted improvements were made to align, where necessary, lessor accounting with the lessee accounting model and Topic 606, Revenue from Contracts with Customers. The amendments in this ASU are effective for fiscal years beginning after December 15, 2018, including interim periods within those fiscal years. Early application is permitted upon issuance. Lessees (for capital and operating leases) and lessors (for sales-type, direct financing, and operating leases) must apply a modified retrospective transition approach for leases existing at, or entered into after, the beginning of the earliest comparative period presented in the financial statements. The modified retrospective approach would not require any transition accounting for leases that expired before the earliest comparative period presented. Lessees and lessors may not apply a full retrospective transition approach. The Company is currently assessing the impact that ASU 2016-02 will have on its consolidated financial statements. The Company has been gathering the lease agreement data and has begun to analyze the financial impact to the consolidated financial statements.

In April 2016, the FASB issued ASU 2016-10 Revenue from Contracts with Customers (Topic 606) (“ASU 2016-10”). The core principle of the guidance in Topic 606 is that an entity should recognize revenue to depict the transfer of promised goods or services to customers in an amount that reflects the consideration to which the entity expects to be entitled in exchange for those goods or services. The amendments in ASU 2016-10 affect the guidance in ASU 2014-09, Revenue from Contracts with Customers, which is not yet effective. The effective date and transition requirements of ASU 2016-10 are the same as the effective date and transition requirements of ASU 2014-09. They are effective prospectively for reporting periods beginning after December 15, 2017 and early adoption is not permitted. The Company is currently assessing the impact of the adoption of these amendments on its consolidated financial statements.

In May 2016, the FASB issued Accounting Standards Update No. 2016-12, Revenue from Contracts with Customers (Topic 606): Narrow -Scope Improvements and Practical Expedients. The amendments do not change the core revenue recognition principle in Topic 606. The amendments provide clarifying guidance in certain narrow areas and add some practical expedients. These amendments are effective at the same date that Topic 606 is effective. Topic 606 is effective for public entities for annual reporting periods beginning after December 15, 2017, including interim reporting periods therein (i.e., January 1, 2018, for a calendar year entity). Topic 606 is effective for nonpublic entities one year later. The Company is currently assessing the impact of the adoption of the amendments to Topic 606 and these amendments on its consolidated financial statements.

In September 2017, the FASB issued ASU 2017-13, “Revenue Recognition (Topic 605), Revenue from Contracts with Customers (Topic 606), Leases (Topic 840), and Leases (Topic 842),” which provides additional implementation guidance on the previously issued ASU 2016-02 Leases (Topic 842). The revenue standard is effective for annual periods beginning after December 15, 2017. ASU 2016-02 requires a lessee to recognize assets and liabilities on the balance sheet for leases with lease terms greater than 12 months. ASU 2016-02 is effective for fiscal years, and interim periods within those years, beginning after December 15, 2018, and early adoption is permitted. The Company is currently assessing the impact of the adoption of this guidance on its consolidated financial statements.

In February 2018, the FASB issued Accounting Standards Update No. 2018-02, Income Statement – Reporting Comprehensive Income (Topic 220): Reclassification of Certain Tax Effects from Accumulated Other Comprehensive Income. This update will be effective for all interim and annual reporting periods beginning after December 15, 2018. The Company is currently assessing the impact of the adoption of these amendments on its consolidated financial statements.

In March 2018, the FASB issued Accounting Standards Update No. 2018-05, Income Taxes (Topic 740): Amendments to SEC Paragraphs Pursuant to SEC Staff Accounting Bulletin No. 118 (“ASU 2018-05”). ASU 2018-05 adds various SEC paragraphs pursuant to the issuance of the December 2017 SEC Staff Accounting Bulletin No. 118, Income Tax Accounting Implications of the Tax Cuts and Jobs Act (“SAB No. 118”), which was effective immediately. SAB No.118 provides for a provisional one year measurement period for entities to finalize their accounting for certain income tax effects related to the Tax Cuts and Jobs Act. The adoption of ASU 2018-05 had no material impact on the Company’s consolidated financial statements as of and for the three months ended March 31, 2018. See Note 10, Income Taxes, for disclosures related to this amended guidance.

