View Filing Data

Document and Entity Information - shares	6 Months Ended
Document and Entity Information - shares	Jun. 30, 2013	Aug. 07, 2013
Document And Entity Information
Entity Registrant Name	AIR INDUSTRIES GROUP, INC.
Entity Central Index Key	0001009891
Document Type	10-Q
Document Period End Date	Jun. 30, 2013
Amendment Flag	false
Current Fiscal Year End Date	--12-31
Is Entity a Well-known Seasoned Issuer?	No
Is Entity a Voluntary Filer?	No
Is Entity's Reporting Status Current?	Yes
Entity Filer Category	Smaller Reporting Company
Entity Common Stock, Shares Outstanding		5,711,093
Document Fiscal Period Focus	Q2
Document Fiscal Year Focus	2013

Condensed Consolidated Balance Sheets - USD ($)	Jun. 30, 2013	Dec. 31, 2012
Current Assets
Cash and Cash Equivalents	$ 955,000	$ 490,000
Accounts Receivable, Net of Allowance for Doubtful Accounts of $789,000 and $705,000	9,009,000	11,631,000
Inventory	28,247,000	26,739,000
Prepaid Expenses and Other Current Assets	357,000	546,000
Deposits - Customers	16,000	133,000
Total Current Assets	38,584,000	39,539,000
Property and Equipment, net	5,129,000	5,883,000
Capitalized Engineering Costs - net of Accumulated Amortization of $3,653,000 and $3,449,000	813,000	802,000
Deferred Financing Costs, net, deposit and other assets	560,000	590,000
Intangible Assets, net	5,308,000	5,889,000
Goodwill	453,000	453,000
TOTAL ASSETS	50,847,000	53,156,000
Current Liabilities
Notes Payable and Capitalized Lease Obligations - Current Portion	16,746,000	19,211,000
Accounts Payable and Accrued Expenses	7,412,000	7,077,000
Lease Impairment - Current	78,000	85,000
Deferred Gain on Sale - Current Portion	38,000	38,000
Dividends Payable	358,000
Income Taxes Payable	2,400,000	1,448,000
Total Current Liabilities	27,032,000	27,859,000
Long Term Liabilities
Notes Payable and Capitalized Lease Obligation - Net of Current Portion	3,382,000	4,640,000
Lease Impairment - Net of Current Portion	89,000	127,000
Deferred Gain on Sale - Net of Current Portion	466,000	485,000
Deferred Rent	1,094,000	1,057,000
TOTAL LIABILITIES	32,063,000	34,168,000
Stockholders' Equity
Preferred Stock Par Value $.001 - Authorized 8,003,716 shares
Designated as Series "A" Convertible Preferred - $.001 par Value, 1,000 Shares Authorized 0 Shares issued and outstanding as of June 30, 2013 and December 31, 2012, respectively.
Designated as Series "B" Convertible Preferred -$.001 Par Value, 4,000,000 Shares Authorized, 0 shares issued and outstanding as of June 30, 2013 and December 31, 2012, respectively; Liquidation Value, $ 0
Common Stock - $.001 Par, 20,000,000 Shares Authorized, 5,711,093 and 5,711,093 Shares Issued and Outstanding as of June 30, 2013 and December 31, 2012, respectively	6,000	6,000
Additional Paid-In Capital	37,203,000	37,913,000
Accumulated Deficit	(18,425,000)	(18,931,000)
TOTAL STOCKHOLDERS' EQUITY	18,784,000	18,988,000
TOTAL LIABILITIES AND STOCKHOLDERS' EQUITY	$ 50,847,000	$ 53,156,000

Condensed Consolidated Balance Sheets (Parenthetical) - USD ($)	Jun. 30, 2013	Dec. 31, 2012
ASSETS
Allowance for Doubtful Accounts	$ 789,000	$ 705,000
Accumulated Amortization	$ 3,653,000	$ 3,449,000
Stockholders Equity
Preferred Stock par value	$ .001	$ .001
Preferred Stock Authorized	8,003,716	8,003,716
Series A Convertible Preferred Stock par Value	$ .001	$ .001
Series A Convertible Preferred Stock Authorized	1,000	1,000
Series A Convertible Preferred Stock Issued	0	0
Series A Convertible Preferred Stock Outstanding	0	0
Series B Convertible Preferred Stock par Value	$ 0.001	$ 0.001
Series B Convertible Preferred Stock Authorized	4,000,000	4,000,000
Series B Convertible Preferred Stock Issued	0	0
Series B Convertible Preferred Stock Outstanding	0	0
Common Stock par value	$ 0.001	$ 0.001
Common Stock Authorized	20,000,000	20,000,000
Common Stock Issued	5,711,093	5,711,093
Common Stock Outstanding	5,711,093	5,711,093

Condensed Consolidated Statements of Income (Unaudited) - USD ($)	3 Months Ended		6 Months Ended
	Jun. 30, 2013	Jun. 30, 2012	Jun. 30, 2013	Jun. 30, 2012
DepositForNewPropertyAndEquipment
Net Sales	$ 14,639,000	$ 15,240,000	$ 28,965,000	$ 31,278,000
Cost of Sales	11,009,000	11,804,000	21,687,000	24,570,000
Gross Profit	3,630,000	3,436,000	7,278,000	6,708,000
Operating Expenses	2,552,000	2,140,000	5,021,000	3,816,000
Income from Operations	1,078,000	1,296,000	2,257,000	2,892,000
Interest and financing costs	(393,000)	(472,000)	(775,000)	(970,000)
Other (expense) income, net	(29,000)	(142,000)	(58,000)	(135,000)
Income before provision for income taxes	656,000	682,000	1,424,000	1,787,000
Provision for income taxes	430,000	363,000	919,000	648,000
Net income	$ 226,000	$ 319,000	$ 505,000	$ 1,139,000
Income per share - basic	$ 0.04	$ 0.09	$ 0.09	$ 0.31
Income per share - diluted	$ 0.04	$ 0.08	$ 0.09	$ 0.31
Weighted average shares outstanding - basic	5,711,093	3,703,011	5,711,093	3,641,062
Weighted average shares outstanding - diluted	5,789,157	3,783,324	5,799,374	3,670,457

