What changed in this filing

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Item 1. Financial Statements

2023-08-11 compared with 2022-11-14 · 318 added, 477 removed, 247 unchanged (76% of the section changed)

Financial statements

Condensed Consolidated Financial Statements:

Condensed Consolidated Balance Sheets as of September 30, 2022 (unaudited) and December 31, 2021

Condensed Consolidated Statements of Operations for the three and nine months ended September 30, 2022 and 2021 (unaudited)

Condensed Consolidated Statements of Stockholders’ Equity for the three and nine months ended September 30, 2022 and 2021 (unaudited)

Condensed Consolidated Statements of Cash Flows for the nine months ended September 30, 2022 and 2021 (unaudited)

Consolidated Financial Statements:

Condensed Consolidated Balance Sheets as of March 31, 2023 (unaudited) and December 31, 2022

Condensed Consolidated Statements of Operations for the three months ended March 31, 2023 and 2022 (unaudited)

Condensed Consolidated Statements of Stockholders’ Equity for the three months ended March 31, 2023 and 2022 (unaudited)

Condensed Consolidated Statements of Cash Flows for the three months ended March 31, 2023 and 2022 (unaudited)

Notes to Condensed Consolidated Financial Statements

AIR INDUSTRIES GROUP

Condensed Consolidated Balance Sheets

September 30,

INDUSTRIES GROUP

Consolidated Balance Sheets

Current Assets

Accounts Receivable, Net of Allowance for Doubtful Accounts of $ 493,000 and $ 594,000

Accounts Receivable, Net of Allowance for Credit Loss of $ 285,000 and $ 281,000

Prepaid Expenses and Other Current Assets

Contract Costs Receivable

Prepaid Taxes

1 unchanged sentence

Property and Equipment, Net

Operating Lease Right-Of-Use-Asset

Operating Lease Right-Of-Use-Assets

Deferred Financing Costs, Net, Deposits and Other Assets

6 unchanged sentences

Customer Deposits

Liability Related to the Sale of Future Proceeds from Disposition of Subsidiary

Deferred payroll tax liability - CARES Act

Total Current Liabilities

1 unchanged sentence

Debt - Net of Current Portion

Subordinated Notes Payable - Related Parties

Subordinated Notes Payable - Related Party

Operating Lease Liabilities - Net of Current Portion

1 unchanged sentence

TOTAL LIABILITIES

Commitments and Contingencies (Notes 4 and 8)

Commitments and Contingencies (see Note 8)

Stockholders’ Equity

Preferred Stock, par value $ .001 - Authorized 3,000,000 shares, 0 shares outstanding, at both September 30, 2022 and December 31, 2021.

Common Stock - Par Value $ .001 - Authorized 6,000,000 Shares, 3,232,467 and 3,212,801 Shares Issued and Outstanding as of September 30, 2022 and December 31, 2021, respectively

Preferred Stock, par value $ .001 - Authorized 3,000,000 shares, 0 shares outstanding, at both March 31, 2023 and December 31, 2022.

Common Stock - Par Value $ .001 - Authorized 6,000,000 Shares, 3,259,367 and 3,247,937 Shares Issued and Outstanding as of March 31, 2023 and December 31, 2022, respectively

Additional Paid-In Capital

4 unchanged sentences

TOTAL LIABILITIES AND STOCKHOLDERS’ EQUITY

Share and per share data have been adjusted for all

periods presented to reflect the one-for-10 reverse stock split effective October 18, 2022.

See Notes to Condensed Consolidated Financial Statements

AIR INDUSTRIES GROUP

Condensed Consolidated Statements of Operations

Three Months Ended

Nine Months Ended

September 30,

Notes to Condensed Consolidated Financial Statements

INDUSTRIES GROUP

Consolidated Statements of Operations

the Three Months Ended March 31,

Cost of Sales

Operating Expenses

Income from Operations

(Loss) Income from Operations

Interest and Financing Costs

1 unchanged sentence

Other Income, Net

(Loss) Income before Provision for Income Taxes

Loss before Benefit From Income Taxes

Provision for Income Taxes

Net (Loss) Income

$ ( 618,000 )

$ ( 177,000 )

(Loss) Income per share - Basic

(Loss) Income per share - Diluted

Weighted Average Shares Outstanding - basic

Weighted Average Shares Outstanding - diluted

Share and per share data have been adjusted for all

periods presented to reflect the one-for-10 reverse stock split effective October 18, 2022.

See Notes to Condensed Consolidated Financial Statements

AIR INDUSTRIES GROUP

Condensed Consolidated Statements of Stockholders’

For the Three and Nine Months Ended September 30,

2022 and 2021

(Loss) Income per share - Basic and diluted

Weighted Average Shares Outstanding - Basic and diluted

Notes to Condensed Consolidated Financial Statements

INDUSTRIES GROUP

Consolidated Statements of Stockholders’ Equity

the Three Months Ended March 31, 2023 and 2022

Stockholders’

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$ ( 66,228,000 )

Common Stock issued for directors fees

Stock Compensation Expense

Balance, June 30, 2022

$ ( 64,569,000 )

Common Stock issued for directors fees

Stock Compensation Expense

Balance, September 30, 2022

$ ( 64,711,000 )

Balance January 1, 2022

1 unchanged sentence

Common Stock issued for directors fees

Stock Options exercised

Stock Compensation Expense

1 unchanged sentence

$ ( 64,562,000 )

Common Stock issued for directors fees

Stock Compensation Expense

Balance, June 30, 2021

$ ( 66,074,000 )

Common Stock issued for directors fees

Stock Compensation Expense

Balance, September 30, 2021

$ ( 66,140,000 )

Share data have been adjusted for all periods presented

to reflect the one-for-10 reverse stock split effective October 18, 2022.