The Company does not believe that any other recently issued, but not yet effective, accounting standards if currently adopted would have a material effect on the accompanying consolidated financial statements.

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DISCONTINUED OPERATIONS (Tables)

3 Months Ended

Mar. 31, 2018

Discontinued Operations Tables

Discontinued operations

	Three Months Ended March 31,
	2018			2017
	(unaudited)			(unaudited)
Net revenue	$	2,543,000		$	3,479,000
Cost of goods sold		2,151,000			3,489,000
Gross profit		392,000			(10,000	)
Operating expenses:
Selling, general and administrative		485,000			680,000
Total operating expenses		(93,000	)		(690,000	)
Interest expense		-			(10,000	)
Other income (expense)		1,000			-
Loss from discontinued operations before income taxes		(92,000	)		(700,000	)
Provision for income taxes		—			-
Net loss from discontinued operations	$	(92,000	)	$	(700,000	)

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SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (Tables)

3 Months Ended

Mar. 31, 2018

Accounting Policies [Abstract]

Inventory Valuation

	March 31,			December 31,
	2018			2017
	(unaudited)
Raw Materials	$	5,290,000		$	5,346,000
Work In Progress		19,065,000			19,947,000
Finished Goods		10,930,000			10,122,000
Inventory Reserve		(4,398,000	)		(4,274,000	)
Total Inventory	$	30,887,000		$	31,141,000

Credit and Concentration Risks

Customer	Percentage of Sales
	March 2018	March 2017
	(Unaudited)	(Unaudited)
1	34.5	18.9
2	28.6	21.5
3	10.0	*
4	**	19.9

*Customer was less than 10% of sales at March 31, 2017.

**Customer was less than 10% of sales at March 31, 2018. 

There were three customers that represented 71.9% of gross accounts receivable and three customers that represented 68.7% of gross accounts receivable at March 31, 2018 and December 31, 2017, respectively. This is set forth in the table below.

Customer	Percentage of Receivables
	March 2018	December 2017
	(Unaudited)
1	43.2	41.9
2	16.3	14.6
3	12.4	*
4	**	12.2

*Customer was less than 10% of gross accounts receivable at December 31, 2017.

**Customer was less than 10% of gross accounts receivable at March 31, 2018.

Earnings per share

	March 31, 2018 (Unaudited)		March 31, 2017 (Unaudited)
Weighted average shares outstanding used to compute basic earnings per share		26,116,262		7,650,165
Effect of dilutive stock options and warrants		—		—
Weighted average shares outstanding and dilutive securities used to compute dilutive earnings per share		26,116,262		7,650,165

Anti-dilutive Securities

	March 31, 2018		March 31, 2017
	(Unaudited)		(Unaudited)
Stock Options		354,000		513,000
Warrants		1,480,000		520,000
		1,834,000		1,033,000

	March 31, 2018		March 31, 2017
	(Unaudited)		(Unaudited)
Convertible Preferred Stock		-		2,517,000
Stock Options		695,000		3,000
Warrants		480,000		321,000
		1,175,000		2,841,000

XML

PROPERTY AND EQUIPMENT (Tables)

3 Months Ended

Mar. 31, 2018

Property, Plant and Equipment [Abstract]

Property and equipment

	March 31,			December 31,
	2018			2017
Land	$	300,000		$	300,000
Buildings and Improvements		1,650,000			1,650,000		31.5 years
Machinery and Equipment		11,570,000			11,554,000		5 - 8 years
Capital Lease Machinery and Equipment		6,534,000			6,534,000		5 - 8 years
Tools and Instruments		8,677,000			8,538,000		1.5 - 7 years
Automotive Equipment		172,000			172,000		5 years
Furniture and Fixtures		316,000			311,000		5 - 8 years
Leasehold Improvements		528,000			528,000		Term of Lease
Computers and Software		406,000			406,000		4 - 6 years
Total Property and Equipment		30,153,000			29,993,000
Less: Accumulated Depreciation		(20,624,000	)		(19,943,000	)
Property and Equipment, net	$	9,529,000		$	10,050,000