Condensed Consolidated Statements of Cash Flows (Unaudited) - USD ($)	6 Months Ended
	Jun. 30, 2013	Jun. 30, 2012
CASH FLOWS FROM OPERATING ACTIVITIES
Net Income	$ 505,000	$ 1,139,000
Adjustments to Reconcile Net Income to Net Cash provided by Operating Activities
Depreciation of property and equipment	801,000	715,000
Amortization of intangible assets	582,000	84,000
Amortization of capitalized engineering costs	203,000	225,000
Bad debt expense	91,000	241,000
Non-cash compensation expense	6,000	43,000
Amortization of deferred financing costs	30,000	27,000
Gain on sale of real estate	(19,000)	(19,000)
Adjustments to Lease Impairment		53,000
Changes in Assets and Liabilities (Increase) Decrease in Operating Assets:
Accounts Receivable	2,530,000	(3,680,000)
Inventory	(1,508,000)	1,280,000
Prepaid Expenses and Other Current Assets	189,000	143,000
Deposits	117,000	(124,000)
Other Assets	10,000	57,000
Increase (Decrease) in Operating Liabilities:
Accounts payable and accrued expenses	334,000	(735,000)
Deferred Rent	38,000	47,000
Income Taxes payable	952,000	586,000
NET CASH PROVIDED BY OPERATING ACTIVITIES	4,861,000	82,000
CASH FLOWS FROM INVESTING ACTIVITIES
Cash paid for acquisition		(11,400,000)
Capitalized engineering costs	(214,000)	(162,000)
Purchase of property and equipment	(46,000)	(243,000)
Deposit for new property and equipment		(116,000)
NET CASH USED IN INVESTING ACTIVITIES	(260,000)	(11,921,000)
CASH FLOWS FROM FINANCING ACTIVITIES
Proceeds from Private Placement		6,885,000
Payment of Issuance costs for Private Placement		(553,000)
Notes payable - Sellers	(317,000)	(295,000)
Capital lease obligations	(374,000)	(282,000)
Notes payable - Revolver	(2,132,000)	3,397,000
Proceeds from note payable - Term Loan		3,900,000
Payments of note payable - Term Loan	(900,000)	(500,000)
Cash paid for deferred financing costs	(10,000)
Payments related to Lease Impairment	(45,000)	(55,000)
Dividends Paid	(358,000)
NET CASH (USED IN) PROVIDED BY FINANCING ACTIVITIES	(4,136,000)	12,497,000
NET INCREASE IN CASH AND CASH EQUIVALENTS	465,000	658,000
CASH AND CASH EQUIVALENTS AT BEGINNING OF PERIOD	490,000	577,000
CASH AND CASH EQUIVALENTS AT END OF PERIOD	955,000	1,235,000
Schedule of noncash activities
Dividends payable	358,000
Supplemental cash flow information:
Cash paid during the year for interest	333,000	860,000
Cash paid during the period for income taxes		64,000
Junior Subordinated Note Converted to Common Stock		5,204,000
Purchase of substantially all assets of Nassau Tool Works, Inc and assumption of liabilities in the acquisition as follows:
Fair Value of Tangible Assets acquired		7,941,000
Intangible assets, subject to amortization		4,975,000
Goodwill		162,000
Liabilities assumed		(660,000)
Due to Seller of Old Nassau Tool		(718,000)
Common Stock		(300,000)
Cash paid for acquisition		$ 11,400,000

1. FORMATION AND BASIS OF PRESENTATION

6 Months Ended

Jun. 30, 2013

Formation And Basis Of Presentation

Note 1. FORMATION AND BASIS OF PRESENTATION

Organization

Air Industries Group, Inc. (the "Company" or “AIRI”), a Delaware corporation, was incorporated on January 13, 2006.

The accompanying consolidated financial statements presented are those of AIRI, and its wholly-owned subsidiaries; Air Industries Machining Corporation (“AIM”), Welding Metallurgy, Inc. ("WMI") and Nassau Tool Works, Inc. (“NTW”).

2. ACQUISITION

6 Months Ended

Jun. 30, 2013

Notes to Financial Statements

2. ACQUISITION

On July 1, 2013 the Company acquired certain assets including production equipment, inventory and intangible assets of Decimal Industries, Inc. (“Decimal”). The acquisition (“Decimal Transaction”) was made by and the assets and business of Decimal will become part of WMI. Decimal is a long established Long Island based manufacturer of precision welded and brazed aerospace chassis and other components housing avionics, radars and other electronic devices in aircraft and naval vessels. Decimal’s customers include major aerospace contractors.

The purchase price of the assets was $975,000, which included inventory of approximately $665,000 valued at a percentage of completion including anticipated profit on sale. The purchase price was paid as follows: $315,000 in cash at closing with the balance payable in eight equal monthly installments without interest in the amount of $76,667, with a final payment in the amount of $46,766. The two owners of Decimal have become employees of AIRI and are under contract until June 2018. As part of the transaction, the facility of Decimal has been leased for 12 months until June 2014. It is our intention to combine and relocate the operations of Decimal into WMI’s facility in Hauppauge.

3. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES

6 Months Ended

Jun. 30, 2013

Summary Of Significant Accounting Policies

Note 3. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES

Principal Business Activity

The Company through its AIM subsidiary is primarily engaged in manufacturing aircraft structural parts, and assemblies for prime defense contractors in the aerospace industry in the United States. WMI is a specialty welding and products provider whose significant customers include the world's largest aircraft manufacturers, subcontractors, and original equipment manufacturers. NTW is a manufacturer of aerospace components, principally landing gear for F-16 and F-18 fighter aircraft. The Company's customers consist mainly of publicly- traded companies in the aerospace industry.

Inventory Valuation

Inventory at June 30, 2013 and 2012 was computed based on a “gross profit” method.

The Company valued inventory at December 31, 2012 at the lower of cost on a first-in-first-out basis or market.

Credit and Concentration Risks

There were three customers that represented 59.0% and two customers that represented 60.6% of total sales for the three months ended June 30, 2013 and 2012, respectively. This is set forth in the table below.

Customer	Percentage of Sales
	2013	2012
	(Unaudited)	(Unaudited)

1	28.0	33.7
2	17.7	31.2
3	13.5	*

* Customer was less than 10% of sales for the six months ended June 30, 2012

There were three customers that represented 59.2% and two customers that represented 64.9% of total sales for the six months ended June 30, 2013 and 2012, respectively. This is set forth in the table below.

Customer	Percentage of Sales
	2013	2012
	(Unaudited)	(Unaudited)

1	30.2	29.0
2	17.1	31.6
3	11.7	*

* Customer was less than 10% of sales for the three months ended June 30, 2012

There were three customers that represented 48.7% and 54.6% of gross accounts receivable at June 30, 2013 and December 31, 2012, respectively. This is set forth in the table below.

Customer	Percentage of Receivables
	June	December
	2013	2012
	(Unaudited)
1	23.1	18.6
2	15.5	10.7
3	10.1	*
4	**	25.3

* Customer was less than 10% of receivables at December 31, 2012
** Customer was less than 10% of receivables at June 30, 2013

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

AIM has several sole-source suppliers of various parts that are used in one or more of our products. If any of these sole source suppliers were to go out of business or be unable to provide it parts for any reason, AIM would be required to develop new suppliers or to re-engineer our products, or both, which could delay shipment of products and have a material adverse effect on our operating results.

Earnings per share

Basic earnings per share is computed by dividing the net income applicable to common stockholders by the weighted-average number of shares of common stock outstanding for the period. Potentially dilutive shares, using the treasury stock method, are included in the diluted per-share calculation for all periods when the effect of their inclusion is dilutive.

