Accounting Policies, by Policy (Policies)

9 Months Ended

Sep. 30, 2024

Summary of Significant Accounting Policies [Abstract]

Accounts Receivable

Accounts Receivable

Accounts receivable are carried at the original invoice amount less an estimate made for credit losses based on a review of all outstanding amounts on a quarterly basis. Management determines the allowance for credit losses by regularly evaluating individual customer receivables and considering a customer’s financial condition, credit history, current economic conditions and other relevant factors, including specific reserves for certain accounts. Accounts receivable are written off when deemed uncollectible.  Bad debt expenses are recorded in operating expenses on the condensed consolidated statements of operations.

The activity for the allowance for credit losses during the nine months ended September 30, 2024 and 2023 is set forth in the table below

	Balance at				Deductions			Balance at
	Beginning of		Charged to		from the			End of
	Period		Expenses		Allowance			Period
Nine Months ended September 30, 2024 Allowance for Credit Losses	$	344,000	$	26,000	$	(133,000	)	$	237,000
Nine Months ended September 30, 2023 Allowance for Credit Losses	$	281,000	$	67,000	$	-		$	348,000

Inventory Valuation

Inventory Valuation

The Company values inventory at the lower of cost or an estimated net realizable value. The Company periodically evaluates inventory items not secured by backlog and establishes write-downs to estimated net realizable value for excess quantities, slow-moving goods, obsolescence and for other impairments of value.

Inventories consist of the following at:

	September 30,		December 31,
	2024		2023
Raw Materials	$	6,497,000	$	4,968,000
Work In Progress		13,514,000		12,798,000
Semi-Finished Goods		9,288,000		10,296,000
Final-Finished Goods		1,210,000		1,789,000
Total Inventory	$	30,509,000	$	29,851,000

Credit and Concentration Risks

Credit and Concentration Risks

A large percentage of the Company’s revenues are derived directly from large aerospace and defense prime contractors for which the ultimate end-user is the U.S. Government, other governments, or commercial airlines.

The composition of customers that exceeded 10% of net sales for the three months ended September 30, 2024 and 2023 are shown below:

	Percentage of Net Sales
Customer	2024			2023
RTX (a)		27.8	%		20.1	%
Lockheed		23.9	%		31.9	%
Northrop		18.3	%		-
Boeing		-			18.0	%

^(a) RTX includes Collins Landing Systems and Collins Aerostructures

The composition of customers that exceeded 10% of net sales for the nine months ended September 30, 2024 and 2023 are shown below:

	Percentage of Net Sales
Customer	2024			2023
RTX (a)		27.0	%		26.6	%
Lockheed		25.1	%		24.7	%
Northrop		19.9	%		2.6	%
Ruag		1.5	%		10.9	%
Boeing		0.3	%		10.0	%

^(a) RTX includes Collins Landing Systems and Collins Aerostructures

The composition of customers that exceed 10% of accounts receivable at September 30, 2024 and December 31, 2023 are shown below:

	Percentage of Net Receivables
	September 30,			December 31,
Customer	2024			2023
RTX (a)		43.5	%		45.5	%
Lockheed		13.9	%		3.7	%
Northrop		13.7	%		8.2	%
Boeing		-			16.0	%

^(a) RTX includes Collins Landing Systems and Collins Aerostructures

Disaggregation of Revenue

Disaggregation of Revenue

The following table summarizes revenue from contracts with customers for the three and nine month periods ending September 30, 2024 and 2023:

	Three Months Ended				Nine Months Ended
Product	September 30, 2024		September 30, 2023		September 30, 2024		September 30, 2023
Military	$	7,968,000	$	10,144,000	$	28,272,000	$	31,513,000
Commercial		4,587,000		2,149,000		11,916,000		6,534,000
Total	$	12,555,000	$	12,293,000	$	40,188,000	$	38,047,000

Cash

Cash

During the period ended September 30, 2024, 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.

Major Suppliers

Major Suppliers

The Company utilizes sole-source suppliers to supply raw materials or other parts used in production. 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, the Company’s business would be severely harmed.

Customer Deposits

Customer Deposits

The Company receives advance payments on certain contracts with the remainder of the contract balance due upon shipment of the final product once the customer inspects and approves the product for shipment. At that time, the entire amount will be recognized as revenue and the deposit will be applied to the customer’s invoice.

At September 30, 2024 and December 31, 2023, customer deposits were $1,717,000 and $3,557,000 respectively. The Company recognized revenue of $544,000 and $1,840,000 during the three and nine months ended September 30, 2024, respectively, that was included in the customer deposits balance as of December 31, 2023. The Company recognized revenue of $147,000 and $461,000 during the three and nine months ended September 30, 2023, respectively, that was included in the customer deposits balance as of December 31, 2022.