XML

ASSETS HELD FOR SALE AND LIABILITES DIRECLTY ASSOCIATED (Tables)

3 Months Ended

Mar. 31, 2018

Assets Held For Sale And Liabilites Direclty Associated Tables

Components of Assets Held for Sale and Liabilities Directly Associated

Assets Held for Sale	March 31, 2018			December 31, 2017
Accounts Receivable, net of allowance for doubtful accounts	$	1,687,000		$	2,217,000
Inventory, net of reserves		9,052,000			8,065,000
Prepaid and other assets		436,000			485,000
Property and equipment, net of accumulated depreciation		837,000			878,000
Impairment of Assets Held for Sale		(1,600,000	)		(1,563,000	)
Assets Held for Sale	$	10,412,000		$	10,082,000
Accounts payable and accrued expenses		1,966,000			2,138,000
Deferred Revenue		689,000			521,000
Notes Payable & Capital lease obligations		8,000			11,000
Deferred rent		134,000			125,000
Liabilities directly associated to Assets Held for Sale	$	2,797,000		$	2,795,000

Company's Turbine Engine Components segment data

Segment Data
Aerostructures & Electronics		2018			2017
Net Sales	$	2,543,000		$	3,479,000
Gross Profit (Loss)		392,000			(10,000	)
Pre Tax (Loss) Income		(92,000	)		(700,000	)
Assets		10,412,000			15,409,000

XML

NOTES PAYABLE AND CAPITAL LEASE OBLIGATIONS (Tables)

3 Months Ended

Mar. 31, 2018

Notes and Loans Payable [Abstract]

Notes payable and capital lease obligations

	March 31,			December 31,
	2018			2017
	(unaudited)
Revolving credit note payable to PNC Bank N.A. ("PNC")	$	17,944,000		$	16,455,000
Term loans, PNC		3,102,000			3,471,000
Capital lease obligations		2,763,000			3,073,000
Related party notes payable, net of debt discount		3,158,000			1,912,000
Convertible notes payable - third parties, net of debt discount		2,063,000			1,930,000
Subtotal		29,030,000			26,841,000
Less:  Current portion of notes and capital obligations		(25,881,000	)		(23,393,000	)
Notes payable and capital lease obligations, net of current portion	$	3,149,000		$	3,448,000

Future minimum principal payments for term loan

For the twelve months ending	Amount
March 31, 2019	$	1,478,000
March 31, 2020		1,478,000
March 31, 2021		146,000
March 31, 2022		—
March 31, 2023		—
Thereafter		—
PNC Term Loans payable		3,102,000
Less: Current portion		(3,102,000	)
Long-term portion	$	—

Future minimum lease payments, including imputed interest

For the twelve months ending	Amount
March 31, 2019	$	1,392,000
March 31, 2020		1,193,000
March 31, 2021		316,000
March 31, 2022		36,000
March 31, 2023		1,000
Thereafter		—
Total future minimum lease payments		2,938,000
Less: imputed interest		(175,000	)
Less: current portion		(1,274,000	)
Total Long Term Portion	$	1,489,000

XML

STOCKHOLDERS' EQUITY (Tables)

3 Months Ended

Mar. 31, 2018

Stockholders Equity Tables

Equity

		Shares		Warrants
Date	Total Investment	# of shares	Price	# of warrants	Ex Price
11/29/2017	$300,000	217,390	$1.38	72,000	$1.50
12/5/2017	400,000	320,000	$1.25	96,000	$1.50
12/29/2017	235,000	188,000	$1.25	56,400	$1.50
Subtotal- 2017	935,000	725,390		224,400
1/9/2018	1,065,000	852,000	$1.25	255,600	$1.50
Total Offering	$2,000,000	1,577,390		480,000

