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Item 1A. Risk Factors

2022-03-25 compared with 2021-03-29 · 444 added, 396 removed, 48 unchanged (95% of the section changed)

The purchase of our

common stock involves a very high degree of risk.

In evaluating our common

stock and our business, you should carefully consider the risks and uncertainties described below and the other information and

our consolidated financial statements and related notes included herein.

If any of the events described in the risks below

actually occurs, our financial condition or operating results may be materially and adversely affected, the price of our common

stock may decline, perhaps significantly, and you could lose all or a part of your investment.

The risks below can

be characterized into four groups:

1) Risks related to COVID-19;

The purchase of our common

stock involves a very high degree of risk.

In evaluating our common stock

and our business, you should carefully consider the risks and uncertainties described below and the other information and our consolidated

financial statements and related notes included herein.

If any of the events described in the risks below actually occurs, our financial

condition or operating results may be materially and adversely affected, the price of our common stock may decline, perhaps significantly,

and you could lose all or a part of your investment.

The risks below can be characterized

into four groups:

Risks related to global events such as COVID-19 and the war in Ukraine;

Risks related to our business, including risks specific to the defense and aerospace industry;

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Risks related to our common stock.

The financial statements

contained in this Report, as well as the description of our business contained herein, unless otherwise indicated, principally

reflect the status of our business and the result of operations as of December 31, 2020.

Risks Related to COVID-19

The financial statements contained

in this Report, as well as the description of our business contained herein, unless otherwise indicated, principally reflect the status

of our business and the result of operations as of December 31, 2021.

Risks Related to Global Events

The COVID-19 pandemic and the resulting

macroeconomic disruption have affected how we, our customers and our suppliers are operating our businesses, and the duration and

extent to which this will impact our future results of operations and overall financial performance remains uncertain.

In March 2020, the

World Health Organization announced that infections caused by the coronavirus disease of 2019 (“COVID-19”) had become

pandemic and the U.S.

macroeconomic disruption have affected how we, our customers and our suppliers are operating and disrupted supply chains in our industry.

In March 2020, the World Health

Organization announced that infections caused by the coronavirus disease of 2019 (“COVID-19”) had become pandemic and the

President announced a National Emergency relating to the disease.

National, state and local authorities,

including those in which our offices and manufacturing facilities are located, have adopted various regulations and orders, including

“shelter in place”

rules, restrictions on travel, mandates on the number of people that may gather in one location

and closing non-essential businesses.

National, state and local authorities, including those in which

our offices and manufacturing facilities are located, have adopted various regulations and orders, including “shelter in place”

rules, restrictions on travel, mandates on the number of people that may gather in one location and closing non-essential businesses.

The global impact of the outbreak is continually evolving.

The measures adopted

by various governments and agencies, as well as the decision by many individuals and businesses to voluntarily shut down or self-quarantine,

had and are expected to continue to have serious adverse impacts on domestic and foreign economies of uncertain severity and duration.

The effectiveness of economic stabilization efforts adopted by governments and their willingness to adopt further measures is uncertain.

The likely overall economic impact of the COVID-19 pandemic has been and will continue to be highly negative to the general economy.

While we continue to operate substantially in the normal course of business, we have implemented procedures to promote employee

safety including more frequent and enhanced cleaning and adjusted schedules and work-flows to support physical distancing.

actions resulted in increased operating costs.

Our facilities did not operate with full staff or with normal efficiency during

portions of 2020 primarily due to employee absenteeism and supplier disruptions.

Although business has substantially returned to

pre-Covid-19 operating levels, an increase in COVID-19 infections or changes in governmental regulations may force us to close

or reduce operations or otherwise adversely impact our operations in future periods.

The future economic

impact of Covid-19 cannot be predicted with certainty.

COVID continues to cause significant disruption to the commercial travel

and aerospace industries.

Although domestic air travel in the United States has increased, it may take several years for overall

economic conditions to return to normal and, particularly in the aerospace industry, for air travel and the resulting demand for

new and refurbished aircraft to return to normal.

If conditions do not improve, or if they worsen, it could make it difficult for

us to access debt and equity capital on attractive terms, or at all, and impact our ability to fund business activities and repay

debt on a timely basis.

Although the impact of reduced air travel may be disproportionately felt in the commercial as opposed to

the defense aerospace industry, it should be expected that manufacturers in the commercial sector with excess capacity will increase

The measures adopted by

various governments and agencies, as well as the decision by many individuals and businesses to voluntarily shut down or

self-quarantine, and the tendency of many individuals to continue to work from home, had and are expected to continue to have

serious adverse impacts on domestic and foreign economies of uncertain severity and duration.

The effectiveness of economic

stabilization efforts adopted by governments and their willingness to adopt further measures is uncertain.

The likely overall

economic impact of the COVID-19 pandemic and changes in business practices which resulted from COVID-19, has been and will continue

to be highly negative to the general economy.

While we continue to operate substantially in the normal course of business, we have

implemented procedures to promote employee safety including more frequent and enhanced cleaning and adjusted schedules and

work-flows to support physical distancing and have adjusted our sales and marketing practices.

These actions resulted in increased

operating costs.

Our facilities did not operate with full staff or with normal efficiency during portions of 2020 and 2021 primarily

due to employee absenteeism and supplier disruptions.

Although business has substantially returned to pre-COVID-19 operating levels

in the latter half of 2021, an increase in COVID-19 infections or changes in governmental regulations may force us to close or

reduce operations or otherwise adversely impact our operations in future periods.

The future economic impact

of COVID-19 and changes in business practices which resulted from COVID-19, cannot be predicted with certainty.

COVID continues to cause

significant disruption to the commercial travel and aerospace industries.

Although domestic air travel in the United States has increased,

it may take several years for overall economic conditions to return to normal and, particularly in the aerospace industry, for air travel

and the resulting demand for new and refurbished aircraft to return to normal.

If conditions do not improve, or if they worsen, it could

make it difficult for us to access debt and equity capital on attractive terms, or at all, and impact our ability to fund business activities

and repay debt on a timely basis.