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

	Three Months Ended				Six Months Ended
	June 30,				June 30,
	2013		2012		2013		2012
	(Unaudited)		(Unaudited)		(Unaudited)		(Unaudited)
Weighted average shares outstanding used to compute basic earning per share		5,711,093		3,703,011		5,711,093		3,641,062
Effect of dilutive stock options and warrants		78,064		80,313		88,281		29,395
Weighted average shares outstanding and dilutive securities used to compute dilutive earnings per share		5,789,157		3,783,324		5,799,374		3,670,457

The following securities have been excluded from the calculation as their effect would be anti-dilutive:

	June 30,		June 30.
	2013		2012
	(Unaudited)		(Unaudited)
Stock Options		12,548		15,548
Warrants		118,835		250
		131,383		15,798

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 amounted to $6,000 and $21,000 for the three months ending June 30, 2013 and 2012, respectively, and $6,000 and $43,000 for the six months ending June 30, 2013 and 2012 respectively, and was included in operating expenses on the accompanying Condensed Consolidated Statement of Income.

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 $453,000 relates to the acquisition of WMI ($291,000) and the acquisition of the assets acquired by NTW (The "NTW Acquisition") ($162,000). Goodwill is not amortized, but is tested at least annually for impairment, or if circumstances occur that more likely than not will reduce the fair value of the reporting unit below its carrying amount.

The Company has determined that there has been no impairment of goodwill at June 30, 2013 and December 31, 2012.

Recently Issued Accounting Pronouncements

Effective January 1, 2013, the Company adopted Accounting Standards Update (“ASU”) 2013-02, “Comprehensive Income (Topic 220): Reporting of Amounts Reclassified Out of Accumulated Other Comprehensive Income” (ASU 2013-02). ASU 2013-02 requires the disclosure of amounts reclassified out of accumulated other comprehensive income by component. In addition, an entity is required to present either on the face of the statement of operations or in the notes, significant amounts reclassified out of accumulated other comprehensive income by the respective line items of net income but only if the amount reclassified is required to be reclassified to net income in its entirety in the same reporting period. For amounts not reclassified in their entirety to net income, an entity is required to cross-reference to other disclosures that provide additional detail about those amounts. This guidance is effective prospectively for the Company for annual and interim periods beginning January 1, 2013. The adoption of ASU 2013-02 did not have a material effect on the Company’s financial position, results of operations or cash flows.

On July 18, 2013, the FASB issued Accounting Standards Update No. 2013-11, “Income Taxes (Topic 740): Presentation of an Unrecognized Tax Benefit When a Net Operating Loss Carryforward, a Similar Tax Loss, or a Tax Credit Carryforward Exists” (“ASU 2013-11”). ASU 2013-11 is expected to reduce diversity in practice by providing guidance on the presentation of unrecognized tax benefits and will better reflect the manner in which an entity would settle at the reporting date any additional income taxes that would result from the disallowance of a tax position when net operating loss carryforwards, similar tax losses, or tax credit carryforwards exist. The amendments in this update should be applied prospectively for annual and interim periods beginning after December 15, 2013. The Company is currently evaluating the impact of its pending adoption of ASU 2013-11 on its 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 financial statements.

Reclassifications

Certain account balances in 2012 have been reclassified to conform with the current period presentation.

Subsequent Events

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

4. ACCOUNTS RECEIVABLE

6 Months Ended

Jun. 30, 2013

Notes to Financial Statements

Note 4. ACCOUNTS RECEIVABLE

The components of accounts receivable are detailed as follows:

	June 30.			December 31,
	2013			2012
	(Unaudited)
Accounts Receivable Gross	$	9,798,000		$	12,336,000
Allowance for Doubtful Accounts		(789,000	)		(705,000	)
Accounts Receivable Net	$	9,009,000		$	11,631,000

5. PROPERTY AND EQUIPMENT

6 Months Ended

Jun. 30, 2013

Property And Equipment

Note 5. PROPERTY AND EQUIPMENT

The components of property and equipment at June 30, 2013 and December 31, 2012 consisted of the following:

	June 30,			December 31,
	2013			2012
	(Unaudited)
Machinery and Equipment	$	5,818,000		$	5,801,000		5 - 8 years
Capital Lease Machinery and Equipment		4,503,000			4,503,000		5 - 8 years
Tools and Instruments		3,984,000			3,968,000		1.5 - 7 years
Automotive Equipment		55,000			55,000		5 years
Furniture and Fixtures		232,000			232,000		5 - 8 years
Leasehold Improvements		612,000			612,000		Term of Lease
Computers and Software		331,000			318,000		4-6 years
Total Property and Equipment		15,535,000			15,489,000
Less: Accumulated Depreciation		(10,406,000	)		(9,606,000	)
Property and Equipment, net	$	5,129,000		$	5,883,000

Depreciation expense for the three months ended June 30, 2013 and 2012 was approximately $398,000 and $359,000, respectively. Depreciation expense for the six months ended June 30, 2013 and 2012 was approximately $801,000 and $715,000, respectively.

6. INTANGIBLE ASSETS

6 Months Ended

Jun. 30, 2013

Intangible Assets

Note 6. INTANGIBLE ASSETS

The components of the intangibles assets consisted of the following:

	June 30,			December 31,
	2013			2012
	(Unaudited)
Customer Relationships	$	5,815,000		$	5,815,000
Trade Names		770,000			770,000
Technical Know-how		660,000			660,000
Non-Compete		50,000			50,000
Professional Certifications		15,000			15,000
Total Intangible Assets		7,310,000			7,310,000
Less: Accumulated Amortization		(2,002,000	)		(1,421,000	)
Intangible Assets, net	$	5,308,000		$	5,889,000

Amortization expense for the three months ended June 30, 2013 and 2012 was approximately $291,000 and $42,000, respectively. Amortization expense for the six months ended June 30, 2013 and 2012 was approximately $582,000 and $84,000, respectively.

7. NOTES PAYABLE AND CAPITAL LEASE OBLIGATIONS

6 Months Ended

Jun. 30, 2013

Notes Payable And Capital Lease Obligations

Note 7. NOTES PAYABLE AND CAPITAL LEASE OBLIGATIONS

Notes payable and capital lease obligations consist of the following:

	June 30,			December 31,
	2013			2012
	(Unaudited)
Revolving credit note payable to PNC Bank N.A. ("PNC") and
secured by substantially all assets	$	13,535,000		$	15,667,000
Term loan, PNC		2,848,000			3,748,000
Capital lease obligations		1,686,000			2,060,000
Notes payable to sellers of acquired business		1,059,000			1,376,000
Junior subordinated notes		1,000,000			1,000,000
Subtotal		20,128,000			23,851,000
Less: Current portion of notes and capital obligations		(16,746,000	)		(19,211,000	)
Notes payable and capital lease obligations, net of current portion	$	3,382,000		$	4,640,000

PNC Bank N.A. ("PNC")

On June 27, 2013, the Company entered into an Amended and Restated Revolving Credit, Term Loan, and Security Agreement with PNC (the “Loan Facility”), secured by substantially all of its assets.. The Company paid an amendment fee of $10,000. The Loan Facility now provides for maximum borrowings of $20,847,604 consisting of the following:

	(i)	a $18,000,000 revolving credit note (includes inventory sub-limit of $12,500,000);
	(ii)	a $2,847,604 term loan; and

(iii)

includes the assets acquired from Decimal as part of the collateral.

