What changed in this filing

/stocks — the workspaceLOADING

Item 1. Business

2022-03-25 compared with 2021-03-29 · 324 added, 186 removed, 19 unchanged (96% of the section changed)

As used in this report,

unless otherwise stated or the context requires otherwise, the “Company”

and terms such as “we,”

“us”

“our,”

and “AIRI”

refer to Air Industries Group, a Nevada corporation, and its wholly-owned subsidiaries.

We are an aerospace

and defense company.

We manufacture and design structural parts and assemblies that focus on flight safety, including landing gear,

arresting gear, engine mounts, flight controls, throttle quadrants, components for jet engines and other components.

are currently deployed on a wide range of high-profile military and commercial aircraft including Sikorsky’s UH-60 Black

Hawk, Lockheed Martin’s F-35 Joint Strike Fighter, Northrop Grumman’s E2 Hawkeye, Boeing’s 777, Airbus’

380 commercial airliners, the US Navy F-18 and USAF F-16 fighter aircraft.

Our Turbine Engine segment makes components for jet

engines that are used on the USAF F-15, the Airbus A-330 and A-380, and the Boeing 777, in addition to a number of ground turbine

applications.

We conduct our operations

through our wholly-owned subsidiaries:

Air Industries Machining (“AIM”);

Nassau Tool Works (“NTW”);

The Sterling Engineering Corporation (“Sterling”).

AIM and NTW comprise our Complex Machining segment and Sterling

represents our Turbine Engine Components segment.

AIM has manufactured components and subassemblies for the defense and commercial

aerospace industry for over 50 years and has established long-term relationships with leading defense and aerospace manufacturers.

are currently focused on positioning our business to obtain profitability, achieve positive cash flow and we remain resolute on

meeting customers’

We believe that an unyielding focus on our customers will allow us to execute on our existing backlog

in a timely fashion.

As part of our effort to increase our operating efficiencies, we relocated our headquarters to our main campus

in Bay Shore, New York and consolidated the operations of NTW with those of AIM.

2020, in order to take advantage of the long-term growth opportunities we see in our markets, we made significant capital investments

in new equipment.

Additionally, we expanded our operations and manufacturing cells located in our Connecticut facility which houses

the operations of Sterling.

We believe these investments will increase the volume and efficiency of production, increase the size

and diversity of products we can make and allow us to offer additional services to our customers.

We are pleased with the positive

responses received from our customers to date.

We operate primarily

in the military and, to a lesser degree, commercial aviation industries.

Defense revenues represent a preponderance of our sales.

Our principal customers include Sikorsky Aircraft, Goodrich Landing Gear Systems, Northrop Grumman, the United States Department

of Defense, GKN Aerospace, Lockheed, Boeing, Raytheon, Piper Aircraft, M7 Aerospace, Vought Aerospace, Ametek/Hughes-Treitler and

Our products are incorporated

into many aircraft platforms, the majority of which remain in production, and of which there are a substantial number of operating

aircraft in fleets maintained by the military and commercial airlines.

Many of our products are “flight critical,”

essential to aircraft performance and safety on takeoff, during flight and when landing.

These products require advanced certifications

as a condition to being a supplier.

For many of our products we are the sole or one of a limited number of sources of supply.

of the parts we supply are subject to wear and tear or fatigue and are routinely replaced on aircraft on a time in service or flight

Replacement demand for these products will continue, albeit at perhaps a lower rate, so long as an aircraft remains

in service, which is usually many years after production has stopped.

As used in this report, unless otherwise stated

or the context requires otherwise, the “Company” and terms such as “we,” “us” “our,” and

“AIRI” refer to Air Industries Group, a Nevada corporation, and its wholly-owned subsidiaries.

We are a manufacturer of complex machined parts

and assemblies for the Aerospace and Defense (“A&D”) market.

Our products are used by Original Equipment Manufacturers

(“OEM”) in the manufacture of fixed wing aircraft, helicopters jet turbine engines, and other complex sophisticated A&D

We are a holding company with

three legal subsidiaries, Air Industries Machining, (“AIM”) Nassau Tool Works (“NTW”) and Sterling Engineering

Company (“SEC”).

Our subsidiaries have been manufacturers of A&D product for decades;

SEC began manufacturing

aircraft components in 1941 – over 80-years ago – for use in World War II.