Although the impact of reduced air travel may be disproportionately felt in the commercial as opposed

to the defense aerospace industry, it should be expected that manufacturers in the commercial sector with excess capacity will increase

their efforts to win projects in the defense aerospace industry.

We cannot forecast

with any certainty whether the disruptions caused by the COVID-19 pandemic will increase, or the extent to which any recovery may

be negatively impacted by an increase in cases as a result of the spread of a new variant and restrictions imposed by various governments

in response to any such increase.

Any such disruption may materially impact our business and our consolidated financial position,

results of operations, and cash flows.

In reading the remaining

risk factors set forth below, in each case, consider the additional uncertainties caused by the outbreak of COVID-19.

We cannot forecast with any

certainty whether the disruptions caused by the COVID-19 pandemic will increase, or the extent to which any recovery may be negatively

impacted by an increase in cases as a result of the spread of a new variant and restrictions imposed by various governments in response

to any such increase.

Any such disruption may materially impact our business and our consolidated financial position, results of operations,

and cash flows.

The Russian invasion of Ukraine and the

retaliatory measures imposed by the United States, United Kingdom, European Union and other countries and the responses of Russia to such

measures have caused significant disruptions to domestic and foreign economies.

The invasion of Ukraine by

the Russian Federation had an immediate impact on the global economy resulting in higher prices for oil and other commodities.

States, United Kingdom, European Union and other countries responded to Russia’s invasion of Ukraine by imposing various economic

sanctions and bans.

Russia has responded with its own retaliatory measures.

These measures have impacted the availability and price of

certain raw materials.

The invasion and retaliatory measures also disrupted economic markets.

The global impact of these measures is

continually evolving and cannot be predicted with certainty and there is no assurance that Russia’s invasion of Ukraine and responses

thereto will not further disrupt the global economy and supply chain.

Further, there is no assurance that even when the invasion of Ukraine

ceases, that nations will not continue to impose sanctions and bans on other nations.

While these events have not interrupted our operations

or materially impacted our ability to obtain raw materials, these or future developments resulting from the invasion of Ukraine such as

a cyberattack on the United States, us or our suppliers, could make it difficult for or increase the cost of certain raw materials, or

make it difficult to access debt and equity capital on attractive terms, if at all, and impact our ability to fund business activities

and repay debt on a timely basis.

Russia’s invasion of Ukraine may alter

countries’ willingness to rely on others as the source of certain products and material.

Historically, prime contractors

and OEMs in the United States A & D industry have relied upon suppliers outside the United States for products and raw materials.

Russia’s invasion of Ukraine and the economic disruption resulting from retaliatory measures may cause many of these companies to

rethink these strategies and seek sources of supply within the United States.

To the extent they do so, it could disrupt domestic markets

for raw materials and supplies, and the market for the skilled laborers we need to manufacture our products.

We cannot forecast with any

certainty whether the disruptions caused by the Russian invasion of Ukraine, restrictions imposed by various governments in response thereto

and resulting changes in business practices, may materially impact our business and our consolidated financial position, results of operations,

and cash flows.

In reading the remaining risk

factors set forth below, in each case, consider the additional uncertainties caused by Global events such as COVID-19 and the war in Ukraine.

Risks Related to Our Business

We may need additional financing .

We may need to obtain

additional financing to fund acquisitions of capital items necessary for our growth and to upgrade equipment to remain competitive.

We may also need to obtain the agreement of holders of portions of our debt to extend or otherwise refinance such debt.

need to offer these holders increases in the rates of interest they receive or otherwise compensate them through payments of cash

or issuances of our equity securities.

Future financings or refinancing may involve the issuance of debt, equity and/or securities

convertible into or exercisable or exchangeable for our equity securities.

Additional funding may not be available to us on reasonable

terms, if at all.

If we are able to consummate such financings or re-financings, the trading price of our common stock could be

adversely affected and the terms of such financings may adversely affect the interests of our existing stockholders.

to obtain additional working capital when required would have a material adverse effect on our business and financial condition

and may result in a decline in our stock price.

Any issuances of our common stock, preferred stock, or securities such as warrants

or notes that are convertible into, exercisable or exchangeable for, our capital stock, would have a dilutive effect on the voting

and economic interest of our existing stockholders.

We may need to obtain additional

financing to fund acquisitions of capital items necessary for our growth and to upgrade equipment to remain competitive.

We may also need

to obtain the agreement of holders of portions of our debt to extend or otherwise refinance such debt.

We may need to offer these holders

increases in the rates of interest they receive or otherwise compensate them through payments of cash or issuances of our equity securities.

Future financings or refinancing may involve the issuance of debt, equity and/or securities convertible into or exercisable or exchangeable

for our equity securities.

Additional funding may not be available to us on reasonable terms, if at all.

If we are able to consummate

such financings or re-financings, the trading price of our common stock could be adversely affected and the terms of such financings may

adversely affect the interests of our existing stockholders.

Any failure to obtain additional working capital when required would have

a material adverse effect on our business and financial condition and may result in a decline in our stock price.

Any issuances of our

common stock, preferred stock, or securities such as warrants or notes that are convertible into, exercisable or exchangeable for, our

capital stock, would have a dilutive effect on the voting and economic interest of our existing stockholders.

A reduction in government spending on defense could materially

adversely impact our revenues, results of operations and financial condition.

A large percentage

of our revenue is derived from products for US military aviation.

There are risks associated with programs that are subject to

appropriation by Congress, which could be potential targets for reductions in funding.

Reductions in United States Government spending

on defense or future changes in the mix of defense products required by United States Government agencies could limit demand for

our products, and may have a materially adverse effect on our operating results and financial condition.

For the past several years,

our operations have been impacted by volatility in government procurement cycles and spending patterns.

There can be no assurance

that our financial condition and results of operations will not be materially adversely impacted by future volatility in defense

spending or a change in the mix of products purchased by defense departments in the United States or other countries, or the perception

on the part of our customers that such changes are about to occur.

We depend on revenues from a few

significant relationships.