XML

INCOME TAXES (Tables)

3 Months Ended

Mar. 31, 2018

Income Tax Disclosure [Abstract]

Provision for income taxes

	2018		2017
	(unaudited)		(unaudited)
Current
Federal	$	-	$	—
State		2,000		-
Prior Year Under accrual
Federal		—		-
State		-		—
Total Current Expense		2,000		-
Deferred Tax Benefit		—		-
Valuation Allowance		—		-
Net Provision for (Benefit from) Income Taxes	$	2,000	$	-

XML

SEGMENT REPORTING (Tables)

3 Months Ended

Mar. 31, 2018

Segment Reporting [Abstract]

Operating segments

	Three Months Ended March 31,
	2018			2017
COMPLEX MACHINING
Net Sales	$	10,627,000		$	9,891,000
Gross Profit		2,023,000			2,900,000
Pre Tax Income		116,000			1,085,000
Assets		45,014,000			41,940,000
AEROSTRUCTURES & ELECTRONICS
Net Sales		333,000			841,000
Gross Profit		28,000			36,000
Pre Tax Loss		(472,000	)		(579,000	)
Assets		930,000			4,260,000
TURBINE ENGINE COMPONENTS
Net Sales		1,282,000			1,942,000
Gross Loss		(48,000	)		(224,000	)
Pre Tax Loss		(457,000	)		(827,000	)
Assets		6,009,000			11,233,000
CORPORATE
Net Sales		—			—
Gross Profit		—			—
Pre Tax Loss		(561,000	)		(133,000	)
Assets		241,000			785,000
CONSOLIDATED
Net Sales		12,242,000			12,674,000
Gross Profit		2,003,000			2,712,000
Pre Tax Loss		(1,374,000	)		(454,000	)
Provision for Income Taxes		2,000			-
Loss from Discontinued Operations		(92,000	)		(700,000	)
Assets Held for Sale		10,412,000			15,409,000
Net Loss		(1,468,000	)		(1,154,000	)
Assets	$	62,606,000		$	73,627,000

XML

DISCONTINUED OPERATIONS (Details) - USD ($)	3 Months Ended
	Mar. 31, 2018	Mar. 31, 2017
Acquisition Details
Net revenue	$ 2,543,000	$ 3,479,000
Cost of goods sold	2,151,000	3,489,000
Gross profit	392,000	(10,000)
Operating expenses:
Selling, general and administrative	485,000	680,000
Total operating expenses	(93,000)	(690,000)
Interest expense	0	(10,000)
Other income (expense)	1,000	0
Loss from discontinued operations before income taxes	(92,000)	(700,000)
Provision for income taxes	0	0
Net income (loss) from discontinued operations	$ (92,000)	$ (700,000)

XML

SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (Details) - USD ($)	Mar. 31, 2018	Dec. 31, 2017
Summary Of Significant Accounting Policies Details
Raw Materials	$ 5,290,000	$ 5,346,000
Work in Process	19,065,000	19,947,000
Finished Goods	10,930,000	10,122,000
Inventory Reserve	(4,398,000)	(4,274,000)
Total Inventory	$ 30,887,000	$ 31,141,000

XML

SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (Details 1)	3 Months Ended
	Mar. 31, 2018		Mar. 31, 2017
Accounting Policies [Abstract]
Customer 1 percentage of sales	34.50%		18.90%
Customer 2 percentage of sales	28.60%		21.50%
Customer 3 percentage of sales	10.00%			[1]
Customer 4 percentage of sales		[2]	19.90%

[1] Customer was less than 10% of sales at March 31, 2017.

[2] Customer was less than 10% of sales at March 31, 2018.

