What changed in this filing

/stocks — the workspaceLOADING

Item 1. Business

2024-04-15 compared with 2023-05-16 · 332 added, 307 removed, 15 unchanged (98% of the section changed)

used in this report, unless otherwise stated or the context requires otherwise, the “Company” and terms such as “we,”

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

subsidiaries.

are a manufacturer of complex machined parts and assemblies for the Aerospace and Defense (“A&D”) market.

are used by Original Equipment Manufacturers (“OEM”) in the manufacture of fixed wing aircraft, helicopters jet turbine engines,

and other complex sophisticated A&D products.

We also manufacture parts for the ground power turbine industry and are in discussions

to manufacture products for submarines.

are a holding company with three legal subsidiaries, Air Industries Machining, (“AIM”) Nassau Tool Works (“NTW”)

and Sterling Engineering Company (“SEC”).

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

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

NTW was formed in the early 1960’s

and AIM has been in business since 1951.

Collectively, our subsidiaries have over 200 years of manufacturing experience in the A&D

operate our business using two main facilities.

One is located in Long Island, New York, and the other is in Barkhamsted, Connecticut.

We have over 150,000 square feet of manufacturing space, approximately 75,000 square feet in each location, and employ approximately

Historically,

we operated our businesses and reported their results as two separate segments, with AIM and NTW comprising our Complex Machining Segment

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

Our CMS segment specializes in flight

critical components including flight controls and landing gear.

Our TEC segment focuses on manufacturing components for jet engines.

Historically, each segment had different customers and utilized different production facilities.

recent years the operations of our CMS and TEC segments have become increasingly integrated.

In addition, we have made significant capital

expenditures to modernize our manufacturing equipment and all of our operations now share the same manufacturing facilities and use most,

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

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

we see in the A&D market.

In early fiscal 2022, we further changed our management approach and now make decisions regarding the allocation

of resources and assess operating performance based on one integrated business rather than two reporting segments.

As such, effective

with our first quarter ended March 31, 2022, we began to present our operations as one reportable operating segment.

A&D business is comprised of a small number of OEM’s relying on several “tiers” or layers of many more numerous

smaller manufacturers supplying product.

Each successive tier supplies increasingly larger, more complex product to the next higher tier

and OEM companies.

Air Industries is generally either a tier one manufacturer supplying product directly to an OEM, or a tier two manufacturer

supplying product to a tier one supplier which delivers to an OEM.

business has evolved over the years, our products becoming increasing complex.

Where once we manufactured smaller individual components

for others to assemble into complex assemblies, we now manufacture those complex assemblies ourselves.

For example, in the past we, along

with other suppliers, manufactured individual components to be assembled into a landing gear by an OEM customer.

Today we manufacture

the entire landing gear, assembling over 200 individual parts, most manufactured internally, others sub-contracted or purchased into

a complete landing gear delivered directly to an OEM, ready to be installed on an aircraft.

are predominately a supplier of military aviation product.

Defense products were 82.6% and 87.7% of our business in 2022 and 2021 respectively.

Our OEM customers in the defense sector include:

Raytheon Technologies

Corporation (f/k/a United Technologies Corporation).

We supply products for several units of Raytheon Technologies Corporation,

Goodrich Landing Systems

– we manufacture landing gear components for the Northrop Grumman E2-D Hawkeye, airborne warning and control aircraft deployed

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

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

& Whitney – we manufacture jet turbine engine components for several military and commercial jet engines.

Lockheed Martin Corporation.

We supply products for the Sikorsky Aircraft unit of Lockheed primarily for the UH-60 BlackHawk multi-purpose helicopter used

by the US and many foreign militaries.

General Electric Corporation .

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

US Department of Defense .

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

Northrop Grumman Corporation.

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

balance of our business, comprising 17.4% and 12.3% of our business in 2022 and 2021 respectively, is in commercial aviation and to a

minor degree in ground power electricity generation.

Our OEM customers in the commercial sector include:

Rohr Inc., (a wholly

owned subsidiary of Raytheon Technologies) We manufacture a component used in several versions of the Pratt & Whitney new geared

turbine fan commercial jet turbine engine.

General Electric Corporation.

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

power electricity generation.

business is concentrated on five aircraft platforms which comprised 76.9% and 76.6% of our business in 2022 and 2021 respectively.

UH-60 BlackHawk .

We have manufactured many components and assemblies for the BlackHawk and its many variants for more than 20 years.