A large percentage of our

revenue is derived from products for US military aviation.

There are risks associated with programs that are subject to appropriation

by Congress, which could be potential targets for reductions in funding.

Reductions in United States Government spending on defense or

future changes in the mix of defense products required by United States Government agencies could limit demand for our products, and may

have a materially adverse effect on our operating results and financial condition.

For the past several years, our operations have been

impacted by volatility in government procurement cycles and spending patterns.

There can be no assurance that our financial condition

and results of operations will not be materially adversely impacted by future volatility in defense spending or a change in the mix of

products purchased by defense departments in the United States or other countries, or the perception on the part of our customers that

such changes are about to occur.

We depend on revenues from a few significant

relationships.

Any loss, cancellation, reduction, or interruption in these relationships could harm our business.

We derive most of our

revenues from a small number of customers.

Three customers represented approximately 74% and 76% of total sales for the years ended

December 31, 2020 and 2019, respectively.

The markets in which we sell our products are dominated by a relatively small number

of customers which have contracts with United States governmental agencies, thereby limiting the number of potential customers.

Our success depends on our ability to develop and manage relationships with significant customers.

We cannot be sure that we will

be able to retain our largest customers or that we will be able to attract additional customers, or that our customers will continue

to buy our products in the same amounts as in prior years.

The loss of one or more of our largest customers, any reduction or interruption

in sales to these customers, our inability to successfully develop relationships with additional customers or future price concessions

that we may have to make, could significantly harm our business.

We depend on revenues from components

for a few aircraft platforms and the cancellation or reduction of either production or use of these aircraft platforms could harm

our business.

We derive a significant

portion of our revenues from components for a few aircraft platforms, specifically the Sikorsky BlackHawk helicopter, the Northrop

Grumman E-2 Hawkeye naval aircraft, the F-16 Falcon and the F-18 Hornet.

A reduction in demand for our products as a result of

either a reduction in the production of new aircraft or a reduction in the use of existing aircraft in the fleet (reducing after-market

demand) would have a material adverse effect on our operating results and financial condition.

Intense competition in our markets may lead to a reduction

in our revenues and market share.

We derive most of our revenues

from a small number of customers.

Three customers represented approximately 75% and 74% of total sales for the years ended December 31,

2021 and 2020, respectively.

The markets in which we sell our products are dominated by a relatively small number of customers which have

contracts with United States governmental agencies, thereby limiting the number of potential customers.

Our success depends on our ability

to develop and manage relationships with significant customers.

We cannot be sure that we will be able to retain our largest customers

or that we will be able to attract additional customers, or that our customers will continue to buy our products in the same amounts as

in prior years.

The loss of one or more of our largest customers, any reduction or interruption in sales to these customers, our inability

to successfully develop relationships with additional customers or future price concessions that we may have to make, could significantly

harm our business.

We depend on revenues from components for

a few aircraft platforms and the cancellation or reduction of either production or use of these aircraft platforms could harm our business.

We derive a significant portion

of our revenues from components for a few aircraft platforms, specifically the Sikorsky BlackHawk helicopter, the Northrop Grumman E-2

Hawkeye naval aircraft, the F-18 Hornet and the Pratt & Whitney Geared TurboFan Jet engine.

A reduction in demand for our products

as a result of either a reduction in the production of new aircraft or a reduction in the use of existing aircraft in the fleet (reducing

after-market demand) would have a material adverse effect on our operating results and financial condition.

Intense competition in our markets may lead to a reduction in

our revenues and market share.

The defense and aerospace

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In particular,

we anticipate that manufacturers which have historically operated predominately in the commercial sector may seek to increase the

revenue derived in the defense aerospace market to utilize excess capacity.

Many competitors have significantly greater technical,

manufacturing, financial and marketing resources than we do.

We may not be able to compete successfully against either current

or future competitors.

Increased competition could result in reduced revenue, lower margins or loss of market share, any of which

could significantly harm our business, our operating results and financial condition.

We may lose sales if our suppliers fail to meet our needs

or shipments of raw materials are not timely made.

Although we procure

most of our parts and components from multiple sources and rely upon a number of subcontractors to perform detailed services, or

believe that these components and services are readily available from numerous sources, certain components and services are available

only from a sole or limited number of sources.

While we believe that substitute components or assemblies and subcontractors could

be obtained, use of substitutes would require development of new suppliers or would require us to re-engineer our products, or

both, which could delay shipment of our products and could have a materially adverse effect on our operating results and financial

In the past, due to our liquidity problems, we had difficulties in securing timely shipments of raw materials from and

the timely performance of services by certain vendors which had negatively impacted our results of operations.

Any delays in the

shipment of raw materials or the performance of subcontracted services could significantly harm our business, our operating results

and our financial condition.

There are risks associated with the bidding processes

in which we compete.

We obtain many contracts

through a competitive bidding process.

We must devote substantial time and resources to prepare bids and proposals and may not

have contracts awarded to us.

Even if we win contracts, there can be no assurance that the prices that we have bid will be sufficient

to allow us to generate a profit from any particular contract.

There are significant costs involved with producing a small number

of initial units of any new product and it may not be possible to recoup such costs on later production runs.

we anticipate that manufacturers which have historically operated predominately in the commercial sector may seek to increase the revenue

derived in the defense aerospace market to utilize excess capacity.

Many competitors have significantly greater technical, manufacturing,

financial and marketing resources than we do.

We may not be able to compete successfully against either current or future competitors.

Increased competition could result in reduced revenue, lower margins or loss of market share, any of which could significantly harm our

business, our operating results and financial condition.

We may lose sales if we fail to timely meet the needs of any

of our customers.

Our customers incorporate

our products into larger aircraft assemblies or completed aircraft.

They rely upon us to deliver products meeting their specifications

on a timely basis to ensure smooth operation of their assembly lines.

If a customer were to conclude that it could not rely upon us for

timely delivery of quality products, it could look to dual source a product or rely upon another party altogether.

Any decision by a customer

to rely upon an alternate supplier for some or all of its needs could significantly harm our business, our operating results and our financial

We may lose sales if our suppliers fail to meet our needs or

shipments of raw materials are not timely made.