Under the terms of the Amended and Restated Revolving Credit, Term Loan, and Security Agreement, the revolving credit note now bears interest at (a) the sum of the Alternate Base Rate plus three quarters of one percent (0.75%) with respect to Domestic Rate Loans or (b) the greater of the sum of the Eurodollar Rate plus two and three quarters of one percent (2.75%) with respect of Eurodollar Rate Loans. Prior to the amendment the revolving credit note bore interest at (a) the sum of PNC's base commercial lending rate as published from time to time ("PNC Rate") plus 2.00% or (b) the greater of the sum of the Eurodollar rate plus 3.5%. The revolving credit note had an interest rate of 4.0 % and 5.50% per annum at June 30, 2013 and December 31, 2012, respectively, and an outstanding balance of $13,535,000 and $15,667,000, respectively. The maturity date of the revolving credit note is November 30, 2016.

Each day, the Company's cash collections are swept directly by the bank to reduce the balance owed under the revolving credit note and we then borrow according to a borrowing base. As such, the Company generally has no cash on hand. Because the revolving credit note contains a subjective acceleration clause which could permit PNC to require repayment prior to maturity, the balance owed under the revolving credit note is classified with the current portion of notes and capital lease obligations.

Under the terms of the Amended and Restated Revolving Credit, Term Loan, and Security Agreement, the maturity date of the term loan is the first business day (as defined) of January 2015. The term loan now bears interest equal to (a) the sum of the Alternate Base Rate plus one and three quarters of one percent (1.75%) with respect to Domestic Rate Loans or (b) the sum of the Eurodollar Rate plus three and one half of one percent (3.50%) with respect to Eurodollar Rate Loans. Prior to the amendment the term loan bore interest, at the option of the Company equal to (a) the greater of (i) the sum of the PNC Rate plus 6.5% and (ii) 11.5%, with respect to Domestic Rate Loans or (b) the greater of (i) the sum of the Eurodollar Rate plus 8.5% and (ii) 10.5%, with respect to Eurodollar Rate Loans. Repayment under the term loan shall consist of 19 consecutive monthly principal installments, the first 18 of which will be in the amount of $150,000 commencing on the first business day of July 2013, with the 19th and final payment of any unpaid balance of principal and interest payable on the first business day of January 2015. Additionally, upon a request from PNC no later than the last day of any applicable fiscal quarter, there is a prepayment equal to 50% of Excess Cash Flow (as defined) for each fiscal quarter commencing with the fiscal quarter ended June 30, 2013 (formerly September 30, 2012), payable upon the delivery of the financial statements for such fiscal period to PNC, but no later than 45 days after the end of the fiscal quarter. PNC did not make such a request for the quarter ended June 30, 2013. At June 30, 2013 and December 31, 2012, the balance due under the term loan was $2,848,000 and $3,748,000, respectively.

To the extent that the Company disposes of collateral used to secure the Loan Facility, other than inventory, the Company must promptly repay the draws on the credit facility in an amount equal to the net proceeds of such sale.

The terms of the Loan Facility require that, among other things, the Company maintain a specified Fixed Charge Coverage Ratio. In addition, the Company is limited in the amount of Capital Expenditures it can make. The Company is also limited to the amount of Dividends it can pay its shareholders as defined in the Loan Facility. As of both June 30, 2013 and December 31, 2012, the Company was in compliance with all terms of its Loan Facility with PNC.

The Company's receivables are payable directly into a lockbox controlled by PNC (subject to the terms of the Loan Facility). PNC may use some elements of subjective business judgment in determining whether a material adverse change has occurred in the Company's condition, results of operations, assets, business, properties or prospects allowing it to demand repayment of the Loan Facility.

As of June 30, 2013 the future minimum principal payments for the term loan are as follows:

For the twelve months ending	Amount
June 30, 2014	$	1,800,000
June 30, 2015		1,048,000
PNC Term Loan Payable		2,848,000
Less: Current portion		(1,800,000	)
Long-term portion	$	1,048,000

Interest expense related to these credit facilities amounted to approximately $272,000 and $205,000 for the three months ended June 30, 2013 and 2012, respectively, and $540,000 and $410,000 for the six months ended June 30, 2013 and 2012, respectively.

On July16, 2012, the Company entered into the 18th amendment to its Credit Facility with PNC. This amendment allowed for the repayment of $115,000 of our Junior Subordinated Notes (see discussion below).

Capital Leases Payable – Equipment

The Company is committed under several capital leases for manufacturing and computer equipment. All leases have bargain purchase options exercisable at the termination of each lease. Capital lease obligations totaled $1,686,000 and $2,060,000 as of June 30, 2013 and December 31, 2012, respectively, with various interest rates ranging from 7.0% to 9.5%.

As of June 30, 2013, the aggregate future minimum lease payments, including imputed interest, with remaining terms of greater than one year are as follows:

For the twelve months ending	Amount
June 30, 2014	$	861,000
June 30, 2015		401,000
June 30, 2016		397,000
June 30, 2017		189,000
June 30, 2018		47,000
Total future minimum lease payments		1,895,000
Less: imputed interest		(209,000	)
Less: current portion		(744,000	)
Total Long Term Portion	$	942,000

On July 1, 2013, the Company satisfied approximately $454,000 of capital leases that had maturities of less than one year remaining. This satisfaction of these leases allowed the Company to pledge as collateral to PNC, the equipment that was previously leased under the capital leases.

Notes Payable - Sellers

As of June 30, 2013 and December 31, 2012, the balance owed to the sellers of WMI is:

	June 30,			December 31,
	2013			2012
	(Unaudited)
Former Welding Stockholders	$	1,059,000		$	1,376,000
Less: Current Portion		(667,000	)		(644,000	)
Total long-term portion	$	392,000		$	732,000

In connection with the acquisition of WMI on August 24, 2007, the Company incurred a note payable (“Note”) to the former stockholders of WMI. Our obligation under the Note is subordinate to our indebtedness to PNC.