XML

SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (Details 2)	Mar. 31, 2018		Dec. 31, 2017
Accounting Policies [Abstract]
Customer 1 percentage of receivables	43.20%		41.90%
Customer 2 percentage of receivables	16.30%		14.60%
Customer 3 percentage of receivables	12.40%			[1]
Customer 4 percentage of receivables		[2]	12.20%

[1] Customer was less than 10% of gross accounts receivable at December 31, 2017

[2] Customer was less than 10% of gross accounts receivable at March 31, 2018.

XML

SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (Details 3) - shares	3 Months Ended
	Mar. 31, 2018	Mar. 31, 2017
Accounting Policies [Abstract]
Weighted average shares outstanding used to compute basic earnings per share	26,116,262	7,650,165
Effect of dilutive stock options and warrants	0	0
Weighted average shares outstanding and dilutive securities used to compute dilutive earnings per share	26,116,262	7,650,165

XML

SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (Details 4) - shares	Mar. 31, 2018	Mar. 31, 2017
Stock Options	354,000	513,000
Warrants	1,480,000	520,000
Anti dilutive Securities	1,834,000	1,033,000
Anti-dilutive
Convertible Preferred Stock	0	2,517,000
Stock Options	695,000	3,000
Warrants	480,000	321,000
Anti dilutive Securities	1,175,000	2,841,000

XML

SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (Details Narrative) - USD ($)	3 Months Ended
	Mar. 31, 2018	Mar. 31, 2017	Dec. 31, 2017
Stock-based compensation	$ 83,000	$ 73,000
Goodwill	272,000		$ 272,000
NTW
Goodwill	163,000		163,000
ECC
Goodwill	$ 109,000		$ 109,000

XML

PROPERTY AND EQUIPMENT (Details) - USD ($)	3 Months Ended
	Mar. 31, 2018	Dec. 31, 2017
Total Property and Equipment	$ 30,153,000	$ 29,993,000
Less: Accumulated Depreciation	(20,624,000)	(19,943,000)
Property and Equipment, net	9,529,000	10,050,000
Land [Member]
Total Property and Equipment	300,000	300,000
Buildings and Improvements [Member]
Total Property and Equipment	$ 1,650,000	1,650,000
Property Plant And Equipment Useful Life	31 years 6 months
Machinery and Equipment [Member]
Total Property and Equipment	$ 11,570,000	11,554,000
Machinery and Equipment [Member] | Minimum
Property Plant And Equipment Useful Life	5 years
Machinery and Equipment [Member] | Maximum [Member]
Property Plant And Equipment Useful Life	8 years
Capital Lease Machinery and Equipment [Member]
Total Property and Equipment	$ 6,534,000	6,534,000
Capital Lease Machinery and Equipment [Member] | Minimum
Property Plant And Equipment Useful Life	5 years
Capital Lease Machinery and Equipment [Member] | Maximum [Member]
Property Plant And Equipment Useful Life	8 years
Tools and Instruments [Member]
Total Property and Equipment	$ 8,677,000	8,538,000
Tools and Instruments [Member] | Minimum
Property Plant And Equipment Useful Life	1 year 6 months
Tools and Instruments [Member] | Maximum [Member]
Property Plant And Equipment Useful Life	7 years
Automotive Equipment [Member]
Total Property and Equipment	$ 172,000	172,000
Property Plant And Equipment Useful Life	5 years
Furniture and Fixtures [Member]
Total Property and Equipment	$ 316,000	311,000
Furniture and Fixtures [Member] | Minimum
Property Plant And Equipment Useful Life	5 years
Furniture and Fixtures [Member] | Maximum [Member]
Property Plant And Equipment Useful Life	8 years
Leasehold Improvements [Member]
Total Property and Equipment	$ 528,000	528,000
Property Plant And Equipment Useful Life	Term of Lease
Computers and Software [Member]
Total Property and Equipment	$ 406,000	$ 406,000
Computers and Software [Member] | Minimum
Property Plant And Equipment Useful Life	4 years
Computers and Software [Member] | Maximum [Member]
Property Plant And Equipment Useful Life	6 years

