0001213900-21-058445 | 10-Q | XBRL Viewer

FORMATION AND BASIS OF PRESENTATION

Note 1. FORMATION AND BASIS OF PRESENTATION

Organization

Air Industries Group is a Nevada corporation (“AIRI”). As of and for the three and nine months ended September 30, 2021 and 2020, the accompanying condensed consolidated financial statements presented are those of AIRI, and its wholly-owned subsidiaries; Air Industries Machining Corp. (“AIM”), Nassau Tool Works, Inc. (“NTW”), and the Sterling Engineering Corporation (“Sterling”), (together, the “Company”).

Basis of Presentation

The accompanying unaudited condensed consolidated financial statements of the Company have been prepared in accordance with U.S. generally accepted accounting principles for interim financial information and with Rule 8-03 of Regulation S-X. These principles require us to make estimates and assumptions that affect the reported amounts of assets and liabilities, and disclosure of contingent assets and liabilities at the date of the condensed unaudited consolidated financial statements, and the reported amount of net sales and expenses during the reported period. Actual results could differ from those estimates. Changes in facts and circumstances may result in revised estimates, which would be recorded in the period in which they become known. Accordingly, they do not include all of the information and footnotes required by generally accepted accounting principles for complete financial statements. In the opinion of management, all adjustments (consisting of normal recurring accruals) considered necessary for a fair presentation have been included. Operating results for the three and nine months ended September 30, 2021 are not necessarily indicative of the results that may be expected for the year ending December 31, 2021. These unaudited condensed consolidated financial statements should be read in conjunction with the audited consolidated financial statements and notes thereto included in the Company’s Annual Report on Form 10-K for the year ended December 31, 2020, as filed with the Securities and Exchange Commission, from which the accompanying condensed consolidated balance sheet dated December 31, 2020 was derived.

Reclassifications

Reclassification occurred to certain 2020 amounts to conform to the 2021 classification. These reclassifications had no impact on the statement of operations.

Liquidity

At each reporting period, management evaluates whether there are conditions or events that raise substantial doubt about the Company’s ability to continue as a going concern within one year after the date that the financial statements are issued. The Company is required to make certain additional disclosures if management concludes that substantial doubt exists about the Company’s ability to continue as a going concern and such doubt is not alleviated by the Company’s plans or when the Company’s plans alleviate substantial doubt about its ability to continue as a going concern. The evaluation entails analyzing prospective operating budgets and forecasts for expectations regarding cash needs and comparing those needs to the current cash and cash equivalent balance and expectations regarding cash to be generated over the following year.

Although the global outbreak of COVID-19 negatively impacted the Company’s revenues, earnings and operating cash flows in 2020, management believes the Company’s operations substantially returned to normal in fiscal 2021. With nine months of fiscal 2021 now completed and the Company beginning to see the benefits from its recent investments in machinery and equipment, management believes the Company will continue to improve its liquidity. As such, based on the Company generating operating income of $177,000 and $644,000 for the three and nine months ended September 30, 2021, respectively, its current best estimates of fourth quarter fiscal 2021 and the first quarter of fiscal 2022 sales, confirmed and expected orders, the strength of existing backlog, overall market demand, expected timing of future cash receipts and expenditures and the Company’s ability to access additional liquidity, if needed, the Company believes it will have adequate cash to support operations through at least November 30, 2022.

Subsequent Events

Management has evaluated subsequent events through the date of this filing.

Summary of Significant Accounting Policies

9 Months Ended

Sep. 30, 2021

SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES

Note 2. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES

Inventory Valuation

For annual periods, the Company values inventory at the lower of cost on a first-in-first-out basis or estimated net realizable value. The Company does not take physical inventories at interim quarterly reporting periods. For interim periods, substantially all of the inventory value has been estimated using a gross profit percentage based on annual gross profit percentages of the immediately preceding year as applied to the net sales of the current period. During the three and nine months ended September 30, 2021, the Company increased its estimate of its gross profit percentage from the percentage for the prior year based on the better absorption of Manufacturing Overhead which results from increased sales. Adjustments to reconcile the annual physical inventory to the Company’s records are recorded in the fourth quarter.

Credit and Concentration Risks

There were two customers that represented 67.7% and three customers that represented 70.6% of total net sales for the three months ended September 30, 2021 and 2020, respectively. This is set forth in the table below.

Customer	Percentage of Sales
	September 30, 2021			September 30, 2020
	(Unaudited)			(Unaudited)
1		41.6	%		23.2	%
2		26.1	%		25.8	%
3		*			21.6	%

Customer was less than 10% of sales for the three months ended September 30, 2021.

There were three customers that represented 75.5% and 74.2% of total sales for the nine months ended September 30, 2021 and 2020, respectively. This is set forth in the table below.

Customer	Percentage of Sales
	September 30, 2021			September 30, 2020
	(Unaudited)			(Unaudited)
1		36.8	%		28.2	%
2		26.2	%		32.1	%
3		12.5	%		13.9	%

There were two customers that represented 68.9% and three customers that represented 80.3% of gross accounts receivable at September 30, 2021 and December 31, 2020, respectively. This is set forth in the table below.

	Percentage of Receivables
Customer	September 30, 2021			December 31, 2020
	(Unaudited)
1		53.5	%		57.1	%
2		15.4	%		*
3		**			12.0	%
4		**			11.2	%

Customer was less than 10% of accounts receivable at December 31, 2020.

Customer was less than 10% of accounts receivable at September 30, 2021.

Cash and Cash Equivalents

During the year, the Company had occasionally maintained balances in its bank accounts that were in excess of the FDIC insurance limit. The Company has not experienced any losses on these accounts.

Major Suppliers

The Company has several key sole-source suppliers of various parts that are important for one or more of its products. These suppliers are its only source for such parts and, therefore, in the event any of them were to go out of business or be unable or unwilling to provide parts for any reason, its business could be severely harmed.

To date, global supply chain constraints that have been impacting the aerospace and defense industry have not materially impacted our ability to source parts or operate our business.

Leases

The Company accounts for leases under ASC 842, “Leases.” All leases are required to be recorded on the balance sheet and are classified as either operating leases or finance leases. The lease classification affects the expense recognition in the income statement. Operating lease charges are recorded entirely in operating expenses. Finance lease charges are split, where amortization of the right-of- use asset is recorded in operating expenses and an implied interest component is recorded in interest expense. See Note 4.

Earnings (Loss) per share

Basic earnings (loss) per share (“EPS”) is computed by dividing the net income (loss) applicable to common stockholders by the weighted-average number of shares of common stock outstanding for the period.

For purposes of calculating diluted earnings per common share, the numerator includes net income plus interest on convertible notes payable assumed converted as of the first day of the period. The denominator includes both the weighted-average number of shares of common stock outstanding during the period and the number of common stock equivalents if the inclusion of such common stock equivalents is dilutive. Dilutive common stock equivalents potentially include stock options and warrants using the treasury stock method and convertible notes payable using the if-converted method.