NTW was formed in the early 1960’s and AIM

has been in business since 1951.

We intend to merge AIM and NTW into one corporation.

Collectively, our subsidiaries

have over 200 years of manufacturing experience in the A&D market.

We operate our business using

two main facilities located in Long Island, New York, and in Barkhamsted in Northwest Connecticut.

We have over 150,000 square feet of

manufacturing space, approximately 75,000 square feet in each location, and employ approximately 200 people.

Historically, we operated our

businesses and reported their results as two separate segments with AIM and NTW comprising our Complex Machining Segment (“CMS”)

and SEC as the Turbine & Engine Component Segment (“TEC”).

Our CMS segment specializes in flight critical components including

flight controls and landing gear.

Our TEC segment focuses on manufacturing components for jet engines.

Historically, each segment had

different customers and utilized different production facilities.

In recent years we integrated

and consolidated the business of AIM and NTW into one facility on Long Island and the operations of our CMS and TEC segments have become

increasingly integrated.

We also made significant capital expenditures and all of our operations now share the same manufacturing facilities

and use most, if not all, of the same sales and marketing functions.

We made these changes to take advantage of the long-term growth opportunities

we see in the A&D market.

In early fiscal 2022, we further changed our management approach and will now make decisions about resources

to be allocated and assessing performance based on one integrated business rather than two reporting segments.

As such, effective with

our first quarter ending March 31, 2022, we will present our operations as one reportable operating segment.

The A&D business is comprised of a small number

of OEM’s relying on several “tiers” or layers of many more numerous smaller manufacturers supplying product.

Each successive

tier supplying increasing larger, more complex product to higher tier and OEM companies.

Air Industries is generally either a tier one

manufacturer supplying product directly to an OEM, or a tier two manufacturer supplying product to a tier one supplier which delivers

Our business has evolved over the years, our products

becoming increasing complex.

Where once we manufactured smaller individual components for others to assemble into complex assemblies we

now manufacture those complex assemblies ourselves.

For example, in the past we, along with other suppliers, manufactured individual components

to be assembled into a landing gear by an OEM customer.

Today we manufacture the entire landing gear, assembling over 200 individual parts,

most manufactured internally, others sub-contracted or purchased into a complete landing gear delivered directly to an OEM, and ready

to be installed on an aircraft.

We are predominately a supplier of military aviation

Defense products were 87.7% and 86.2% of our business in 2021 and 2020 respectively.

Our OEM customers in the defense sector

● Raytheon Technologies Corporation (f/y/a United Technologies Corporation).

We supply products for several units of Raytheon

Technologies Corporation, including:

o Goodrich Landing Systems – we manufacture landing gear components for the Northrop Grumman E2-D Hawkeye, airborne warning and

control aircraft deployed with the US Navy and several foreign governments, the Lockheed F-35 Lightning II Joint Strike multi-role fighter

aircraft used by all branches of the US military and multiple foreign militaries and for the F-15 Eagle fighter aircraft.

Pratt & Whitney – we manufacture jet turbine engine

components for several military and commercial jet engines.

● Lockheed Martin Corporation.

We supply products for the Sikorsky Aircraft unit of Lockheed primarily for the UH-60 BlackHawk

multi-purpose helicopter used by the US and many foreign militaries.

● General Electric Corporation .

We supply products used in General Electric jet turbine aircraft engines used by several military

aircraft platforms.

● US Department of Defense .

We supply landing gear product for the US Navy F-18 fighter aircraft directly to the Defense Department.

● Northrop Grumman Corporation.

We supply product used on the E2-D Hawkeye, airborne warning and control aircraft.

The balance of our business, comprising 12.3% and

13.8% of our business in 2021 and 2020 respectively, is in commercial aviation and to a minor degree in ground power electricity generation.

Our OEM customers in the commercial sector include:

● Rohr Inc., (a wholly owned subsidiary of Raytheon Technologies) We manufacture a component used in several versions of the

Pratt & Whitney new geared turbine fan commercial jet turbine engine.

● General Electric Corporation.

We supply products used in General Electric jet turbine aircraft engines used by several commercial

aircraft platforms and ground power electricity generation.

Our business is concentrated on five aircraft platforms.

