Nevada
|
80-0948413
|
(State or other jurisdiction of incorporation or organization)
|
(I.R.S. Employer Identification No.)
|
360 Motor Parkway, Suite 100, Hauppauge, New York 11788
|
(Address of Principal Executive Offices)
|
(631) 881-4920
|
(Registrant’s Telephone Number, Including Area Code)
|
Title of Each Class
|
Name of Exchange on which Registered
|
Common Stock, par value $0.001
|
NYSE MKT
|
Page
|
||
PART I
|
||
Item 1.
|
Business
|
1
|
Item 1A.
|
Risk Factors
|
6
|
Item 2.
|
Properties
|
12
|
Item 3.
|
Legal Proceedings
|
13
|
Item 4.
|
Mine Safety Disclosures
|
13
|
PART II
|
||
Item 5.
|
Market for Registrant’s Common Equity, Related Stockholder Matters and Issuer Purchases of Equity Securities
|
14
|
Item 6.
|
Selected Financial Data
|
15
|
Item 7.
|
Management’s Discussion and Analysis of Financial Condition and Results of Operation
|
15
|
Item 8.
|
Financial Statements and Supplementary Data
|
28
|
Item 9.
|
Changes in and Disagreements with Accountants on Accounting and Financial Disclosure
|
28
|
Item 9A.
|
Controls and Procedures
|
28
|
Item 9B.
|
Other Information
|
29
|
PART IV
|
||
Item 15.
|
Exhibits and Financial Statements Schedule
|
31
|
Consolidated Financial Statements
|
F-1
|
|
-
|
In August 2007, we acquired Welding Metallurgy, which has provided specialty welding services and metal fabrications to the defense and commercial aerospace industry since 1979;
|
|
-
|
In June 2012, we acquired the assets and ongoing operations of the predecessor of NTW, which was founded in 1959 and whose principal business was the fabrication and assembly of landing gear components and complete landing gear for F-16 and F-18 fighter aircraft for the US and foreign governments;
|
|
-
|
In July 2013, we acquired the assets and business of Decimal Industries, Inc. ("Decimal"). Decimal was founded in 1968 and its principal business is the fabrication of brazed and welded precision sheet metal assemblies for the aerospace industry;
|
|
-
|
In November 2013, we acquired MSI. MSI was founded in 1966 and specializes in electromechanical systems, harness and cable assemblies, electronic equipment and printed circuit boards;
|
|
-
|
In April 2014, we acquired Woodbine. WPI was founded in 1954 and is a fabricator of precision sheet metal assemblies for aerospace applications;
|
|
-
|
In June 2014, we acquired Eur-Pac. EPC was founded in 1947 and specializes in military packaging and supplies all branches of the United States Defense Department with ordnance parts and kits, hose assemblies, hydraulic, mechanical and electrical assemblies;
|
|
-
|
In September 2014, we acquired ECC. ECC was founded in 1989 and specializes in wire harnesses and leads for the aerospace and other industries;
|
|
-
|
In October 2014, we acquired AMK. AMK has been a provider of welding services to the aerospace industry since 1964. For more than ten years it was owned by Dynamic Materials Corporation and was part of what once was a group of aerospace companies owned by DMC;
|
|
-
|
Most recently, effective March 1, 2015, we acquired Sterling. Founded in 1941, Sterling provides complex machining services and its business is concentrated with aircraft jet engine and ground turbine manufacturers.
|
1)
|
Risks related to our business, including risks specific to the defense and aerospace industry:
|
|
2)
|
Risks arising from our indebtedness; and
|
|
3)
|
Risks related to our common stock and our status as a public company.
|
High
|
Low
|
|||||||
Quarter Ended March 31, 2013
|
$ | 7.27 | $ | 6.00 | ||||
Quarter Ended June 30, 2013
|
$ | 6.24 | $ | 5.97 | ||||
Quarter Ended September 30, 2013
|
$ | 7.91 | $ | 5.97 | ||||
Quarter Ended December 31, 2013
|
$ | 9.50 | $ | 7.61 | ||||
Quarter Ended March 31, 2014
|
$ | 9.64 | $ | 7.97 | ||||
Quarter Ended June 30, 2014
|
$ | 12.48 | $ | 9.50 | ||||
Quarter Ended September 30, 2014
|
$ | 11.00 | $ | 9.00 | ||||
Quarter Ended December 31, 2014
|
$ | 12.12 | $ | 9.80 |
Plan Category
|
Number of
Securities to
Be Issued Upon
Exercise of
Outstanding
Options, Warrants
and Rights
|
Weighted
Average
Exercise Price
of Outstanding
Options,
Warrants and
Rights
|
Number of
Securities Remaining
Available for Future
Issuance Under Equity
Compensation Plans
|
|||||||||
Eq Equity compensation plans approved by security
holders
|
528,539
|
$
|
8.98
|
71,753
|
||||||||
EqE Equity compensation plans not approved by security
holders
|
164,585
|
$
|
7.85
|
None
|
||||||||
Tot Total
|
693,124
|
$
|
8.71
|
71,753
|
|
-
|
In July 2013 we acquired the assets and business of Decimal. Decimal’s principal business is the fabrication of brazed and welded precision sheet metal assemblies for the aerospace industry;
|
|
-
|
In November 2013, we acquired MSI. MSI specializes in electromechanical systems, harness and cable assemblies, electronic equipment and printed circuit boards;
|
|
-
|
In April 2014 we acquired WPI. WPI is a fabricator of precision sheet metal assemblies for aerospace applications;
|
|
-
|
In June 2014 we acquired Eur-Pac. EPC specializes in military packaging and supplies all branches of the United States Defense Department with ordnance parts and kits, hose assemblies, hydraulic, mechanical and electrical assemblies;
|
|
-
|
In September 2014 we acquired ECC. ECC specializes in wire harnesses and leads for the aerospace and other industries;
|
|
-
|
In October 2014 we acquired AMK. AMK has been a provider of welding services to the aerospace industry since 1964;
|
|
-
|
Most recently, effective March 1, 2015, we acquired Sterling. Sterling provides complex machining services and its business is concentrated with aircraft jet engine and ground turbine manufacturers.