BlackHawk helicopters

entered service in 1979 and remain in production today.

It is the primary helicopter used by the US Army and other branches of the

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

Over 4,000 aircraft have been produced with many,

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

F-35 Lightning II.

The F-35 Lightning also known as the Joint Strike Fighter is a new aircraft that will in coming years replace the US Air Force F-15

and the US Navy and Marine Corps F-18 fighters.

Eight other nations have participated in the development of the aircraft and will

be users of the aircraft, as will other international militaries.

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

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

The aircraft entered service with

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

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

The F-18 is also

in service internationally, notably Finland and Australia.

We manufacture complete landing gear and landing gear components for the

many variants of the aircraft.

Northrop Grumman E2-D

Advanced Hawkeye.

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

air operations.

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

the vessel and aircraft in operation.

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

is also used by seven foreign militaries notably Japan.

Pratt & Whitney

Geared Turbo-Fan.

The P&W Geared Turbo-Fan (“GTF”) is a next generation jet turbine engine used in commercial

The GTF engine is widely acknowledged to deliver improved fuel economy and a lower noise footprint than existing jet engines.

There are several versions of the GTF.

Air Industries produces a component for the smaller versions of the engine used on the popular

A-220 and Embraer narrow body aircraft.

A&D industry has become very consolidated, now dominated by just a few very large prime contractors and OEM’s.

These include

Airbus, Boeing, General Electric, Lockheed Martin, Northrop Grumman, and Raytheon Technologies.

Many if not most of the large prime contractors

and OEM’s are our direct Tier One customers, and we also supply product as a Tier two supplier to many of their Tier one suppliers.

We also sell directly to the US Department of Defense (“DOD”).

products are incorporated into many aircraft platforms, the majority of which remain in production today.

The demand for after-market

products for the maintenance, repair and overhaul (“MRO”) of aircraft can continue for many years, even decades, after the

production line for new aircraft is shut-down.

target products that are flight critical, whose flawless operation is essential to the safe operation of the aircraft.

To qualify to

produce these products a manufacturer needs to maintain various accreditations.

Obtaining accreditation while not impossible is difficult,

time consuming and thus a barrier to entry for competitors.

Further, flight critical components are frequently replaced on aircraft on

a flight time, or flight cycle basis.

Thus, demand for these products arises from both production of new aircraft, and MRO demand based

on the flight hours of existing fleets of aircraft.

many of our products we are the sole or single source of product for our customers.

Sole source product means that we are the only manufacturer

of the product.

Single source means that while other manufacturers could supply the product, we are the only producer currently in the

Single or sole sourcing is more likely to occur with legacy aircraft.

OEM’s generally prefer to have multiple sources of

product to support a production line of new aircraft and avoid single point of failure issues, particularly in light of the supply chain

disruptions caused by the outbreak of Covid-19.

market is predominately military.

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

We monitor two components

of the DOD budget;

procurement which affects demand resulting from new production and operations & maintenance which affects demand

resulting from the maintaining of existing aircraft.

For Fiscal Year 2022, procurement and operations and maintenance accounted for more

than 50% of the entire defense budget.

believe we are one of the leading manufacturers of precision components and assemblies for large aerospace and defense prime contractors.

Our products include landing gears, flight controls, engine mounts and components for aircraft jet engines, ground turbines and other

complex machines.

The ultimate end-user for most of our products is the U.S.

Government, international governments, and commercial global

Whether it is a small individual component for assembly by others or complete assemblies we manufacture ourselves, our high

quality and extremely reliable products are used in mission critical operations that are essential for safety of military personnel and

specialize in the aerospace and defense markets, operating within a hierarchical network of suppliers.

At the top of the supply chain

pyramid, is the prime contractor, also known as an Original Equipment Manufacturer (“OEM”).

A prime contractor designs, develops

and produces the final product for the end-user.

We play a critical role in this ecosystem, operating as a “Tier One” supplier,

delivering our products directly to prime contractors, or as a “Tier Two” supplier, providing larger complex components to

In some cases, we ship products directly to the U.S.

Our strategic position has made us a key partner for many prominent

defense prime contractors and global commercial aviation manufacturers, often leading us to become the exclusive or primary supplier

for certain high precision parts and assemblies.

We often receive Long-Term Agreements (“LTAs”) from our customers, demonstrating

their commitment to us.

are renowned for our unwavering commitment to genuine quality and exceptional reliability.