See Notes to Condensed Consolidated Financial Statements

AIR INDUSTRIES GROUP

Condensed Consolidated Statements of Cash Flows

For the Nine Months Ended September 30,

Notes to Condensed Consolidated Financial Statements

INDUSTRIES GROUP

Consolidated Statements of Cash Flows

the Three Months Ended March 31,

CASH FLOWS FROM OPERATING ACTIVITIES

Net (Loss) Income

$ ( 618,000 )

Adjustments to reconcile net (loss) income to net cash provided by (used in) operating activities

Adjustments to reconcile net loss to net cash provided by

operating activities

Depreciation of property and equipment

2 unchanged sentences

Non-cash other income recognized

Non-cash interest expense

Amortization of operating Right-of-Use assets

Amortization of Right-of-Use Assets

Deferred gain on sale of real estate

Bad debt recovery

Bad debt expense (recovery)

Amortization of deferred financing costs

Changes in Operating Assets and Liabilities

Decrease (Increase) in Operating Assets:

(Increase) Decrease in Operating Assets:

Accounts receivable

( 2,467,000 )

( 3,876,000 )

Prepaid expenses and other current assets

3 unchanged sentences

Accounts payable and accrued expenses

( 1,261,000 )

Operating lease liabilities

Customer deposits

NET CASH (USED IN) PROVIDED BY OPERATING ACTIVITIES

NET CASH PROVIDED BY OPERATING ACTIVITIES

CASH FLOWS FROM INVESTING ACTIVITIES

Purchase of property and equipment

( 1,980,000 )

NET CASH USED IN INVESTING ACTIVITIES

( 1,980,000 )

CASH FLOWS FROM FINANCING ACTIVITIES

Note payable - revolver - net - Webster Bank

( 2,187,000 )

Proceeds from term loan - Webster Bank

Payments of term loan - Webster Bank

( 1,430,000 )

( 1,147,000 )

Payments of deferred Financing Costs

Payment of subordinated note payable - related party

Payments for revolving loan - Webster Bank

Proceeds from note payable - term note - Webster Bank

Payments of term note - Webster Bank

Payments of finance lease obligations

2 unchanged sentences

( 1,118,000 )

NET DECREASE IN CASH

( 1,813,000 )

NET INCREASE (DECREASE) IN CASH

CASH AT BEGINNING OF PERIOD

CASH AT END OF PERIOD

See Notes to Condensed Consolidated Financial Statements

Notes to Condensed Consolidated Financial Statements

AIR INDUSTRIES GROUP

Condensed Consolidated Statements of Cash Flows

For the Nine Months Ended September 30, (Continued)

Condensed Consolidated

Statements of Cash Flows

For the Three Months

Ended March 31, (Continued)

Supplemental cash flow information

Cash paid during the period for

Supplemental disclosure of non-cash investing and financing activities

Capitalization of related party note interest to principal

See Notes to Condensed Consolidated Financial Statements

Cash paid during the period for interest

Notes to Condensed Consolidated Financial Statements

AIR INDUSTRIES GROUP

NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS

FORMATION AND BASIS OF PRESENTATION

ORGANIZATION AND BASIS OF PRESENTATION

Air Industries Group is a Nevada corporation (“AIRI”).

of September 30, 2022, and for the three and nine months ended September 30, 2022 and 2021, the accompanying condensed consolidated financial

statements presented are those of AIRI, and its wholly-owned subsidiaries;

of and for the three months ending March 31, 2023 and 2022, the accompanying condensed consolidated financial statements presented are

those of AIRI, and its wholly-owned subsidiaries;

Air Industries Machining Corp.

(“AIM”), Nassau

Tool Works, Inc.

(“NTW”), and the Sterling Engineering Corporation (“Sterling”), (together, the “Company”).

(“AIM”), Nassau Tool Works, Inc.

and the Sterling Engineering Corporation (“Sterling”), (together, the “Company”).

Basis of Presentation

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recurring accruals) considered necessary for a fair presentation have been included.

Operating results for the three and nine months ended

September 30, 2022 are not necessarily indicative of the results that may be expected for the year ending December 31, 2022.

These unaudited

condensed consolidated financial statements should be read in conjunction with the audited consolidated financial statements and notes

thereto included in the Company’s Annual Report on Form 10-K for the year ended December 31, 2021, as filed with the Securities

and Exchange Commission, from which the accompanying condensed consolidated balance sheet dated December 31, 2021 was derived.

Effective with the Company’s first quarter ended

March 31, 2022, the Company is presenting its operations as one reportable operating segment.

Historically the Company operated its businesses and

reported its results as two separate segments with AIM and NTW comprising the Complex Machining segment (“CMS”) and Sterling

as the Turbine & Engine Component segment (“TEC”).

The CMS segment specialized in flight critical components including

flight controls and landing gear.

The TEC segment focused on manufacturing components for jet engines.

Along with its operating subsidiaries,

the Company reported the results of its corporate division as an independent segment.

In recent years the Company integrated and consolidated

the business of AIM and NTW into one facility on Long Island and the operations of its CMS and TEC segments have become increasingly integrated.

The Company also made significant capital expenditures and all of its operations now share the same manufacturing facilities and use most,

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

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

it sees in the aerospace and defense market.

In early fiscal 2022, the Company further changed its management approach and is now making

decisions about resources to be allocated and assesses performance based on one integrated business rather than two reporting segments.

As such, effective with the first quarter ended March 31, 2022, the Company is presenting its operations as one reportable operating segment.

Reverse Stock Split

On October 4, 2022, the Company announced a reverse

stock split of its authorized, issued and outstanding shares of common stock at a ratio of 1-for-10.

The reverse stock split was effective

on October 18, 2022, and its common stock began trading on a post-split-adjusted basis at that time.

All share and per share amounts of

its common stock presented have been retroactively adjusted to reflect the 1-for-10 reverse stock split.

As result of the reverse stock

split there were no fractional shares issued and all holders were rounded up to the next whole share.

See Note 7 for more information.

Operating results for the three months ended March

31, 2023 are not necessarily indicative of the results that may be expected for the year ending December 31, 2023.

These unaudited condensed

consolidated financial statements should be read in conjunction with the audited consolidated financial statements and notes thereto included

in the Company’s Annual Report on Form 10-K for the year ended December 31, 2022, as filed with the Securities and Exchange Commission,

from which the accompanying condensed consolidated balance sheet dated December 31, 2022 was derived.

SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES

Inventory Valuation

For annual periods, the Company values inventory at

the lower of cost on a first-in-first-out basis or estimated net realizable value.

The Company does not take physical inventories at interim

quarterly reporting periods.

For interim periods, substantially all of the inventory value has been estimated using a gross profit percentage

based on the annual gross profit percentage of the immediately preceding year as applied to the net sales of the current period.

to reconcile the annual physical inventory to the Company’s books are recorded in the fourth quarter.

As of March 31,2023, the Company values inventory

at the lower of cost on a first-in-first-out basis or estimated net realizable value.