|
2014
|
2013
|
|||||||
Net sales
|
$ | 64,331,000 | $ | 62,833,000 | ||||
Cost of sales
|
50,233,000 | 47,598,000 | ||||||
Gross profit
|
14,098,000 | 15,235,000 | ||||||
Operating expenses, acquisition costs and interest costs
|
(13,658,000 | ) | (11,962,000 | ) | ||||
Other income (expense) net
|
(141,000 | ) | 296,000 | |||||
Income taxes benefit
|
368,000 | 170,000 | ||||||
Net Income
|
$ | 667,000 | $ | 3,739,000 |
December 31, 2014
|
December 31, 2013
|
|||||||
Cash and cash equivalents
|
$ | 1,418,000 | $ | 561,000 | ||||
Working capital
|
16,176,000 | 12,531,000 | ||||||
Total assets
|
65,920,000 | 50,172,000 | ||||||
Total stockholders' equity
|
$ | 28,272,000 | $ | 21,613,000 |
Year Ended December 31,
|
|||||||||
2014
|
2013
|
||||||||
COMPLEX MACHINING
|
|||||||||
Net Sales
|
$ | 44,220,000 | $ | 49,203,000 | |||||
Gross Profit
|
8,691,000 | 11,753,000 | |||||||
Pre Tax Income
|
1,074,000 | 4,273,000 | |||||||
Assets
|
60,409,000 | 33,207,000 | |||||||
AEROSTRUCTURES AND ELECTRONICS
|
|||||||||
Net Sales
|
18,273,000 | 13,630,000 | |||||||
Gross Profit
|
4,812,000 | 3,482,000 | |||||||
Pre Tax Loss
|
(554,000 | ) | (203,000 | ) | |||||
Assets
|
21,386,000 | 11,619,000 | |||||||
TURBINE ENGINE COMPONENTS
|
|||||||||
Net Sales
|
1,838,000 | - | |||||||
Gross Profit
|
595,000 | - | |||||||
Pre Tax Income
|
142,000 | - | |||||||
Assets
|
8,150,000 | - | |||||||
CORPORATE
|
|||||||||
Net Sales
|
- | - | |||||||
Gross Profit
|
- | - | |||||||
Pre Tax Loss
|
(363,000 | ) | (501,000 | ) | |||||
Assets
|
20,066,000 | 9,647,000 | |||||||
CONSOLIDATED
|
|||||||||
Net Sales
|
64,331,000 | 62,833,000 | |||||||
Gross Profit
|
14,098,000 | 15,235,000 | |||||||
Pre Tax Income
|
299,000 | 3,569,000 | |||||||
Provision for Taxes
|
(368,000 | ) | (170,000 | ) | |||||
Net Income
|
667,000 | 3,739,000 | |||||||
Elimination of Assets
|
(44,091,000 | ) | (4,301,000 | ) | |||||
Assets
|
$ | 65,920,000 | $ | 50,172,000 |
Year ended
|
Year ended
|
|||||||
December 31, 2014
|
December 31, 2013
|
|||||||
Cash (used in) provided by
|
||||||||
Operating activities
|
$
|
(2,799)
|
$
|
8,889
|
||||
Investing activities
|
(9,663)
|
(1,118)
|
||||||
Financing activities
|
13,319
|
(7,700)
|
||||||
Net increase in cash and cash equivalents
|
$
|
857
|
$
|
71
|
Payment due by period
(in thousands)
|
||||||||||||||||||||
Less than
|
1-3 | 3-5 |
More than
|
|||||||||||||||||
Total
|
1 year*
|
years
|
years
|
5 years
|
||||||||||||||||
Long term debt and capital leases
|
$ | 27,956 | $ | 19,593 | $ | 5,105 | $ | 2,800 | $ | 458 | ||||||||||
Operating leases
|
18,930 | 1,931 | 3,746 | 3,337 | 9,916 | |||||||||||||||
Total
|
$ | 46,886 | $ | 21,524 | $ | 8,851 | $ | 6,137 | $ | 10,374 | ||||||||||
* The revolving line of credit with our senior lender is classified as due in less than 1 year
|
2.1
|
Agreement and Plan of Merger dated July 29, 2013 between Air Industries Group, Inc. and Air Industries Group (incorporated by reference to Exhibit 2.1 to the Registrant's Current Report on Form 8-K filed August 30, 2013).
|
2.2
|
Articles of Merger between Air Industries Group and Air Industries Group, Inc. filed with the Secretary of State of Nevada on August 28, 2013 (incorporated by reference to Exhibit 3.2 to the Registrant's Current Report on Form 8-K filed August 30, 2013).
|
2.3
|
Certificate of Merger between Air Industries Group and Air Industries Group, Inc. filed with the Secretary of State of Nevada on August 29, 2013 (incorporated by reference to Exhibit 3.3 to the Registrant's Current Report on Form 8-K filed August 30, 2013).
|
3.1
|
Articles of Incorporation of Air Industries Group (incorporated by reference to Exhibit 3.1 to the Registrant's Current Report on Form 8-K filed August 30, 2013).
|
3.2
|
Amended and Restated By-Laws of the Registrant.
|
4.1
|
Form of Warrant Agreement dated as of December 31, 2008 between the Registrant and Taglich Brothers, Inc. (incorporated by reference to Exhibit 4.1 to the Registrant's Current Report on Form 8-K filed January 7, 2009).
|
4.2
|
Form of Placement Agent’s Warrant Agreement (incorporated by reference to Exhibit 4.1 to the Registrant’s Current Report on Form 8-K filed May 29, 2014).
|
10.1
|
Contract of Sale, dated as of November 7, 2005, by and between KPK Realty Corp. and Gales Industries Incorporated for the purchase of the property known as 1460 North Fifth Avenue and 1479 North Clinton Avenue, Bay Shore, NY (incorporated by reference to Exhibit 10.6 of the Registrant's Current Report on Form 8-K filed December 6, 2005).
|
10.2
|
Mortgage and Security Agreement, dated as of November 30, 2005, by and between Air Industries Machining, Corp. and PNC Bank (incorporated by reference to Exhibit 10.20 of the Registrant's Current Report on Form 8-K filed December 6, 2005).
|
10.3
|
Long Term Agreement, dated as of August 18, 2000, between Air Industries Machining, Corp. and Sikorsky Aircraft Corporation (incorporated by reference to Exhibit 10.21 of the Registrant's Current Report on Form 8-K filed December 6, 2005).
|
10.4
|
Long Term Agreement, dated as of September 7, 2000, between Air Industries Machining, Corp. and Sikorsky Aircraft Corporation (incorporated by reference to Exhibit 10.22 of the Registrant's Current Report on Form 8-K filed December 6, 2005).
|
10.5
|
Stock Purchase Agreement, dated March 9, 2009, between Gales Industries Incorporated and John Gantt and Lugenia Gantt, the shareholders of Welding Metallurgy, Inc. (incorporated by reference to Exhibit 10.1 of the Registrant's Current Report on Form 8-K filed March 14, 2009).
|
10.6
|
Amendment No. 1 dated August 2, 2009 to the Stock Purchase Agreement, dated March 9, 2009, between Gales Industries Incorporated and John Gantt and Lugenia Gantt, the shareholders of Welding Metallurgy, Inc. (incorporated by reference to Exhibit 10.1 of Registrant's Current Report on Form 8-K/A filed August 3, 2009).
|
10.7
|
7% Promissory Note of Registrant in the principal amount of $2,000,000 in favor of John and Lugenia Gantt (incorporated by reference from the Registrant's Current Report on Form 8-K filed August 26, 2009).
|
10.8
|
Registration Rights Agreement dated as of August 24, 2009 by and among the Registrant and John and Lugenia Gantt (incorporated by reference from the Registrant's Current Report on Form 8-K filed August 26, 2009).
|
10.9
|
Amended and Restated Promissory Note dated as of August 26, 2009 payable to John and Lugenia Gantt (the "Amended and Restated Gantt Note") (incorporated by reference from Exhibit 10.46 to the Registrant's Annual Report on Form 10-K for the year ended December 31, 2007 (the “2007 Form 10-K”).
|
10.10
|
Amendment dated as of October 9, 2009 to Amended and Restated Gantt Note (incorporated by reference from Exhibit 10.47 to the Registrant's 2007 Form 10-K).
|
10.11
|
Amended and Restated Revolving Credit, Term Loan and Security Agreement (the “PNC Loan Agreement”) dated June 27, 2013 by and among PNC Bank, National Association, as Lender and Agent, and Air Industries Machining, Corp., Welding Metallurgy, Inc., Nassau Tool Works, Inc. and Air Industries Group, Inc. (incorporated by reference to Exhibit 10.1 to the Registrant's Current Report on Form 8-K filed June 27, 2013).
|
10.12
|
Guarantor’s Ratification by Air Industries Group, Inc. under PNC Agreement (incorporated by reference to Exhibit 10.4 to the Registrant's Current Report on Form 8-K filed June 27, 2013).
|
10.13
|
Securities Purchase Agreement for sale of junior subordinated notes and series B convertible preferred stock (incorporated by reference to Exhibit 10.1 to the Registrant's Current Report on Form 8-K filed October 7, 2010).
|
10.14
|
Junior Subordinated Note due 2010 (incorporated by reference to Exhibit 10.2 to the Registrant's Current Report on Form 8-K filed October 7, 2010).
|
10.15
|
Asset Purchase Agreement dated as of June 20, 2012 among the Registrant, Nassau Tool Works, Inc., Vincent DiCarlo and Robert E. Hunt (incorporated by reference to Exhibit 10.22 to the Registrant's Form 10).
|
10.16
|
Assignment and Assumption Agreement dated as of June 20, 2012 between the Registrant and NTW Operating Inc. (incorporated by reference to Exhibit 10.23 to the Registrant's Form 10).
|
10.17
|
2010 Equity Incentive Plan (incorporated by reference to Exhibit 10.24 to the Registrant's Form 10).
|
10.18
|
Subscription documents for purchase of common stock and conversion of junior subordinated notes into common stock. (incorporated by reference to Exhibit 10.25 to the Registrant's Form 10).