Our rich history dates to 1941, producing

parts for World War II fighter aircraft.

Since then, we have maintained an impeccable record with no known incidents of part failure

leading to a mission failure resulting in a fatality.

In an era plagued by foreign counterfeit parts, we strategically operate all our

facilities within the United States.

Our two state-of-the-art manufacturing centers located in Long Island, New York, and Barkhamsted,

Connecticut, allow for rigorous oversight of production and adherence to stringent quality standards.

Spanning over 150,000 square feet,

our manufacturing centers serve as the operational hubs for our three legal subsidiaries, Air Industries Machining, (“AIM”)

Nassau Tool Works (“NTW”) and Sterling Engineering Company (“STE”).

the past several years, despite facing significant financial and operational challenges, we have strategically invested substantial amounts

in new capital equipment, tooling, and processes to bolster our competitive position.

Additionally, we expanded our sales and marketing

efforts, with a sharp focus on expanding relationships with customers and cultivating new ones.

Fiscal 2023 marked a year of progress

and positioning for growth.

We finished 2023 with $51.5 million of net sales.

Our backlog, which represents the value of all funded orders received, stood at $98.3 million an increase of 14.7% as compared to our

backlog on December 31, 2022.

Our marketing efforts bore fruit and we secured our first order with a new foreign-based defense and aerospace

prime customer.

Despite absorbing a sudden and unexpected increase of interest rates related to our outstanding indebtedness, we were

able to make significant investments in capital equipment and related processes.

On the bottom-line, we reported a net loss of $2.1 million.

As we enter fiscal 2024, we believe our future is looking brighter.

Moving forward, our business strategy is geared

towards competing and winning contracts that enable us to achieve sustainable and profitable business growth and delivering high quality

reliable products to our customers.

At its core, lies a highly trained and close- knit team of over 180 individuals committed to driving

excellence and precision in every aspect of our operations.

We are firmly focused on securing new contract awards, improving operations

and successful execution.

With total unfilled contract values amounting to $191.9 million (including our $98.3 million in backlog and

all potential orders against LTA agreements previously awarded to us), as of December 31, 2023, we are confident in our ability to boost

sales in 2024, attain profitability and improve our financial position.

2023 and 2022, approximately 82.3% and 82.6% of our net sales were attributed to customers who use our products for end-use on military

The rest of our net sales are attributable to commercial aviation uses and, to a much lesser extent, ground power electricity

generation and other uses.

have cultivated long-standing relationships with many large and well-known customers including:

RTX Corporation (“RTX” ) - a multinational aerospace and defense conglomerate and a major player in the aerospace and defense industry.

We sell to several business units and/or subsidiaries of RTX, including Collins Aerospace (which includes Collins Landing Systems and Collins Aerostructures) and Pratt Whitney.

RTX was formerly known as Raytheon Technologies Corporation and prior to that United Technologies Corporation.

Martin Corporation (“Lockheed Martin”) - Lockheed Martin is a leading

global security and aerospace company with its principal customers being agencies of the

We sell directly to one of its legal subsidiaries, Sikorsky Aircraft Corporation

(“Sikorsky”).

General Electric Aerospace (“GE”) – We supply GE Aerospace with high precision components that are used in jet turbine aircraft engines that are used on several commercial aircraft platforms.

GE Verona – We supply GE Verona with precision components that are used in ground-based turbines for electrical power generation.

Government – We supply certain components and assemblies directly to the Defense Logistics Agency (“DLA”), a combat support agency within the U.S.

Department of Defense (“DoD”).

The DLA’s mission is to manage the end-to-end global defense supply chain and deliver readiness to the warfighter.

It supports all five U.S.

military services, federal, state, and local agencies, as well as partner and allied nations.

The DLA procures items from us and provides them, as it deems fit, to other suppliers who assemble them into finished products.

2023, our sales and marketing strategy to expand our customer base yielded significant results, as we secured an initial $700,000 order

from a foreign-based defense and aerospace prime ranked among the world’s leading suppliers of finished landing gears.

order from them was for specialized components with initial deliveries slated to commence in the fourth quarter of 2024.

As we continue

to develop and strengthen this relationship, we are optimistic about securing additional orders over time.

and Program Profiles

of our machined components and assemblies are integral to high-profile platforms and named programs.

Platforms generally refer to equipment

that is utilized in missions or operations whereas programs are broader initiatives and can encompass the development and production

of new platforms, upgrades to existing systems and other initiatives.