Although we procure most of

our parts and components from multiple sources and rely upon a number of subcontractors to perform detailed services, or believe that

these components and services are readily available from numerous sources, certain components and services are available only from a sole

or limited number of sources.

While we believe that substitute components or assemblies and subcontractors could be obtained, use of substitutes

would require development of new suppliers or would require us to re-engineer our products, or both, which could delay shipment of our

products and could have a materially adverse effect on our operating results and financial condition.

In the past, due to our liquidity

problems, we had difficulties in securing timely shipments of raw materials from and the timely performance of services by certain vendors

which negatively impacted our results of operations.

Any delays in the shipment of raw materials or the performance of subcontracted services

could significantly harm our business, our operating results and our financial condition.

There are risks associated with the bidding processes in which

We obtain many contracts through

a competitive bidding process.

We must devote substantial time and resources to prepare bids and proposals and may not have contracts

awarded to us.

Even if we win contracts, there can be no assurance that the prices that we have bid will be sufficient to allow us to

generate a profit from any particular contract.

There are significant costs involved with producing a small number of initial units of

any new product and it may not be possible to recoup such costs on later production runs.

Due to fixed contract pricing, increasing

contract costs expose us to reduced profitability and the potential loss of future business.

The cost estimation

process requires significant judgment and expertise.

Reasons for cost growth may include unavailability and productivity of labor,

the nature and complexity of the work to be performed, the effect of change orders, the availability of materials, the effect of

any delays in performance, availability and timing of funding from the customer, natural disasters, and the inability to recover

any claims included in the estimates to complete.

A significant change in cost estimates on one or more programs could have a material

effect on our consolidated financial position or results of operations.

The cost estimation process

requires significant judgment and expertise.

Reasons for cost growth may include unavailability and productivity of labor, the nature

and complexity of the work to be performed, the effect of change orders, the availability of materials, the effect of any delays in performance,

availability and timing of funding from the customer, natural disasters, and the inability to recover any claims included in the estimates

A significant change in cost estimates on one or more programs could have a material effect on our consolidated financial

position or results of operations.

The prices of raw materials we use are volatile.

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used in our manufacturing processes are volatile.

If the prices of raw materials rise, we may not be able to pass along such increases

Our contracts generally allow us to increase our prices due to increases in the price

of raw materials.

Many contracts, however, require that we absorb all or a portion of the increase in expense resulting from inflation

before passing the increase on to the customer.

If the prices of raw materials rise, we may not be able to pass along all of such increases

to our customers and this could have an adverse impact on our consolidated financial position and results of operations.

possible that some of the raw materials we use might become subject to new or increased tariffs.

Significant increases in the prices

of raw materials could adversely impact our customers’

demand for certain products which could lead to a reduction in our

revenues and have a material adverse impact on our revenues and on our consolidated financial position and results of operations.

It is possible

that some of the raw materials we use might become subject to new or increased tariffs.

Significant increases in the prices of raw materials

could adversely impact our customers’ demand for certain products which could lead to a reduction in our revenues and have a material

adverse impact on our revenues and on our consolidated financial position and results of operations.

Some of the products we produce have long lead times.

Some of the products

we produce require months to produce and we sometimes produce products in excess of the number ordered intending to sell the excess

as spares when orders arise.

Some of the products we produce

require months to produce and we sometimes produce products in excess of the number ordered intending to sell the excess as spares when

orders arise.

As a result, our inventory turns slowly and ties up our working capital.

Our inventory represented

approximately 56% of our assets as of December 31, 2020.

Any requirement to write down the value of our inventory due to obsolescence

or a drop in the price of materials could have a material adverse effect on our consolidated financial position, results of operations

and could result in a breach of the financial covenants in our Loan Facility.

We do not own the intellectual property rights to products

Nearly all the parts

and subassemblies we produce are built to customer specifications and the customer owns the intellectual property, if any, related

to the product.

Consequently, if a customer desires to use another manufacturer to fabricate its part or subassembly, it would

be free to do so, which could have a material adverse effect on our business, our operating results and financial condition.

Our inventory represented approximately 55% of

our assets as of December 31, 2021.

Any requirement to write down the value of our inventory due to obsolescence or a drop in the price

of materials could have a material adverse effect on our consolidated financial position, results of operations and could result in a

breach of the financial covenants in our Loan Facility with Webster Bank.

We do not own the intellectual property rights to products we

Nearly all the parts and subassemblies

we produce are built to customer specifications and the customer owns the intellectual property, if any, related to the product.

Consequently,

if a customer desires to use another manufacturer to fabricate its part or subassembly, it would be free to do so, which could have a

material adverse effect on our business, our operating results and financial condition.

There are risks associated with new programs.

New programs typically

carry risks associated with design changes, acquisition of new production tools, funding commitments, imprecise or changing specifications,

New programs typically carry

risks associated with design changes, acquisition of new production tools, funding commitments, imprecise or changing specifications,

timing delays and the accuracy of cost estimates associated with such programs.

In addition, any new program may experience delays

for a variety of reasons after significant expenditures are made.

If we were unable to perform under new programs to the customers’

satisfaction or if a new program in which we had made a significant investment was terminated or experienced weak demand, delays

or other problems, then our business, financial condition and results of operations could be materially adversely affected.

could result in low margin or forward loss contracts, and the risk of having to write-off costs and estimated earnings in excess

of billings on uncompleted contracts if it were deemed to be unrecoverable over the life of the program.

In addition, any new program may experience delays for

a variety of reasons after significant expenditures are made.

If we were unable to perform under new programs to the customers’

satisfaction or if a new program in which we had made a significant investment was terminated or experienced weak demand, delays or other

problems, then our business, financial condition and results of operations could be materially adversely affected.

This could result in

low margin or forward loss contracts, and the risk of having to write-off costs and estimated earnings in excess of billings on uncompleted

contracts if it were deemed to be unrecoverable over the life of the program.

