Summary of Significant Accounting Policies

3 Months Ended

Mar. 31, 2025

Summary of Significant Accounting Policies [Abstract]

SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES

Note 2. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES

Accounts Receivable

Accounts receivable are carried at the original invoice amount less an estimate made for expected credit losses based on a review of all outstanding amounts on a quarterly basis. Management determines the allowance for expected credit losses based upon historical experiences as well as current conditions that affect the collectability of the reported amount and regularly evaluates individual customer receivables and considering a customer’s financial condition, credit history, current economic conditions and other relevant factors, in setting 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 three months ended March 31, 2025 and 2024 is set forth in the table below:

	Balance at				Deductions			Balance at
	Beginning of		Charged to		from the			End of
	Period		Expenses		Allowance			Period
Three Months ended March 31, 2025 Allowance for Credit Losses	$	396,000	$	20,000	$	-		$	416,000
Three Months ended March 31, 2024 Allowance for Credit Losses	$	344,000	$	26,000	$	(49,000	)	$	321,000

Inventory Valuation

The Company values inventory at the lower of cost or estimated net realizable value using the first-in first out method. 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. Adjustments to inventory net realizable value are recorded in cost of sales.

Inventories consist of the following at:

	March 31,		December 31,
	2025		2024
Raw Materials	$	5,073,000	$	6,318,000
Work In Progress		14,217,000		13,028,000
Semi-Finished Goods		8,687,000		8,805,000
Final-Finished Goods		958,000		660,000
Total Inventory	$	28,935,000	$	28,811,000

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 March 31, 2025 and 2024 are shown below:

	Percentage of Net Sales
Customer	2025			2024
Lockheed Martin		39.6	%		25.9	%
RTX (a)		28.9	%		33.4	%
Northrop		8.1	%		11.0	%

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

The composition of customers that exceed 10% of accounts receivable at March 31, 2025 and December 31, 2024 are shown below: 

	Percentage of Net Receivables
	March 31,			December 31,
Customer	2025			2024
RTX (a)		48.6	%		38.2	%
Lockheed Martin		13.0	%		8.6	%
Ontic		10.5	%		14.6	%
Northrop		6.0	%		11.0	%

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

Disaggregation of Revenue

The following table summarizes revenue from contracts with customers for the three month periods ended March 31, 2025 and 2024:

Product	March 31, 2025		March 31, 2024
Military	$	8,340,000	$	10,385,000
Commercial		3,795,000		3,676,000
Total	$	12,135,000	$	14,061,000

Cash

During the period ended March 31, 2025, 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

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 or unwilling to provide parts for any reason, the Company’s business would be severely harmed.

Customer Deposits

The Company receives advance payments on certain contracts with the remainder of the contract balance due upon the 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 March 31, 2025 and December 31, 2024, customer deposits were $583,000 and $1,115,000, respectively. The Company recognized revenue of $531,000 during the three months ended March 31, 2025 that was included in customer deposits balance as of December 31, 2024. The Company recognized revenue of $399,000 during the three months ended March 31, 2024, that was included in the customer deposits balance as of December 31, 2023.

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 March 31, 2025, backlog relating to remaining performance obligations on contracts was approximately $120.6 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 our backlog.

Contract Costs Receivable

Contract costs receivable represent costs to be reimbursed from a terminated contract. The Company collected the contract cost receivable of $296,000 at December 31, 2024 in March of 2025. Contract costs receivable at March 31, 2025 and December 31, 2024 were $0 and 296,000, respectively.

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 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 because the effect of including these potential shares was anti-dilutive due to the net loss incurred during that period:

	Three Months Ended
	March 31,		March 31,
	2025		2024
Stock Options		374,503		424,010
Restricted Stock Units		285,628		-
Convertible notes payable		361,700		405,800
		1,021,831		829,810

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 $435,000 and $24,000 for the three months ended March 31, 2025 and 2024, respectively. Stock-based compensation expense for directors amounted to $39,000 and $38,000 for the three months ended March 31, 2025 and 2024, 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

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 consolidated financial statements.

In November 2024, the FASB issued ASU 2024-03, “Disaggregation of Income Statement Expenses”, which requires public business entities to disclose additional information about specific expenses categories in the notes to financial statements at interim and annual reporting periods. The amendments in ASU 2024-03 are effective for annual reporting periods beginning after December 15, 2026, and interim reporting periods beginning after December 15, 2027. Early adoption is permitted. The Company is currently assessing the impact that adoption of this new accounting guidance will have on its consolidated financial statements and footnote disclosures.

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.