Prior to 2023, for interim periods, substantially

all of the inventory value was estimated using a gross profit percentage based on the annual gross profit percentage of the immediately

preceding year as applied to the net sales of the current period.

The Company generally purchases raw materials

and supplies uniquely suited to the production of larger more complex parts, such as landing gear, only when non-cancellable contracts

for orders have been received for finished goods.

It occasionally produces larger more complex products, such as landing gear, in excess

of purchase order quantities in anticipation of future purchase order demand, when it is economically advantageous to do so, since historically

this excess has been used in fulfilling future purchase orders.

The Company purchases supplies and materials useful in a variety of products

as deemed necessary even though orders have not been received.

The Company periodically evaluates inventory items not secured by purchase

orders and establishes write-downs to estimated net realizable value for excess quantities, slow-moving goods, obsolescence and for other

impairments of value.

Inventories consist of the following at:

September 30,

Raw Materials

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Credit and Concentration Risks

There were two customers that represented 63.9 % and

67.7 % of total net sales for the three months ended September 30, 2022 and 2021, respectively.

This is set forth in the table below.

There were four customers that represented 57.1 %

and three customers that represented 70.8 % of total net sales for the three months ended March 31, 2023 and 2022, respectively.

set forth in the table below.

Percentage of Sales

September 30,

There were three customers that represented 68.9 %

and 75.5 % of total sales for the nine months ended September 30, 2022 and 2021, respectively.

* Customer was less than 10 % of sales for the three months ended March 31, 2023

** Customer was less than 10 % of sales for the three months ended March 31, 2022

were two customers that represented 33.1 % and three customers 70.3 % of gross accounts receivable at March 31, 2023 and December 31, 2022,

respectively.

This is set forth in the table below.

Percentage of Sales

September 30,

There were two customers that represented 70.2 % and

three customers that represented 74.7 % of gross accounts receivable at September 30, 2022 and December 31, 2021, respectively.

set forth in the table below.

Percentage of Receivables

September 30,

● Customer was less than 10 % of accounts receivable at September 30, 2022.

Percentage of Accounts

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

Disaggregation of Revenue

The following table summarizes revenue from contracts with customers for

the three and nine month periods ending September 30, 2022 and 2021:

Three Months Ended

Nine Months Ended

September 30,

Concentration of Credit Risk

During the period, the Company had occasionally maintained

balances in its bank accounts that were in excess of the FDIC insurance limit.

The following table summarizes revenue from contracts with customers

for the three month periods ended March 31, 2023 and 2022:

During the period, the Company had occasionally

maintained balances in its bank accounts that were in excess of the FDIC limit.

The Company has not experienced any losses on these accounts.

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The Company has several key sole-source suppliers

of various parts that are important for one or more of its products.

These suppliers are its only source for such parts and, therefore,

in the event any of them were to go out of business or be unable to provide parts for any reason, its business could be severely harmed.

of various parts or services that are important for one or more of its products.

These suppliers are its only source for such parts or

services and, therefore, in the event any of them were to go out of business or be unable to provide parts or services for any reason,

its business could be severely harmed.

Customer Deposits

The Company receives advance payments on certain contracts

with the remainder of the contract balance due upon the shipment of the final product once the customer inspects and approves the product

for shipment.

At that time, the entire amount will be recognized as revenue and the deposit will be applied to the customer’s invoice.

At September 30, 2022 and December 31, 2021, customer

The Company receives advance payments on certain

contracts with the remainder of the contract balance due upon shipment of the final product once the customer inspects and approves the

product for shipment.

At that time, the entire amount will be recognized as revenue and the deposit will be applied to the customer’s

At March 31, 2023 and December 31, 2022, customer

deposits were $ 508,000 and $ 781,000 respectively.

The Company recognized revenue of $ 73,000 and $ 126,000 during the three and nine

months ended September 30, 2022, respectively, that was included in the customer deposits balance as of December 31, 2021.

recognized revenue of $ 132,000 and $ 507,000 during the three and nine months ended September 30, 2021, respectively, that was included

in the customer deposits balance as of December 31, 2020.

Backlog represents executed non-cancellable contracts

that represent firm orders that are deliverable over the next 18- month period.

As of September 30, 2022, backlog relating to remaining

performance obligations in contracts was approximately $65,000,000.

We expect to recognize revenue amounts in future periods related to

these remaining performance obligations as follows:

approximately $13,000,000 to $15,000,000 of our backlog during the remainder of 2022,

approximately $25,000,000 to $30,000,000 from January 1, 2023 - June 30, 2023, and approximately $11,000,000 to $15,000,000 from July

1, 2023 through December 31, 2023.

This expectation assumes that raw material suppliers, and that outsourced processing is completed and

delivered on-time and that its customers will accept delivery as scheduled.

The Company anticipates that sales during the aforementioned

periods will also include sales pursuant to contracts that are not currently in backlog.

The Company accounts for leases under ASC 842, “Leases.”

All leases are required to be recorded on the balance sheet and are classified as either operating leases or finance leases.

classification affects the expense recognition in the income statement.

Operating lease charges are recorded entirely in operating expenses.

Finance lease charges are split, where amortization of the right-of- use asset is recorded in operating expenses and an implied interest

component is recorded in interest expense.

The Company recognized revenue of $ 272,000 during the three ended March 31, 2023, that

was included in the customer deposits balance as of December 31, 2022.

The Company recognized revenue of $ 45,000 during the three months

ended March 31, 2022, that was included in the customer deposits balance as of December 31, 2021.

Backlog represents anticipated revenue from remaining

performance obligations under executed non-cancellable contracts in the form of firm purchase orders that are deliverable over the next

18-month period.

As of March 31, 2023, backlog was approximately $ 72,200,000 .

The Company expects to recognize revenue amounts in future

periods related to these remaining performance obligations as follows:

approximately $ 40,300,000 during the period April 1to December

31, 2023, and approximately $ 31,900,000 during the period from January 1, 2024, to September 30, 2024.

This expectation assumes that raw

material suppliers and outsourced processing is delivered and completed on-time and that the Company’s customers will accept delivery

as scheduled.

The Company anticipates that sales during the aforementioned periods will also include sales pursuant to customer orders

and contracts that are not currently in the 18-month backlog.

Contract Costs Receivable

Contract costs receivable represent costs to be

reimbursed from a terminated contract.

The Company expects to collect the receivable in the next twelve months.