|
10.19
|
Placement Agent Agreement dated as of May 21, 2012 between the Registrant and Taglich Brothers Inc. (incorporated by reference to Exhibit 10.26 to the Registrant's Form 10).
|
10.20
|
2013 Equity Incentive Plan (incorporated by reference to Exhibit 10.1 to the Registrant's Registration Statement on Form S-8 (Registration No. 333-191560) filed on October 4, 2013).
|
10.21
|
Common Stock Purchase Agreement dated October 25, 2013 with Kimura Corporation (incorporated by reference to Exhibit 10.1 to the Registrant's Current Report on Form 8-K filed October 29, 2013).
|
10.22
|
First Amendment to PNC Loan Agreement (incorporated by reference from Exhibit 10.22 to the Registrant's Annual Report on Form 10-K for the year ended December 31, 2013 (the “2013 Form 10-K”).
|
10.23
|
Amended and Restated PNC Loan Agreement (incorporated by reference from Exhibit 10.23 to the Registrant's 2013 Form 10-K.)
|
10.24 |
Amended and Restated Revolving Credit Note issued under the PNC Loan Agreement (incorporated by reference from Exhibit 10.24 to the Registrant's 2013 Form 10-K.)
|
10.25 | Second Amendment to Term Note issued under the PNC Loan Agreement (incorporated by reference from Exhibit 10.25 to the Registrant's 2013 Form 10-K.) . |
10.26 | Stock Purchase Agreement dated as of April 1, 2014 by and among WMI and the shareholders of Woodbine Products, Inc. (incorporated by reference to Exhibit 10.1 to the Registrant's Current Report on Form 8-K filed April 2, 2014). |
10.27 |
Third Amendment to Amended and Restated Loan and Security Agreement with PNC Bank, N.A
(incorporated by reference to Exhibit 10.2 to the Registrant's Current Report on Form 8-K filed April 2, 2014).
|
10.28 | Form of Subscription Agreement, dated as of May 28, 2014(incorporated by reference to Exhibit 10.1 to the Registrant’s Current Report on Form 8-K filed May 29, 2014). |
10.29 | Placement Agent Agreement, dated as of May 28, 2014, between the Registrant and Taglich Brothers, Inc. (incorporated by reference to Exhibit 10.2 to the Registrant’s Current Report on Form 8-K filed May 29, 2014). |
10.30 | Stock Purchase Agreement dated as of June 4, 2014, by and among the Registrant and the shareholders of Eur-Pac Corporation (incorporated by reference to Exhibit 10.1 to the Registrant’s Current Report on Form 8-K filed June 4, 2014). |
10.31 | Stock Purchase Agreement dated as of October 1, 2014, between the Registrant and Dynamic Materials Corporation (incorporated by reference to Exhibit 10.1 to the Registrant’s Current Report on Form 8-K filed (October 2, 2014). |
10.32 | Promissory Note of Registrant payable to AMK Welding, Inc. (incorporated by reference to Exhibit 10.2 to the Registrant’s Current Report on Form 8-K filed October 2, 2014). |
10.33 | Mortgage and Security Agreement in favor of Dynamic Materials Corporation (incorporated by reference to Exhibit 10.3 to the Registrant’s Current Report on Form 8-K filed October 2, 2014). |
10.34 | Term Note (incorporated by reference to Exhibit 10.4 to the Registrant’s Current Report on Form 8-K filed October 2, 2014). |
10.35 | Capital Market Advisory Agreement dated as of January 1, 2014 between the Registrant and Taglich Brothers, Inc. |
10.36 | Agreement and Plan of Merger dated as of February 27, 2015, by and among the Registrant, SEC Acquisition Corp., The Sterling Engineering Corporation (“Old Sterling”) and the shareholders of Old Sterling (incorporated by reference to Exhibit 10.1 to the Registrant’s Current Report on Form 8-K filed March 5, 2015). |
10.37 | Term Note in the principal amount of $3,500,000 (incorporated by reference to Exhibit 10.2 to the Registrant’s Current Report on Form 8-K filed March 10, 2015). |
10.38 | Open End Mortgage Deed and Security Agreement with respect to South Windsor, Connecticut premises (incorporated by reference to Exhibit 10.3 to the Registrant’s Current Report on Form 8-K filed March 10, 2015). |
21.1
|
Subsidiaries.
|
23.1
|
Consent of Rotenberg Meril Solomon Bertiger & Guttilla, P.C.
|
31.1
|
Certification of principal executive officer pursuant to Rule 13a-14 or Rule 15d-14 of Securities Exchange Act of 1934.
|
|
31.2
|
Certification of principal financial officer pursuant to Rule 13a-14 or Rule 15d-14 of the Exchange Act of 1934.
|
|
32.1
|
Certification of principal executive officer pursuant to Section 906 of Sarbanes-Oxley Act of 2002 (18 U.S.C. Section 1350).
|
|
32.2
|
Certification of principal financial officer pursuant to Section 906 of Sarbanes-Oxley Act of 2002 (18 U.S.C. Section 1350).
|
|
101.INS
|
XBRL Instance Document
|
|
101.SCH
|
XBRL Taxonomy Extension Schema Document
|
|
101.CAL
|
XBRL Taxonomy Extension Calculation Linkbase Document
|
|
101.DEF
|
XBRL Taxonomy Extension Definition Linkbase Document
|
|
101.LAB
|
XBRL Taxonomy Extension Label Linkbase Document
|
|
101.PRE
|
XBRL Taxonomy Extension Presentation Linkbase Document
|
AIR INDUSTRIES GROUP
|
|||
By:
|
/s/ Daniel R. Godin
|
||
Daniel R. Godin
President and CEO
(principal executive officer)
|
By:
|
/s/ James Sartori
|
||
James Sartori
Chief Accounting Officer and Treasurer
(principal financial and accounting officer)
|
|||
Signature
|
Capacity
|
|
/s/ Daniel R. Godin
|
||
Daniel R. Godin
|
President and CEO
|
|
/s/James Sartori
|
||
James Sartori
|
Chief Accounting Officer and Treasurer
|
|
/s/ Michael N. Taglich
|
||
Michael N. Taglich
|
Chairman of the Board
|
|
/s/ Seymour G. Siegel
|
||
Seymour G. Siegel
|
Director
|
|
/s/ Robert F. Taglich
|
||
Robert F. Taglich
|
Director
|
|
/s/ David J. Buonanno
|
||
David J. Buonanno
|
Director
|
|
/s/ Robert Schroeder
|
||
Robert Schroeder
|
Director
|
|
/s/ Michael Brand
|
||
Michael Brand
|
Director
|
|
December 31,
|
December 31,
|
|||||||
2014
|
2013
|
|||||||
ASSETS
|
||||||||
Current Assets
|
||||||||
Cash and Cash Equivalents
|
$ | 1,418,000 | $ | 561,000 | ||||
Accounts Receivable, Net of Allowance for Doubtful Accounts
of $1,566,000 and $783,000, respectively
|
11,916,000 | 8,584,000 | ||||||
Inventory
|
28,391,000 | 26,222,000 | ||||||
Deferred Tax Asset
|
1,421,000 | 1,051,000 | ||||||
Prepaid Expenses and Other Current Assets
|
875,000 | 510,000 | ||||||
Total Current Assets
|
44,021,000 | 36,928,000 | ||||||
Property and Equipment, Net
|
9,557,000 | 6,523,000 | ||||||
Capitalized Engineering Costs - Net of Accumulated Amortization
of $4,184,000 and $3,879,000, respectively
|
712,000 | 752,000 | ||||||