The Note and payment terms were adjusted and/or amended several times. On October 1, 2010, the Company entered into a letter agreement with the former stockholders of WMI making the new balance of the note $2,397,967. Payments on the note began on October 1, 2010. It was further agreed that payments would be made according to the following schedule: equal monthly installments of $40,000 on the first business day of each month until December 31, 2011, followed by equal monthly installments of $60,000 on the first business day of each month commencing on January 1, 2012 and continuing until the entire principal amount of the obligation is paid in full, which is estimated to be in January 2015. Interest shall accrue at the rate of 7% per annum, and each payment will first apply to interest and then to principal. At June 30, 2013 and December 31, 2012, the balance owed under the note was $1,059,000 and $1,376,000, respectively.

As of June 30, 2013, the future minimum payments for the note payable to the former stockholders of WMI are as follows:

For the twelve months ending	Amount
June 30, 2014	$	667,000
June 30, 2015		392,000
Former WMI Stockholders Notes Payable		1,059,000
Less: Current portion		(667,000	)
Long-term portion	$	392,000

Interest expense related to notes payable to the former stockholder was $21,000 and $31,000 for the three months ended June 30, 2013 and 2012, respectively and $44,000 and $65,000 for the six months ended June 30, 2013 and 2012 respectively.

Junior Subordinated Notes

In 2008 and 2009, the Company sold in a series of private placements to accredited investors $5,990,000 of principal amount in Junior Subordinated Notes. The notes bear interest at the rate of 1% per month (or 12% per annum).

In connection with the offering of the Company's Junior Subordinated Notes, the Company issued to Taglich Brothers, Inc. ("Taglich Brothers"), as placement agent, a Junior Subordinated Note in the principal amount of $510,000. The terms of the note issued to Taglich Brothers are identical to the notes. In connection with the amounts raised in 2009, the Company issued to Taglich Brothers a Junior Subordinated Note on the same terms as the Junior Subordinated Notes referred to above for commission of $44,500.

In conjunction with the Private Placement of our common stock to raise money for the NTW Acquisition, we solicited the holders of our Junior Subordinated Notes to convert their notes to Common Stock at a price of $6.00 per share. On June 29, 2012, we issued 867,461 shares of our common stock in exchange for approximately $5,204,000 of our Junior Subordinated Notes. On July 26, 2012, we repaid $115,000 of our Junior Subordinated Notes along with the accrued interest thereon of approximately $1,000.

The due dates of the remaining Junior Subordinated Notes were extended from November 18, 2013 to mature on November 30, 2016 and are subordinated to the Company's obligations to PNC.

The balance owed at June 30, 2013 and December 31, 2012 amounted to $1,000,000.

Interest expense amounted to $30,000 and $188,000 for the three months ended June 30, 2013 and 2012, respectively, and $60,000 and $379,000 for the six months ended June 30, 2013 and 2012, respectively.

8. STOCKHOLDERS' EQUITY

6 Months Ended

Jun. 30, 2013

Stockholders' Equity

Note 8. STOCKHOLDERS' EQUITY

Common Stock Issuances

There were no shares issued during the three and six months ended June 30, 2013 and 2012.

Dividends

On March 11, 2013, the Board of Directors approved and the Company announced a quarterly dividend of $0.0625 per common share paid on April 1, 2013 to all shareholders of record as of the close of business on March 15, 2013. The approximate amount of the dividend was $358,000.

On June 20, 2013, the Board of Directors approved and the Company announced a quarterly dividend of $0.0625 per common share paid on July 5, 2013 to all shareholders of record as of the close of business on July 1, 2013. The approximate amount of the dividend was $358,000.

Stock Options

On June 3, 2013, the Board of Directors adopted the Company’s 2013 Equity Incentive Plan (“2013 Plan”). The 2013 Plan is virtually identical to and is intended to replace, the Company’s 2010 Equity Incentive Plan. The proposal to approve the 2013 Plan was approved by the affirmative vote of the Company’s stockholders on July 29, 2013.

Derivative Liability

In connection with the issuances of equity instruments or debt, the Company may issue options or warrants to purchase common stock. In certain circumstances, these options or warrants may be classified as liabilities, rather than as equity. In addition, the equity instrument or debt may contain embedded derivative instruments, such as conversion options or listing requirements, which in certain circumstances may be required to be bifurcated from the associated host instrument and accounted for separately as a derivative liability instrument. The Company accounts for derivative liability instruments under the provisions of FASB ASC 815, “Derivatives and Hedging.”

In connection with the private placement to raise money for the NTW Acquisition, the Company issued warrants to Taglich Brothers. Such warrants contain “cashless exercise” provisions. As a result, the value of the warrants has to be recognized as a liability. In addition, the Company would be required to revalue the derivative liability at the end of each reporting period with the change in value reported on the statement of operations. The Company did not account for the derivative liability in its financial statements as it was determined to not be material.

- Definition

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.

+ References

Reference 1: http://www.xbrl.org/2003/role/presentationRef
-Publisher FASB
-Name Accounting Standards Codification
-Topic 235
-SubTopic 10
-Section S99
-Paragraph 1
-Subparagraph (SX 210.4-08.(d),(e))
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Reference 3: http://www.xbrl.org/2003/role/presentationRef
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-Paragraph d
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Reference 15: http://www.xbrl.org/2003/role/presentationRef
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Reference 16: http://www.xbrl.org/2003/role/presentationRef
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Reference 17: http://www.xbrl.org/2003/role/presentationRef
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Reference 19: http://www.xbrl.org/2003/role/presentationRef
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+ Details

9. CONTINGENCIES

6 Months Ended

Jun. 30, 2013

Federal AMT

Note 9. CONTINGENCIES

Litigation

Sigma Metals, Inc. (“Sigma”): Several former vendors to Sigma, a former subsidiary of the Company, had commenced legal action against Sigma seeking to recover amounts owed to them. All of these have been settled except for one that is still deciding whether to commence litigation seeking the recovery of approximately $71,000. Settlement discussions have commenced with this vendor but there is not yet a definitive resolution.

10. INCOME TAXES

6 Months Ended

Jun. 30, 2013

Income Taxes

Note 10. INCOME TAXES

The provision for income taxes as at June 30, are set forth below:

	2013		2012
	(Unaudited)		(Unaudited)
Current
Federal	$	707,000	$	485,000
State		212,000		163,000
Total Expense		919,000		648,000

Deferred
Federal		-		-
State		-		-
Total Deferred Taxes		-		-
Net Expense for Income Taxes	$	919,000	$	648,000

The components of net deferred tax assets as of June 30, 2013 and December 31 2012 are set forth below:

	June 30,			December 31,
	2013			2012
	(Unaudited)
Deferred tax assets:
Capital loss carry forwards	$	1,088,000		$	1,088,000
Section 1231 loss carry forward		86,000			86,000
Bad debts		315,000			282,000
Stock based compensation - options and restricted stock		509,000			506,000
Capitalized engineering costs		474,000			447,000
Account payable, accrued expenses and reserves		9,000			9,000
Deferred rent		438,000			423,000
Amortization - NTW Transaction		277,000			138,000
Inventory - 263A adjustment		747,000			569,000
Lease Impairment		67,000			85,000
Deferred gain on sale of real estate		202,000			209,000
Total deferred tax assets before valuation allowance		4,212,000			3,842,000
Valuation allowance		(2,770,000	)		(2,269,000	)
Total deferred tax assets after valuation allowance		1,442,000			1,573,000