The following five platforms comprised 76.6% and 71.0% of our business in 2021 and 2020 respectively.

● UH-60 BlackHawk .

We have manufactured many components and assemblies for the BlackHawk and its many variants for more than

BlackHawk helicopters entered service in 1979 and remain in production today.

It is the primary helicopter used by the US Army

and other branches of the US military.

The BlackHawk is also used by many foreign countries and militaries.

Over 4,000 aircraft have been

produced with many, perhaps as many as 3,000, remaining in use today and generating significant after-market demand.

● F-35 Lightning II.

The F-35 Lightning also known as the Joint Strike Fighter is a new aircraft that will in coming years replace

the US Air Force F-15 and the US Navy and Marine Corps F-18 fighters.

Eight other nations have participated in the development of the

aircraft and will be customers, as will other international militaries.

There are three variants of the aircraft, conventional take-off

and landing F-35A, short take-off and vertical landing F-35B and a carrier based variant F-35C.

The aircraft entered service with the

US Marine Corps in 2015 and approximately 2,300 are expected to be produced.

● F-18 Hornet.

The F-18 Hornet currently is the primary fighter aircraft for the US Navy operating primarily from aircraft carriers.

The F-18 is also in service internationally, notably Finland and Australia.

We manufacture complete landing gear and landing gear components

for the many variants of the aircraft.

● Northrop Grumman E2-D Advanced Hawkeye.

The ED-D Hawkeye is a US Navy carrier-based aircraft used to provide airborne warning

and control for carrier based air operations.

The aircraft’s role is to maintain control of the airspace surrounding an aircraft

carrier for protection of the vessel and aircraft in operation.

The “D” version, the most current of the E2 remains in production.

The aircraft is also used by seven foreign militaries notably Japan.

● Pratt & Whitney Geared Turbo-Fan.

The P&W Geared Turbo-Fan (“GTF”) is a next

generation jet turbine engine used in commercial aviation.

The GTF engine is widely acknowledged to deliver improved fuel economy and

a lower noise footprint than existing jet engines.

There are several versions of the GTF.

Air Industries produces a component for the

smaller versions of the engine used on the popular A-220 and Embraer narrow body aircraft.

The A&D industry has become very consolidated,

now dominated by just a few very large Prime contractors and OEM’s.

These include Airbus, Boeing, General Electric, Lockheed Martin,

Northrop Grumman, and Raytheon Technologies.

Many if not most of the large Prime contractors and OEM’s are our direct Tier One customers,

and we also supply product as a Tier two supplier to many of their Tier one suppliers.

We also sell directly to the US Department of Defense

Our products are incorporated into many aircraft

platforms, the majority of which remain in production today.

The demand for after-market products for the maintenance, repair and overhaul

(“MRO”) of aircraft can continue for many years, even decades, after the production line for new aircraft is shut-down.

We target products that are flight critical, whose

flawless operation is essential to the safe operation of the aircraft.

To qualify to produce these products a manufacturer needs to maintain

various accreditations.

Obtaining accreditation while not impossible is difficult, time consuming and thus a barrier to entry for competitors.

Further, flight critical components are frequently replaced on aircraft on a flight time, or flight cycle basis.

Thus, demand for these

products arises from both production of new aircraft, and MRO demand based on the flight hours of existing fleets of aircraft.

For many of our products we are the sole or single

source of product for our customers.

Sole source product means that we are the only manufacturer of the product.

Single source means that

while other manufacturers could supply the product we are the only producer currently in the market.

Single or sole sourcing is more likely

to occur with legacy aircraft.

OEM’s generally prefer to have multiple sources of product to support a production line of new aircraft

and avoid single point of failure issues.

Our market is predominately military.

As such demand

for our products is closely aligned with the budget of the DOD.

We monitor two components of the DOD budget;

procurement which affects

demand resulting from new production and operations & maintenance which affects demand resulting from the maintaining existing aircraft.

For Fiscal Year 2022, procurement and operations and maintenance accounted for more than 50% of the entire defense budget.

Sales and Marketing

Our approach to sales

and marketing can be best understood through the concept of customer alignment.

The aerospace industry is dominated by a small

number of large prime contractors and equipment manufacturers.

These customers rely heavily upon subcontractors to supply quality

parts meeting specifications on a timely and cost effective basis.