To perform on new programs,

we may be required to incur material up-front costs which may not have been separately negotiated and may not be recoverable.

charges and the loss of up-front costs could have a material impact on our liquidity.

The need to control

our expenses will place a significant strain on our management and operational resources.

If we are unable to control our expenses

effectively, our business, results of operations and financial condition may be adversely affected.

Attracting and retaining executive

talent and other key personnel is an essential element of our future success.

Our future success

depends to a significant extent upon our ability to attract executive talent, as well as the continued service of our existing

executive officers and other key management and technical personnel.

Experienced management and technical, marketing and support

personnel in the defense and aerospace industries are in demand and competition for their talents is intense.

Our failure to attract

executive talent, or retain our existing executive officers and key personnel, could have a material adverse effect on our business,

financial condition and results of operations.

We are subject to strict governmental regulations relating

to the environment, which could result in fines and remediation expense in the event of non-compliance.

We are required to

comply with extensive and frequently changing environmental regulations at the federal, state and local levels.

Among other things,

these regulatory bodies impose restrictions 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 substances into the environment.

This extensive regulatory framework imposes significant compliance burdens and risks

In addition, these regulations may impose liability for the cost of removal or remediation of certain hazardous substances

released on or in our facilities without regard to whether we knew of, or caused, the release of such substances.

we are required to provide a place of employment that is free from recognized and preventable hazards that are likely to cause

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

in the use of such substances.

Our operations require the use of chemicals and other materials for painting and cleaning that are

classified under applicable laws as hazardous chemicals and substances.

If we are found to be in violation of any of these rules,

regulations or permits, we may be subject to fines, remediation expenses and the obligation to change our business practice, any

of which could result in substantial costs that would adversely impact our business operations and financial condition.

and the loss of up-front costs could have a material impact on our liquidity.

The need to control our expenses

will place a significant strain on our management and operational resources.

If we are unable to control our expenses effectively, our

business, results of operations and financial condition may be adversely affected.

There are risks associated with offering

new services.

To reduce our dependence on

subcontractors we may offer new services to our customers, such as painting and finishing products we manufacture.

There are risks associated

with offering new services and even if such services are performed timely and correctly, it is likely that our margins will be low in

the initial phases when volume is low.

Attracting and retaining executive talent and other key

personnel is an essential element of our future success.

Our future success depends

to a significant extent upon our ability to attract executive talent, as well as the continued service of our existing executive officers

and other key management and technical personnel.

Experienced management and technical, marketing and support personnel in the defense

and aerospace industries are in demand and competition for their talents is intense.

Our failure to attract executive talent, or retain

our existing executive officers and key personnel, could have a material adverse effect on our business, financial condition and results

of operations.

We are subject to intense competition for

the skilled machinists necessary to manufacture our products.

We are subject to intense

competition for the services of skilled machinists necessary to manufacture our products and those of other companies in the A & D

We are currently seeking to hire machinists for our Long Island and Connecticut manufacturing facilities to expand our business.

The demand for these individuals may increase as other manufacturers seek to bring to the United States manufacturing processes currently

outsourced overseas.

If the United States economy undergoes a period of inflation, our labor costs may increase which could have a material

adverse effect on our business, financial condition and results of operations.

We are subject to strict governmental regulations

relating to the environment, which could result in fines and remediation expense in the event of non-compliance.

We are required to comply

with extensive and frequently changing environmental regulations at the federal, state and local levels.

Among other things, these regulatory

bodies impose restrictions 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 substances into

the environment.

This extensive regulatory framework imposes significant compliance burdens and risks on us.

In addition, these regulations

may impose liability for the cost of removal or remediation of certain hazardous substances released on or in our facilities without regard

to whether we knew of, or caused, the release of such substances.

Furthermore, we are required to provide a place of employment that is

free from recognized and preventable hazards that are likely to cause serious physical harm to employees, provide notice to employees

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

Our operations require the use of

chemicals and other materials for painting and cleaning that are classified under applicable laws as hazardous chemicals and substances.

If we are found to be in violation of any of these rules, regulations or permits, we may be subject to fines, remediation expenses and

the obligation to change our business practice, any of which could result in substantial costs that would adversely impact our business

operations and financial condition.

We may be subject to fines and disqualification for non-compliance

4 unchanged sentences

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 disqualification.

Cyber security attacks, internal

system or service failures may adversely impact our business and operations.

Any system or service

disruptions, including those caused by projects to improve our information technology systems, if not anticipated and appropriately

mitigated, could disrupt our business and impair our ability to effectively provide products and related services to our customers

and could have a material adverse effect on our business.

We could also be subject to systems failures, including network, software

or hardware failures, whether caused by us, third-party service providers, intruders or hackers, computer viruses, natural disasters,

power shortages or terrorist attacks.

Cyber security threats are evolving and include, but are not limited to, malicious software,

unauthorized attempts to gain access to sensitive, confidential or otherwise protected information related to us or our products,

customers or suppliers, or other acts that could lead to disruptions in our business.

Any such failures could cause loss of data

and interruptions or delays in our business, cause us to incur remediation costs or require us to pay ransom to a hacker which

takes over our systems, or subject us to claims and damage our reputation.

In addition, the failure or disruption of our communications

or utilities could cause us to interrupt or suspend our operations or otherwise adversely affect our business.

Although we utilize

various procedures and controls to monitor and mitigate the risk of these threats, there can be no assurance that these procedures

and controls will be sufficient.

Our property and business interruption insurance may be inadequate to compensate us for all losses

that may occur as a result of any system or operational failure or disruption which would adversely affect our business, results

of operations and financial condition.

Moreover, expenditures incurred in implementing cyber security and other procedures and

controls could adversely affect our results of operations and financial condition.

Terrorist acts and acts of war may seriously harm our

business, results of operations and financial condition.

United States and global

responses to actual or potential military conflicts, terrorism, perceived nuclear, biological and chemical threats and other global

political crises increase uncertainties with respect to the U.S.

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.

have never been subject to such fines or disqualification.

Cyber security attacks, internal system

or service failures may adversely impact our business and operations.