The following is the calculation of net (loss) income applicable to common stockholders utilized to calculate the EPS:

	Three Months Ended						Nine Months Ended
	September 30, 2021			September 30, 2020			September 30, 2021		September 30, 2020
	(Unaudited)			(Unaudited)			(Unaudited)		(Unaudited)
Net (Loss) Income per statement of operations	$	(66,000	)	$	(477,000	)	$	21,000	$	(1,003,000	)
Add: Convertible Note Interest for Potential Note Conversion		-			-			232,000		-

(Loss) Income used to calculate diluted earnings per share	$	(66,000	)	$	(477,000	)	$	253,000	$	(1,003,000	)

The following is a reconciliation of the denominators of basic and diluted earnings per share computations:

	Three Months Ended				Nine Months Ended
	September 30, 2021		September 30, 2020		September 30, 2021		September 30, 2020
	(Unaudited)		(Unaudited)		(Unaudited)		(Unaudited)

Weighted average shares outstanding used to compute basic earnings per share		32,074,053		30,620,990		32,022,873		30,524,874
Effect of dilutive stock options and warrants		-		-		2,663,000		-
Effect of dilutive convertible notes payable		-		-		4,057,892		-
Weighted average shares outstanding and dilutive securities used to compute dilutive earnings per share		32,074,053		30,620,990		38,743,765		30,524,874

The following securities have been excluded from the calculation as the exercise price was greater than the average market price of the common shares:

	Three Months Ended				Nine Months Ended
	September 30, 2021		September 30, 2020		September 30, 2021		September 30, 2020
	(Unaudited)		(Unaudited)		(Unaudited)		(Unaudited)
Stock Options		1,178,000		163,000		186,000		163,000
Warrants		1,828,000		1,423,000		1,068,000		1,423,000
		3,006,000		1,586,000		1,254,000		1,586,000

The following securities have been excluded from the calculation even though the exercise price was less than the average market price of the common shares during the periods set forth below because the effect of including these potential shares was anti-dilutive due to the net loss incurred during these periods:

	Three Months Ended				Nine Months Ended
	September 30, 2021		September 30, 2020		September 30, 2021		September 30, 2020
	(Unaudited)		(Unaudited)		(Unaudited)		(Unaudited)
Stock Options		1,330,000		1,696,000		-		1,696,000
Warrants		-		760,000		-		760,000
Convertible notes payable		5,092,000		5,092,000		-		5,092,000
		6,422,000		7,548,000		-		7,548,000

Stock-Based Compensation

The Company accounts for stock-based compensation in accordance with FASB ASC 718, “Compensation – Stock Compensation.” Under the fair value recognition provision of the ASC, stock-based compensation cost is estimated at the grant date based on the fair value of the award. The Company estimates the fair value of stock options and warrants granted using the Black-Scholes-Merton option pricing model. Stock based compensation expense for employees amounted to $147,000 and $52,000 for the three months ended September 30, 2021 and 2020, respectively, and $361,000 and $266,000 for the nine months ended September 30, 2021 and 2020, respectively. Stock compensation expense for directors amounted to $52,000 and $58,000 for the three months ended September 30, 2021 and 2020, respectively and $156,000 and $159,000 for the nine months ended September 30, 2021 and 2020, respectively. Stock compensation expense for employees and directors was included in operating expenses on the accompanying Condensed Consolidated Statements of Operations.

Goodwill

Goodwill represents the excess of the acquisition cost of businesses over the fair value of the identifiable net assets acquired. The goodwill amount of $163,000 at September 30, 2021 and December 31, 2020 relates to the acquisition of NTW.

Goodwill is not amortized, but is tested at least annually for impairment, or if circumstances occur that more likely than not reduce the fair value of the reporting unit below its carrying amount.

The Company will test Goodwill for impairment at December 31, 2021, and has determined that there has been no impairment of goodwill as of December 31, 2020.

Recently Issued Accounting Pronouncements

In June 2016, the FASB issued ASU No. 2016-13, Financial Instruments-Credit Losses (Topic 326) (“ASU 2016- 13”), which significantly changes how entities will account for credit losses for most financial assets and certain other instruments that are not measured at fair value through net income. ASU 2016-13 replaces the existing incurred loss model with an expected credit loss model that requires entities to estimate an expected lifetime credit loss on most financial assets and certain other instruments. Under ASU 2016-13 credit impairment is recognized as an allowance for credit losses, rather than as a direct write-down of the amortized cost basis of a financial asset. The impairment allowance is a valuation account deducted from the amortized cost basis of financial assets to present the net amount expected to be collected on the financial asset. Once the new pronouncement is adopted by the Company, the allowance for credit losses must be adjusted for management’s current estimate at each reporting date. The new guidance provides no threshold for recognition of impairment allowance. Therefore, entities must also measure expected credit losses on assets that have a low risk of loss. For instance, trade receivables that are either current or not yet due may not require an allowance reserve under currently generally accepted accounting principles, but under the new standard, the Company will have to estimate an allowance for expected credit losses on trade receivables under ASU 2016-13. ASU 2016-13 is effective for annual periods, including interim periods within those annual periods, beginning after December 15, 2022 for smaller reporting companies. Early adoption is permitted. The Company will evaluate the impact of ASU 2016-13 on the Company’s consolidated financial statements in a future period closer to the date of adoption.

In August 2020, the FASB issued ASU No. 2020-06, Debt – Debt with Conversion and Other Options (Subtopic 470-20) and Derivatives and Hedging – Contracts in Entity’s Own Equity (Subtopic 815-40) (“ASU 2020-06), which is intended to address issues identified as a result of the complexity associated with applying GAAP for certain financial instruments with characteristics of liabilities and equity. For convertible instruments, ASU 2020-06 reduces the number of accounting models for convertible debt instruments and convertible preferred stock, and enhances information transparency by making targeted improvements to the disclosures for convertible instruments and earnings-per-share guidance on the basis of feedback from financial statement users. ASU 2020-06 is effective for fiscal years, and interim periods in those fiscal years, beginning after December 15, 2021. Early adoption is permitted, but no earlier than fiscal years beginning after December 15, 2020, including interim periods with those fiscal years. The Company is evaluating the effect of adopting this new accounting guidance on its financial statements.

On January 1, 2021, the Company adopted ASU No. 2019-12, Income Taxes (Topic 740): Simplifying the Accounting for Income Taxes (“ASU 2019-12”), which is intended to simplify various aspects related to accounting for income taxes. ASU 2019-12 removes certain exceptions to the general principles in Topic 740 and also clarifies and amends existing guidance to improve consistent application. The adoption of ASU 2019-12 did not have a material impact on the Company’s condensed consolidated financial statements.

On January 1, 2021, the Company adopted ASU 2020-04, Reference Rate Reform (Topic 848): Facilitation of the Effects of Reference Rate Reform on Financial Reporting, which provides optional guidance for a limited time to ease the potential burden in accounting for reference rate reform. In January 2021, the FASB issued ASU 2021-01, “Reference Rate Reform” (Topic 848): Scope: which clarified the scope of ASU 2020-04. The new guidance provides optional expedients and exceptions for applying U.S. GAAP to contracts, hedging relationships and other transactions affected by reference rate reform if certain criteria are met. The amendments apply only to contracts and hedging relationships that reference LIBOR or another reference rate expected to be discontinued due to reference rate reform. These amendments may be applied prospectively to contract modifications made and hedging relationships entered into or evaluated on or before December 31, 2022. The adoption of these ASU’s did not have a material impact on the Company’s condensed consolidated financial statements.