Contract costs receivable

totals $ 296,000 of both March 31, 2023 and December 31, 2022.

The Company accounts for leases under ASC 842,

“Leases.” All leases are required to be recorded on the balance sheet and are classified as either operating leases or finance

The lease classification affects the expense recognition in the income statement.

Operating lease charges are recorded entirely

in operating expenses.

Finance lease charges are split, amortization of the right-of- use asset is recorded in operating expenses and

an implied interest component is recorded in interest expense.

Earnings (Loss) per share

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outstanding for the period.

For purposes of calculating diluted earnings per common

share, the numerator includes net income plus interest on convertible notes payable assumed converted as of the first day of the period.

The denominator includes both the weighted-average number of shares of common stock outstanding during the period and the number of common

stock equivalents if the inclusion of such common stock equivalents is dilutive.

Dilutive common stock equivalents potentially include

stock options and warrants using the treasury stock method and convertible notes payable using the if-converted method.

The following is the calculation of net (loss) income

applicable to common stockholders utilized to calculate the EPS:

Three Months Ended

Nine Months Ended

September 30,

(Loss) Income - Basic

$ ( 142,000 )

$ ( 177,000 )

Convertible Note Interest for Potential Note Conversion

(Loss) Income used to calculate diluted earnings per share

$ ( 142,000 )

$ ( 177,000 )

The following is a reconciliation of the denominators

of basic and diluted earnings per share computations:

Three Months Ended

Nine Months Ended

September 30,

Weighted average shares outstanding used to compute basic earnings per share

Effect of dilutive stock options and warrants

Effect of dilutive convertible notes payable

Weighted average shares outstanding and dilutive securities used to compute dilutive earnings per share

The following securities have been excluded from the

calculation as the exercise price was greater than the average market price of the common shares:

For purposes of calculating diluted earnings per

common share, the numerator includes net income plus interest on convertible notes payable assumed converted as of the first day of the

The denominator includes both the weighted-average number of shares of common stock outstanding during the period and the number

of common stock equivalents if the inclusion of such common stock equivalents is dilutive.

Dilutive common stock equivalents potentially

include stock options and warrants using the treasury stock method and convertible notes payable using the if-converted method.

The following securities have been excluded from

the calculation as the exercise price was greater than the average market price of the common stock:

Three Months Ended

Nine Months Ended

September 30,

Stock Options

The following securities have been excluded from

the calculation even though the exercise price was less than the average market price of the common shares during the periods set forth

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

the calculation even though the exercise price was less than the average market price of the common shares because the effect of including

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

Three Months Ended

Nine Months Ended

September 30,

Stock Options

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Stock based compensation expense

for employees amounted to $ 55,000 and $ 147,000 for the three months ended September 30, 2022 and 2021, respectively, and $ 262,000 and

$ 361,000 for the nine months ended September 30, 2022 and 2021, respectively.

Stock compensation expense for directors amounted to $ 54,000

and $ 52,000 for the three months ended September 30, 2022 and 2021, respectively and $ 162,000 and $ 156,000 for the nine months ended September

30, 2022 and 2021, respectively.

Stock compensation expense for employees and directors was included in operating expenses on the accompanying

Condensed Consolidated Statements of Operations.

Goodwill represents the excess of the acquisition

cost of businesses over the fair value of the identifiable net assets acquired.

The goodwill amount of $ 163,000 at both September 30,

2022 and December 31, 2021 relates to the acquisition of NTW.

Goodwill is not amortized, but is tested at least

annually for impairment, or if circumstances occur that more likely than not reduce the fair value of the reporting unit below its carrying

for employees amounted to $ 45,000 and $ 66,000 for the three months ended March 31, 2023 and 2022, respectively.

Stock compensation expense

for directors amounted to $ 54,000 and $ 54,000 for the three months ended March 31, 2023 and 2022, respectively.

Stock compensation expenses

for employees and directors were included in operating expenses on the accompanying Condensed Consolidated Statements of Operations.

Recently Issued Accounting Pronouncements

Effective January 1, 2023, the Company adopted

2020-06, Debt – Debt with Conversion and Other Options (Subtopic 470-20) and Derivatives and Hedging – Contracts in

Entity’s Own Equity (Subtopic 815-40) (“ASU 2020-06), which is intended to address issues identified as a result of the complexity

associated with applying accounting principles generally accepted in the United States of America for certain financial instruments with

characteristics of liabilities and equity.

For convertible instruments, ASU 2020-06 reduces the number of accounting models for convertible

debt instruments and convertible preferred stock, and enhances information transparency by making targeted improvements to the disclosures

for convertible instruments and earnings-per-share guidance on the basis of feedback from financial statement users.

The adoption of ASU

2020-06 did not have a material effect on the Company’s financial statements.

In June 2016, the FASB issued ASU No.

2016-13, Financial

Instruments-Credit Losses (Topic 326) (“ASU 2016-13”), which significantly changes how entities will account for credit

losses for most financial assets and certain other instruments that are not measured at fair value through net income.

ASU 2016-13 replaces

the existing incurred loss model with an expected credit loss model that requires entities to estimate an expected lifetime credit loss

on most financial assets and certain other instruments.

Under ASU 2016-13 credit impairment is recognized as an allowance for credit losses,

rather than as a direct write-down of the amortized cost basis of a financial asset.

The impairment allowance is a valuation account deducted

from the amortized cost basis of financial assets to present the net amount expected to be collected on the financial asset.

new pronouncement is adopted by the Company, the allowance for credit losses must be adjusted for management’s current estimate

at each reporting date.

2016-13, Financial Instruments-Credit Losses (Topic 326) (“ASU 2016-13”), which significantly changes how

entities will account for credit losses for most financial assets and certain other instruments that are not measured at fair value through

ASU 2016-13 replaces the existing incurred loss model with an expected credit loss model that requires entities to estimate

an expected lifetime credit loss on most financial assets and certain other instruments.

Under ASU 2016-13 credit impairment is recognized

as an allowance for credit losses, rather than as a direct write-down of the amortized cost basis of a financial asset.

The impairment

allowance is a valuation account deducted from the amortized cost basis of financial assets to present the net amount expected to be collected

on the financial asset.

The Company, the allowance for credit losses must be adjusted for management’s current estimate at each

reporting date.

The new guidance provides no threshold for recognition of impairment allowance.

Therefore, entities must also

measure expected credit losses on assets that have a low risk of loss.