XML

PROPERTY AND EQUIPMENT (Details Narrative) - USD ($)	3 Months Ended
	Mar. 31, 2018	Mar. 31, 2017
Property, Plant and Equipment [Abstract]
Depreciation expense	$ 681,000	$ 722,000

XML

ASSETS HELD FOR SALE AND LIABILITES DIRECLTY ASSOCIATED (Details) - USD ($)	Mar. 31, 2018	Dec. 31, 2017
Assets Held for Sale
Accounts Receivable, net of allowance for doubtful accounts	$ 1,687,000	$ 2,217,000
Inventory, net of reserves	9,052,000	8,065,000
Prepaid and other assets	436,000	485,000
Property and equipment, net of accumulated depreciation	837,000	878,000
Impairment of Assets Held for Sale	(1,600,000)	(1,563,000)
Assets Held for Sale	10,412,000	10,082,000
Accounts payable and accrued expenses	1,966,000	2,138,000
Deferred Revenue	689,000	521,000
Notes Payable & Capital lease obligations	8,000	11,000
Deferred rent	134,000	125,000
Liabilities directly associated to Assets Held for Sale	$ 2,797,000	$ 2,795,000

XML

ASSETS HELD FOR SALE AND LIABILITES DIRECLTY ASSOCIATED (Details 1) - USD ($)	3 Months Ended
	Mar. 31, 2018	Mar. 31, 2017
Gross Profit	$ 2,003,000	$ 2,712,000
Pre Tax (Loss) Income	(1,374,000)	(454,000)
WMI
Net Sales	2,453,000	3,479,000
Gross Profit	392,000	(10,000)
Pre Tax (Loss) Income	(92,000)	(700,000)
Assets	$ 10,412,000	$ 15,409,000

XML

INTANGIBLE ASSETS (Details Narrative)	3 Months Ended
	Mar. 31, 2018 USD ($)
Goodwill and Intangible Assets Disclosure [Abstract]
Amortization of the intangibles	$ 254,000

XML

NOTES PAYABLE AND CAPITAL LEASE OBLIGATIONS (Details) - USD ($)	Mar. 31, 2018	Dec. 31, 2017
Notes and Loans Payable [Abstract]
Revolving credit note payable to PNC Bank N.A. ("PNC")	$ 17,944,000	$ 16,455,000
Term loans, PNC	3,102,000	3,471,000
Capital lease obligations	2,763,000	3,073,000
Related party note payable, net of debt discount	3,158,000	1,912,000
Convertible notes payable - third parties, net of debt discount	2,063,000	1,930,000
Subtotal	29,030,000	26,841,000
Less: Current portion of notes and capital lease obligations	(25,881,000)	(23,393,000)
Notes payable and capital lease obligations, net of current portion	$ 3,149,000	$ 3,448,000

XML

NOTES PAYABLE AND CAPITAL LEASE OBLIGATIONS (Details 1)	Mar. 31, 2018 USD ($)
Notes and Loans Payable [Abstract]
March 31, 2019	$ 1,478,000
March 31, 2020	1,478,000
March 31, 2021	146,000
March 31, 2022	0
March 31, 2023	0
Thereafter	0
PNC Term Loans payable	3,102,000
Less: Current portion	(3,102,000)
Long-term portion	$ 0

XML

NOTES PAYABLE AND CAPITAL LEASE OBLIGATIONS (Details 2)	Mar. 31, 2018 USD ($)
Notes and Loans Payable [Abstract]
March 31, 2019	$ 1,392,000
March 31, 2020	1,193,000
March 31, 2021	316,000
March 31, 2022	36,000
March 31, 2023	1,000
Thereafter	0
Total future minimum lease payments	2,938,000
Less: Imputed interest	(175,000)
Less: Current portion	(1,274,000)
Total Long Term Portion	$ 1,489,000