The following platforms and programs (ranked in descending order

by their 2023 net sales), accounted for 85.2% and 81.0% of our net sales in 2023 and 2022, respectfully:

The F-18 Hornet, the U.S.

Navy’s primary fighter aircraft, primarily operates from aircraft carriers and enjoys

international use, notably in Finland and Australia.

Originating in the late 1960s, it has seen numerous upgrades and enhancements over

We manufacture complete landing gear components for several variants, supplying these to the U.S.

government or Tier 1 or

other suppliers for spares that go on the aircraft that where originally produced by Boeing.

The E-2D Hawkeye:

We provide the main and nose landing gear, as well as the arresting gear for the E-2D Hawkeye, a twin-engine, tactical aircraft utilized for providing advanced airborne warning and control for carrier-based operations.

Often referred to as the “digital quarterback,” it conducts battlefield management and command and control operations for aircraft carrier strike groups.

While primarily used by the U.S.

Navy, a small number have been sold to U.S.

allies, notably Japan.

Black Hawk Helicopter :

We supply flight critical components, such as the primary flight control assembly and the

tail-rotor gearbox, for the UH-60 Black Hawk Helicopter.

Serving as the primary helicopter for the U.S.

Army, it fulfills essential

roles in transport, troop movement, medical evacuation and cargo lift operations.

Manufactured by Sikorsky, it includes many

variants and is also utilized by other branches of the U.S military and U.S.

allied countries.

Since entering service in 1979, over

4,000 helicopters have been produced.

Deployment of new helicopters is projected to continue through at least 2027, with ongoing

sustainment activities anticipated for many years thereafter.

Pratt & Whitney Geared Turbo-Fan Engine (“GTF”):

Used in commercial aviation, the GTF represents a new generation of jet engines that offer improved fuel efficiency, reduced emissions, and lower noise levels compared to traditional turbofan engines.

We manufacture Thrust Struts, a critical component that essentially absorbs and distributes the forward thrust produced by the jet engine, ensuring that the force is evenly applied across the structure of the aircraft to maintain stability and integrity during takeoff, cruising and landing.

We supply our Thrust Struts to Collins Aerostructures for integration into Geared Turbofan engines, utilized by smaller airlines such as those operating the Airbus A220 and Embraer E2 aircraft.

Demand for these engines is anticipated to increase over the next few years.

The CH-53 Helicopter (including the CH53K variant):

Developed in the 1960s and manufactured by Sikorsky, the CH-53 is recognized as the largest and most powerful helicopter in the U.S.

It has evolved through several variants, with hundreds delivered and used by the U.S.

Marine Corps.

In 2021, we secured a LTA to supply Chaff Pods for the CH-53K, the latest iteration in the CH-53 series.

These pods deploy metallized strips to generate false radar targets, safeguarding the helicopters from missile threats.

The CH-53K plays a crucial role in the U.S.

Marine Corps’ plans to support a wide range of current and future operations.

In 2023 we received a purchase order to manufacture Swashplates and Hubs to be used on the CH-53K.

Initial deliveries of these parts has commenced.

The F-35 Lightning II (also known as the Joint Strike Fighter):

Manufactured by Lockheed Martin, the Joint Strike Fighter is a stealth fighter aircraft designed to replace the U.S.

Air Force F-15 and the U.S.

Navy and Marine Corps F-18 fighters.

It includes three variants:

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

We have produced landing gear components for all three variants and currently manufacture landing gear components for the US Navy version.

The production of this aircraft is expected to continue for many years, with the DoD’s aiming for an inventory objective of 2,456 aircraft, in addition to expected demand from other countries.

The F-15 Eagle Tactical Fighter:

We provide landing gear components for the F-15 Eagle Tactical Fighter.

Originally designed for the U.S.

Air Force, it is known as a dedicated air superiority fighter.

Currently manufactured by Boeing, it was designed in the late 1960s with over 600 aircraft estimated to be in service.

The F-15 has been exported to various countries including Israel, Saudi Arabia and Japan.

Although it is anticipated that this plane will be ultimately replaced by the Joint Strike Fighter, we believe it will be flying for years to come.

It boasts an impeccable combat record with no known losses in aerial combat.

We ship most of our components directly to the U.S.

aerospace and defense industry is dominated by a select few large prime contractors including Airbus, Boeing, General Electric, Lockheed

Martin, Northrop Grumman, and RTX.