For instance, trade receivables that are either current or not

yet due may not require an allowance reserve under currently generally accepted accounting principles, but under the new standard, the

Company will have to estimate an allowance for expected credit losses on trade receivables under ASU 2016-13.

ASU 2016-13 is effective

for annual periods, including interim periods within those annual periods, beginning after December 15, 2022 for smaller reporting companies.

The Company is currently assessing the impact ASU 2016-13 will have on its consolidated financial statements.

Therefore, entities must also measure

expected credit losses on assets that have a low risk of loss.

For instance, trade receivables that are either current or not yet due

may not require an allowance reserve under currently generally accepted accounting principles, but under the new standard, the Company

will have to estimate an allowance for expected credit losses on trade receivables under ASU 2016-13.

The adoption of ASU 2016-13 did

not have a material effect on the Company’s financial statements.

The Company does not believe that any other recently

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PROPERTY AND EQUIPMENT

The components of property and equipment at September

The components of property and equipment at March

31, 2023 and December 31, 2022 consisted of the following:

September 30,

Buildings and Improvements

Machinery and Equipment

Finance Lease Machinery and Equipment

Finance Lease ROU Assets - Machinery and Equipment

Tools and Instruments

9 unchanged sentences

Depreciation expense for the three months ended

September 30, 2022 and 2021 was $ 598,000 and $ 688,000 , respectively.

Depreciation expense for the nine months ended September 30, 2022

and 2021 was $ 1,906,000 and $ 2,105,000 , respectively.

Assets held under financed lease obligations are

March 31, 2023 and 2022 was approximately $ 617,000 and $ 665,000 , respectively.

Assets held under finance lease obligations are

depreciated over the shorter of their related lease terms or their estimated productive lives.

Depreciation of assets under finance leases

is included in depreciation expense for 2022 and 2021.

Accumulated depreciation on these assets was approximately $ 12,000 and $ 32,000

as of September 30, 2022 and December 31, 2021, respectively.

The Company has operating and finance leases for

leased office and manufacturing facilities and equipment leases.

The Company leases certain machinery and equipment under finance leases

and leases its offices and manufacturing facilities under operating leases.

The leases have remaining lease terms of one to six years,

some of which include options to extend or terminate the leases.

September 30,

is included in depreciation expense.

Accumulated depreciation on these assets was approximately $ 13,000 and $ 0 as of March 31, 2023 and

December 31, 2022, respectively.

OPERATING LEASE LIABILITIES

The Company has operating leases for leased office

and manufacturing facilities.

The leases have remaining lease terms of one to five years , some of which include options to extend or terminate

Three Months Ended

Operating lease cost:

Total lease cost

Other Information

Cash paid for amounts included in the measurement lease liability:

Operating cash flow from operating leases

Weighted Average Remaining Lease Term - in years

Weighted Average discount rate - %

The aggregate undiscounted cash flows of operating lease payments for

leases with remaining terms greater than one year are as follows:

The aggregate undiscounted cash flows of operating lease payments as

of March 31, 2023, with remaining terms greater than one year are as follows:

December 31, 2023 (remainder of year)

2 unchanged sentences

December 31, 2026

Total future minimum lease payments

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finance lease obligations consist of the following:

September 30,

Revolving loan payable to Webster Bank (F/K/A Sterling National Bank) (“Webster”)

Revolving loan to Webster Bank (“Webster”)

Term loan, Webster

1 unchanged sentence

Loans Payable - financed assets

Related party subordinated notes payable

Related party notes payable

Current portion

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Long Term Portion

Webster Bank (F/K/A Sterling National Bank)

Webster Bank (“Webster”)

The Company has a loan facility (“Webster

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The Webster Facility, which was first entered into on December 31,

2019, was amended several times, and now provides for a $ 20,000,000 revolving loan (“Revolving Line of Credit”), a $ 5,000,000

term loan (“Term Loan”) and a $ 2,000,000 Equipment Line of Credit, which as it is drawn upon will be added to the balance

of the Term Loan.

As of September 30, 2022, there is currently $ 14,097,000

outstanding under the Revolving Loan and $ 4,691,000 under the Term Loan.

The below table shows the timing of payments due under the Term

For the period ending

2019, was amended several times, and now provides for a $ 20,000,000 revolving loan (“Revolving Line of Credit”) and a $ 5,000,000

term loan (“Term Loan”) and a $ 2,000,000 Equipment Line of Credit, which as it is drawn upon is added to the balance of the

On December 15, 2022, the Company made a draw

against the capital expenditure line of credit in the amount of $ 877,913 .

The principal payments are $ 10,451 per month commencing in February

2023 with a balloon payment due on December 30, 2025 .

On January 4, 2023, the Company made an additional

draw against the capital expenditure line of credit in the amount of $ 739,500 .

The principal payments are $ 8,804 per month commencing

in March 2023 with a balloon payment due on December 30, 2025 .

As of March 31, 2023, there is currently $ 13,220,000

outstanding under the Webster Revolving Loan and $ 5,933,000 under the Webster term loan, inclusive of amounts drawn under the Equipment

Line of Credit.

Additionally, there is $ 382,000 remaining available under the equipment line of credit.

The below table shows the timing

of payments due under the Term Loan:

For the year ending

December 31, 2023 (remainder of the year)

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December 31, 2025

Webster Term Loan payable

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Current portion of Webster Term Loan payable

( 1,141,000 )

Total long-term portion of Webster Term Loan payable

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the amount of $ 18,748,000 consisted of the Webster Revolving Loan in the amount of $ 13,352,000 and the Webster term loan in the amount

of $4,192,000.

of $ 5,396,000 which included $ 878,000 of what was drawn on the equipment line of credit.

Interest expense related to the Webster Facility

amounted to approximately $ 204,000 and $ 181,000 for the three months ended September 30, 2022 and 2021, respectively, and $ 506,000 and

$ 542,000 for the nine months ended September 30, 2022 and 2021, respectively.

amounted to approximately $ 332,000 and $ 155,000 for the three months ended March 31, 2023 and 2022, respectively.

The below summarizes historical amendments to

the Webster Facility and various terms:

In 2020, the Company entered into the First Amendment

to the Webster Facility which increased the Term Loan to $ 5,685,000 and required the Company to make monthly principal installments in

the amount of $ 67,679 beginning on December 1, 2020.

Other minor modifications were made and the Company paid an amendment fee of $ 20,000 .