These customers and other customers we supply routinely rate

their suppliers based on a variety of performance factors.

One of our principal goals is to be highly rated and thus relied upon

by all of our customers.

We are generally recognized as a Tier 1 or Tier

2 supplier in the A&D industry.

We are also recognized as having extensive experience and accreditation to produce and assemble complex

flight safety products.

Most of our contracts with our customers are in

the form of a Long-Term Agreement (“LTA”).

These LTA’s specify the number and price of products that the customer may

order from us for a period of time.

The quantity and price in any year may vary from other years within the LTA.

Once awarded, the customer

places orders against the LTA.

These orders are called releases.

Once released the order is a firm order.

While an order may be cancelled

the customer is subject to termination liability and must pay us for the cost of material, labor and other costs incurred up to the date

of termination.

Our sales cycle is highly variable, ranging from

a few weeks to several years.

And contracts for product can be very short, just a few months to as long as ten-years.

We obtain new or follow-on LTA’s through

competitive bidding.

We respond to a customer’s Request for Quotation (“RFQ”) with proposed prices based on quantities,

sometimes varying quantities per year, for shipments over a number of years.

There may be several rounds of submissions from us and from

competitive suppliers, and a period of negotiation before an LTA is awarded.

In addition to products sold pursuant to LTA’s there

are also “spot buys” of product by customers.

LTA’s, particularly for defense products,

may be extended or new orders placed without competitive bidding.

In this instance and in some others our price for the product must be

supported by an analysis or audit and approval of our costs by the customer or by the Government.

sales and marketing efforts and those of our competitors have been negatively affected by Covid travel restrictions limiting our ability

to visit customers and cancelled trade events.

Many of our customers’ employees continue to work remotely further complicating

our ability to contact them.

Despite these challenges we have been able to maintain a “book-to-bill” ratio (new orders booked

divided by sales) of 0.9 to 1.00 and 1.07 to 1.00 for the years ended December 31, 2021 and 2020 respectively.

Our approach to sales and

marketing can be best understood through the concept of customer alignment.

The aerospace industry is dominated by a small number of large

prime contractors and OEM’s.

These customers rely heavily upon subcontractors to supply quality parts meeting specifications on

a timely and cost effective basis.

These customers and other customers we supply routinely rate their suppliers based on a variety of

performance factors.

One of our principal goals is to be highly rated and thus deemed reliable by all of our customers and throughout

the industry.

The large prime contractors

are increasingly seeking subcontractors who can supply and are qualified to integrate the fabrication of larger, more complex and

more complete subassemblies.

We seek to position ourselves within the supply chain of these contractors and manufacturers to be

selected for subcontracted projects.

Successful positioning requires that we qualify to be a preferred supplier by achieving and

maintaining independent third party quality approval certifications, specific customer quality system approvals and top supplier

ratings through strong performance on existing contracts.

During our sales and

marketing efforts we let customers know that we have employees with the talent and experience to manage the manufacture of sections

of aircraft structures to be delivered to the final assembly phase of the aircraft manufacturing cycle, and customers have now

engaged us for these services.

Initial contracts are

usually obtained through competitive bidding against other qualified subcontractors, while follow-on contracts are usually retained

by successfully performing initial contracts.

Our long term business generally benefits from barriers to entry resulting from investments,

certifications, familiarization with the needs and systems of customers, and manufacturing techniques developed during the initial

manufacturing phase.

We endeavor to develop each of our relationships to one of a “partnership”

where we participate

in the resolution of pre-production design and build issues, and initial contracts are obtained as single source awards and follow-on

pricing is determined through negotiations.

Our ability to interact with our customers was hampered during 2020 as a result of

the cancellation of industry-wide events and the difficulties in scheduling meetings with our customers as many of their personnel

worked from home.

In response, we have adapted our business development efforts to increase our use of social media and online

presentations.

The production cycle

of products we manufacture can extend from several months to a year or longer.

This gives rise to significant backlogs as customers

must order product with sufficient lead time to ensure timely delivery.

We have a number of

long-term multi-year purchase agreements or LTA’s with several of our customers.

These agreements specify part numbers, specifications

and prices of the covered products for an agreed upon period, but do not authorize immediate production and shipment.

is authorized periodically by the customer through Purchase Orders or Releases by customers.