These primes oversee large platforms and programs for ultimate end-user for the U.S.

government, foreign

governments or global aviation companies.

a supplier is chosen and integrated into a platform or selected for a specific program, replacing them becomes a complex challenge.

many cases, suppliers often become the sole or single source.

Being a sole source means being chosen as the exclusive supplier by the

customer, whereas being a single source indicates that, despite the availability of other potential manufacturers, only one supplier

is currently used.

This scenario of single or sole sourcing is especially prevalent with legacy aircraft.

While prime contractors generally

prefer multiple sources for new aircraft production lines to mitigate single points of failure, utilizing a single vendor can lead to

higher production volumes, lower average unit costs, and opportunities for quality improvements.

for both defense and commercial aviation components is based on new production and subsequent maintenance, repair and overhaul (“MRO”).

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

The demand for MRO and after-market

products can continue for many years, even decades, after the production line for new aircraft is shut down.

a high level, we are able to monitor the DoD budget for both new production and operations and maintenance components as well as industry

reports to gauge overall industry spending.

While large U.S.

Government programs are managed through specific budget lines and oversight

structures, most, if not all, of our machine parts and assemblies are not explicitly identified in the U.S.

Government budget.

predicting period-to-period demand with precision is challenging.

While we primarily rely on our customers to help us project short-term

and long-term demand, the timing of receipt of contract awards and related orders is difficult to predict.

Consequently, comparative

period-to-period net sales for any customer or program may not be meaningful.

and Marketing

are generally recognized as a Tier 1 or Tier 2 supplier in the A&D industry.

We are also recognized as having extensive experience

and accreditation to produce and assemble complex flight safety products.

of our contracts with our customers are in the form of a Long-Term Agreement (“LTA”).

These LTA’s specify the number

and price of products that the customer may order from us for a period of time.

The quantity and price in any year may vary from other

years within the LTA.

Once awarded, the customer places orders against the LTA.

These orders are called releases.

Once released the order

is a firm order.

While a firm order may be cancelled the customer is subject to termination liability and must pay us for the cost of

material, labor and other costs incurred up to the date of termination.

sales cycle is highly variable, ranging from a few weeks to several years depending upon the complexity of the product and the number

of steps necessary to complete manufacturing.

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

obtain new or follow-on LTA’s through competitive bidding.

We respond to a customer’s Request for Quotation (“RFQ”)

with proposed prices based on quantities, sometimes varying quantities per year, for shipments over a number of years.

There may be several

rounds of submissions from us and from competitive suppliers, and a period of negotiation before an LTA is awarded.

In addition to products

sold pursuant to LTA’s there are also “spot buys” of product by customers.

particularly for defense products, may be extended or new orders placed without competitive bidding.

In this instance and in some others

our price for the product must be supported by an analysis or audit and approval of our costs by the customer or by the Government.

In 2021 and to a lesser extent

in the first half of 2022 our sales and marketing efforts were negatively affected by Covid travel restrictions limiting our ability

to visit customers and the reluctance of the employees of some of our customers to return to the office and attend trade shows, complicating

our ability to contact them.

As a result of these challenges our “book-to-bill” ratio (new orders booked divided by sales)

was 0.75 to 1.00 and 0.9 to 1.00 for the years ended December 31, 2022 and 2021 respectively, below historic levels.

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

The aerospace industry is dominated

by a small number of large prime contractors and OEM’s.

These customers rely heavily upon subcontractors to supply quality parts

meeting specifications on a timely and cost effective basis.

These customers and other customers we supply routinely rate their suppliers

based on a variety of performance factors.

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

and throughout the industry.

large prime contractors are increasingly seeking subcontractors who can supply and are qualified to integrate the fabrication of larger,

more complex and more complete subassemblies.

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

to be selected for subcontracted projects.

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

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

through strong performance on existing contracts.

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

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

now engaged us for these services.

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

retained by successfully performing initial contracts.

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

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

initial manufacturing phase.

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

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

pricing is determined through negotiations.

In response to the impediments to traditional means of marketing our products and services

encountered during 2020 and 2021 as a result of the cancellation of industry-wide events and the difficulties in scheduling meetings

with our customers, we have adapted our business development efforts to increase our use of social media and online presentations, and

will continue to look for new ways to interact with our customers.

backlog we report consists solely of firm orders received from customers.