Deferred Financing Costs, Net, Deposit and Other Assets
|
825,000 | 605,000 | ||||||
Intangible Assets, Net
|
4,513,000 | 4,726,000 | ||||||
Deferred Tax Asset
|
858,000 | 185,000 | ||||||
Goodwill
|
5,434,000 | 453,000 | ||||||
TOTAL ASSETS
|
$ | 65,920,000 | $ | 50,172,000 | ||||
LIABILITIES AND STOCKHOLDERS' EQUITY
|
||||||||
Current Liabilities
|
||||||||
Notes Payable and Capitalized Lease Obligations - Current Portion
|
$ | 19,508,000 | $ | 14,969,000 | ||||
Accounts Payable and Accrued Expenses
|
6,948,000 | 6,855,000 | ||||||
Lease Impairment - Current
|
56,000 | 71,000 | ||||||
Deferred Gain on Sale - Current Portion
|
38,000 | 38,000 | ||||||
Customer Deposits
|
158,000 | 251,000 | ||||||
Dividends Payable
|
1,066,000 | 717,000 | ||||||
Income Taxes Payable
|
71,000 | 1,496,000 | ||||||
Total Current Liabilities
|
27,845,000 | 24,397,000 | ||||||
Long Term Liabilities
|
||||||||
Notes Payable and Capitalized Lease Obligations - Net of Current Portion
|
8,213,000 | 2,527,000 | ||||||
Lease Impairment - Net of Current Portion
|
4,000 | 56,000 | ||||||
Deferred Gain on Sale - Net of Current Portion
|
409,000 | 447,000 | ||||||
Deferred Rent
|
1,177,000 | 1,132,000 | ||||||
TOTAL LIABILITIES
|
37,648,000 | 28,559,000 |
December 31,
|
December 31,
|
|||||||
2014 | 2013 | |||||||
Commitments and Contingencies
|
||||||||
Stockholders' Equity
|
||||||||
Preferred Stock Par Value $.001 - Authorized 1,000,000 Shares, None Issued and Outstanding at December 31, 2014 and 2013
|
- | - | ||||||
Common Stock - Par Value $.001 - Authorized 25,000,000 Shares, 7,108,677 and 5,844,093 Shares Issued and Outstanding as of December 31, 2014 and 2013, respectively
|
7,000 | 6,000 | ||||||
Additional Paid-In Capital
|
42,790,000 | 36,799,000 | ||||||
Accumulated Deficit
|
(14,525,000 | ) | (15,192,000 | ) | ||||
TOTAL STOCKHOLDERS' EQUITY
|
28,272,000 | 21,613,000 | ||||||
TOTAL LIABILITIES AND STOCKHOLDERS' EQUITY
|
$ | 65,920,000 | $ | 50,172,000 |
2014
|
2013
|
|||||||
Net Sales
|
$ | 64,331,000 | $ | 62,833,000 | ||||
Cost of Sales
|
50,233,000 | 47,598,000 | ||||||
Gross Profit
|
14,098,000 | 15,235,000 | ||||||
Operating Expenses
|
11,960,000 | 10,594,000 | ||||||
Acquisition Costs
|
403,000 | 28,000 | ||||||
Income from Operations
|
1,735,000 | 4,613,000 | ||||||
Interest and Financing Costs
|
(1,295,000 | ) | (1,340,000 | ) | ||||
Other (Expense) Income, Net
|
(141,000 | ) | 296,000 | |||||
Income before Provision for Income Taxes
|
299,000 | 3,569,000 | ||||||
Benefit from Income Taxes
|
368,000 | 170,000 | ||||||
Net income
|
$ | 667,000 | $ | 3,739,000 | ||||
Income per share - basic
|
$ | 0.10 | $ | 0.65 | ||||
Income per share - diluted
|
$ | 0.10 | $ | 0.63 | ||||
Weighted average shares outstanding - basic
|
6,591,755 | 5,739,014 | ||||||
Weighted average shares outstanding - diluted
|
6,915,688 | 5,932,726 |
Preferred Stock
|
Common
Stock
|
Additional
Paid-in
|
Accumulated
|
Total
Stockholders'
|
||||||||||||||||||||||||
Shares
|
Amount
|
Shares
|
Amount
|
Capital
|
Deficit
|
Equity
|
||||||||||||||||||||||
Balance, January 1, 2013
|
- | $ | - | 5,711,093 | $ | 6,000 | $ | 37,913,000 | $ | (18,931,000 | ) | $ | 18,988,000 | |||||||||||||||
Issuance of Shares For Private Placement
|
- | - | 133,000 | - | 997,000 | - | 997,000 | |||||||||||||||||||||
Dividends Paid
|
- | - | - | - | (1,432,000 | ) | - | (1,432,000 | ) | |||||||||||||||||||
Dividends Payable
|
- | - | - | - | (717,000 | ) | - | (717,000 | ) | |||||||||||||||||||
Stock Compensation Expense
|
- | - | - | - | 38,000 | - | 38,000 | |||||||||||||||||||||
Net Income
|
- | - | - | - | - | 3,739,000 | 3,739,000 | |||||||||||||||||||||
Balance, December 31, 2013
|
- | - | 5,844,093 | 6,000 | 36,799,000 | (15,192,000 | ) | 21,613,000 | ||||||||||||||||||||
Issuance of Shares For Public Offering
|
- | - | 1,170,000 | 1,000 | 9,561,000 | - | 9,562,000 | |||||||||||||||||||||
Issuance of Shares For Acquisitions
|
- | - | 50,000 | - | 485,000 | - | 485,000 | |||||||||||||||||||||
Exercise of Options/Warrants
|
- | - | 44,584 | - | - | - | - | |||||||||||||||||||||
Dividends Paid
|
- | - | - | - | (3,031,000 | ) | - | (3,031,000 | ) | |||||||||||||||||||
Dividends Payable
|
- | - | - | - | (1,066,000 | ) | - | (1,066,000 | ) | |||||||||||||||||||
Stock Compensation Expense
|
- | - | - | - | 42,000 | - | 42,000 | |||||||||||||||||||||
Net Income
|
- | - | - | - | - | 667,000 | 667,000 | |||||||||||||||||||||
Balance, December 31, 2014
|
- | $ | - | 7,108,677 | $ | 7,000 | $ | 42,790,000 | $ | (14,525,000 | ) | $ | 28,272,000 |
2014
|
2013
|
|||||||
CASH FLOWS FROM OPERATING ACTIVITIES
|
||||||||
Net Income
|
$ | 667,000 | $ | 3,739,000 | ||||
Adjustments to reconcile net income to net
|
||||||||
cash provided by (used in) operating activities
|
||||||||
Depreciation of property and equipment
|
2,364,000 | 1,709,000 | ||||||
Amortization of intangible assets
|
1,163,000 | 1,163,000 | ||||||
Amortization of capitalized engineering costs
|
375,000 | 430,000 | ||||||
Bad debt expense
|
299,000 | 394,000 | ||||||
Non-cash compensation expense
|
42,000 | 38,000 | ||||||
Amortization of deferred financing costs
|
49,000 | 69,000 | ||||||
Negative goodwill resulting from the bargain purchase acquisition
|
- | (361,000 | ) | |||||
Gain on sale of real estate
|
(38,000 | ) | (38,000 | ) | ||||
Deferred income taxes
|
(1,043,000 | ) | (1,236,000 | ) | ||||
Changes in Assets and Liabilities
|
||||||||
(Increase) Decrease in Operating Assets:
|
||||||||
Accounts receivable
|
(2,417,000 | ) | 2,871,000 | |||||
Inventory
|
(1,802,000 | ) | 440,000 | |||||
Prepaid expenses and other current assets
|
(244,000 | ) | 35,000 | |||||
Deposits
|
(46,000 | ) | 134,000 | |||||
Other assets
|
(118,000 | ) | 20,000 | |||||
Increase (Decrease) in Operating Liabilities:
|
||||||||
Accounts payable and accrued expenses
|
(577,000 | ) | (892,000 | ) | ||||
Deferred rent
|
45,000 | 75,000 | ||||||
Income taxes payable
|
(1,425,000 | ) | 48,000 | |||||
Customer deposits
|
(93,000 | ) | 251,000 | |||||
NET CASH (USED IN) PROVIDED BY OPERATING ACTIVITIES
|
(2,799,000 | ) | 8,889,000 | |||||
CASH FLOWS FROM INVESTING ACTIVITIES
|
||||||||
Cash paid for acquisitions
|
(8,930,000 | ) | (457,000 | ) | ||||
Cash acquired in acquisitions | 173,000 | 7,000 | ||||||
Capitalized engineering costs
|
(335,000 | ) | (380,000 | ) | ||||
Purchase of property and equipment
|
(571,000 | ) | (288,000 | ) | ||||
NET CASH USED IN INVESTING ACTIVITIES