Our “firm backlog”

includes only fully authorized orders received for products to be delivered within the forward 18-month period.

As of December

31, 2020, our 18-month “firm backlog”

was approximately $81.1 million.

Winning a new contract

is highly competitive.

We manufacture to customer design specifications, and we compete against companies that have similar manufacturing

capabilities in a global marketplace.

Consequently, the ability to obtain contracts requires providing quality products at competitive

To accomplish this requires that we strive for continuous improvement in our capabilities to assure our competitiveness

and provide value to our customers.

Our marketing strategy involves developing long-term ongoing working relationships with customers.

These relationships enable us to develop entry barriers to would-be competitors by establishing and maintaining advanced quality

approvals, certifications and tooling investments that are difficult and expensive to duplicate.

Many of our competitors are larger

enterprises or divisions of significantly larger companies having greater financial, physical and technical resources, and the

capabilities to timelier respond under much larger contracts.

are increasingly seeking subcontractors who can supply and are qualified to integrate the fabrication of larger, more complex and more

complete subassemblies.

We seek to position ourselves within the supply chain of these contractors and manufacturers to be selected for

subcontracted projects.

Successful positioning requires that we qualify to be a preferred supplier by achieving and maintaining independent

third party quality approval certifications, specific customer quality system approvals and top supplier ratings through strong performance

on existing contracts.

During our sales and marketing

efforts we let customers know that we have employees with the talent and experience to manage the manufacture of sections of aircraft

structures to be delivered to the final assembly phase of the aircraft manufacturing cycle, and customers have now engaged us for these

Initial contracts are usually

obtained through competitive bidding against other qualified subcontractors, while follow-on contracts are usually retained by successfully

performing initial contracts.

Our long term business generally benefits from barriers to entry resulting from investments, certifications,

familiarization with the needs and systems of customers, and manufacturing techniques developed during the initial manufacturing phase.

We endeavor to develop each of our relationships to one of a “partnership” where we participate in the resolution of pre-production

design and build issues, and initial contracts are obtained as single source awards and follow-on pricing is determined through negotiations.

In response to the impediments to traditional means of marketing our products and services encountered during 2020 and 2021 as a result

of the cancellation of industry-wide events and the difficulties in scheduling meetings with our customers, we have adapted our business

development efforts to increase our use of social media and online presentations, and will continue to look for new ways to interact with

our customers.

The backlog we report consists solely of firm orders

received from customers.

We do not estimate possible or probable future orders pursuant to LTA’s or anticipated contract renewals.

Our backlog exists due the long lead times necessary to produce many of our products.

Our production cycle from ordering raw material

to delivering finished product can vary from several weeks to over twelve months.

Customers must place orders in light of these lead-times

creating a back-log of future deliveries.

The production cycle for jet engine products is much shorter and accordingly the backlog for

jet engine products is much lower.

Our total 18-Month firm backlog was $75.0 and $81.1 Million at December 31, 2021 and 2020, respectively.

Our backlog today is the result of purchase orders

for the Sikorsky Black Hawk, the F-25 Joint Strike Fighter, the Northrop Grumman E2-D, the F-18 fighter aircraft and the Pratt & Whitney

Geared Turbo-Fan jet engine.

Winning a new contract is highly competitive.

manufacture to customer design specifications.

We compete against companies that have similar manufacturing capabilities and often greater

financial, physical and technical resources in the domestic and to a lesser degree in the global marketplace.

Our ability to win new contracts

requires providing quality products on a timely basis at competitive prices.

This requires that we strive for continuous improvement in

our capabilities to enhance our competitiveness.

To accomplish this, we have made significant investments in new machinery and equipment

totaling over $5,000,000;

$3,797,000 and $1,626,000 in 2020 and 2021, respectively.

This new equipment increases the productive capacity

of our employees, provides increased efficiency, and closer tolerances, and a larger working “envelope” increasing the size

of product we can manufacture.

Additionally, we anticipate spending an additional $1,750,000 to $2,500,000 in 2022 to continue to expand

our productive capacity.

Our marketing strategy involves developing long-term

working relationships with customers.

These relationships enable us to develop barriers to entry to competitors by establishing and maintaining

advanced quality approvals, certifications and tooling investments that are difficult and expensive to duplicate.