In May 2021, the FASB issued ASU No. 2021-04, Earnings Per Share (Topic 260), Debt – Modifications and Extinguishments (Subtopic 470-50), Compensation – Stock Compensation (Topic 718), and Derivatives and Hedging – Contracts in Entity’s Own Equity (Subtopic 815-40): Issuer’s Accounting for Certain Modification or Exchanges of Freestanding Equity-Classified Written Call Options (“ASU 2021-04”), which will clarify and reduce diversity in practice. Specifically, the new standard includes a recognition model comprising four categories of transactions and corresponding accounting treatment for each category. The category that would apply to a modification or an exchange of an equity-classified warrant would depend on the substance of the modification transaction (e.g. a financing transaction to raise equity versus one to raise debt). This recognition model is premised on the idea that the accounting for the transaction should not differ from what it would have been had the issuer of the warrants paid cash instead of modifying the warrants. ASU 2021-04 will be effective for fiscal years beginning after December 15, 2021 and interim periods within those fiscal years. Early adoption is permitted. This ASU will be applied prospectively to modifications or exchanges occurring on or after the effective date of the ASU. The Company is currently evaluating the impact this new guidance will have on its condensed consolidated financial statements.

The Company does not believe that any other recently issued, but not yet effective, accounting standards if currently adopted would have a material effect on the accompanying condensed consolidated financial statements.

Property and Equipment

9 Months Ended

Sep. 30, 2021

Property, Plant and Equipment [Abstract]

PROPERTY AND EQUIPMENT

Note 3. PROPERTY AND EQUIPMENT

The components of property and equipment at September 30, 2021 and December 31, 2020 consisted of the following:

	September 30,			December 31,
	2021			2020

Land	$	300,000		$	300,000
Buildings and Improvements		1,697,000			1,683,000		31.50 years
Machinery and Equipment		22,035,000			21,738,000		5 - 8 years
Finance Lease Machinery and Equipment		78,000			78,000		5 - 8 years
Tools and Instruments		12,593,000			12,116,000		1.50 - 7 years
Automotive Equipment		148,000			148,000		5 years
Furniture and Fixtures		290,000			290,000		5 - 8 years
Leasehold Improvements		882,000			855,000		Term of Lease
Computers and Software		583,000			436,000		4 - 6 years
Total Property and Equipment		38,606,000			37,644,000
Less: Accumulated Depreciation		(30,147,000	)		(28,063,000	)
Property and Equipment, net	$	8,459,000		$	9,581,000

Depreciation expense for the three months ended September 30, 2021 and 2020 was $688,000 and $576,000, respectively. Depreciation expense for the nine months ended September 30, 2021 and 2020 was $2,105,000 and $1,920,000, respectively.

Assets held under financed lease obligations are depreciated over the shorter of their related lease terms or their estimated productive lives. Depreciation of assets under finance leases is included in depreciation expense for 2021 and 2020. Accumulated depreciation on these assets was approximately $32,000 and $28,000 as of September 30, 2021 and December 31, 2020, respectively.

Leases

9 Months Ended

Sep. 30, 2021

Leases Abstract

LEASES

Note 4. LEASES

The Company has operating and finance leases for leased office and manufacturing facilities and equipment leases. The Company leases certain machinery and equipment under finance leases and leases its offices and manufacturing facilities under operating leases. The leases have remaining lease terms of one to six years, some of which include options to extend or terminate the leases.

	September 30,			December 31,
	2021			2020
	(unaudited)
Weighted Average Remaining Lease Term - in years		4.87			5.53
Weighted Average discount rate - %		8.89	%		8.90	%

The aggregate undiscounted cash flows of operating lease payments for leases with remaining terms greater than one year are as follows:

	Amount
December 31, 2021 (remainder of the year)	$	249,000
December 31, 2022		1,007,000
December 31, 2023		1,038,000
December 31, 2024		1,070,000
December 31, 2025		992,000
Thereafter		730,000
Total future minimum lease payments		5,086,000
Less: discount		(999,000	)
Total operating lease maturities		4,087,000
Less: current portion of operating lease liabilities		(664,000	)
Total long term portion of operating lease maturities	$	3,423,000

On April 29, 2021 the Company entered into an agreement to surrender possession of the premises of the former corporate office, located in Hauppauge, NY. The Company made a one-time payment of 40% of the remaining balance due to the landlord as of May 1, 2021, of approximately $37,000. The Company had previously recognized a lease impairment of $275,000 to its Operating Lease Right-of-Use-Asset for the year-ended December 31, 2019.

Notes Payable, Related Party Notes Payable and Finance Lease Obligations

9 Months Ended

Sep. 30, 2021

Debt Disclosure [Abstract]

NOTES PAYABLE, RELATED PARTY NOTES PAYABLE AND FINANCE LEASE OBLIGATIONS

Note 5. NOTES PAYABLE, RELATED PARTY NOTES PAYABLE AND FINANCE LEASE OBLIGATIONS

Notes payable and finance lease obligations at September 30, 2021 and December 31, 2020 consisted of the following:

	September 30,			December 31,
	2021			2020

Revolving credit note payable to Sterling National Bank ("SNB")	$	13,463,000		$	15,649,000
Term loan, SNB		4,411,000			5,558,000
Finance lease obligations		2,000			6,000
Loans Payable - financed assets		41,000			48,000
Related party notes payable, net of debt discount		6,412,000			6,012,000
Subtotal		24,329,000			27,273,000
Less: Current portion of notes payable, related party notes payable and finance lease obligations		(14,285,000	)		(16,475,000	)
Notes payable, related party notes payable and finance lease obligations,
net of current portion	$	10,044,000		$	10,798,000

Sterling National Bank (“SNB”)

On December 31, 2019, the Company entered into a loan facility (“SNB Facility”) with SNB expiring on December 30, 2022. The loan facility provides for a $16,000,000 revolving loan (“SNB revolving line of credit”) and a term loan (“SNB term loan”).

In 2020, the Company entered into the First Amendment to the Loan and Security Agreement (“First Amendment”). The terms of the amendment increase the Term Loan to $5,685,000. The repayment terms of the term loan were amended to provide monthly principal installments in the amount of $67,679 beginning on December 1, 2020, with a final payment of any unpaid balance of principal and interest payable on December 30, 2022. Additionally, the date by which certain subordinated third-party notes need to be extended was changed from September 30, 2020 to November 30, 2020. The Company paid an amendment fee of $20,000.

On June 14, 2021, the Company entered into the Second Amendment to the Loan and Security Agreement (“Second Amendment”). The purpose of the Second Amendment was to clarify the definition and calculation of Excess Cash Flow, and to confirm the extension of the due date for the payment of the Excess Cash Flow payment. For so long as the SNB term loan remains outstanding, if Excess Cash Flow (as defined) is a positive number for any fiscal year the Company shall pay to SNB an amount equal to the lesser of (i) twenty-five percent (25%) of the excess Cash flow for such fiscal year and (ii) the outstanding principal balance of the term loan. Such payment shall be made to SNB and applied to the outstanding principal balance of the term loan, on or prior to the close of the fiscal year immediately following such fiscal year. The amount of the Excess Cash Flow payment for the year ended December 31, 2020 was calculated to be $558,750. Per the terms of the Second Amendment, the Excess Cash Flow is payable in three instalments of $186,250 on each of June 15, 2021, June 30, 2021, and September 15, 2021. As of September 30, 2021, the Company paid this in full. Additionally, the Company paid an amendment fee of $10,000.