|
(9,663,000 | ) | (1,118,000 | ) | ||||
CASH FLOWS FROM FINANCING ACTIVITIES
|
||||||||
Proceeds from public issuance in 2014 and private placement in 2013
|
9,530,000 | 997,000 | ||||||
Costs to raise capital
|
(968,000 | ) | - | |||||
Notes payable - sellers
|
(691,000 | ) | (644,000 | ) | ||||
Capital lease obligations
|
(143,000 | ) | (996,000 | ) | ||||
Note payable - revolver
|
3,142,000 | (3,637,000 | ) | |||||
Proceeds from note payable - term loans
|
7,328,000 | - | ||||||
Payments of note payable - term loans
|
(913,000 | ) | (1,800,000 | ) | ||||
Deferred financing costs
|
(151,000 | ) | (102,000 | ) | ||||
Payments related to lease impairment
|
(67,000 | ) | (85,000 | ) | ||||
Dividends paid
|
(3,748,000 | ) | (1,433,000 | ) | ||||
NET CASH PROVIDED BY (USED IN) FINANCING ACTIVITIES
|
13,319,000 | (7,700,000 | ) | |||||
NET INCREASE IN CASH AND CASH EQUIVALENTS
|
857,000 | 71,000 | ||||||
CASH AND CASH EQUIVALENTS AT BEGINNING OF YEAR
|
561,000 | 490,000 | ||||||
CASH AND CASH EQUIVALENTS AT END OF YEAR
|
$ | 1,418,000 | $ | 561,000 |
2014 | 2013 | |||||||
Supplemental cash flow information
|
||||||||
Cash paid during the period for interest
|
$ | 1,074,000 | $ | 1,188,000 | ||||
Supplemental cash flow information
|
||||||||
Cash paid during the period for income taxes
|
$ | 2,494,000 | $ | 1,061,000 | ||||
Supplemental schedule of non-cash investing and financing activities
|
||||||||
Conversion of junior subordinated notes
|
$ | 1,000,000 | $ | - | ||||
Dividends payable
|
$ | 1,066,000 | $ | 717,000 | ||||
Purchase of substantially all assets of AMK Welding, Inc. and assumption
|
||||||||
of liabilities in the acquisition as follows:
|
||||||||
Fair Value of tangible assets acquired
|
$ | 5,637,000 | $ | - | ||||
Intangible assets, subject to amortization
|
950,000 | - | ||||||
Goodwill
|
651,000 | - | ||||||
Cash acquired
|
168,000 | |||||||
Liabilities assumed
|
(453,000 | ) | - | |||||
Due to seller
|
(2,500,000 | ) | - | |||||
Cash paid for acquisition
|
$ | 4,453,000 | $ | - | ||||
Purchase of stock of Woodbine Products, Inc.
|
||||||||
Fair value of tangible assets acquired
|
$ | 309,000 | $ | - | ||||
Goodwill
|
2,565,000 | - | ||||||
Liabilities assumed
|
(19,000 | ) | - | |||||
Common stock issued
|
(290,000 | ) | - | |||||
Cash paid for acquisition
|
$ | 2,565,000 | $ | - | ||||
Purchase of stock of Eur-Pac Corporation
|
||||||||
Fair value of tangible assets acquired
|
$ | 412,000 | $ | - | ||||
Goodwill
|
1,656,000 | - | ||||||
Liabilities assumed
|
(170,000 | ) | - | |||||
Common stock issued
|
(195,000 | ) | - | |||||
Cash paid for acquisition
|
$ | 1,703,000 | $ | - | ||||
Purchase of stock of Electronic Connection Corporation
|
||||||||
Fair value of tangible assets acquired
|
$ | 126,000 | $ | - | ||||
Goodwill
|
109,000 | - | ||||||
Cash acquired
|
5,000 | |||||||
Liabilities assumed
|
(31,000 | ) | - | |||||
Cash paid for acquisition
|
$ | 209,000 | $ | - | ||||
Purchase of certain assets of Decimal Industries, Inc.
|
||||||||
Fair value of tangible assets acquired
|
$ | - | $ | 975,000 | ||||
Due to sellers of Decimal Industries, Inc.
|
- | (660,000 | ) | |||||
Cash paid for acquisition
|
$ | - | $ | 315,000 | ||||
Purchase of stock of Miller Stuart, Inc
|
||||||||
Fair value of tangible assets acquired
|
$ | - | $ | 506,000 | ||||
Cash acquired
|
- | 7,000 | ||||||
Liabilities assumed
|
- | (10,000 | ) | |||||
Negative goodwill resulting from the bargain purchase acquisition
|
- | (361,000 | ) | |||||
Cash paid for acquisition
|
$ | - | $ | 142,000 |
Fair value of tangible assets acquired (including cash acquired of $7,000)
|
$
|
513,000
|
||
Liabilities assumed
|
(10,000
|
)
|
||
Negative goodwill resulting from the bargain purchase acquisition
|
(361,000
|
)
|
||
Total
|
$
|
142,000
|
Fair value of tangible assets acquired
|
$ | 309,000 | ||
Goodwill
|
2,565,000 | |||
Liabilities assumed
|
(19,000 | ) | ||
Total
|
$ | 2,855,000 |
Fair Value of tangible assets acquired
|
$ | 412,000 | ||
Goodwill
|
1,656,000 | |||
Liabilities assumed
|
(170,000 | ) | ||
Total
|
$ | 1,898,000 |
Fair value of tangible assets acquired
|
$ | 126,000 | ||
Goodwill
|
109,000 | |||
Cash acquired
|
5,000 | |||
Liabilities assumed
|
(31,000 | ) | ||
Total
|
$ | 209,000 |
Fair value of tangible assets acquired
|
$ | 5,637,000 | ||
Intangible assets, subject to amortization
|
950,000 | |||
Goodwill
|
651,000 | |||
Cash acquired
|
168,000 | |||
Liabilities assumed
|
(453,000 | ) | ||
Total
|
$ | 6,953,000 |
Woodbine | Eur-Pac | ECC | AMK | |||||||||||||
Net sales
|
$ | 1,047,000 | $ | 2,756,000 | $ | 281,000 | $ | 1,838,000 | ||||||||
Income from operations
|
$ | 300,000 | $ | 637,000 | $ | 67,000 | $ | 359,000 |
·
|
The customer requests that the transaction be on a bill and hold basis. A customer must initiate the request for any bill and hold arrangement. Upon request for a bill and hold, the Company requires a signed letter from the customer upon which the customer specifically requests the bill and hold arrangement. Upon receipt of the letter, the Company begins its evaluation process to determine whether a bill and hold arrangement can be granted.
|
|
·
|
The customer has made fixed commitment to purchase in written documentation. All customers’ orders are through firm written purchase orders.
|
|
·
|
The goods are segregated from other inventory and are not available to fill any other customers’ orders. The Company’s goods are made to customers’ or their customer’s specifications and could not be sold to others.
|
|
·
|
The risk of ownership has passed to the customer. The product is complete and ready for shipment. The earnings process is complete. An internal evaluation is made as to whether the product is complete and ready for shipment. This involves a review of the purchase order and a completed inspection process by the Company’s quality control department.
|
·
|
The date is determined by which the Company expects payment and the Company has not modified its normal billing and credit terms for this buyer. Payment is expected as if the goods had been shipped.
|
|
·
|
The customer has the expected risk of loss in the event of a decline in the market value of goods. All goods are made to firm purchase orders with fixed prices. Any decline in value would not affect the pricing of the goods. The Company has not at any point, agreed to a price reduction on a bill and hold arrangement.
