What changed in this filing

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Item 1. Business

2025-04-15 compared with 2024-04-15 · 255 added, 256 removed, 91 unchanged (85% of the section changed)

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 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 airlines.

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 civilians.

We 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 others.

In some cases, we ship products directly to the

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.

receive Long-Term Agreements (“LTAs”) from our customers, demonstrating their commitment to us.

We 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.

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

For the past several years 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 2024 marked

a year of progress and positioning for growth.

We finished 2024 with $55.1 million of net sales.

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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.

We made significant investments in capital equipment and related processes.

On the bottom-line, we reported a net loss

of $1.4 million.

As we enter fiscal 2025, we believe our future is looking brighter.

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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

With total unfilled contract values amounting to $271.3 million (including our $117.9 million in funded backlog

and all potential orders against LTA agreements previously awarded to us), as of December 31, 2024, we are confident in our ability to

boost sales in 2025, attain profitability and improve our financial position.

Customer Profiles

In 2024 and 2023, approximately 69.9% and 82.3%

of our net sales were attributed to customers who use our products for end-use on military aircraft.

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.

We have cultivated long-standing relationships

with many large and well-known customers including:

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 U.S.

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

(“Sikorsky”).

Northrop Grumman (“Northrop”) – We supply product used on the E2-D Hawkeye, airborne warning and control aircraft.

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.

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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.

Platform and Program Profiles

Most 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 2024 net sales), accounted for 79.3%

and 85.2% of our net sales in 2024 and 2023, respectfully:

The E-2D Hawkeye:

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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.

UH-60 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.

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.

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”):

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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 increased in 2024, thus reducing the concentration in the net sales attributable to military end users.

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

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

The F-18 Hornet, the U.S.

Navy’s primary fighter aircraft, principally 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 the years.

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 were originally produced by Boeing.

The F-15 Eagle Tactical Fighter:

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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.

The aerospace and defense industry is dominated

by a select few large prime contractors including Airbus, Boeing, General Electric, Lockheed Martin, Northrop Grumman, and RTX.

prime contractors oversee large platforms and programs for ultimate end-user, the U.S.

government, foreign governments or global aviation

Once a supplier is chosen and integrated into

a platform or selected for a specific program, replacing them becomes a complex challenge.

In 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.

Demand 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.

At 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 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

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.

Therefore, 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.

Sales and Marketing

Sales and marketing activities during 2024 were robust, resulting in

a book-to-bill ratio of 1.29x, growth in our funded backlog to $117.9 million and total unfilled contract values amounting to $271.3 million

(including our $117.9 million funded backlog and all potential orders against LTA agreements).

We primarily rely upon a small team of highly

skilled sales and business development professionals with extensive industry experience with hands on support from management.

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

For example, our customers heavily

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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.

Our sales cycle varies significantly,

ranging from a few weeks to over a year, depending on the complexity of the product and manufacturing steps involved.

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

LTAs outline the

quantity and price of products the customer may order within a specified time frame.

When actual products are needed, the customer

places a funded order against the LTA.

The value of this funded order is included in our funded 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 certain termination cases, the customer is also required to pay us a reasonable

We 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 or competitive bidding.

In such cases, pricing may be determined through cost analysis or audit with ultimate approval by the customer or the U.S.

Bookings and Backlog

Bookings represent funded orders secured during

a given financial period.

In fiscal 2024, bookings were $71,000,000, a 14% increase compared to $62,262,000 in 2023.

Our “book-to-bill”

ratio, which is our bookings divided by net sales, was 1.29x for 2024, a significant improvement over the 1.20x ratio of 2023.

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 $117.9 million as of December 31, 2024, marking a 19.9% increase from $98.3 million on December 31, 2023.

This 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.

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

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

The bulk of our $117.9 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 renewals

that would also contribute sales during such period.

The total potential net sales under contracts actually awarded to us as of December

31, 2024, was $271.3 million, including the value of our existing funded backlog of $117.9 million.

Winning 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.

we must continually invest in process improvements and capital equipment.

In recent years, we have strategically made significant

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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.

closer tolerances, have expanded the size of products we can manufacture and have been appreciated by our customers.

While we plan to

continue this strategy in 2025 it will likely be on a much smaller level.

Our competitors include:

Monitor Aerospace, a division of GKN Aerospace;

Monitor Aerospace, a

division of GKN Aerospace;

Hydromil, a division of Triumph Aerospace Group;

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.

Heroux Devetek and Ellanef Manufacturing, a division of Magellan

Manufacturing, Raw Materials and Replacement

Our 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

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

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 and

in other cases the customer chooses to rely on us to manage suppliers.

The price and availability of many raw materials

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However, many of our LTAs provide pricing protection when there

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

is a large increase in the cost of raw materials.

As of March 31, 2025, we employed 184 people.

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remaining 8 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

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

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

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

disposal of hazardous waste.

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

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

In addition, the

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

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

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

Aviation Administration:

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

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

The FAA prescribes standards and licensing requirements for aircraft and

aircraft components.

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

cease production) for noncompliance with FAA regulations.

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

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

We have never been

subject to such fines or disqualifications.

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.

Our AIM subsidiary has a collective bargaining

agreement with the United Service Workers, IUJAT, Local 355 (the “Union”).

This agreement is effective until December 31,

2027 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”

We believe we maintain good relationships with the Union and expect to renew the collective bargaining agreement before it expires.

We believe that we are in compliance with all

federal, state and local laws and regulations governing our operations and have obtained all material licenses and permits required for

the operation of our business.

They key regulations impacting our business are further discussed below:

Environmental Regulation and Employee

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

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.

The Comprehensive Environmental Response, Compensation

and Liability Act of 1980 (“CERCLA”) imposes strict, joint and several liabilities on the present and former owners and operators

of facilities that release hazardous substances into the environment.

The Resource Conservation and Recovery Act of 1976 (“RCRA”)

regulates the generation, transportation, treatment, storage and disposal of hazardous waste.

New York and Connecticut, the states where

our production facilities are located, also have stringent laws and regulations governing the handling, storage and disposal of hazardous

substances, counterparts of CERCLA and RCRA.

In addition, the Occupational Safety and Health Act, which requires employers to provide

a place of employment that is free from recognized and preventable hazards that are likely to cause serious physical harm to employees,

obligates employers to provide notice to employees regarding the presence of hazardous chemicals and to train employees in the use of

such substances.

Federal Aviation Administration:

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

of 1958, as amended.

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

We are subject to inspections

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

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

which could have a material adverse effect on our operations.

We have never been subject to such fines or disqualifications.

Federal 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.

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.

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

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.

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.

More Information About Our Business and

Where to Find It

Our 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.

None of the 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