Any system or service disruptions,

including those caused by projects to improve our information technology systems, if not anticipated and appropriately mitigated, could

disrupt our business and impair our ability to effectively provide products and related services to our customers and could have a material

adverse effect on our business.

We could also be subject to systems failures, including network, software or hardware failures, whether

caused by us, third-party service providers, intruders or hackers, computer viruses, natural disasters, power shortages or terrorist attacks.

Cyber security threats are evolving and include, but are not limited to, malicious software, unauthorized attempts to gain access to sensitive,

confidential or otherwise protected information related to us or our products, customers or suppliers, or other acts that could lead to

disruptions in our business.

Any such failures could cause loss of data and interruptions or delays in our business, cause us to incur

remediation costs or require us to pay ransom to a hacker which takes over our systems, or subject us to claims and damage our reputation.

In addition, the failure or disruption of our communications or utilities could cause us to interrupt or suspend our operations or otherwise

adversely affect our business.

Although we utilize various procedures and controls to monitor and mitigate the risk of these threats,

there can be no assurance that these procedures and controls will be sufficient.

Our property and business interruption insurance may

be inadequate to compensate us for all losses that may occur as a result of any system or operational failure or disruption which would

adversely affect our business, results of operations and financial condition.

Moreover, expenditures incurred in implementing cyber security

and other procedures and controls could adversely affect our results of operations and financial condition.

Terrorist acts and acts of war may seriously harm our business,

results of operations and financial condition.

United States and global responses

to actual or potential military conflicts such as Russia’s invasion of Ukraine, terrorism, perceived nuclear, biological and chemical

threats and other global political crises increase uncertainties with respect to the U.S.

and other business and financial markets.

Several factors associated,

directly or indirectly, with actual or potential military conflicts, terrorism, perceived nuclear, biological and chemical threats,

and other global political crises and responses thereto, may adversely affect the mix of products purchased by defense departments

in the United States or other countries to platforms not serviced by us.

A shift in defense budgets to product lines we do not

produce could have a material adverse effect on our business, financial condition and results of operations.

factors associated, directly or indirectly, with actual or potential military conflicts, terrorism, perceived nuclear, biological and

chemical and cyber threats, and other global political crises and responses thereto, may adversely affect the mix of products purchased

by defense departments in the United States or other countries to platforms not serviced by us.

A shift in defense budgets to product

lines we do not produce could have a material adverse effect on our business, financial condition and results of operations.

Risks Related to Our Indebtedness

Our indebtedness may have a material adverse effect on

our operations.

We have substantial

indebtedness under our Loan Facility.

As of December 31, 2020, we had approximately $21,207,000 of indebtedness outstanding under

the Loan Facility.

All of our indebtedness under the Loan Facility is secured by substantially all of our assets.

Our indebtedness may have a material adverse effect on our operations.

We have substantial indebtedness

under our loan facility with Webster Bank (“Loan Facility”).

As of December 31, 2021, we had approximately $16,648,000 of

indebtedness outstanding under the Loan Facility.

All of our indebtedness under the Loan Facility is secured by substantially all of

We also have approximately

$6,412,000 of indebtedness outstanding in the form of subordinated notes payable on July 1, 2026.

These notes are held by related

parties, specifically Michael N.

These notes are held by related parties,

specifically Michael N.

Taglich (our Chairman) and Robert F.

Taglich (a Director), and their affiliates.

Notes with a principal

value of approximately $4,412,000 are convertible into approximately 3,791,000 shares of common stock at a weighted average conversion

price of $1.16 per share.

These notes carry interest rates from 6% to 15% per annum with a weighted average interest rate of 7.8%

If we are unable to

pay or refinance the outstanding principal and accrued interest on these notes when due, our operations may be materially and adversely

We may need to offer the holders of this debt increases in the rates of interest they receive or otherwise compensate

them through payments of cash or issuances of our equity securities.

Future financings or re-financings may involve the issuance

of debt, equity and/or securities convertible into or exercisable or exchangeable for our equity securities.

If we are able to

consummate such financings or re-financings, the terms of such financings may adversely affect the trading price of our common

stock and the interests of our existing stockholders.

Any failure to obtain additional working capital when required would have

a material adverse effect on our business and financial condition and may result in a decline in our stock price.

Any issuances

of our common stock, preferred stock, or securities such as warrants or notes that are convertible into, exercisable or exchangeable

for, our capital stock, would have a dilutive effect on the voting and economic interest of our existing stockholders.

Notes with a principal value

of approximately $2,732,000 carry an interest rate of 6% per annum and are convertible into approximately 1,821,000 shares of common stock

at a conversion price of $1.50 per share.

Notes with a principal value of approximately $2,080,000 carry an interest rate of 7% per annum

and are convertible into approximately 2,237,000 shares of common stock at a conversion price of $0.93 per share.

If we are unable to pay or

refinance the outstanding principal and accrued interest on these notes when due, our operations may be materially and adversely affected.

We may need to offer the holders of this debt increases in the rates of interest they receive or otherwise compensate them through payments

of cash or issuances of our equity securities.

Future financings or re-financings may involve the issuance of debt, equity and/or securities

convertible into or exercisable or exchangeable for our equity securities.

If we are able to consummate such financings or re-financings,

the terms of such financings may adversely affect the trading price of our common stock and the interests of our existing stockholders.

Any failure to obtain additional working capital when required would have a material adverse effect on our business and financial condition

and may result in a decline in our stock price.

Any issuances of our common stock, preferred stock, or securities such as warrants or

notes that are convertible into, exercisable or exchangeable for, our capital stock, would have a dilutive effect on the voting and economic

interest of our existing stockholders.

Our leverage may adversely

affect our ability to finance future operations and capital needs, may limit our ability to pursue business opportunities and may

make our results of operations more susceptible to adverse economic conditions.

Our indebtedness may limit our ability to pay dividends

in the future.

We currently do not

pay dividends and the terms of our Loan Facility require that we maintain certain financial covenants.

Unless we are in compliance

with our Loan Facility in the future, we would need to seek covenant changes under our Loan Facility to pay dividends in the future.