|
Customer
|
Percentage of Sales
|
|||||||||
2014
|
2013
|
|||||||||
1 | 26.8 | 27.7 | ||||||||
2 | 20.5 | 18.3 | ||||||||
3 | * | 10.0 |
Customer
|
Percentage of Receivables
|
|||||||||
December
|
December
|
|||||||||
2014
|
2013
|
|||||||||
1 | 29.0 | 20.1 | ||||||||
2 | 11.4 | * | ||||||||
3 | 10.0 | 22.8 | ||||||||
2014
|
2013
|
|||||||
Weighted average shares outstanding used to compute basic earnings per share
|
6,591,755
|
5,739,014
|
||||||
Effect of dilutive stock options and warrants
|
323,933
|
193,712
|
||||||
Weighted average shares outstanding and dilutive securities used to compute dilutive earnings per share
|
6,915,688
|
5,932,726
|
December 31,
|
December 31,
|
|||||||
2014
|
2013
|
|||||||
Stock Options
|
22,888 | 24,548 | ||||||
Warrants
|
46,800 | - | ||||||
69,688 | 24,548 |
December 31,
|
December 31,
|
|||||||
2014
|
2013
|
|||||||
Accounts Receivable Gross
|
$
|
13,482,000
|
$
|
9,367,000
|
||||
Allowance for Doubtful Accounts
|
(1,566,000
|
)
|
(783,000
|
)
|
||||
Accounts Receivable Net
|
$
|
11,916,000
|
$
|
8,584,000
|
Balance at
|
Charged to Costs
|
Deductions From
|
Balance at End of
|
|||||||||||||
Beginning of Year
|
and Expenses
|
Reserves
|
Year
|
|||||||||||||
Year ended December 31, 2014
|
||||||||||||||||
Allowance for Doubtful Accounts
|
$
|
783,000
|
$
|
816,000
|
$
|
33,000
|
$
|
1,566,000
|
||||||||
Year ended December 31, 2013
|
||||||||||||||||
Allowance for Doubtful Accounts
|
$
|
705,000
|
$
|
400,000
|
$
|
322,000
|
$
|
783,000
|
December 31,
|
December 31,
|
|||||||
2014
|
2013
|
|||||||
Raw Materials
|
$
|
7,168,000
|
$
|
6,002,000
|
||||
Work In Progress
|
14,886,000
|
15,665,000
|
||||||
Finished Goods
|
10,072,000
|
7,712,000
|
||||||
Progress Payments Received
|
(260,000
|
) |
(416,000
|
)
|
||||
Inventory Reserve
|
(3,475,000
|
)
|
(2,741,000
|
)
|
||||
Total Inventory
|
$
|
28,391,000
|
$
|
26,222,000
|
December 31,
|
December 31,
|
||||||||
2014
|
2013
|
||||||||
Land
|
$ |
200,000
|
$
|
-
|
|||||
Buildings and Improvements
|
1,680,000
|
-
|
31.5 years
|
||||||
Machinery and Equipment
|
12,514,000
|
6,251,000
|
5 - 8 years
|
||||||
Capital Lease Machinery and Equipment
|
1,800,000
|
5,261,000
|
5 - 8 years
|
||||||
Tools and Instruments
|
5,566,000
|
5,009,000
|
1.5 - 7 years
|
||||||
Automotive Equipment
|
162,000
|
59,000
|
5 years
|
||||||
Furniture and Fixtures
|
275,000
|
257,000
|
5 - 8 years
|
||||||
Leasehold Improvements
|
646,000
|
646,000
|
Term of Lease
|
||||||
Computers and Software
|
372,000
|
357,000
|
4-6 years
|
||||||
Total Property and Equipment
|
23,215,000
|
17,840,000
|
|||||||
Less: Accumulated Depreciation
|
(13,658,000
|
)
|
(11,317,000
|
)
|
|||||
Property and Equipment, net
|
$
|
9,557,000
|
$
|
6,523,000
|
December
31,
|
December
31,
|
||||||||
2014
|
2013
|
||||||||
Customer Relationships
|
$
|
6,255,000
|
$
|
5,815,000
|
5 to 14 years
|
||||
Trade Names
|
1,280,000
|
770,000
|
20 years
|
||||||
Technical Know-how
|
660,000
|
660,000
|
10 years
|
||||||
Non-Compete
|
50,000
|
50,000
|
5 years
|
||||||
Professional Certifications
|
15,000
|
15,000
|
.25 to 2 years
|
||||||
Total Intangible Assets
|
8,260,000
|
7,310,000
|
|||||||
Less: Accumulated Amortization
|
(3,747,000
|
)
|
(2,584,000
|
)
|
|||||
Intangible Assets, net
|
$
|
4,513,000
|
$
|
4,726,000
|
For the year ending
|
Amount
|
|||
December 31, 2015
|
$
|
1,228,000
|
||
December 31, 2016
|
1,228,000
|
|||
December 30, 2017
|
703,000
|
|||
December 31, 2018
|
233,000
|
|||
December 31, 2019
|
233,000
|
|||
Thereafter
|
888,000
|
|||
Total
|
$
|
4,513,000
|
December 31,
|
December 31,
|
|||||||
2014
|
2013
|
|||||||
Revolving credit note payable to PNC Bank N.A. ("PNC")
|
$
|
17,672,000
|
$
|
12,029,000
|
||||
Term loans, PNC
|
8,363,000
|
1,948,000
|
||||||
Capital lease obligations
|
1,645,000
|
1,787,000
|
||||||
Notes payable to sellers of WMI
|
41,000
|
732,000
|
||||||
Junior subordinated notes
|
-
|
1,000,000
|
||||||
Subtotal
|
27,721,000
|
17,496,000
|
||||||
Less: Current portion of notes and capital obligations
|
(19,508,000
|
)
|
(14,969,000
|
)
|
||||
Notes payable and capital lease obligations, net of current portion
|
$
|
8,213,000
|
$
|
2,527,000
|
(i)
|
a $23,000,000 revolving loan (includes inventory sub-limit of $15,000,000) and
|
|
(ii)
|
Three term loans (Term Loan A, Term Loan B, and Term Loan C).