We do not estimate possible or probable future orders pursuant

to LTA’s or anticipated contract renewals.

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

Our production cycle from ordering raw material to delivering finished product can vary from several weeks to more than one year.

must place orders in light of these lead-times creating a back-log of future deliveries.

The production cycle for jet engine products

is much shorter and accordingly the backlog for jet engine products is much lower.

Our total 18-Month firm backlog was $60.1 and $75.0

Million at December 31, 2022 and 2021, respectively.

backlog today is the result of purchase orders for the Sikorsky Black Hawk, the F-25 Joint Strike Fighter, the Northrop Grumman E2-D,

the F-18 fighter aircraft and the Pratt & Whitney Geared Turbo-Fan jet engine.

Winning a new contract is highly competitive.

We manufacture to customer

design specifications.

We compete against companies that have similar, or better manufacturing capabilities and often greater financial,

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

Our ability to win new contracts

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

This requires that we strive for continuous improvement in

our capabilities to enhance our competitiveness.

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

totaling approximately $3,725,000;

$1,364,000 and $2,361,000 in 2021 and 2022, respectively.

This new equipment improves the productive

capacity of our employees, increases efficiency and speed, while maintaining closer tolerances, and increasing the size of product we

can manufacture with a larger working “envelope”.

We anticipate spending an additional $1,750,000 to $2,500,000 in 2023 to

continue to expand our productive capacity.

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

These relationships enable us to develop barriers

to entry to competitors by establishing and maintaining advanced quality approvals, certifications and tooling investments that are difficult

and expensive to duplicate.

our competitors are:

Monitor Aerospace, a division of Stellex Aerospace;

and marketing activities in 2023 indicate a return to normalcy compared to the disruptions caused by COVID-19 in 2022 and 2021.

restrictions no longer hinder our ability to visit customers, and employees are more willing to attend trade shows, facilitating our

communication efforts.

primarily rely upon a small team of highly skilled sales and business development professionals with extensive industry experience.

goal is to cultivate customer relationships akin to partnerships and the concept of customer alignment.

For example, our customers heavily

rely on suppliers to deliver high-quality parts that meet specifications in a timely and cost-effective manner.

They regularly assess

suppliers based on various quantitative criteria such as on-time delivery performance, defect rates, adherence to specifications, cost

performance, lead times, order processing time, stockout rates, and similar metrics.

Therefore, one of our primary objectives is to maintain

high ratings and leverage these metrics in our sales and marketing activities.

sales cycle varies significantly, ranging from a few weeks to several years, depending on the complexity of the product and manufacturing

steps involved.

While customers may occasionally engage in spot buys, most of our orders (also known as bookings) stem from LTAs.

outline the quantity and price of products the customer may order within a specified timeframe.

When actual products are needed, the

customer places a funded order against the LTA.

The value of this funded order is included in our backlog until we ship it.

cancellations of funded orders are possible, customers are usually subject to termination liability, necessitating payment to us for

costs incurred up to the termination date.

In certain termination cases, the customer is also required to pay us a reasonable profit.

secure new or follow-on LTAs through competitive bidding in response to a customer’s Request for Quotation (“RFQ”).

These proposals detail prices based on quantities, which may vary annually, for shipments over multiple years.

The bidding process typically

entails several rounds of submissions and negotiations before an award is granted.

For defense products, in certain cases, LTAs may be

awarded or extended without an RFQ, competitive bidding.

In such cases, pricing may be determined through cost analysis or audit with

ultimate approval by the customer or the U.S.

believe our sales and marketing strategy received significant validation in 2023 when we secured an initial $700,000 order from a foreign-based

defense and aerospace prime ranked among the world’s leading suppliers of finished landing gears.

While this new customer relationship

is in its early stages, we are dedicating substantial efforts to further develop and strengthen this partnership, with the aim of receiving

significant orders in the future.

Bookings represent funded orders we have

secured during a given financial period.

In fiscal 2023, bookings were $62,262,000 or a 55% increase compared to $40,166,000 in 2022.

Our “book-to-bill” ratio, which is our bookings divided by net sales, was 1.20x for 2023, a significant improvement over

the 0.75x ratio of 2022.

Although bookings are subject to wide variations in timing, resulting in period-to-period comparisons not

necessarily being meaningful, we do use bookings and our book-to-bill as a gauge of future net sales.