The terms of the SNB Facility require that, among other things, the Company maintain a specified Fixed Charge Coverage Ratio of 1.25 to 1.00 at the end of each Fiscal Quarter beginning with the Fiscal Quarter ending March 31, 2020. In addition, the Company is limited in the amount of Capital Expenditures it can make. As of September 30, 2021, the Company was in compliance with all loan covenants. The SNB Facility also restricts the amount of dividends the Company may pay to its stockholders. Substantially all of the Company’s assets are pledged as collateral under the SNB Facility.

The aggregate payments for the term note at September 30, 2021 are as follows:

For the twelve months ending	Amount
December 31, 2021 (remainder of the year)	$	203,000
December 31, 2022		4,247,000
SNB Term Loan payable		4,450,000
Less: debt issuance costs		(39,000	)
Total SNB Term Loan payable, net of debt issuance costs		4,411,000
Less: Current portion of SNB Term Loan payable		(812,000	)
Total long-term portion of SNB Term Loan payable	$	3,599,000

Under the terms of the SNB Facility, both the SNB revolving line of credit and the SNB term loan bear an interest rate equal to 30-day LIBOR (with a 1% floor) plus 2.5%. The average interest rate charged during the period ended September 30, 2021 was 3.5%.

As of September 30, 2021, the debt to SNB in the amount of $17,874,000 consisted of the SNB revolving line of credit note in the amount of $13,463,000 and the SNB term loan in the amount of $4,411,000. As of December 31, 2020, the debt to SNB in the amount of $21,207,000 consisted of the SNB revolving line of credit note in the amount of $15,649,000 and the SNB term loan in the amount of $5,558,000.

Interest expense related to the SNB Facility amounted to approximately $181,000 and $147,000 for the three months ended September 30, 2021 and 2020, respectively, and $542,000 and $420,000 for the nine months ended September 30, 2021 and 2021, respectively.

Loans Payable – Financed Assets

The Company financed the purchase of a delivery vehicle in July 2020. The loan obligation totaled $41,000 and $48,000 as of September 30, 2021 and December 31, 2020, respectively. The loan bears no interest and a final payment is due and payable for all unpaid principal on July 20, 2026.

Annual maturities of this loan are as follows:

For the twelve months ending	Amount
December 31, 2021 (remainder of the year)	$	2,000
December 31, 2022		9,000
December 31, 2023		9,000
December 31, 2024		9,000
December 31, 2025		9,000
Thereafter		3,000
Loans Payable - financed assets		41,000
Less: Current portion		(9,000	)
Long-term portion	$	32,000

Related Party Notes Payable

Taglich Brothers, Inc. is a corporation co-founded by two directors of the Company, Michael and Robert Taglich.

Taglich Brothers, Inc. has acted as placement agent for various debt and equity financing transactions and has received cash and equity compensation for their services.

From 2016 through 2020, the Company entered into various subordinated notes payable and convertible subordinated notes payable with Michael and Robert Taglich. These notes resulted in proceeds to the Company totaling $6,550,000. In connection with these notes, Michael and Robert were issued a total of 355,082 shares of common stock and Taglich Brothers Inc. was issued promissory notes totaling $554,000 for placement agency fees.

On January 1, 2021, the related party subordinated notes due to Michael and Robert Taglich and Taglich Brothers, Inc., were amended to include all accrued interest through December 31, 2020 in the principal balance of the notes. Per the terms of the SNB Facility, these notes remain subordinate to the SNB Facility and are due on July 1, 2023. Approximately $2,732,000 of the related party subordinated notes can be converted at the option of the holder into Common Stock of the Company at $0.93 per share, while the remaining $2,080,000 of the related party subordinated notes can be converted at the option of the holder into Common Stock of the Company at $1.50 per share. There are no principal payments due on these notes until such time. The note holders and the principal balance of the notes as amended on January 1, 2021 are shown below:

	Michael Taglich,		Robert Taglich,		Taglich Brothers,
	Chairman		Director		Inc.		Total
Convertible Subordinated Notes	$	2,666,000	$	1,905,000	$	241,000	$	4,812,000
Subordinated Notes		1,250,000		350,000		-		1,600,000
Total	$	3,916,000	$	2,255,000	$	241,000	$	6,412,000

For the three and nine months ended September 30, 2021, no principal payments have been made on these notes and the principal balances remain unchanged from the table above. Interest expense for the three months ended September 30, 2021 and 2020 on all related party notes payable was $126,000 and $125,000, respectively, and $376,000 and $378,000 for the nine months ended September 30, 2021 and 2020, respectively.

Convertible Notes Payable – Third Parties

As of both September 30, 2021 and December 31, 2020, the notes payable to third parties totaled $0 as the notes were converted into shares of common stock in 2020. Interest incurred on these notes amounted to approximately $38,000 and $118,000 for the three and nine months ended September 30, 2020, respectively. Amortization of debt discount on these notes amounted to approximately $0 and $7,000 for the three and nine months ended September 30, 2020, respectively. These costs are included in interest and financing costs in the Condensed Consolidated Statement of Operations.

The entire disclosure for information about short-term and long-term debt arrangements, which includes amounts of borrowings under each line of credit, note payable, commercial paper issue, bonds indenture, debenture issue, own-share lending arrangements and any other contractual agreement to repay funds, and about the underlying arrangements, rationale for a classification as long-term, including repayment terms, interest rates, collateral provided, restrictions on use of assets and activities, whether or not in compliance with debt covenants, and other matters important to users of the financial statements, such as the effects of refinancing and noncompliance with debt covenants.

Reference 1: http://fasb.org/us-gaap/role/ref/legacyRef
-Publisher FASB
-Name Accounting Standards Codification
-Topic 470
-URI http://asc.fasb.org/topic&trid=2208564

Reference 2: http://www.xbrl.org/2003/role/disclosureRef
-Publisher FASB
-Name Accounting Standards Codification
-Topic 470
-SubTopic 20
-Section 50
-Paragraph 1B
-Subparagraph (h)
-URI http://asc.fasb.org/extlink&oid=123466505&loc=SL123495323-112611

Reference 3: http://www.xbrl.org/2003/role/disclosureRef
-Publisher FASB
-Name Accounting Standards Codification
-Topic 470
-SubTopic 20
-Section 50
-Paragraph 1C
-Subparagraph (c)
-URI http://asc.fasb.org/extlink&oid=123466505&loc=SL123495334-112611

Reference 4: http://www.xbrl.org/2003/role/disclosureRef
-Publisher FASB
-Name Accounting Standards Codification
-Topic 470
-SubTopic 20
-Section 50
-Paragraph 1I
-Subparagraph (a)
-URI http://asc.fasb.org/extlink&oid=123466505&loc=SL123495371-112611

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Stockholders' Equity Note [Abstract]

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

9 Months Ended

Sep. 30, 2021

NOTE 6. LIABILITY RELATED TO THE SALE OF FUTURE PROCEEDS FROM DISPOSITION OF SUBSIDIARY

In connection with the sale of the Company’s wholly-owned subsidiary, AMK Welding, Inc. (“AMK”) to Meyer Tool, Inc., (“Meyer”) in 2017, Meyer was obligated to pay the Company within 30 days after the end of each calendar quarter, commencing April 1, 2017, an amount equal to five (5%) percent of the net sales of AMK for that quarter until the aggregate payments made to the Company (the “Meyer Agreement”) equals $1,500,000 (the “Maximum Amount”).