|
For the year ending
|
Amount
|
|||
December 31, 2015
|
$
|
1,464,000
|
||
December 31, 2016
|
3,156,000
|
|||
December 31, 2017
|
1,117,000
|
|||
December 31, 2018
|
1,117,000
|
|||
December 31, 2019
|
1,058,000
|
|||
Thereafter
|
451,000
|
|||
PNC Term Loans payable
|
8,363,000
|
|||
Less: Current portion
|
(1,464,000
|
)
|
||
Long-term portion
|
$
|
6,899,000
|
For the year ending
|
Amount
|
|||
December 31, 2015
|
$
|
416,000
|
||
December 31, 2016
|
416,000
|
|||
December 31, 2017
|
416,000
|
|||
December 31, 2018
|
400,000
|
|||
December 31, 2019
|
225,000
|
|||
Thereafter
|
7,000
|
|||
Total future minimum lease payments
|
1,880,000
|
|||
Less: imputed interest
|
(235,000
|
)
|
||
Less: current portion
|
(331,000
|
)
|
||
Total Long Term Portion
|
$
|
1,314,000
|
December 31,
|
December 31,
|
|||||||
2014
|
2013
|
|||||||
Former Welding Stockholders
|
$
|
41,000
|
$
|
732,000
|
||||
Less: Current Portion
|
(41,000
|
)
|
(691,000
|
)
|
||||
Total long-term portion
|
$
|
-
|
$
|
41,000
|
December 31,
|
December 31,
|
|||||||
2014
|
2013
|
|||||||
Accounts Payable
|
$
|
5,636,000
|
$
|
5,142,000
|
||||
Accrued Expenses
|
812,000
|
793,000
|
||||||
Other Payables
|
500,000
|
920,000
|
||||||
$
|
6,948,000
|
$
|
6,855,000
|
For the year ending
|
Plant
Avenue
Annual
Rent
|
Fifth
Street
Annual
Rent
|
Lamar
Street
Annual
Rent
|
Motor
Parkway
AnnualRent
|
Porter
Street
Annual
Rent
|
Old Willets
Path
Annual
Rent
|
Total
Rents
|
|||||||||||||||||||||
December 31, 2015
|
$ | 633,000 | $ | 684,000 | $ | 360,000 | $ | 117,000 | $ | 115,000 | $ | 22,000 | $ | 1,931,000 | ||||||||||||||
December 31, 2016
|
615,000 | 704,000 | 360,000 | 103,000 | 115,000 | - | 1,897,000 | |||||||||||||||||||||
December 31, 2017
|
543,000 | 725,000 | 360,000 | 106,000 | 115,000 | - | 1,849,000 | |||||||||||||||||||||
December 31, 2018
|
559,000 | 747,000 | 300,000 | 110,000 | 115,000 | - | 1,831,000 | |||||||||||||||||||||
December 31, 2019
|
576,000 | 769,000 | - | 113,000 | 48,000 | - | 1,506,000 | |||||||||||||||||||||
Thereafter
|
3,865,000 | 5,832,000 | - | 219,000 | - | - | 9,916,000 | |||||||||||||||||||||
Total Rents
|
$ | 6,791,000 | $ | 9,461,000 | $ | 1,380,000 | $ | 768,000 | $ | 508,000 | $ | 22,000 | $ | 18,930,000 |
2014
|
2013
|
|||||||
Current
|
||||||||
Federal
|
$
|
939,000
|
$
|
1,135,000
|
||||
State
|
16,000
|
339,000
|
||||||
Prior year overaccruals
|
||||||||
Federal
|
10,000
|
(185,000)
|
||||||
State
|
(290,000)
|
(223,000)
|
||||||
Total Expense
|
675,000
|
1,066,000
|
||||||
Deferred Tax Benefit
|
(1,043,000
|
)
|
(1,236,000)
|
|||||
Net Benefit from Income Taxes
|
$
|
(368,000
|
)
|
$
|
(170,000)
|
2014
|
2013
|
|||||||
Federal Tax Rate
|
34
|
%
|
34
|
%
|
||||
Effect of State Taxes
|
6 |
%
|
6
|
%
|
||||
State Franchise Taxes
|
4 |
%
|
1
|
%
|
||||
Permanent Differences
|
-12 |
%
|
-3
|
%
|
||||
Prior Year Over Accrual and Others
|
-155 |
%
|
-8
|
%
|
||||
Change in Valuation Allowance
|
0 |
%
|
-35
|
%
|
||||
Total
|
-123
|
%
|
-5
|
%
|
December
31,
|
December
31,
|
|||||||
2014
|
2013
|
|||||||
Deferred tax assets:
|
||||||||
Current:
|
||||||||
Bad debts
|
$
|
650,000
|
$
|
313,000
|
||||
Inventory - 263A adjustment
|
762,000
|
729,000
|
||||||
Account payable, accrued expenses and reserves
|
9,000
|
9,000
|
||||||
Total current deferred tax asset before valuation allowance
|
1,421,000
|
1,051,000
|
||||||
Valuation Allowance
|
-
|
-
|
||||||
Total current deferred tax asset after valuation allowance
|
$
|
1,421,000
|
$
|
1,051,000
|
||||
Non-Current
|
||||||||
Capital loss carry forwards
|
$
|
1,088,000
|
$
|
1,088,000
|
||||
Section 1231 loss carry forward
|
4,000
|
4,000
|
||||||
Stock based compensation - options and restricted stock
|
527,000
|
521,000
|
||||||
Capitalized engineering costs
|
522,000
|
503,000
|
||||||
Deferred rent
|
483,000
|
453,000
|
||||||
Amortization - NTW Transaction
|
663,000
|
475,000
|
||||||
Lease impairment
|
22,000
|
51,000
|
||||||
Deferred gain on sale of real estate
|
179,000
|
194,000
|
||||||
Total deferred tax assets before valuation allowance
|
3,488,000
|
3,289,000
|
||||||
Valuation allowance
|
(1,092,000
|
)
|
(1,092,000
|
)
|
||||
Total deferred tax assets after valuation allowance
|
$
|
2,396,000
|
$
|
2,197,000
|
||||
Deferred tax liabilities:
|
||||||||
Property and equipment
|
$
|
(1,082,000
|
)
|
$
|
(1,497,000
|
)
|
||
Goodwill - NTW Transaction
|
(11,000
|
)
|
(7,000)
|
|||||
Goodwill - AMK Transaction
|
(4,000)
|
-
|
||||||
Amortization - Welding Transaction
|
(441,000
|
)
|
(508,000
|
)
|
||||
Total Deferred Tax Liability
|
(1,538,000
|
)
|
(2,012,000
|
)
|
||||
Net deferred tax asset
|
$
|
858,000
|
$
|
185,000
|
2014
|
2013
|
|||||||
Risk-free interest rates
|
1.55% - 1.68
|
%
|
0.71% - 1.75
|
%
|
||||
Expected life (in years)
|
5 - 7
|
5
|
||||||
Expected volatility
|
25
|
%
|
25
|
%
|
||||
Dividend yield
|
5.6% - 6.1%
|
5.6%
|
||||||
Weighted-average grant date fair value per share
|
$1.10
|
$0.83
|
Options
|
Wtd. Avg. Exercise Price
|
|||||||
Balance, December 31, 2012
|
327,338
|
$
|
9.97
|
|||||
Granted during the period
|
113,247
|
6.85
|
||||||
Exercised during the period
|
(18,253)
|
4.50
|
||||||
Terminated/Expired during the period
|
-
|
-
|
||||||
Balance, December 31, 2013
|
422,332
|
9.34
|
||||||
Granted during the period
|
144,000
|
10.13
|
||||||
Exercised during the period
|
(33,133
|
)
|
4.74
|
|||||
Terminated/Expired during the period
|
(4,660)
|
81.72
|
||||||
Balance, December 31, 2014
|
528,539
|
$
|
8.98
|
|||||
Exercisable at December 31, 2014
|
396,627
|
$
|
9.28
|
Range of Exercise
Prices
|
Remaining
Number
Outstanding
|
Wtd. Avg.
Life
|
Wtd. Avg.
Exercise Price
|
||||||||
$ | 0.00 - $5.00 |
246,168
|
.8 years
|
$
|
4.39
|
||||||
$ | 5.01 - $90.00 |
272,831
|
5.9 years
|
8.88
|
|||||||
$ | 90.01 - $100.00 |
3,000
|
. 8 years
|
90.00
|
|||||||
$ | 100.01 - $110.00 |
-
|
-
|
-
|
|||||||
$ | 110.01 - $170.00 |
3,216
|
.3 years
|
122.78
|
|||||||
$ | 170.01 - $200.00 |
3,325
|
.7 years
|
179.16
|
|||||||
528,539
|
3.4 years
|
$
|
8.98
|
Warrants
|
Wtd. Avg. Exercise Price
|
|||||||
Balance, December 31, 2012
|
118,835
|
$
|
6.38
|
|||||
Granted during the period
|
-
|
-
|
||||||
Exercised during the period
|
-
|
-
|
||||||
Terminated/Expired during the period
|
(250
|
)
|
43.60
|
|||||
Balance, December 31, 2013
|
118,585
|
6.30
|
||||||
Granted during the period
|
56,800
|
10.80
|
||||||
Exercised during the period
|
(10,800
|
) |
6.30
|
|||||
Terminated/Expired during the period
|
-
|
|
-
|
|||||
Balance, December 31, 2014
|
164,585
|
$
|
7.85
|
|||||
Exercisable at December 31, 2014
|
164,585
|
$
|
7.85
|
Exercise Price
|
Warrants
|
Wtd. Avg.
Life
|
Wtd. Avg. Exercise Price
|
|||||||||
$6.30 |
107,785
|
2.5 years
|
|
$
6.30
|
||||||||
$8.72 - $11.25 | 56,800 |
4.4 years
|
$10
.80
|
|||||||||
$6.30 - $11.25 | 164,585 |
3.2 years
|
$7
.85
|
|
1.
|
Services.