In June 2021, the Company entered into the Second

Amendment to the Webster Facility, which clarified the definition and calculation of Excess Cash Flow, and to confirm the due date of

required payment of the Excess Cash Flow payment.

For so long as the Webster term loan remains outstanding, if Excess Cash Flow (as defined)

is a positive number for any fiscal year the Company shall pay to Webster an amount equal to the lesser of (i) twenty-five percent ( 25 %)

of the Excess Cash Flow for such fiscal year and (ii) the outstanding principal balance of the term loan.

Such payment shall be made to

Webster and applied to the outstanding principal balance of the term loan, on or prior to the close of the fiscal year immediately following

such fiscal year.

The Company made Excess Cash Flow payments of $ 558,750 in 2021 (for the fiscal year ended December 31, 2020) and $ 854,000

in April 2022 (for fiscal year ended December 31, 2021).

In connection with these changes, the Company paid an amendment fee of $ 10,000 .

On December 7, 2021, the Company entered into

the Third Amendment to the Webster Facility (“Third Amendment”).

The purpose of the amendment was to provide a maturity date

for the Webster Facility of December 30, 2025 as compared to the original maturity date of December 30, 2022.

Such amendment also increased

the Revolving Line of Credit to its current limit of $20,000,000 (up from the original $16,000,000) and also provided for a similar increase

in the inventory sublimit to $14,000,000 (up from the original $11,000,000).

The Third Amendment, also allows the Company, subject to

certain limitations, to begin amortizing $250,000 of its related party subordinated notes payable each quarter as long as certain conditions

In connection with these changes, the Company paid an amendment fee of $ 75,000 .

the facility and various terms:

For so long as the Webster term loan remains outstanding,

if Excess Cash Flow (as defined) is a positive number for any fiscal year the Company shall pay to Webster an amount equal to the lesser

of (i) twenty-five percent ( 25 %) of the Excess Cash Flow for such fiscal year and (ii) the outstanding principal balance of the term loan.

Such payment shall be made to Webster and applied to the outstanding principal balance of the term loan, on or prior to the April 15 immediately

following such fiscal year.

The Company made Excess Cash Flow payments of $ 854,000 in April 2022 (for fiscal year ended December 31, 2021).

As required, the Company provided the calculation for the Excess Cash Flow payment of $ 195,000 for fiscal year ended December 31, 2022

to Webster prior to the April 15, 2023 deadline for such payment and authorized such payment to be made from the Revolving Loan.

13, 2023, Webster applied this payment to the term loan.

On May 17, 2022, the Company entered into the

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The purpose of the amendment was to increase the Term Loan

to $ 5,000,000 , generating proceeds of $ 1,945,000 , reduced the monthly principal installments to be made in respect to the term loan, and

to $ 5,000,000 , generating proceeds of $ 1,945,000 , reduce the monthly principal installments to be made in respect to the term loan, and

establish a capital expenditure line of credit in the amount of $ 2,000,000 which the Company can draw upon from time to time to finance

purchases of machinery and equipment, thereby increasing the amount of capital expenditures that the Company may make each year.

The principle

The principal

payments are $ 59,524 per month commencing in June 2022 with a balloon payment due on December 30, 2025.

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for corporate loans at the nation’s largest commercial bank, less sixty-five hundredths (-0.65%) of one percent per annum.

interest rate charged was 4.70% and 3.50% for the three months ended September 30, 2022 and 2021, respectively and was 3.94% and 3.50%

for the nine months ended September 30, 2022 and 2021, respectively.

All amendment fees paid in connection with the

Webster Facility are included in Deferred Financing Costs, Net, Deposits and Other Assets, in the accompanying Condensed Consolidated

Balance Sheets and are amortized over the term of the loan.

interest rate charged was 7.04 % and 3.50 % for the three months ended March 31, 2023 and 2022, respectively.

Amendment fees paid in connection with the Webster

Facility are included in Deferred Financing Costs, Net, Deposits and Other Assets, in the accompanying Condensed Consolidated Balance

Sheets and are amortized over the term of the loan.

In connection with the Webster Facility, the Company

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assets are pledged as collateral under the Webster Facility.

As of September 30, 2022, the Company was in compliance

with all financial loan covenants.

As of March 31, 2023, the Company was not in compliance

with one of its financial covenants.

On August 4, 2023, the Company entered into the Fifth Amendment to

the Webster Facility (“Fifth Amendment”).

The purpose of the amendment was to waive the default caused by the failure to achieve

the required Fixed Coverage Charge Ratio for the Fiscal Quarter ended March 31, 2023 and decrease the required Fixed Coverage Charge Ratio

to 0.95 to 1.00 for the Fiscal Quarters ending June 30, 2023 and September 30, 2023.

Additionally, the Fifth Amendment increased the amount

of purchase money secured Debt (including Capital Leases) the Company is allowed to have outstanding at any time to $ 2,000,000 .

In connection

with these changes, the Company paid an amendment fee of $ 10,000 .

Finance Lease Obligations

The Company entered into a Finance lease in December

The Company entered into a finance lease in November

of 2022 for the purchase of new manufacturing equipment.

The obligation for the Finance lease totaled $ 0 and $ 263,000 as of September

The obligation for the finance lease totaled $ 308,000 and $ 328,000 as of March

31, 2023 and December 31, 2022, respectively.

The lease had an imputed interest rate of 4.2 % per annum and was payable monthly with the

final payment due on December 17, 2026.

In connection with the Fourth Amendment to the Webster Facility, this Finance Lease was paid in

The lease has an imputed interest rate of 7.48 % per annum and is payable monthly with the

final payment due in September of 2026.

Three Months Ended

Finance Lease cost:

Amortization of ROU assets

Interest on lease liabilities

Total lease Costs

Other Information:

Cash Paid for amounts included in the measurement lease liabilities:

Financing cash flow from finance lease obligations

Supplemental disclosure of non-cash activity

Acquisition of finance lease asset

Weighted Average Remaining Lease Term - in years

Weighted Average Discount rate - %

As of March 31, 2023, the aggregate future minimum

finance lease payments, including imputed interest are as follows:

For the year ending

December 31, 2023 (remainder of the year)

December 31, 2024

December 31, 2025

December 31, 2026

Total future minimum finance lease payments

imputed interest

Current portion

Long-term portion

Loan Payable – Financed Asset

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vehicle in July 2020.