There can be no assurance our lenders would agree to covenant changes acceptable to us or at all.

In addition, we may in the future

incur indebtedness or otherwise become subject to agreements whose terms restrict our ability to pay dividends in the future.

affect our ability to finance future operations and capital needs, may limit our ability to pursue business opportunities and may make

our results of operations more susceptible to adverse economic conditions.

Our indebtedness may limit our ability to pay dividends in the

We currently do not pay dividends

and the terms of our Loan Facility require that we maintain certain financial covenants.

In the future should we decide to pay dividends,

we would need to seek covenant changes under our Loan Facility.

There can be no assurance our lenders would agree to covenant changes

acceptable to us or at all.

In addition, we may in the future incur indebtedness or otherwise become subject to agreements whose terms

restrict our ability to pay dividends in the future.

Even if our lender would agree to allow us to pay a dividend, our Board of Directors

may choose to use the amount which could be paid as a dividend to reduce our outstanding indebtedness.

Risks Related to our common stock

The price of our common stock can fluctuate.

The financial markets

have been impacted in various ways by the reactions to the outbreak of the COVID-19 pandemic and government stimulus programs adopted

in response to the pandemic.

The price of our common stock has and is expected to continue to be volatile.

We cannot forecast with

any certainty whether and to what degree the disruption caused by the COVID-19 pandemic and reactions thereto will continue to

adversely impact financial markets and the impact to our common stock.

Likewise, we cannot state with certainty the degree to which

financial markets were supported by government stimulus programs and whether such support will continue as governments elect not

to adopt similar measures in the future.

The ownership of our common stock

is highly concentrated, and your interests may conflict with the interests of our existing stockholders.

Two of our directors,

The financial markets have

been impacted in various ways by the reactions to the outbreak of the COVID-19 pandemic and government stimulus programs adopted in response

to the pandemic, and Russia’s invasion of Ukraine and government responses thereto.

The price of our common stock has and is expected

to continue to be volatile.

We cannot forecast with any certainty whether and to what degree the disruption caused by the COVID-19 pandemic,

Russia’s invasion of Ukraine and reactions thereto will continue to adversely impact financial markets and the impact to our common

Likewise, we cannot state with certainty the degree to which financial markets were supported by government stimulus programs and

whether such support will continue as governments elect not to adopt similar measures in the future.

The ownership of our common stock is highly

concentrated, and your interests may conflict with the interests of our existing stockholders.

Two of our directors, Michael

Taglich and Robert F.

Taglich, and their affiliates own a significant number of shares of our outstanding common stock

as well as a significant amount of debt convertible into our common stock, which together with their position as directors of our

company, give them significant influence over the outcome of corporate actions requiring stockholder approval and the terms on

which we complete transactions with their affiliates.

The interests of these directors may be different from the interests of other

stockholders on these matters.

This concentration of ownership could also have the effect of delaying or preventing a change in

our control or otherwise discouraging a potential acquirer from attempting to obtain control of us, which in turn could reduce

the price of our common stock.

We can provide no assurance that our common stock will

continue to meet NYSE American listing requirements.

If we fail to comply with the continuing listing standards of the NYSE American,

our common stock could be delisted.

If we fail to satisfy

the continued listing requirements of the NYSE American, the NYSE American may take steps to delist our common stock.

The delisting

of our common stock would likely have a negative effect on the price of our common stock and would impair your ability to sell

or purchase common stock when you wish to do so.

Taglich, and their affiliates own a significant number of shares of our outstanding common stock as well as a

significant amount of debt convertible into our common stock, which together with their position as directors of our Company, give them

significant influence over the outcome of corporate actions, including those requiring stockholder approval and the terms on which we

complete transactions with their affiliates.

The interests of these directors may be different from the interests of other stockholders

on these and other matters.

This concentration of ownership could also have the effect of delaying or preventing a change in our control

or otherwise discouraging a potential acquirer from attempting to obtain control of us, which in turn could reduce the price of our common

We can provide no assurance that our common

stock will continue to meet NYSE American listing requirements.

If we fail to comply with the continuing listing standards of the NYSE

American, our common stock could be delisted.

If we fail to satisfy the

continued listing requirements of the NYSE American, the NYSE American may take steps to delist our common stock.

The delisting of our

common stock would likely have a negative effect on the price of our common stock and would impair your ability to sell or purchase common

stock when you wish to do so.

There is only a limited public market for our common stock.

Our common stock is

listed on the NYSE American.

However, trading volume has been limited and a more active public market for our common stock may

not develop or be sustained over time.

The lack of a robust market may impair a stockholder’s ability to sell shares of our

common stock.

In the absence of a more active trading market, any attempt to sell a substantial number of our shares could result

in a decrease in the price of our stock.

Specifically, you may not be able to resell your shares of common stock at or above the

price you paid for such shares or at all.

Moreover, sales of

our common stock in the public market, or the perception that such sales could occur, could negatively impact the price of our

common stock.

As a result, you may not be able to sell your shares of our common stock in short time periods, or possibly at all,

and the price per share of our common stock may fluctuate significantly.

If we fail to meet the expectations of securities analysts

or investors, our stock price could decline significantly.

Our quarterly and annual

operating results fluctuate significantly due to a variety of factors, some of which are outside our control.

Accordingly, we believe

period-to-period comparisons of our results of operations are not meaningful and should not be relied upon as indications of future

Some of the factors that could cause quarterly or annual operating results to fluctuate include conditions inherent

in government contracting and our business such as the timing of cost and expense recognition for contracts, the United States

Government contracting and budget cycles, introduction of new government regulations and standards, contract closeouts, variations

in manufacturing efficiencies, our ability to obtain components and subassemblies from contract manufacturers and suppliers, general

economic conditions and economic conditions specific to the defense market.

Because we base our operating expenses on anticipated

revenue trends and a high percentage of our expenses are fixed in the short term, any delay in generating or recognizing forecasted

revenues could significantly harm our business.

Our common stock is listed

on the NYSE American.