Backlog

Backlog

Backlog represents the value of orders received pursuant to our Long-Term Agreements (“LTA”) or spot orders pursuant to a purchase order. As of September 30, 2024, backlog relating to remaining performance obligations on contracts was approximately $105.2 million. The Company estimates that a substantial portion of this backlog will be recognized as net sales during the next twenty-four-months, with the rest thereafter. This expectation assumes that raw material supplies and outsourced processing is completed and delivered on time and that the Company’s customers will accept delivery as scheduled. The Company anticipates that sales during the aforementioned periods will also include sales from expected new orders that are not included in backlog.

Contract Costs Receivable

Contract Costs Receivable

Contract costs receivable represent costs to be reimbursed from a terminated contract. The Company expects to collect the receivable in the next twelve months. Contract costs receivable totals $296,000 at both September 30, 2024 and December 31, 2023.

Earnings (Loss) per share

Earnings (Loss) per share

Basic earnings (loss) per share (“EPS”) is computed by dividing the net income (loss) applicable to common stockholders by the weighted-average number of shares of common stock outstanding for the period.

For purposes of calculating diluted earnings (loss) per common share, the numerator includes net income (loss) plus interest on convertible notes payable assumed converted as of the first day of the period. The denominator includes both the weighted-average number of shares of common stock outstanding during the period and the number of common stock equivalents if the inclusion of such common stock equivalents is dilutive. Dilutive common stock equivalents potentially include stock options, restricted units and warrants using the treasury stock method and convertible notes payable using the if-converted method.

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				Nine Months Ended
	September 30,		September 30,		September 30,		September 30,
	2024		2023		2024		2023
Stock Options		236,753		462,870		236,753		462,870
		236,753		462,870		236,753		462,870

The following securities have been excluded from the calculation because the effect of including these potential shares was anti-dilutive due to the net loss incurred during these periods:

	Three Months Ended				Nine Months Ended
	September 30,		September 30,		September 30,		September 30,
	2024		2023		2024		2023
Stock Options		154,250		-		154,250		-
Restricted Stock Units		282,628		-		282,628		-
Convertible notes payable		405,800		405,800		405,800		405,800
		842,678		405,800		842,678		405,800

Stock-Based Compensation

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 and stock grants at their closing reported market value. Stock-based compensation expense for employees amounted to $150,000 and $28,000 for the three months ended September 30, 2024 and 2023, respectively, and $186,000 and $260,000 for the nine months ended September 30, 2024 and 2023, respectively. Stock compensation expense for directors amounted to $40,000 and $54,000 for the three months ended September 30, 2024 and 2023, respectively, and $116,000 and $162,000 for the nine months ended September 30, 2024 and 2023, respectively. Stock compensation expenses for employees and directors were included in operating expenses in the accompanying condensed consolidated statements of operations. 

Recently Issued Accounting Pronouncements

Recently Issued Accounting Pronouncements

In November 2023, Financial Accounting Standards Board (“FASB) issued Accounting Standards Updated (“ASU”) 2023-07 - Segment Reporting (Topic 280): Improvements to Reportable Segment Disclosures, which requires public entities with a single reportable segment to provide all the disclosures required by this standard and all existing segment disclosures in Topic 280 on an interim and annual basis, including new requirements to disclose significant segment expenses that are regularly provided to the Chief Operating Decision Maker (“CODM”) and included within the reported measure(s) of a segment’s profit or loss, the amount and composition of any other segment items, the title and position of the CODM, and how the CODM uses the reported measure(s) of a segment’s profit or loss to assess performance and decide how to allocate resources. The amendments in this update are effective for fiscal years beginning after December 15, 2023. The adoption of this pronouncement is not expected to have a material impact on the Company’s condensed consolidated financial statements.

In December 2023, the FASB issued ASU 2023-09 “Income Taxes (Topic 740): Improvements to Income Tax Disclosures”, related to improvements to income tax disclosures. The amendments in this update require enhanced jurisdictional and other disaggregated disclosures for the effective tax rate reconciliation and income taxes paid. The amendments in this update are effective for fiscal years beginning after December 15, 2024. The adoption of this pronouncement is not expected to have a material impact on the Company’s condensed consolidated financial statements.

In November 2024, the FASB issued ASU 2024-03, “Income Statement—Reporting Comprehensive Income—Expense Disaggregation Disclosures” to require more detailed information about specified categories of expenses (purchases of inventory, employee compensation, depreciation, amortization, and depletion) included in certain expense captions presented on the face of the income statement. This ASU is effective for fiscal years beginning after December 15, 2026 and for interim periods within fiscal years beginning after December 15, 2027. Early adoption is permitted. The amendments may be applied either (1) prospectively to financial statements issued for reporting periods after the effective date of this ASU or (2) retrospectively to all prior periods presented in the financial statements. The Company is currently evaluating the impact of adopting this guidance on its condensed consolidated financial statements and related disclosures. The adoption of this pronouncement is not expected to have a material impact on the Company’s condensed consolidated financial statements.

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 condensed consolidated financial statements.