Among our competitors

1 unchanged sentence

Hydromil, a division of Triumph Aerospace Group;

Heroux Aerospace and

Ellanef Manufacturing, a division of Magellan Corporation.

Heroux Aerospace and Ellanef

Manufacturing, a division of Magellan Corporation.

Raw Materials and Replacement Parts

The manufacturing process

for certain products, particularly those for which we serve as product integrator, requires significant purchases of raw materials,

hardware and subcontracted details.

As a result, much of our success in profitably meeting customer demand for these products requires

efficient and effective subcontract management.

Price and availability of many raw materials utilized in the aerospace industry

are subject to volatile global markets and political conditions.

Most suppliers of raw materials are unwilling to commit to long-term

contracts at fixed prices.

for certain products, particularly those for which we serve as product integrator, requires significant purchases of raw materials, hardware

and subcontracted details.

As a result, much of our success in profitably meeting customer demand for these products requires efficient

and effective subcontract management.

Price and availability of many raw materials utilized in the aerospace industry are subject to volatile

global markets and political conditions.

Most suppliers of raw materials are unwilling to commit to long-term contracts at fixed prices.

This is a substantial risk as our strategy often involves long term fixed price commitments to our customers.

As of March 15, 2021,

we employed approximately 151 people.

Of these, approximately 52 were in administration, 6 were in sales and procurement, and 93

were in manufacturing.

AIM is a party to a

collective bargaining agreement (the “Agreement”) with the United Service Workers, IUJAT, Local 355 (the “Union”)

with which we believe we maintain good relations.

The Agreement was renewed as of December 31, 2018 and expires on December 31,

2021 and covers all of AIM’s production personnel, approximately 93 individuals.

AIM is required to make a monthly contribution

to each of the Union’s United Welfare Fund and the United Services Worker’s Security Fund.

This is the only pension

benefit required by the Agreement and the Company is not obligated for any future defined benefit to retirees.

The Agreement contains

a “no-strike”

clause, whereby, during the term of the Agreement, the Union will not strike and AIM will not lockout

As of March 15, 2022, we

employed 197 people.

Of these, 79 were in administration, 10 were in sales and procurement, and 108 were in manufacturing.

AIM is a party to a collective

bargaining agreement (the “Agreement”) with the United Service Workers, IUJAT, Local 355 (the “Union”) with which

we believe we maintain good relations.

The Agreement was renewed as of December 31, 2021 and expires on December 31, 2024 and covers the

majority of AIM’s personnel, approximately 131 individuals, which equates to approximately 66% of all employees.

AIM is required to make a

monthly contribution to each of the Union’s United Welfare Fund and the United Services Worker’s Security Fund.

only pension benefit required by the Agreement and the Company is not obligated for any future defined benefit to retirees.

The Agreement

contains a “no-strike” clause, whereby, during the term of the Agreement, the Union will not strike and AIM will not lockout

its employees.

All of our employees

are covered under a co-employment agreement with Insperity Services, Inc., a professional employer organization (“PEO”)

that provides out-sourced human resource services.

All of our employees are covered under a co-employment

agreement with Insperity Services, LLC, a professional employer organization that provides out-sourced human resource and payroll services.

Environmental Regulation;

1 unchanged sentence

We are subject to regulations

administered by the United States Environmental Protection Agency, the Occupational Safety and Health Administration, various state

agencies and county and local authorities acting in cooperation with federal and state authorities.

Among other things, these regulatory

bodies impose restrictions that require us to control air, soil and water pollution, to protect against occupational exposure to

chemicals, including health and safety risks, and to require notification or reporting of the storage, use and release of certain

hazardous chemicals and substances.

The extensive regulatory framework imposes compliance burdens and financial and operating risks

Governmental authorities have the power to enforce compliance with these regulations and to obtain injunctions or impose

civil and criminal fines in the case of violations.

administered by the United States Environmental Protection Agency, the Occupational Safety and Health Administration, various state agencies

and county and local authorities acting in cooperation with federal and state authorities.

Among other things, these regulatory bodies

impose restrictions that require us to control air, soil and water pollution, to protect against occupational exposure to chemicals, including

health and safety risks, and to require notification or reporting of the storage, use and release of certain hazardous chemicals and substances.

The extensive regulatory framework imposes compliance burdens and financial and operating risks on us.