The loan obligation totaled $ 33,000 and $ 39,000 as of September 30, 2022 and December 31, 2021, respectively.

loan bears no interest and a final payment is due and payable for all unpaid principal on July 20, 2026.

The loan obligation totaled $ 28,000 and $ 30,000 as of March 31, 2023 and December 31, 2022, respectively.

bears no interest and a final payment is due and payable for all unpaid principal on July 20, 2026.

The future minimum loan payments, are as follows:

For the period ending

For the year ending

December 31, 2023 (remainder of the year)

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December 31, 2026

Loans Payable - financed assets

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proceeds to the Company totaling $ 6,550,000 .

In connection with these notes, Michael and Robert were issued a total of 35,508 shares of

common stock and Taglich Brothers Inc.

In connection with these notes, Michael and Robert were issued a total of 355,082 shares

of common stock and Taglich Brothers Inc.

was issued promissory notes totaling $ 554,000 for placement agency fees.

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Per the terms of the Webster Facility, these notes remain subordinate to the Webster Facility

and are due on July 1, 2026.

Approximately $ 2,732,000 of the related party convertible subordinated notes can be converted at the option

of the holder into Common Stock of the Company at $ 15.00 per share, while the remaining $ 2,080,000 of the related party convertible subordinated

notes can be converted at the option of the holder into common stock of the Company at $ 9.30 per share.

There are no principal payments

due on these notes.

Under the terms of the Third Amendment to the Webster Facility, the Company is now allowed, subject to certain limitations,

to make principal payments of $ 250,000 per quarter of this subordinated debt.

For the three and nine months ended September

30, 2022, a principal payment of $ 250,000 was made against the Subordinated Notes due to Michael Taglich.

This payment was made pursuant

to the conditions set forth in the Third Amendment to the Webster Facility.

the outstanding principal amount and any accrued but unpaid interest due on July 1, 2026.

Approximately $ 2,732,000 of the related party

convertible subordinated notes can be converted at the option of the holder into Common Stock of the Company at $ 15.00 per share and bears

interest at a rate of 6 % per annum, while the remaining $ 2,080,000 of the related party convertible subordinated notes can be converted

at the option of the holder into common stock of the Company at $ 9.30 per share and bears interest rate of 7 % per annum.

The subordinated

notes which are not convertible bear interest at the rate of 12 % per annum.

There are no periodic principal payments due on the subordinated

notes payable and convertible subordinated notes payable.

Under the terms of the Third Amendment to the Webster Facility, the Company

is now allowed, subject to certain limitations, to make principal payments of $ 250,000 per quarter of this subordinated debt.

For the three months ended March 31, 2023 and

2022, no principal payments have been made on these notes.

The note holders and the principal balance of

the notes of September 30, 2022 are shown below:

the notes of March 31, 2023 and December 31, 2022 are shown below:

Michael Taglich,

Robert Taglich,

Taglich Brothers,

Brothers, Inc.

Convertible Subordinated Notes

Subordinated Notes

Interest expense for the three months ended September

30, 2022 and 2021 on all related party notes payable was $ 118,000 and $ 126,000 , respectively, and $ 369,000 and $ 376,000 for the nine months

ended September 30, 2022 and 2021, respectively.

LIABILITY RELATED TO THE SALE OF FUTURE PROCEEDS FROM DISPOSITION

OF SUBSIDIARY

In connection with the sale of the Company’s

wholly-owned subsidiary, AMK Welding, Inc.

(“AMK”) to Meyer Tool, Inc., (“Meyer”) in 2017, Meyer was obligated

to pay the Company within 30 days after the end of each calendar quarter, commencing April 1, 2017, an amount equal to five (5%) percent

of the net sales of AMK for that quarter until the aggregate payments made to the Company (the “Meyer Agreement”) equals $1,500,000

(the “Maximum Amount”).

In order to increase liquidity, on January 15,

2019, the Company entered into a “Purchase Agreement” with 15 accredited investors (the “Purchasers”), including

Michael and Robert Taglich, pursuant to which the Company assigned to the Purchasers all of its rights, title and interest to the remaining

$1,137,000 of the $1,500,000 in payments due from Meyer for the sale of AMK (the “Remaining Amount”) for an immediate payment

of $800,000, including $100,000 from each of Michael and Robert Taglich, and $75,000 for the benefit of the children of Michael Taglich.

The timing of the payments is based upon the net sales of AMK .

The Company recognized $ 0 and $ 79,000 of non-cash

income for the three months ended September 30, 2022 and 2021, respectively, and $ 94,000 and $ 274,000 of non-cash income for the nine

months ended September 30, 2022 and 2021, respectively, reflected in “other income, net” on the condensed consolidated statements

of operations and recorded $ 0 and $ 24,000 of related non-cash interest expense related to the Purchase Agreement for the three months

ended September 30, 2022 and 2021, respectively, and $ 35,000 and $ 82,000 for the nine months ended September 30, 2022 and 2021, respectively.

The table below shows the activity within the

liability account for:

September 30,

Liabilities related to sale of future proceeds from disposition of subsidiaries - beginning balance

Non-Cash other income recognized

Non-Cash interest expense recognized

Liabilities related to sale of future proceeds from disposition of subsidiary - ending balance

unamortized transaction costs

Liability related to sale of future proceeds from disposition of subsidiary, net

Interest expense for the three months ended March

31, 2023 and 2022 on all related party notes payable was $ 118,000 and $ 125,000 , respectively.

STOCKHOLDERS’ EQUITY

On October 4, 2022 the Company announced a reverse

stock split of its authorized, issued and outstanding shares of common stock at a ratio of 1-for-10.

The reverse stock split was effective

on October 18, 2022, and its common stock began trading on a post-split-adjusted basis at that time.

As result of the reverse stock split

there were no fractional shares issued and all holders were rounded up to the next whole share.

An additional 7,287 shares were issued

to account for this.

As such all references to shares and per share price has been adjusted to retrospectively account for this transaction.

Common Stock – Sale of Securities

The Company issued 7,715 and 3,998 shares of common

stock in payment of director fees totaling $ 54,000 and $ 52,000 for the three months ended September 30, 2022 and 2021, respectively, and

19,667 and 11,934 shares totaling $ 162,000 and $ 156,000 for the nine months ended September 30, 2022 and 2021, respectively.