Deferred tax liabilities:
Property and equipment		(896,000	)		(997,000	)
Goodwill - NTW Transaction		(4,000	)		-
Amortization - Welding Transaction		(542,000	)		(576,000	)
Total Deferred Tax Liability		(1,442,000	)		(1,573,000	)

Net deferred tax asset	$	-		$	-

Due to the uncertainty of realization of the net deferred tax assets, the Company has provided a valuation allowance. In assessing the realizability of it, management considers whether it is more likely than not that some or perhaps all of the deferred tax assets will not be realized. The valuation allowance will be reversed at such time that realization is believed to be more likely than not. The valuation allowance at June 30, 2013 and December 31, 2012 amounted to $2,770,000 and $2,269,000, respectively.

The Company has a capital loss carry forward from the sale of Sigma of $2,719,000 which will expire in fiscal 2015.

11. SEGMENT REPORTING

6 Months Ended

Jun. 30, 2013

Notes to Financial Statements

Note 11. SEGMENT REPORTING

In accordance with FASB ASC 280, “Segment Reporting”, 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 is operating in three segments. AIM manufactures components and subassemblies for the defense and aerospace industry. NTW is a manufacturer of aerospace components, principally landing gear for F-16 and F-18 fighter aircraft. The financial information of NTW is only included as of the date of acquisition (June 20, 2012). WMI provides specialty welding services and metal fabrications to the defense and commercial aerospace industry. While each of these segments service the same industries and a similar customer base, we evaluate the performance of each segment separately in deciding how to allocate resources and in accessing profitability.

Beginning January 1, 2013, the Company began to allocate all of the corporate selling and general and administrative costs of AIRI to each of its three subsidiaries. For 2013, these are allocated 50% to AIM and 25% to each of WMI and NTW. For 2012, such costs have been reclassified to reflect an allocation of AIRI corporate costs to its subsidiaries. These were reclassified 75% to AIM and 25% to WMI. (NTW was acquired on June 20, 2012).

Financial information about the Company's operating segments for the three months ended June 30, 2013 and 2012 are as follows:

Three Months Ended June 30,
		2013			2012
		(Unaudited)			(Unaudited)
*AIM*
	Net Sales	$	8,188,000		$	11,585,000
	Gross Profit		1,599,000			2,193,000
	Pre Tax Income		594,000			794,000
	Assets		23,645,000			27,159,000

*WMI*
	Net Sales		3,307,000			3,142,000
	Gross Profit		894,000			1,044,000
	Pre Tax Income		7,000			165,000
	Assets		9,477,000			8,746,000

*NTW*
	Net Sales		3,144,000			513,000
	Gross Profit		1,137,000			199,000
	Pre Tax Income		228,000			154,000
	Assets		13,247,000			13,366,000

*Corporate*
	Net Sales		-			-
	Gross Profit		-			-
	Pre Tax Loss		(173,000	)		(431,000	)
	Assets		11,074,000			16,860,000

*Consolidated*
	Net Sales		14,639,000			15,240,000
	Gross Profit		3,630,000			3,436,000
	Pre Tax Income		656,000			682,000
	Provision for Taxes		430,000			363,000
	Net Income		226,000			319,000
	Elimination of Assets		(6,596,000	)		(13,860,000	)
	Assets		50,847,000			52,271,000

Financial information about the Company's operating segments for the six months ended June 30, 2013 and 2012 are as follows:

Six Months Ended June 30,
		2013			2012
		(Unaudited)			(Unaudited)
*AIM*
	Net Sales	$	15,666,000		$	23,728,000
	Gross Profit		3,059,000			4,439,000
	Pre Tax Income		1,088,000			1,706,000
	Assets		23,645,000			27,159,000

*WMI*
	Net Sales		6,446,000			7,037,000
	Gross Profit		1,743,000			2,069,000
	Pre Tax Income		(5,000	)		658,000
	Assets		9,477,000			8,746,000

*NTW*
	Net Sales		6,853,000			513,000
	Gross Profit		2,476,000			199,000
	Pre Tax Income		721,000			154,000
	Assets		13,247,000			13,366,000

*Corporate*
	Net Sales		-			-
	Gross Profit		-			-
	Pre Tax Loss		(380,000	)		(731,000	)
	Assets		11,074,000			16,860,000

*Consolidated*
	Net Sales		28,965,000			31,278,000
	Gross Profit		7,278,000			6,707,000
	Pre Tax Income		1,424,000			1,787,000
	Provision for Taxes		919,000			648,000
	Net Income		505,000			1,139,000
	Elimination of Assets		(6,596,000	)		(13,860,000	)
	Assets		50,847,000			52,271,000

- Definition

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.

+ References

Reference 1: http://www.xbrl.org/2003/role/presentationRef
-Publisher FASB
-Name Accounting Standards Codification
-Topic 280
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-Section 50
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-URI http://asc.fasb.org/extlink&oid=6534315&loc=d3e8981-108599

Reference 2: http://www.xbrl.org/2003/role/presentationRef
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+ Details

3. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (Policies)

6 Months Ended

Jun. 30, 2013

Summary Of Significant Accounting Policies Policies

Principal Business Activity

Principal Business Activity

Inventory Valuation

Inventory Valuation

Inventory at June 30, 2013 and 2012 was computed based on a “gross profit” method.

The Company valued inventory at December 31, 2012 at the lower of cost on a first-in-first-out basis or market.

Credit and Concentration Risks

Credit and Concentration Risks

Customer	Percentage of Sales
	2013	2012
	(Unaudited)	(Unaudited)

1	28.0	33.7
2	17.7	31.2
3	13.5	*

* Customer was less than 10% of sales for the six months ended June 30, 2012

Customer	Percentage of Sales
	2013	2012
	(Unaudited)	(Unaudited)

1	30.2	29.0
2	17.1	31.6
3	11.7	*

* Customer was less than 10% of sales for the three months ended June 30, 2012

There were three customers that represented 48.7% and 54.6% of gross accounts receivable at June 30, 2013 and December 31, 2012, respectively. This is set forth in the table below.