XML

NOTES PAYABLE AND CAPITAL LEASE OBLIGATIONS (Details Narrative) - USD ($)	3 Months Ended
	Mar. 31, 2018	Mar. 31, 2017	Dec. 31, 2017
Notes and Loans Payable [Abstract]
Balance due under revolving loan	$ 17,944,000		$ 16,455,000
Interest expense related to credit facilities	342,000	$ 720,000
Capital lease obligations	$ 2,763,000		$ 3,073,000

XML

STOCKHOLDERS' EQUITY (Details)	3 Months Ended
	Mar. 31, 2018 USD ($) $ / shares shares
Total Investment | $	$ 2,000,000
Number of shares	1,577,390
Number of warrants	480,000
Date One
Total Investment | $	$ 300,000
Number of shares	217,390
Price | $ / shares	$ 1.38
Number of warrants	72,000
Ex Price | $ / shares	$ 1.50
Date Two
Total Investment | $	$ 400,000
Number of shares	320,000
Price | $ / shares	$ 1.25
Number of warrants	96,000
Ex Price | $ / shares	$ 1.50
Date Three
Total Investment | $	$ 235,000
Number of shares	188,000
Price | $ / shares	$ 1.25
Number of warrants	56,400
Ex Price | $ / shares	$ 1.50
2017
Total Investment | $	$ 935,000
Number of shares	725,390
Number of warrants	224,400
Date Four
Total Investment | $	$ 1,065,000
Number of shares	852,000
Price | $ / shares	$ 1.25
Number of warrants	255,600
Ex Price | $ / shares	$ 1.50

XML

INCOME TAXES (Details) - USD ($)	3 Months Ended
	Mar. 31, 2018	Mar. 31, 2017
Current
Federal	$ 0	$ 0
State	2,000	0
Prior Year (over)/under Accrual
Federal	0	0
State	0	0
Total Current Expense	2,000	0
Deferred Tax Benefit	0	0
Valuation Allowance	0	0
Net Benefit from Income Taxes	$ 0	$ 0

XML

SEGMENT REPORTING (Details) - USD ($)	3 Months Ended
	Mar. 31, 2018	Mar. 31, 2017	Dec. 31, 2017
Gross Profit	$ 2,003,000	$ 2,712,000
Pre Tax Income (Loss)	(1,374,000)	(454,000)
Provision for Income Taxes	2,000	0
Loss from Discontinued Operations	(92,000)	(700,000)
Assets Held for Sale	10,412,000		$ 10,082,000
Assets	62,606,000		$ 60,755,000
COMPLEX MACHINING
Net Sales	10,627,000	9,891,000
Gross Profit	2,023,000	2,900,000
Pre Tax Income (Loss)	116,000	1,085,000
Assets	45,014,000	41,940,000
AEROSTRUCTURES AND ELECTRONICS
Net Sales	333,000	841,000
Gross Profit	28,000	36,000
Pre Tax Income (Loss)	(472,000)	(579,000)
Assets	930,000	4,260,000
TURBINE ENGINE COMPONENTS
Net Sales	1,282,000	1,942,000
Gross Profit	(48,000)	(224,000)
Pre Tax Income (Loss)	(457,000)	(827,000)
Assets	6,009,000	11,233,000
CORPORATE
Net Sales	0	0
Gross Profit	0	0
Pre Tax Income (Loss)	(561,000)	(133,000)
Assets	241,000	785,000
CONSOLIDATED
Net Sales	12,242,000	12,674,000
Gross Profit	2,003,000	2,712,000
Pre Tax Income (Loss)	(1,374,000)	(454,000)
Provision for Income Taxes	2,000	0
Loss from Discontinued Operations	(92,000)	(700,000)
Assets Held for Sale	10,412,000	15,409,000
Net Loss	(1,468,000)	(1,154,000)
Assets	$ 62,606,000	$ 73,627,000