In order to increase liquidity, on January 15, 2019, the Company entered into a “Purchase Agreement” with 15 accredited investors (the “Purchasers”), including Michael and Robert Taglich, pursuant to which the Company assigned to the Purchasers all of its rights, title and interest to the remaining $1,137,000 of the $1,500,000 in payments due from Meyer for the sale of AMK (the “Remaining Amount”) for an immediate payment of $800,000, including $100,000 from each of Michael and Robert Taglich, and $75,000 for the benefit of the children of Michael Taglich. The timing of the payments is based upon the net sales of AMK. If the Purchasers have not received the entire Remaining Amount by March 31, 2023, they have the right to demand payment of their pro rata portion of the unpaid Remaining Amount from the Company (“Put Right”). To the extent the Purchasers exercise their Put Right, the remaining payments from Meyer will be retained by the Company.

The Company recognized $79,000 and $91,000 of non-cash income for the three months ended September 30, 2021 and 2020, respectively, and $274,000 and $302,000 of non-cash income for the nine months ended September 30, 2021 and 2020, respectively, reflected in “other income, net” on the condensed consolidated statements of operations and recorded $24,000 and $26,000 of related non-cash interest expense related to the Purchase Agreement for the three months ended September 30, 2021 and 2020, respectively, and $82,000 and $90,000 for the nine months ended September 30, 2021 and 2020, respectively.

The table below shows the activity within the liability account for the nine months ended September 30, 2021 and the year ended December 31, 2020:

	September 30, 2021			December 31, 2020
	(Unaudited)

Liabilities related to sale of future proceeds from disposition of subsidiaries - beginning balance	$	322,000		$	602,000
Non-Cash other income recognized		(274,000	)		(402,000	)
Non-Cash interest expense recognized		82,000			122,000
Liabilities related to sale of future proceeds from disposition of subsidiary - ending balance		130,000			322,000
Less: unamortized transaction costs		(3,000	)		(3,000	)
Liability related to sale of future proceeds from disposition of subsidiary, net	$	127,000		$	319,000

Stockholders' Equity

9 Months Ended

Sep. 30, 2021

STOCKHOLDERS' EQUITY

Note 7. STOCKHOLDERS’ EQUITY

Common Stock – Sale of Securities

The Company issued 39,983 and 41,915 shares of common stock in payment of director fees totaling $52,000 and $58,000 for the three months ended September 30, 2021 and 2020, respectively, and 119,335 and 132,812 shares totaling $156,000 and $159,000 for the nine months ended September 30, 2021 and 2020, respectively. Additionally, the Company issued 51,224 shares of common stock upon the cashless exercise of stock options during the nine months ended September 30, 2021.

In January 2020, the Company issued and sold 419,597 shares of our common stock for gross proceeds of $984,000 pursuant to a Form S-3 filed on October 10, 2019 as updated on January 15, 2020. Costs of the sale amounted to $145,000.

During the nine months ended September 30, 2020, the Company issued 590,243 shares of common stock to convert third party subordinated debt totaling $885,000 to equity.

On or about October 1, 2021, the Company issued 50,476 shares of common stock in payment of directors’ fees totaling $54,000.

Issuance of Stock Options

On January 11, 2021, the Company granted to its directors, stock options to purchase an aggregate of 70,000 shares of the Company’s common stock at a price of $1.32 per share. The options expire on the seventh anniversary of the grant date and vest over a term of one year.

On March 24, 2021, the Company granted to certain members of management and certain employees, stock options to purchase an aggregate of 327,500 shares of the Company’s common stock at a price of $1.39 per share. The options expire on the fifth anniversary of the grant date and vest over a term of three years.

On July 30, 2021, the Company granted to certain members of management and certain employees, stock options to purchase an aggregate of 415,000 shares of the Company’s common stock at a price of $1.22 per share. The options expire on the fifth anniversary of the grant date and vest over a term of one to three years.

The entire disclosure for shareholders' equity comprised of portions attributable to the parent entity and noncontrolling interest, including other comprehensive income. Includes, but is not limited to, balances of common stock, preferred stock, additional paid-in capital, other capital and retained earnings, accumulated balance for each classification of other comprehensive income and amount of comprehensive income.

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Contingencies

9 Months Ended

Sep. 30, 2021

Loss Contingency [Abstract]

CONTINGENCIES

Note 8. CONTINGENCIES

A number of actions have been commenced against the Company by vendors, landlords and former landlords, including a third party claim as a result of an injury suffered on a portion of a leased property not occupied by the Company. As certain portions of these claims represent amounts included in accounts payable they are not specifically discussed herein.

Contract Pharmacal Corp. (“Contact Pharmacal”) commenced an action on October 2, 2018, relating to a Sublease entered into between the Company and Contract Pharmacal in May 2018 with respect to the property at 110 Plant Avenue, Hauppauge, New York. In the action Contract Pharmacal originally sought damages in excess of $1,000,000 for the Company’s failure to make the entire premises available by the Sublease commencement date. On July 8, 2021, the Court denied Contract Pharmacal’s Motion for Summary Judgement. In the Order, the Court granted Contract Pharmacal’s Motions to drop its claim for specific performance and to amend its Complaint to reduce its claim for damages to $700,000. The Company continues to dispute the validity of the claims asserted by Contract Pharmacal and believes it has meritorious defenses to those claims. As of September 30, 2021, it is not possible to estimate if a loss will be incurred, as such there has been no accrual.

From time to time the Company may be engaged in various lawsuits and legal proceedings in the ordinary course of business. Currently management is not aware of any legal proceedings the ultimate outcome of which, in its judgment based on information currently available, would have a material adverse effect on the Company’s business, financial condition or operating results. There are no proceedings in which any of the Company’s directors, officers or affiliates, or any registered or beneficial stockholder of its common stock, is an adverse party or has a material interest averse to our interest.

Income Taxes

9 Months Ended

Sep. 30, 2021

Income Tax Disclosure [Abstract]

INCOME TAXES

Note 9. INCOME TAXES

The Company recorded no income tax expense for the three and nine months ended September 30, 2021 and 2020 because the estimated annual effective tax rate was zero. In determining the estimated annual effective income tax rate, the Company analyzes various factors, including projections of the Company’s annual earnings and taxing jurisdictions in which the earnings will be generated, the impact of state and local income taxes, the ability to use tax credits and net operating loss carry forwards, and available tax planning alternatives.