Governmental authorities have the

power to enforce compliance with these regulations and to obtain injunctions or impose civil and criminal fines in the case of violations.

The Comprehensive Environmental

Response, Compensation and Liability Act of 1980 (“CERCLA”) imposes strict, joint and several liabilities on the present

and former owners and operators of facilities that release hazardous substances into the environment.

The Resource Conservation

and Recovery Act of 1976 (“RCRA”) regulates the generation, transportation, treatment, storage and disposal of hazardous

New York and Connecticut, the states where our production facilities are located, also have stringent laws and regulations

governing the handling, storage and disposal of hazardous substances, counterparts of CERCLA and RCRA.

In addition, the Occupational

Safety and Health Act, which requires employers to provide a place of employment that is free from recognized and preventable hazards

that are likely to cause serious physical harm to employees, obligates employers to provide notice to employees regarding the presence

of hazardous chemicals and to train employees in the use of such substances.

Response, Compensation and Liability Act of 1980 (“CERCLA”) imposes strict, joint and several liabilities on the present and

former owners and operators of facilities that release hazardous substances into the environment.

The Resource Conservation and Recovery

Act of 1976 (“RCRA”) regulates the generation, transportation, treatment, storage and disposal of hazardous waste.

and Connecticut, the states where our production facilities are located, also have stringent laws and regulations governing the handling,

storage and disposal of hazardous substances, counterparts of CERCLA and RCRA.

In addition, the Occupational Safety and Health Act, which

requires employers to provide a place of employment that is free from recognized and preventable hazards that are likely to cause serious

physical harm to employees, obligates employers to provide notice to employees regarding the presence of hazardous chemicals and to train

employees in the use of such substances.

Federal Aviation Administration

We are subject to regulation

by the Federal Aviation Administration (“FAA”) under the provisions of the Federal Aviation Act of 1958, as amended.

The FAA prescribes standards and licensing requirements for aircraft and aircraft components.

We are subject to inspections by

the FAA and may be subjected to fines and other penalties (including orders to cease production) for noncompliance with FAA regulations.

Our failure to comply with applicable regulations could result in the termination of or our disqualification from some of our contracts,

which could have a material adverse effect on our operations.

by the Federal Aviation Administration (“FAA”) under the provisions of the Federal Aviation Act of 1958, as amended.

prescribes standards and licensing requirements for aircraft and aircraft components.

We are subject to inspections by the FAA and may

be subjected to fines and other penalties (including orders to cease production) for noncompliance with FAA regulations.

Our failure to

comply with applicable regulations could result in the termination of or our disqualification from some of our contracts, which could

have a material adverse effect on our operations.

We have never been subject to such fines or disqualifications.

Government Contract Compliance

Our government contracts

and those of many of our customers are subject to the procurement rules and regulations of the United States government, including

the Federal Acquisition Regulations.

Our government contracts and

those of many of our customers are subject to the procurement rules and regulations of the United States government, including the Federal

Acquisition Regulations.

Many of the contract terms are dictated by these rules and regulations.

During and after the

fulfillment of a government contract, we may be audited in respect of the direct and allocated indirect costs attributed to the

These audits may result in adjustments to our contract costs.

During and after the fulfillment of a

government contract, we may be audited in respect of the direct and allocated indirect costs attributed to the project.

These audits may

result in adjustments to our contract costs.

Additionally, we may be subject to U.S.

government inquiries

and investigations because of our participation in government procurement.

Any inquiry or investigation can result in fines or

limitations on our ability to continue to bid for government contracts and fulfill existing contracts.

We believe that we

are in compliance with all federal, state and local laws and regulations governing our operations and have obtained all material

licenses and permits required for the operation of our business.

government inquiries and investigations because of

our participation in government procurement.

Any inquiry or investigation can result in fines or limitations on our ability to continue

to bid for government contracts and fulfill existing contracts.

We believe that we are in

compliance with all federal, state and local laws and regulations governing our operations and have obtained all material licenses and

permits required for the operation of our business.

Compared sentence by sentence after normalising whitespace, quotation marks, case and digits, so re-formatting and restated figures do not read as changed language. Wording changes appear as one removal and one addition. The current filing and the prior one are authoritative.

What changed 10-K

Item 1. Business