Customer	Percentage of Receivables
	June	December
	2013	2012
	(Unaudited)
1	23.1	18.6
2	15.5	10.7
3	10.1	*
4	**	25.3

* Customer was less than 10% of receivables at December 31, 2012
** Customer was less than 10% of receivables at June 30, 2013

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

Earnings per share

Earnings per share

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

	Three Months Ended				Six Months Ended
	June 30,				June 30,
	2013		2012		2013		2012
	(Unaudited)		(Unaudited)		(Unaudited)		(Unaudited)
Weighted average shares outstanding used to compute basic earning per share		5,711,093		3,703,011		5,711,093		3,641,062
Effect of dilutive stock options and warrants		78,064		80,313		88,281		29,395
Weighted average shares outstanding and dilutive securities used to compute dilutive earnings per share		5,789,157		3,783,324		5,799,374		3,670,457

The following securities have been excluded from the calculation as their effect would be anti-dilutive:

	June 30,		June 30.
	2013		2012
	(Unaudited)		(Unaudited)
Stock Options		12,548		15,548
Warrants		118,835		250
		131,383		15,798

Stock-Based Compensation

Stock-Based Compensation

Goodwill

Goodwill

The Company has determined that there has been no impairment of goodwill at June 30, 2013 and December 31, 2012.

Recently Issued Accounting Pronouncements

Recently Issued Accounting Pronouncements

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 financial statements.

Reclassifications

Reclassifications

Certain account balances in 2012 have been reclassified to conform with the current period presentation.

Subsequent Events

Subsequent Events

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

3. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (Tables)

6 Months Ended

Jun. 30, 2013

Summary Of Significant Accounting Policies Tables

Credit and Concentration Risks

Customer	Percentage of Sales
	2013	2012
	(Unaudited)	(Unaudited)

1	28.0	33.7
2	17.7	31.2
3	13.5	*

* Customer was less than 10% of sales for the six months ended June 30, 2012

Customer	Percentage of Sales
	2013	2012
	(Unaudited)	(Unaudited)

1	30.2	29.0
2	17.1	31.6
3	11.7	*

* Customer was less than 10% of sales for the three months ended June 30, 2012

There were three customers that represented 48.7% and 54.6% of gross accounts receivable at June 30, 2013 and December 31, 2012, respectively. This is set forth in the table below.

Customer	Percentage of Receivables
	June	December
	2013	2012
	(Unaudited)
1	23.1	18.6
2	15.5	10.7
3	10.1	*
4	**	25.3

* Customer was less than 10% of receivables at December 31, 2012
** Customer was less than 10% of receivables at June 30, 2013

Earnings per share

	Three Months Ended				Six Months Ended
	June 30,				June 30,
	2013		2012		2013		2012
	(Unaudited)		(Unaudited)		(Unaudited)		(Unaudited)
Weighted average shares outstanding used to compute basic earning per share		5,711,093		3,703,011		5,711,093		3,641,062
Effect of dilutive stock options and warrants		78,064		80,313		88,281		29,395
Weighted average shares outstanding and dilutive securities used to compute dilutive earnings per share		5,789,157		3,783,324		5,799,374		3,670,457

Anti-dilutive Securities

	June 30,		June 30.
	2013		2012
	(Unaudited)		(Unaudited)
Stock Options		12,548		15,548
Warrants		118,835		250
		131,383		15,798

4. ACCOUNTS RECEIVABLE (Tables)

6 Months Ended

Jun. 30, 2013

Notes to Financial Statements

Components of accounts receivable

	June 30.			December 31,
	2013			2012
	(Unaudited)
Accounts Receivable Gross	$	9,798,000		$	12,336,000
Allowance for Doubtful Accounts		(789,000	)		(705,000	)
Accounts Receivable Net	$	9,009,000		$	11,631,000

5. PROPERTY AND EQUIPMENT (Tables)

6 Months Ended

Jun. 30, 2013

Property And Equipment Tables

Property and equipment

	June 30,			December 31,
	2013			2012
	(Unaudited)
Machinery and Equipment	$	5,818,000		$	5,801,000		5 - 8 years
Capital Lease Machinery and Equipment		4,503,000			4,503,000		5 - 8 years
Tools and Instruments		3,984,000			3,968,000		1.5 - 7 years
Automotive Equipment		55,000			55,000		5 years
Furniture and Fixtures		232,000			232,000		5 - 8 years
Leasehold Improvements		612,000			612,000		Term of Lease
Computers and Software		331,000			318,000		4-6 years
Total Property and Equipment		15,535,000			15,489,000
Less: Accumulated Depreciation		(10,406,000	)		(9,606,000	)
Property and Equipment, net	$	5,129,000		$	5,883,000

6. INTANGIBLE ASSETS (Tables)

6 Months Ended

Jun. 30, 2013

Intangible Assets Tables

Intangible assets

	June 30,			December 31,
	2013			2012
	(Unaudited)
Customer Relationships	$	5,815,000		$	5,815,000
Trade Names		770,000			770,000
Technical Know-how		660,000			660,000
Non-Compete		50,000			50,000
Professional Certifications		15,000			15,000
Total Intangible Assets		7,310,000			7,310,000
Less: Accumulated Amortization		(2,002,000	)		(1,421,000	)
Intangible Assets, net	$	5,308,000		$	5,889,000

7. NOTES PAYABLE AND CAPITAL LEASE OBLIGATIONS (Tables)

6 Months Ended

Jun. 30, 2013

Notes Payable And Capital Lease Obligations Tables

Notes payable and capital lease obligations

	June 30,			December 31,
	2013			2012
	(Unaudited)
Revolving credit note payable to PNC Bank N.A. ("PNC") and
secured by substantially all assets	$	13,535,000		$	15,667,000
Term loan, PNC		2,848,000			3,748,000
Capital lease obligations		1,686,000			2,060,000
Notes payable to sellers of acquired business		1,059,000			1,376,000
Junior subordinated notes		1,000,000			1,000,000
Subtotal		20,128,000			23,851,000
Less: Current portion of notes and capital obligations		(16,746,000	)		(19,211,000	)
Notes payable and capital lease obligations, net of current portion	$	3,382,000		$	4,640,000

Future minimum principal payments for term loan

For the twelve months ending	Amount
June 30, 2014	$	1,800,000
June 30, 2015		1,048,000
PNC Term Loan Payable		2,848,000
Less: Current portion		(1,800,000	)
Long-term portion	$	1,048,000

Future minimum lease payments, including imputed interest

For the twelve months ending	Amount
June 30, 2014	$	861,000
June 30, 2015		401,000
June 30, 2016		397,000
June 30, 2017		189,000
June 30, 2018		47,000
Total future minimum lease payments		1,895,000
Less: imputed interest		(209,000	)
Less: current portion		(744,000	)
Total Long Term Portion	$	942,000

Notes Payable - Sellers

	June 30,			December 31,
	2013			2012
	(Unaudited)
Former Welding Stockholders	$	1,059,000		$	1,376,000
Less: Current Portion		(667,000	)		(644,000	)
Total long-term portion	$	392,000		$	732,000

Future minimum payments for the note payable to the former stockholders of Welding

For the twelve months ending	Amount
June 30, 2014	$	667,000
June 30, 2015		392,000
Former WMI Stockholders Notes Payable		1,059,000
Less: Current portion		(667,000	)
Long-term portion	$	392,000