Additionally,

the Company issued 5,122 shares of common stock upon the cashless exercise of stock options during the nine months ended September 30,

During the fourth quarter of 2022, the Company

Common Stock – Issuances of Securities

The Company issued 11,430 and 5,522 shares of

common stock in payment of director fees totaling $ 54,000 and $ 54,000 for the three months ended March 31, 2023 and 2022, respectively.

During the second quarter of 2023, the Company

issued 15,230 shares of common stock in payment of directors’ fees totaling $ 54,000 .

Issuance of Stock Options

Issued in 2022

On January 31, 2022, the Company granted certain

employees, stock options to purchase an aggregate of 3,000 shares of the Company’s common stock at a price of $ 8.50 per share.

options expire on the fifth anniversary of the grant date and vest over a term of three years .

On April 6, 2022, the Company granted to its directors,

stock options to purchase an aggregate of 6,000 shares of the Company’s common stock at a price of $ 8.40 per share.

expire on the fifth anniversary of the grant date and vest over a term of one year .

On April 11, 2022, the Company granted to certain

members of management and certain employees, stock options to purchase an aggregate of 53,000 shares of the Company’s common stock

at a price of $ 8.40 per share.

The options expire on the fifth anniversary of the grant date and vest over a term of three years .

Issued in 2021

On January 11, 2021, the Company granted to its

directors, stock options to purchase an aggregate of 7,000 shares of the Company’s common stock at a price of $ 13.20 per share.

The options expire on the seventh anniversary of the grant date and vested over a term of one year .

On March 24, 2021, the Company granted to certain

members of management and certain employees, stock options to purchase an aggregate of 32,750 shares of the Company’s common stock

at a price of $ 13.90 per share.

The options expire on the fifth anniversary of the grant date and vest over a term of three years .

On July 30, 2021, the Company granted to certain

members of management and certain employees, stock options to purchase an aggregate of 41,500 shares of the Company’s common stock

at a price of $ 12.20 per share.

The options expire on the fifth anniversary of the grant date and vest over a term of one to three years .

During the third quarter of 2023, the Company

issued 15,230 shares of common stock in payment of director’s fees totaling $ 54,000

CONTINGENCIES

A number of actions have been commenced against

the Company by vendors, landlords and former landlords, including a third party claim as a result of an injury suffered on a portion of

a leased property not occupied by the Company.

As certain of these claims represent amounts included in accounts payable they are not

specifically discussed herein.

On October 2, 2018, Contract Pharmacal Corp.

Pharmacal”) commenced an action, relating to a Sublease entered into between the Company and Contract Pharmacal in May 2018 with

respect to the property that was formerly occupied by the Company’s former subsidiary WMI, at 110 Plant Avenue, Hauppauge, New York.

In the action Contract Pharmacal sought damages for an amount in excess of $ 1,000,000 for the Company’s failure to make the entire

premises available by the Sublease commencement date.

(“Contract Pharmacal”)

commenced an action, relating to a Sublease entered into between the Company and Contract Pharmacal in May 2018 with respect to the property

that was formerly occupied by the Company’s former subsidiary WMI, at 110 Plant Avenue, Hauppauge, New York.

In the action Contract

Pharmacal sought damages for an amount in excess of $ 1,000,000 for the Company’s failure to make the entire premises available by

the Sublease commencement date.

On July 8, 2021, the Court denied Contract Phamacal’s motion for summary judgement.

In the Order, the court granted Contract Pharmacal’s Motions to drop its claim for specific performance and to amend its Complaint

to reduce its claim for damages to $ 700,000 .

In the Order,

the court granted Contract Pharmacal’s Motions to drop its claim for specific performance and to amend its Complaint to reduce its

claim for damages to $ 700,000 .

Subsequently, Contact Pharmacal moved to amend its Complaint.

The Company opposed and the Court denied

the request to amend the Complaint.

Contract Pharmacal filed a Motion to reargue which the Court denied on November 30, 2021.

On March 10, 2022, Contract Pharmacal filed an appeal to the Court’s decision with the Appellate Division which the Company will

The Company disputes the validity of the claims asserted by Contract Pharmacal and intends contest them vigorously.

10, 2022, Contract Pharmacal filed an appeal to the Court’s decision with the Appellate Division which the Company has opposed.

The date for argument of the appeal has not been set by the Appellate Division.

The Company disputes the validity of the claims asserted

by Contract Pharmacal and intends to contest them vigorously.

The Company recorded no income tax expense for

the three and nine months ended September 30, 2022 and 2021 because the estimated annual effective tax rate was zero .

In determining the

estimated annual effective income tax rate, the Company analyzes various factors, including projections of the Company’s annual

earnings and taxing jurisdictions in which the earnings will be generated, the impact of state and local income taxes, the ability to

use tax credits and net operating loss carry forwards, and available tax planning alternatives.

As of September 30, 2022, and December 31, 2021,

the Company provided a full valuation allowance against its net deferred tax assets since the Company believes it is more likely than

not that its deferred tax assets will not be realized.

the three months ended March 31, 2023 and 2022 because the estimated annual effective tax rate was zero.

In determining the estimated

annual effective income tax rate, the Company analyzes various factors, including projections of the Company’s annual earnings and

taxing jurisdictions in which the earnings will be generated, the impact of state and local income taxes, the ability to use tax credits

and net operating loss carry forwards, and available tax planning alternatives.

As of March 31, 2023, and December 31, 2022, the

Company provided a full valuation allowance against its net deferred tax assets since the Company believes it is more likely than not

that its deferred tax assets will not be realized.

SUBSEQUENT EVENTS

Management has evaluated subsequent events through the date of this

On May 23, 2023, the Company received a notice

from NYSE American (the “Exchange”) stating that the Company is not in compliance with the continued listing standards of

the Exchange under the timely filing criteria included in Section 1007 of the NYSE American Company Guide because the Company failed to

file by the extended due date of May 23, 2023, its Quarterly Report on Form 10-Q for the quarter ended March 31, 2023 (the “Form

In accordance with Section 1007 of the Company

Guide, the Company will have six months from the date of the filing delinquency, or until November 22, 2023 (the “Initial Cure Period”),

to file the Form 10-Q with the Securities and Exchange Commission.

If the Company fails to file the Form 10-Q during the Initial Cure

Period, the Exchange may, in its sole discretion, provide an additional six-month cure period depending on the Company’s specific

circumstances.

Upon filing of the Form 10-Q, the Company will cure this delinquency.

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-Q

Item 1. Financial Statements