As a result of the passage of the CARES Act, the Company filed for a net operating loss carryback claim of $1,416,000 in March 2020. The refund was received in April 2020.

As of September 30, 2021 and December 31, 2020, the Company provided a full valuation allowance against its net deferred tax assets since the Company believes it is more likely than not that its deferred tax assets will not be realized.

The entire disclosure for income taxes. Disclosures may include net deferred tax liability or asset recognized in an enterprise's statement of financial position, net change during the year in the total valuation allowance, approximate tax effect of each type of temporary difference and carryforward that gives rise to a significant portion of deferred tax liabilities and deferred tax assets, utilization of a tax carryback, and tax uncertainties information.

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Segment Reporting

9 Months Ended

Sep. 30, 2021

Segment Reporting [Abstract]

SEGMENT REPORTING

Note 10. SEGMENT REPORTING

In accordance with FASB ASC 280, “Segment Reporting” (“ASC 280”), the Company discloses financial and descriptive information about its reportable operating segments. Operating segments are components of an enterprise about which separate financial information is available and regularly evaluated by the chief operating decision maker in deciding how to allocate resources and in assessing performance.

The Company follows ASC 280, which establishes standards for reporting information about operating segments in annual and interim financial statements, and requires that companies report financial and descriptive information about their reportable segments based on a management approach. ASC 280 also establishes standards for related disclosures about products and services, geographic areas and major customers.

The Company currently divides its operations into two operating segments: Complex Machining, which consists of AIM and NTW; and Turbine Engine Components, which consists of Sterling. Along with its operating subsidiaries, the Company reports the results of its corporate division as an independent segment.

The accounting policies of each of the segments are the same as those described in the Summary of Significant Accounting Policies. Intersegment transfers are recorded at the transferor’s cost, and there is no intercompany profit or loss on intersegment transfers. Management evaluates performance based on revenue, gross profit contribution and assets employed.

Financial information about the Company’s reporting segments for the three and nine months ended September 30, 2021 and 2020 are as follows:

	For the Three Months						For the Nine Months
	Ended September 30,						Ended September 30,
	2021			2020			2021			2020
	(unaudited)			(unaudited)			(unaudited)			(unaudited)
COMPLEX MACHINING
Net Sales	$	13,043,000		$	12,423,000		$	38,992,000		$	31,795,000
Gross Profit		2,022,000			1,735,000			5,966,000			4,584,000
Income before benefit from income taxes		1,420,000			912,000			3,973,000			2,072,000
Assets		49,275,000			52,963,000			49,275,000			52,963,000

TURBINE ENGINE COMPONENTS
Net Sales		1,311,000			1,239,000			4,527,000			3,808,000
Gross (loss) Profit		(8,000	)		(79,000	)		448,000			(133,000	)
Loss before benefit from income taxes		(119,000	)		(251,000	)		(20,000	)		(594,000	)
Assets		3,443,000			3,941,000			3,443,000			3,941,000

CORPORATE
Net Sales		-			-			-			-
Gross Profit		-			-			-			-
Loss before benefit from income taxes		(1,367,000	)		(1,138,000	)		(3,932,000	)		(3,895,000	)
Assets		803,000			1,860,000			803,000			1,860,000

CONSOLIDATED
Net Sales		14,354,000			13,662,000			43,519,000			35,603,000
Gross Profit		2,014,000			1,656,000			6,414,000			4,451,000
(Loss) Income before benefit from income taxes		(66,000	)		(477,000	)		21,000			(2,417,000	)
Benefit from Income Taxes		-			-			-			(1,414,000	)
Net (Loss) Income		(66,000	)		(477,000	)		21,000			(1,003,000	)
Assets	$	53,521,000		$	58,764,000		$	53,521,000		$	58,764,000

The entire disclosure for reporting segments including data and tables. Reportable segments include those that meet any of the following quantitative thresholds a) it's reported revenue, including sales to external customers and intersegment sales or transfers is 10 percent or more of the combined revenue, internal and external, of all operating segments b) the absolute amount of its reported profit or loss is 10 percent or more of the greater, in absolute amount of 1) the combined reported profit of all operating segments that did not report a loss or 2) the combined reported loss of all operating segments that did report a loss c) its assets are 10 percent or more of the combined assets of all operating segments.

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Accounting Policies, by Policy (Policies)

9 Months Ended

Sep. 30, 2021

Credit and Concentration Risks

Inventory Valuation

Inventory Valuation

Credit and Concentration Risks

Customer	Percentage of Sales
	September 30, 2021			September 30, 2020
	(Unaudited)			(Unaudited)
1		41.6	%		23.2	%
2		26.1	%		25.8	%
3		*			21.6	%

Customer was less than 10% of sales for the three months ended September 30, 2021.

There were three customers that represented 75.5% and 74.2% of total sales for the nine months ended September 30, 2021 and 2020, respectively. This is set forth in the table below.

Customer	Percentage of Sales
	September 30, 2021			September 30, 2020
	(Unaudited)			(Unaudited)
1		36.8	%		28.2	%
2		26.2	%		32.1	%
3		12.5	%		13.9	%

	Percentage of Receivables
Customer	September 30, 2021			December 31, 2020
	(Unaudited)
1		53.5	%		57.1	%
2		15.4	%		*
3		**			12.0	%
4		**			11.2	%

Customer was less than 10% of accounts receivable at December 31, 2020.

Customer was less than 10% of accounts receivable at September 30, 2021.

Cash and Cash Equivalents

During the year, the Company had occasionally maintained balances in its bank accounts that were in excess of the FDIC insurance limit. The Company has not experienced any losses on these accounts.

Major Suppliers

To date, global supply chain constraints that have been impacting the aerospace and defense industry have not materially impacted our ability to source parts or operate our business.

Leases

Leases

Earnings (Loss) per share

Earnings (Loss) per share

The following is the calculation of net (loss) income applicable to common stockholders utilized to calculate the EPS:

	Three Months Ended						Nine Months Ended
	September 30, 2021			September 30, 2020			September 30, 2021		September 30, 2020
	(Unaudited)			(Unaudited)			(Unaudited)		(Unaudited)
Net (Loss) Income per statement of operations	$	(66,000	)	$	(477,000	)	$	21,000	$	(1,003,000	)
Add: Convertible Note Interest for Potential Note Conversion		-			-			232,000		-

(Loss) Income used to calculate diluted earnings per share	$	(66,000	)	$	(477,000	)	$	253,000	$	(1,003,000	)

The following is a reconciliation of the denominators of basic and diluted earnings per share computations:

	Three Months Ended				Nine Months Ended
	September 30, 2021		September 30, 2020		September 30, 2021		September 30, 2020
	(Unaudited)		(Unaudited)		(Unaudited)		(Unaudited)

Weighted average shares outstanding used to compute basic earnings per share		32,074,053		30,620,990		32,022,873		30,524,874
Effect of dilutive stock options and warrants		-		-		2,663,000		-
Effect of dilutive convertible notes payable		-		-		4,057,892		-
Weighted average shares outstanding and dilutive securities used to compute dilutive earnings per share		32,074,053		30,620,990		38,743,765		30,524,874

The following securities have been excluded from the calculation as the exercise price was greater than the average market price of the common shares:

	Three Months Ended				Nine Months Ended
	September 30, 2021		September 30, 2020		September 30, 2021		September 30, 2020
	(Unaudited)		(Unaudited)		(Unaudited)		(Unaudited)
Stock Options		1,178,000		163,000		186,000		163,000
Warrants		1,828,000		1,423,000		1,068,000		1,423,000
		3,006,000		1,586,000		1,254,000		1,586,000

	Three Months Ended				Nine Months Ended
	September 30, 2021		September 30, 2020		September 30, 2021		September 30, 2020
	(Unaudited)		(Unaudited)		(Unaudited)		(Unaudited)
Stock Options		1,330,000		1,696,000		-		1,696,000
Warrants		-		760,000		-		760,000
Convertible notes payable		5,092,000		5,092,000		-		5,092,000
		6,422,000		7,548,000		-		7,548,000

Stock-Based Compensation

Stock-Based Compensation

Goodwill

Goodwill

Goodwill is not amortized, but is tested at least annually for impairment, or if circumstances occur that more likely than not reduce the fair value of the reporting unit below its carrying amount.

The Company will test Goodwill for impairment at December 31, 2021, and has determined that there has been no impairment of goodwill as of December 31, 2020.

Recently Issued Accounting Pronouncements

Recently Issued Accounting Pronouncements

Disclosure of inventory accounting policy for inventory classes, including, but not limited to, basis for determining inventory amounts, methods by which amounts are added and removed from inventory classes, loss recognition on impairment of inventories, and situations in which inventories are stated above cost.

+ References + Details

Summary of Significant Accounting Policies (Tables)

9 Months Ended

Sep. 30, 2021

Schedule of credit and concentration risks

Customer	Percentage of Sales
	September 30, 2021			September 30, 2020
	(Unaudited)			(Unaudited)
1		41.6	%		23.2	%
2		26.1	%		25.8	%
3		*			21.6	%

Customer	Percentage of Sales
	September 30, 2021			September 30, 2020
	(Unaudited)			(Unaudited)
1		36.8	%		28.2	%
2		26.2	%		32.1	%
3		12.5	%		13.9	%

	Percentage of Receivables
Customer	September 30, 2021			December 31, 2020
	(Unaudited)
1		53.5	%		57.1	%
2		15.4	%		*
3		**			12.0	%
4		**			11.2	%

Schedule of calculation of net income (loss)

	Three Months Ended						Nine Months Ended
	September 30, 2021			September 30, 2020			September 30, 2021		September 30, 2020
	(Unaudited)			(Unaudited)			(Unaudited)		(Unaudited)
Net (Loss) Income per statement of operations	$	(66,000	)	$	(477,000	)	$	21,000	$	(1,003,000	)
Add: Convertible Note Interest for Potential Note Conversion		-			-			232,000		-

(Loss) Income used to calculate diluted earnings per share	$	(66,000	)	$	(477,000	)	$	253,000	$	(1,003,000	)

Schedule of basic and diluted earnings per share

	Three Months Ended				Nine Months Ended
	September 30, 2021		September 30, 2020		September 30, 2021		September 30, 2020
	(Unaudited)		(Unaudited)		(Unaudited)		(Unaudited)

Weighted average shares outstanding used to compute basic earnings per share		32,074,053		30,620,990		32,022,873		30,524,874
Effect of dilutive stock options and warrants		-		-		2,663,000		-
Effect of dilutive convertible notes payable		-		-		4,057,892		-
Weighted average shares outstanding and dilutive securities used to compute dilutive earnings per share		32,074,053		30,620,990		38,743,765		30,524,874

Schedule of anti-dilutive securities

	Three Months Ended				Nine Months Ended
	September 30, 2021		September 30, 2020		September 30, 2021		September 30, 2020
	(Unaudited)		(Unaudited)		(Unaudited)		(Unaudited)
Stock Options		1,178,000		163,000		186,000		163,000
Warrants		1,828,000		1,423,000		1,068,000		1,423,000
		3,006,000		1,586,000		1,254,000		1,586,000

	Three Months Ended				Nine Months Ended
	September 30, 2021		September 30, 2020		September 30, 2021		September 30, 2020
	(Unaudited)		(Unaudited)		(Unaudited)		(Unaudited)
Stock Options		1,330,000		1,696,000		-		1,696,000
Warrants		-		760,000		-		760,000
Convertible notes payable		5,092,000		5,092,000		-		5,092,000
		6,422,000		7,548,000		-		7,548,000

Property and Equipment (Tables)

9 Months Ended

Sep. 30, 2021

Property, Plant and Equipment [Abstract]

Schedule of property and equipment

	September 30,			December 31,
	2021			2020

Land	$	300,000		$	300,000
Buildings and Improvements		1,697,000			1,683,000		31.50 years
Machinery and Equipment		22,035,000			21,738,000		5 - 8 years
Finance Lease Machinery and Equipment		78,000			78,000		5 - 8 years
Tools and Instruments		12,593,000			12,116,000		1.50 - 7 years
Automotive Equipment		148,000			148,000		5 years
Furniture and Fixtures		290,000			290,000		5 - 8 years
Leasehold Improvements		882,000			855,000		Term of Lease
Computers and Software		583,000			436,000		4 - 6 years
Total Property and Equipment		38,606,000			37,644,000
Less: Accumulated Depreciation		(30,147,000	)		(28,063,000	)
Property and Equipment, net	$	8,459,000		$	9,581,000

Leases (Tables)

9 Months Ended

Sep. 30, 2021

Leases, Operating [Abstract]

Schedule of operating and finance leases

	September 30,			December 31,
	2021			2020
	(unaudited)
Weighted Average Remaining Lease Term - in years		4.87			5.53
Weighted Average discount rate - %		8.89	%		8.90	%

Schedule of aggregate undiscounted cash flows of operating lease payments

	Amount
December 31, 2021 (remainder of the year)	$	249,000
December 31, 2022		1,007,000
December 31, 2023		1,038,000
December 31, 2024		1,070,000
December 31, 2025		992,000
Thereafter		730,000
Total future minimum lease payments		5,086,000
Less: discount		(999,000	)
Total operating lease maturities		4,087,000
Less: current portion of operating lease liabilities		(664,000	)
Total long term portion of operating lease maturities	$	3,423,000

Notes Payable, Related Party Notes Payable and Finance Lease Obligations (Tables)

9 Months Ended

Sep. 30, 2021

Debt Disclosure [Abstract]

Schedule of notes payable, related party notes payable and finance lease obligations

	September 30,			December 31,
	2021			2020

Revolving credit note payable to Sterling National Bank ("SNB")	$	13,463,000		$	15,649,000
Term loan, SNB		4,411,000			5,558,000
Finance lease obligations		2,000			6,000
Loans Payable - financed assets		41,000			48,000
Related party notes payable, net of debt discount		6,412,000			6,012,000
Subtotal		24,329,000			27,273,000
Less: Current portion of notes payable, related party notes payable and finance lease obligations		(14,285,000	)		(16,475,000	)
Notes payable, related party notes payable and finance lease obligations,
net of current portion	$	10,044,000		$	10,798,000