Our backlog, which can be considered our “funded

backlog,” stood at $98.3 million as of December 31, 2023, marking a 14.7% increase from the $85.7 million on December 31, 2022.

It represents the net sales we expect to realize from funded orders received and is equivalent to our remaining performance obligations

pursuant to Accounting Standards Codification (“ASC”) 606, Revenue from Contracts with Customers, at the end of each period.

These funded orders, approved by customers, come from LTAs, spot-buys, or other contracts and are for essential machined components and

assemblies used in the key platforms and programs we serve.

Previously, we limited our backlog to items scheduled to ship within an 18-month

Our new enhanced definition provides visibility into the value of all firm orders.

The bulk of our $98.3 million backlog is expected

to ship over the next 24 months.

but does not include possible or probable future orders pursuant to existing LTAs or probable contract

The total potential net sales under contracts actually awarded to us as of December 31, 2023, was $191.1 million, including

the value of our existing funded backlog of $98.3 million.

a new contract award is highly competitive.

Not only must we have the capabilities to manufacture to customer design specifications,

but we compete against companies that have greater financial, physical and technical resources.

Our ability to win new contracts generally

requires us to become a trusted partner to the customer by having the capabilities to deliver superior quality product, more quickly

and with lower pricing than our competitors.

Accordingly, we must continually invest in process improvements and capital equipment.

In recent years, we have strategically made significant

investments to enhance our competitiveness and market position.

For example, in fiscal 2023 and 2022, we invested $2,119,000 and $2,361,000

in new property and equipment to support our goals.

These investments have increased production efficiency and speed, while maintaining

closer tolerances, and have expanded the size of products we can manufacture.

We plan to continue this strategy and anticipate investing

approximately $2,000,000 in 2024 for new or upgraded equipment.

Our competitors include:

Monitor Aerospace, a division of GKN Aerospace;

Hydromil, a division of Triumph Aerospace Group;

Heroux Aerospace

and Ellanef Manufacturing, a division of Magellan Corporation.

Materials and Replacement Parts

manufacturing process for certain products, particularly those for which we serve as product integrator, requires significant purchases

of raw materials, hardware and subcontracted details.

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

products requires efficient and effective subcontract management.

Price and availability of many raw materials utilized in the aerospace

industry are subject to volatile global markets and political conditions.

Most suppliers of raw materials are unwilling to commit to

long-term contracts at fixed prices.

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

As of May 1, 2023, we employed

Of these, 76 were in administration, 9 were in sales and procurement, and 100 were in manufacturing.

is a party to a collective bargaining agreement (the “Agreement”) with the United Service Workers, IUJAT, Local 355 (the

“Union”) with which we believe we maintain good relations.

The Agreement was renewed as of December 31, 2021 and expires

on December 31, 2024 and covers the majority of AIM’s personnel, approximately 130 individuals, which equates to approximately

70% of all of our employees.

is required to make a monthly contribution to each of the Union’s United Welfare Fund and the United Services Worker’s Security

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

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

will not lockout its employees.

of our employees are covered under a co-employment agreement with Insperity Services, LLC, a professional employer organization that

provides out-sourced human resource and payroll services.

Heroux Devetek and Ellanef Manufacturing, a division of Magellan Corporation.

Manufacturing,

Raw Materials and Replacement Parts

production cycle spanning from ordering raw materials to delivering finished products, can vary from several weeks to over a year.

Consequently,

for certain products, especially those involving finished assemblies, we must procure significant amounts of raw materials and begin

processing well ahead of actual ship dates.

This underscores the importance of efficient subcontract management in meeting customer delivery

In some cases, customers may provide us with these raw materials as they may be able to obtain better processing or delivery

schedules from other suppliers.

The price and availability of many raw materials

in the aerospace industry are susceptible to fluctuations in global markets and political conditions.

Most raw material suppliers are

hesitant to commit to long-term contracts at fixed prices, posing a substantial risk given our strategy often entails entering into LTA

agreements which require us to commit to long-term price commitments.

However, many of our LTAs provide pricing protection when there

is a large increase in the in the cost of raw materials.

As of March 31, 2024, we employed 180 people.

Of these, 101 were involved in manufacturing and production activities, 25 were in quality control, 45 were in administration, and the

remaining 9 were in sales and procurement.

All of our employees are covered under a co-employment agreement with Insperity Services,

LLC, a professional employer organization.

This arrangement allows us to provide employees with comprehensive benefits at a lower cost

than we could provide.