Subject to the terms and conditions of this Agreement, Taglich will use its best efforts to furnish ongoing business advisory services as the Company may from time to time reasonably request. The Services may include, without limitation, the following
|
|
a)
|
Identify and evaluate financial transactions; including potential acquisitions and/or mergers.
|
|
b)
|
Guide the Company in their message to the Investment Community.
|
|
c)
|
Introduction to Brokers and/or Investors that Taglich feel would be accretive to the Company’s goals.
|
|
d)
|
Hold weekly strategy calls with the Company.
|
|
e)
|
Set up Investor road shows in various cities.
|
|
f)
|
Aid in sponsorship to targeted micro-cap conferences.
|
|
2.
|
Term.
The term of this Agreement shall be for a twelve (12) months period beginning on January 1, 2014. After such twelve (12) month period, this agreement shall automatically be extend for a twelve (12) month period, unless the Company provides thirty (30) days prior written notice to Taglich that the Company does not wish to extend the term for a twelve (12) month period. Such extension shall be at the same Monthly Advisory Fee described in paragraph 3 below.
|
|
3.
|
Fees and Expenses.
As compensation for the Services provided by Taglich, the Company will pay a Monthly Advisory Fee of Seven Thousand Dollars ($7,000
)
per month (“Monthly Advisory Fee”). The first month’s advisory fee shall be paid to Taglich on January 15, 2014 (the “Effective Date”) and thereafter no later than the fifteenth (15
th
) day of each month after the Effective Date during the Term of this Agreement. The Company agrees to reimburse Taglich for any reasonable out of pocket expenses.
|
|
4.
|
Additional Compensation.
The Company shall issue to Taglich Brothers CMA 10,000 warrants with a strike price of $8.72 and vesting quarterly over a twelve-month period beginning three months after the effective date.
|
|
5.
|
Representations and Covenants.
The Company recognized that Taglich now renders and may continue to render financial consulting, management, investment banking and other services to other companies that may or may not conduct business and activities similar to those of the Company. Taglich shall be free to render such advice and other services and the Company hereby consents thereto. Taglich shall not be required to devote its full time and attention to the performance of its duties under this Agreement, but shall devote only so much of it time and attention as it deems reasonable or necessary to fulfill its obligation hereunder.
|
|
6.
|
Indemnification.
The Company and Taglich agree to indemnify the other party to the extent of and in accordance with the provisions of Schedule A hereto, which is incorporated by reference herein and made a part hereof and shall survive the termination, expiration or supersession of this Agreement.
|
|
7.
|
Acknowledgement
.
The Company understands and acknowledges that Taglich Brothers and its affiliates (collectively “Taglich”), provide investment banking, securities trading, financing, and financial advisory services and other commercial and investment banking products and services to a wide range of institutions and individuals. In the ordinary course of business, Taglich and certain of its employees, as well as investment funds in which they may have financial interests, may acquire, hold or sell, long or short positions, or trade or otherwise effect transactions, in debt, equity, and other securities and financial instruments (including bank loans and other obligations) of, or investments in, a party that may be involved in the matters contemplated by this Agreement. The holder of such securities, financial instruments and/or investments may and will exercise all voting and other rights in respect thereof, in its sole discretion. The Company also understands and acknowledges that Taglich is being engaged hereunder as an independent contractor to provide the services described above solely to the Company, and that Taglich is not acting as a fiduciary of the Company, any subsidiary or affiliate of the Company (including the Company’s security holders) or creditors of the Company or any other persons in connection with this engagement.
|
|
8.
|
Limitation on Services
.
Taglich shall not be obligated to provide advice or perform services to the Company that are not specifically addressed in this Agreement. The Company hereby acknowledges that Taglich is not a fiduciary of the Company and that Taglich makes no representations or warranties regarding the Company’s ability to secure financing, whether now or in the future. The obligations of Taglich described in this Agreement consist solely of commercially reasonable best efforts services to the Company, and in no event shall Taglich be required to act as the agent of the Company or to provide legal or accounting services. All final decisions with respect to acts of the Company or its affiliates, whether or not made pursuant to or in reliance upon information or advice furnished by Taglich hereunder, shall be those of the Company or such affiliates, and Taglich shall under no circumstances be liable for any expense incurred or loss suffered by the Company as a consequence of such decisions.
|
|
9.
|
Governing Law
.
This Agreement will be governed by and construed in accordance with the laws of the State of New York, without giving effect to its conflict of laws principles or rules. If a dispute or claim shall arise with respect to any of the terms or provisions of this Agreement, or with respect to the performance by any of the parties under this Agreement, then the parties agree to submit the dispute to binding and non-appealable arbitration in a venue located in New York, NY in accordance with the rules of the American Arbitration Association (“AAA”). The prevailing party shall be reimbursed by the non-prevailing party for all reasonable attorney's fees and costs (including all arbitration costs) incurred by the prevailing party in resolving such dispute. Any award rendered in arbitration may be enforced in any court of competent jurisdiction. Notwithstanding the foregoing, any action by either Taglich or the Company to obtain specific performance of any provision of this Agreement by the other party may be brought in any appropriate judicial forum.
|
|
10.
|
Successors and Assigns
. This Agreement shall be binding upon and inure to the benefit of the parties and their respective successors and authorized assigns. Any attempt by either party to assign (other than by operation of law pursuant to a merger) any rights, duties or obligations which may arise under this Agreement without the prior written consent of the other party shall be void.
|
|
11.
|
Notices.
Any notice given pursuant to this Agreement shall be in writing and shall be effective immediately upon hand delivery or upon confirmation of delivery by mail, facsimile or e-mail. Notices under this agreement shall be sent to the following:
|
|
12.
|
If to Taglich:
|
|
13.
|
Entire Agreement; Severability
.
This document contains the entire agreement between the parties with respect to the subject matter hereof, and neither party is relying on any agreement, representation, warranty, or other understanding not expressly stated herein. No amendment to this Agreement shall be valid unless such amendment is in writing and is signed by authorized representatives of all the parties to this Agreement. In the event that any provision of this Agreement shall be held to be invalid, illegal or unenforceable in any circumstances, the remaining provisions shall nevertheless remain in full force and effect and shall be construed as if the unenforceable portion or portions were deleted.
|
|
14.
|
Survival.
The parties acknowledge that certain provisions of this Agreement must survive any termination or expiration thereof in order to be fair and equitable to the party to whom any promise or duty to perform is owed under such provision prior to such termination or expiration of the Agreement. Therefore, the parties agree that Sections 3, 4, 5, 6, and 9 shall survive the termination or expiration of this Agreement for the period required to meet and satisfy any obligations and promises arising therein and thereunder.
|
|
15.
|
Headings
. The headings contained herein are for convenience only, do not constitute a part of this Agreement and shall not be deemed to limit or affect any of the provisions hereof.
|
|
16.
|
Counterparts; Facsimile Signatures.
This Agreement may be executed in counterparts, each of which shall be deemed an original and all of which together will constitute one and the same instrument. This Agreement may be executed by signatures delivered by facsimile transmission or electronic mail (e-mail) attachment.
|
|
·
|
Healthcare related benefits including:
|
|
o
|
Optional employee benefits including: Short Term and Long Term Disability and Flexible Spending Accounts (FSA)
|
|
·
|
Air Industries has a 401(k) plan that it has established for the benefit of all employees that meet the plans requirements. You are elidgible to enroll in Air Industries 401(k) plan upon the plan elidgibility at your 6 month anniversary from your date of hire. Currently, the Company does not match or contribute on behalf of its employees.
|
|
·
|
Extensive training and development programs to help employees and supervisors learn new skills, maintain safety or compliance, improve performance and for career development.
|
Name
|
Jurisdiction of Incorporation
|
Ownership
|
Air Industries Machining, Corp.
|
New York
|
100%
|
|
||
Welding Metallurgy, Inc. | New York | 100% |
Nassau Tool Works, Inc.
|
New York
|
100%
|
|
||
Woodbine Products, Inc. | New York | 100% |
|
||
Decimal Industries, Inc.
|
New York | 100% |
Eur-Pac Corporation
|
New York
|
100%
|
|
||
Electronic Connection Corporation | Connecticut | 100% |
|
||
AMK Welding, Inc.
|
Connecticut | 100% |
The Sterling Engineering Corporation | Connecticut | 100% |
Air Realty Group, LLC | Connecticut | 100% |