However, trading volume has been limited and a more active public market for our common stock may not develop or

be sustained over time.

The lack of a robust market may impair a stockholder’s ability to sell shares of our common stock.

absence of a more active trading market, any attempt to sell a substantial number of our shares could result in a decrease in the price

of our stock.

Specifically, you may not be able to resell your shares of common stock at or above the price you paid for such shares or

Moreover, sales of our common

stock in the public market, or the perception that such sales could occur, could negatively impact the price of our common stock.

result, you may not be able to sell your shares of our common stock in short time periods, or possibly at all, and the price per share

of our common stock may fluctuate significantly.

If we fail to meet the expectations of securities analysts or

investors, our stock price could decline significantly.

Our quarterly and annual operating

results fluctuate significantly due to a variety of factors, some of which are outside our control.

Accordingly, we believe period-to-period

comparisons of our results of operations are not meaningful and should not be relied upon as indications of future performance.

the factors that could cause quarterly or annual operating results to fluctuate include conditions inherent in government contracting

and our business such as the timing of cost and expense recognition for contracts, the United States Government contracting and budget

cycles, introduction of new government regulations and standards, contract closeouts, variations in manufacturing efficiencies, our ability

to obtain components and subassemblies from contract manufacturers and suppliers, general economic conditions and economic conditions

specific to the defense market and disruptions caused by global events such as COVID-19 and Russia’s invasion of Ukraine.

we base our operating expenses on anticipated revenue trends and a high percentage of our expenses are fixed in the short term, any delay

in generating or recognizing forecasted revenues could significantly harm our business.

Fluctuations in quarterly

results or announcements of extraordinary events such as an award of a new contract, acquisitions or litigation may cause earnings

to fall below the expectations of securities analysts and investors.

In this event, the trading price of our common stock could

significantly decline.

These fluctuations, as well as general economic and market conditions, may adversely affect the future market

price of our common stock, as well as our overall operating results.

Consequently, our share price may experience significant volatility

and may not necessarily reflect the value of our expected performance.

Future financings or acquisitions may adversely affect

the market price of our common stock.

results or announcements of extraordinary events such as an award of a new contract, acquisitions or litigation, may cause earnings to

fall below the expectations of securities analysts and investors.

In this event, the trading price of our common stock could significantly

These fluctuations, as well as general economic and market conditions, may adversely affect the future market price of our common

stock, as well as our overall operating results.

Consequently, our share price may experience significant volatility and may not necessarily

reflect the value of our expected performance.

Future financings or acquisitions may adversely affect the market

price of our common stock.

Future sales or issuances

of our common stock, including upon conversion of our outstanding convertible notes, upon exercise of our outstanding warrants

of our common stock, including upon conversion of our outstanding convertible notes, upon exercise of our outstanding warrants and options,

or as part of future financings or acquisitions, would be substantially dilutive to the outstanding shares of common stock.

dilution or potential dilution may cause our stockholders to sell their shares, which would contribute to a downward movement in

the price of common stock.

We incur significant costs as a result

of operating as a public company, and our management is required to devote substantial time to compliance requirements, including

establishing and maintaining internal controls over financial reporting, and we may be exposed to potential risks if we are unable

to comply with these requirements.

As a public company,

we incur significant legal, accounting and other expenses under the Sarbanes-Oxley Act of 2002, together with rules implemented

by the Securities and Exchange Commission and applicable market regulators.

These rules impose various requirements on public companies,

including requiring certain corporate governance practices.

Our management and other personnel will need to devote a substantial

amount of time to these requirements.

Moreover, these rules and regulations will increase our legal and financial compliance costs

and will make some activities more time-consuming and costly.

The Sarbanes-Oxley

Act, among other things, requires that we maintain effective internal controls for financial reporting and disclosure controls

and procedures.

In particular, we must perform system and process evaluations and testing of our internal controls over financial

reporting to allow management to report on the effectiveness of our internal controls over financial reporting, as required by

Section 404 of the Sarbanes-Oxley Act.

Compliance with Section 404 may require that we incur substantial accounting expenses and

expend significant management efforts.

Our testing may reveal deficiencies in our internal controls over financial reporting that

are deemed to be material weaknesses.

In the event we identify significant deficiencies or material weaknesses in our internal

controls that we cannot remediate in a timely manner, the market price of our stock could decline if investors and others lose

confidence in the reliability of our financial statements and we could be subject to sanctions or investigations by the SEC or

other applicable regulatory authorities.

or potential dilution may cause our stockholders to sell their shares, which would contribute to a downward movement in the price of common

We incur significant costs as a result of

operating as a public company, and our management is required to devote substantial time to compliance requirements, including establishing

and maintaining internal controls over financial reporting, and we may be exposed to potential risks if we are unable to comply with these

requirements.

As a public company, we incur

significant legal, accounting and other expenses under the Sarbanes-Oxley Act of 2002, together with rules implemented by the Securities

and Exchange Commission and applicable market regulators.

These rules impose various requirements on public companies, including requiring

certain corporate governance practices.

Our management and other personnel will need to devote a substantial amount of time to these requirements.

Moreover, these rules and regulations will increase our legal and financial compliance costs and will make some activities more time-consuming

and costlier.

The Sarbanes-Oxley Act, among

other things, requires that we maintain effective internal controls for financial reporting and disclosure controls and procedures.

particular, we must perform system and process evaluations and testing of our internal controls over financial reporting to allow management

to report on the effectiveness of our internal controls over financial reporting, as required by Section 404 of the Sarbanes-Oxley Act.

Compliance with Section 404 may require that we incur substantial accounting expenses and expend significant management efforts.

may reveal deficiencies in our internal controls over financial reporting that are deemed to be material weaknesses.

In the event we identify

significant deficiencies or material weaknesses in our internal controls that we cannot remediate in a timely manner, the market price

of our stock could decline if investors and others lose confidence in the reliability of our financial statements and we could be subject

to sanctions or investigations by the SEC or other applicable regulatory authorities.

UNRESOLVED STAFF COMMENTS

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 1A. Risk Factors