AIM subsidiary has a collective bargaining agreement with the United Service Workers, IUJAT, Local 355 (the “Union”).

agreement is effective until December 31, 2024 and covers the majority of AIM’s 125 personnel.

We are required to make a monthly

contribution to Union’s United Welfare Fund and the United Services Worker’s Security Fund, the sole pension benefit for

covered employees.

We are not obligated to provide any future defined benefits.

Additionally, the collective bargaining agreement contains

a “no-strike” clause, and a “no-lock-out” clause.

We believe we maintain good relationships with the Union and

expect to renew the collective bargaining agreement before it expires.

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

material licenses and permits required for the operation of our business.

They key regulations impacting our business are further

discussed below:

Environmental

Employee Safety

are subject to regulations administered by the United States Environmental Protection Agency, the Occupational Safety and Health Administration,

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

Among other things,

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

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

certain hazardous chemicals and substances.

The extensive regulatory framework imposes compliance burdens and financial and operating

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

civil and criminal fines in the case of violations.

Regulation and Employee Safety :

We are subject to regulations administered by the United States Environmental Protection

Agency, the Occupational Safety and Health Administration, various state agencies and county and local authorities acting in cooperation

with federal and state authorities.

Among other things, these regulatory bodies impose restrictions that require us to control air, soil

and water pollution, to protect against occupational exposure to chemicals, including health and safety risks, and require notification

or reporting of the storage, use and release of certain hazardous chemicals and substances.

This regulatory framework imposes compliance

burdens and financial and operating risks on us.

Governmental authorities have the power to enforce compliance with these regulations

and to obtain injunctions or impose civil and criminal fines in the case of violations.

Comprehensive Environmental Response, Compensation and Liability Act of 1980 (“CERCLA”) imposes strict, joint and several

9 unchanged sentences

Aviation Administration:

are subject to regulation by the Federal Aviation Administration (“FAA”) under the provisions of the Federal Aviation Act

of 1958, as amended.

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

We are subject to

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

FAA regulations.

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

of our contracts, which could have a material adverse effect on our operations.

We have never been subject to such fines or disqualifications.

Contract Compliance

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

including the Federal Acquisition Regulations.

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

During and after

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

We are subject to regulation by the Federal Aviation Administration (“FAA”) under the

provisions of the Federal Aviation Act of 1958, as amended.

The FAA prescribes standards and licensing requirements for aircraft and

aircraft components.

We are subject to inspections by the FAA and may be subjected to fines and other penalties (including orders to

cease production) for noncompliance with FAA regulations.

Our failure to comply with applicable regulations could result in the termination

of or our disqualification from some of our contracts, which could have a material adverse effect on our operations.

We have never been

subject to such fines or disqualifications.

Acquisition Regulations:

All our U.S government contracts and those of many of our customers are subject to the procurement

rules and regulations of the Federal Acquisition Regulations.

As such, many of our LTA agreements require us to adhere to these rules

and regulations.

During and after the fulfillment of a government contract, we may be audited in respect of the direct and allocated

indirect costs attributed to the project.

These audits may result in adjustments to our contract costs.

Additionally, we may be subject to U.S.

government inquiries and investigations

because of our participation in government procurement.

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

to continue to bid for government contracts and fulfill existing contracts.

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

material licenses and permits required for the operation of our business.

Additionally, we may be subject

government inquiries and investigations because of our participation in government procurement.

Any inquiry or investigation

can result in fines or limitations on our ability to continue to bid for government contracts and fulfill existing contracts.

Information About Our Business and Where to Find It

Internet website is AirIndustriesGroup.com, at which you can find our filings with the SEC, including press releases, annual reports,

quarterly reports, current reports, and any amendments to those filings.

We also use our website to disseminate other material information

to our investors.

We also make announcements regarding company developments and financial and operating performance through social media

channels such as at LinkedIn.com/company/air-industries-group to communicate with customers and the public about our Company, our products,

services, and other issues.

Among other things, we post on our website and social media channels information about our public conference

calls (including the scheduled dates, times and the methods by which investors and others can listen to those calls), and we make available

for replay webcasts of those calls and other presentations for a limited time.

Information and updates about our Annual Meetings will

also be posted on our website including on the “Home Page” and in the “Investor Relations” section.

information on our website, blog or any other website identified herein is incorporated by reference in this annual report and such information

should not be considered a part of this annual report.

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

What changed 10-K

Item 1. Business