Schedule of payments for the term note

For the twelve months ending	Amount
December 31, 2021 (remainder of the year)	$	203,000
December 31, 2022		4,247,000
SNB Term Loan payable		4,450,000
Less: debt issuance costs		(39,000	)
Total SNB Term Loan payable, net of debt issuance costs		4,411,000
Less: Current portion of SNB Term Loan payable		(812,000	)
Total long-term portion of SNB Term Loan payable	$	3,599,000

Schedule of SBA Loans future minimum loan payments

For the twelve months ending	Amount
December 31, 2021 (remainder of the year)	$	2,000
December 31, 2022		9,000
December 31, 2023		9,000
December 31, 2024		9,000
December 31, 2025		9,000
Thereafter		3,000
Loans Payable - financed assets		41,000
Less: Current portion		(9,000	)
Long-term portion	$	32,000

Schedule of subordinated principal balance of the notes

	Michael Taglich,		Robert Taglich,		Taglich Brothers,
	Chairman		Director		Inc.		Total
Convertible Subordinated Notes	$	2,666,000	$	1,905,000	$	241,000	$	4,812,000
Subordinated Notes		1,250,000		350,000		-		1,600,000
Total	$	3,916,000	$	2,255,000	$	241,000	$	6,412,000

Liability Related to the Sale of Future Proceeds from Disposition of Subsidiary (Tables)

9 Months Ended

Sep. 30, 2021

Schedule of activity within the liability account

	September 30, 2021			December 31, 2020
	(Unaudited)

Liabilities related to sale of future proceeds from disposition of subsidiaries - beginning balance	$	322,000		$	602,000
Non-Cash other income recognized		(274,000	)		(402,000	)
Non-Cash interest expense recognized		82,000			122,000
Liabilities related to sale of future proceeds from disposition of subsidiary - ending balance		130,000			322,000
Less: unamortized transaction costs		(3,000	)		(3,000	)
Liability related to sale of future proceeds from disposition of subsidiary, net	$	127,000		$	319,000

Segment Reporting (Tables)

9 Months Ended

Sep. 30, 2021

Segment Reporting [Abstract]

Schedule of operating segments

	For the Three Months						For the Nine Months
	Ended September 30,						Ended September 30,
	2021			2020			2021			2020
	(unaudited)			(unaudited)			(unaudited)			(unaudited)
COMPLEX MACHINING
Net Sales	$	13,043,000		$	12,423,000		$	38,992,000		$	31,795,000
Gross Profit		2,022,000			1,735,000			5,966,000			4,584,000
Income before benefit from income taxes		1,420,000			912,000			3,973,000			2,072,000
Assets		49,275,000			52,963,000			49,275,000			52,963,000

TURBINE ENGINE COMPONENTS
Net Sales		1,311,000			1,239,000			4,527,000			3,808,000
Gross (loss) Profit		(8,000	)		(79,000	)		448,000			(133,000	)
Loss before benefit from income taxes		(119,000	)		(251,000	)		(20,000	)		(594,000	)
Assets		3,443,000			3,941,000			3,443,000			3,941,000

CORPORATE
Net Sales		-			-			-			-
Gross Profit		-			-			-			-
Loss before benefit from income taxes		(1,367,000	)		(1,138,000	)		(3,932,000	)		(3,895,000	)
Assets		803,000			1,860,000			803,000			1,860,000

CONSOLIDATED
Net Sales		14,354,000			13,662,000			43,519,000			35,603,000
Gross Profit		2,014,000			1,656,000			6,414,000			4,451,000
(Loss) Income before benefit from income taxes		(66,000	)		(477,000	)		21,000			(2,417,000	)
Benefit from Income Taxes		-			-			-			(1,414,000	)
Net (Loss) Income		(66,000	)		(477,000	)		21,000			(1,003,000	)
Assets	$	53,521,000		$	58,764,000		$	53,521,000		$	58,764,000

Formation and Basis of Presentation (Details) - USD ($)	3 Months Ended	9 Months Ended
Formation and Basis of Presentation (Details) - USD ($)	Sep. 30, 2021	Sep. 30, 2021
Accounting Policies [Abstract]
Generating operating income	$ 177,000	$ 644,000

Summary of Significant Accounting Policies (Details)	3 Months Ended		9 Months Ended		12 Months Ended
Summary of Significant Accounting Policies (Details)	Sep. 30, 2021 USD ($)	Sep. 30, 2020 USD ($)	Sep. 30, 2021 USD ($)	Sep. 30, 2020 USD ($)	Dec. 31, 2020 USD ($)
Summary of Significant Accounting Policies (Details) [Line Items]
Goodwill (in Dollars)	$ 163,000		$ 163,000		$ 163,000
Percentage of sales [Member]
Summary of Significant Accounting Policies (Details) [Line Items]
Number of customers	2	3	3	3
Concentration risk percentage	67.70%	70.60%	75.50%	74.20%
Net sales percentage	10.00%
Percentage of Receivables [Member]
Summary of Significant Accounting Policies (Details) [Line Items]
Number of customers			2		3
Concentration risk percentage			68.90%		80.30%
Net sales percentage			10.00%		10.00%
Director [Member]
Summary of Significant Accounting Policies (Details) [Line Items]
Stock based compensation expense (in Dollars)	$ 52,000	$ 58,000	$ 156,000	$ 159,000
Employees [Member]
Summary of Significant Accounting Policies (Details) [Line Items]
Stock based compensation expense (in Dollars)	$ 147,000	$ 52,000	$ 361,000	$ 266,000

Summary of Significant Accounting Policies (Details) - Schedule of credit and concentration risks

3 Months Ended

9 Months Ended

12 Months Ended

Sep. 30, 2021

Sep. 30, 2020

Sep. 30, 2021

Sep. 30, 2020

Dec. 31, 2020

Customer One [Member]

Percentage of Sales

41.60%

23.20%

36.80%

28.20%

53.50%

57.10%

Customers Two [Member]

Percentage of Sales

26.10%

25.80%

26.20%

32.10%

15.40%

^[1]

Customers Three [Member]

Percentage of Sales

^[2]

21.60%

12.50%

13.90%

^[3]

12.00%

Customers Four [Member]

^[3]

11.20%

[1]	Customer was less than 10% of accounts receivable at December 31, 2020.
[2]	Customer was less than 10% of sales for the three months ended September 30, 2021.
[3]	Customer was less than 10% of accounts receivable at September 30, 2021.

Summary of Significant Accounting Policies (Details) - Schedule of calculation of net income (loss) - USD ($)	3 Months Ended		9 Months Ended
	Sep. 30, 2021	Sep. 30, 2020	Sep. 30, 2021	Sep. 30, 2020
Schedule of calculation of net income (loss) [Abstract]
Net (Loss) Income per statement of operations	$ (66,000)	$ (477,000)	$ 21,000	$ (1,003,000)
Add: Convertible Note Interest for Potential Note Conversion			232,000
(Loss) Income used to calculate diluted earnings per share	$ (66,000)	$ (477,000)	$ 253,000	$ (1,003,000)

Amount, after deduction of tax, noncontrolling interests, dividends on preferred stock and participating securities; of income (loss) available to common shareholders.

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