10. INCOME TAXES (Tables)

6 Months Ended

Jun. 30, 2013

Disclosure14.IncomeTaxesTablesAbstract

Provision for income

	2013		2012
	(Unaudited)		(Unaudited)
Current
Federal	$	707,000	$	485,000
State		212,000		163,000
Total Expense		919,000		648,000

Deferred
Federal		-		-
State		-		-
Total Deferred Taxes		-		-
Net Expense for Income Taxes	$	919,000	$	648,000

Deferred tax assets

	June 30,			December 31,
	2013			2012
	(Unaudited)
Deferred tax assets:
Capital loss carry forwards	$	1,088,000		$	1,088,000
Section 1231 loss carry forward		86,000			86,000
Bad debts		315,000			282,000
Stock based compensation - options and restricted stock		509,000			506,000
Capitalized engineering costs		474,000			447,000
Account payable, accrued expenses and reserves		9,000			9,000
Deferred rent		438,000			423,000
Amortization - NTW Transaction		277,000			138,000
Inventory - 263A adjustment		747,000			569,000
Lease Impairment		67,000			85,000
Deferred gain on sale of real estate		202,000			209,000
Total deferred tax assets before valuation allowance		4,212,000			3,842,000
Valuation allowance		(2,770,000	)		(2,269,000	)
Total deferred tax assets after valuation allowance		1,442,000			1,573,000

Deferred tax liabilities:
Property and equipment		(896,000	)		(997,000	)
Goodwill - NTW Transaction		(4,000	)		-
Amortization - Welding Transaction		(542,000	)		(576,000	)
Total Deferred Tax Liability		(1,442,000	)		(1,573,000	)

Net deferred tax asset	$	-		$	-

11. SEGMENT REPORTING (Tables)

6 Months Ended

Jun. 30, 2013

Segment Reporting Tables

Operating segments

Financial information about the Company's operating segments for the three months ended June 30, 2013 and 2012 are as follows:

Three Months Ended June 30,
		2013			2012
		(Unaudited)			(Unaudited)
*AIM*
	Net Sales	$	8,188,000		$	11,585,000
	Gross Profit		1,599,000			2,193,000
	Pre Tax Income		594,000			794,000
	Assets		23,645,000			27,159,000

*WMI*
	Net Sales		3,307,000			3,142,000
	Gross Profit		894,000			1,044,000
	Pre Tax Income		7,000			165,000
	Assets		9,477,000			8,746,000

*NTW*
	Net Sales		3,144,000			513,000
	Gross Profit		1,137,000			199,000
	Pre Tax Income		228,000			154,000
	Assets		13,247,000			13,366,000

*Corporate*
	Net Sales		-			-
	Gross Profit		-			-
	Pre Tax Loss		(173,000	)		(431,000	)
	Assets		11,074,000			16,860,000

*Consolidated*
	Net Sales		14,639,000			15,240,000
	Gross Profit		3,630,000			3,436,000
	Pre Tax Income		656,000			682,000
	Provision for Taxes		430,000			363,000
	Net Income		226,000			319,000
	Elimination of Assets		(6,596,000	)		(13,860,000	)
	Assets		50,847,000			52,271,000

Financial information about the Company's operating segments for the six months ended June 30, 2013 and 2012 are as follows:

Six Months Ended June 30,
		2013			2012
		(Unaudited)			(Unaudited)
*AIM*
	Net Sales	$	15,666,000		$	23,728,000
	Gross Profit		3,059,000			4,439,000
	Pre Tax Income		1,088,000			1,706,000
	Assets		23,645,000			27,159,000

*WMI*
	Net Sales		6,446,000			7,037,000
	Gross Profit		1,743,000			2,069,000
	Pre Tax Income		(5,000	)		658,000
	Assets		9,477,000			8,746,000

*NTW*
	Net Sales		6,853,000			513,000
	Gross Profit		2,476,000			199,000
	Pre Tax Income		721,000			154,000
	Assets		13,247,000			13,366,000

*Corporate*
	Net Sales		-			-
	Gross Profit		-			-
	Pre Tax Loss		(380,000	)		(731,000	)
	Assets		11,074,000			16,860,000

*Consolidated*
	Net Sales		28,965,000			31,278,000
	Gross Profit		7,278,000			6,707,000
	Pre Tax Income		1,424,000			1,787,000
	Provision for Taxes		919,000			648,000
	Net Income		505,000			1,139,000
	Elimination of Assets		(6,596,000	)		(13,860,000	)
	Assets		50,847,000			52,271,000

3. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (Details)	6 Months Ended
3. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (Details)	Jun. 30, 2013	Jun. 30, 2012
Summary Of Significant Accounting Policies Details
Customer 1	28.00%	33.70%
Customer 2	17.70%	31.20%
Customer 3	13.50%

3. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (Details 1)	Jun. 30, 2013	Dec. 31, 2012
Summary Of Significant Accounting Policies Details 1
Customer 1	30.20%	29.00%
Customer 2	17.10%	31.60%
Customer 3	11.70%

3. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (Details 2)	Jun. 30, 2013	Jun. 30, 2012
Summary Of Significant Accounting Policies Details 2
Customer 1	23.10%	18.60%
Customer 2	15.50%	10.70%
Customer 3	10.10%
Customer 4		25.30%

3. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (Details 3) - shares	3 Months Ended		6 Months Ended
	Jun. 30, 2013	Jun. 30, 2012	Jun. 30, 2013	Jun. 30, 2012
Summary Of Significant Accounting Policies Details 3
Weighted average shares outstanding used to compute basic earning per share	5,711,093	3,703,011	5,711,093	3,641,062
Effect of dilutive stock options and warrants	78,064	80,313	88,281	29,395
Weighted average shares outstanding and dilutive securities used to compute dilutive earnings per share	5,789,157	3,783,324	5,799,374	3,670,457

3. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (Details 4) - shares	Jun. 30, 2013	Jun. 30, 2012
Summary Of Significant Accounting Policies Details 4
Stock Options	12,548	15,548
Warrants	118,835	250
Anti dilutive Securities	131,383	15,798

3. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (Details Narrative) - USD ($)	3 Months Ended		6 Months Ended
	Jun. 30, 2013	Jun. 30, 2012	Jun. 30, 2013	Jun. 30, 2012	Dec. 31, 2012
Summary Of Significant Accounting Policies Details Narrative
Customer Sales			59.00%	60.60%
customers gross accounts receivables	59.20%		59.20%		64.90%
Stock-based compensation	$ 6,000	$ 21,000	$ 6,000	$ 43,000

4. ACCOUNTS RECEIVABLE (Details) - USD ($)	Jun. 30, 2013	Dec. 31, 2012
Receivables [Abstract]
Accounts Receivable Gross	$ 9,798,000	$ 12,336,000
Allowance for Doubtful Accounts	(789,000)	(705,000)
Accounts Receivable Net	$ 9,009,000	$ 11,631,000

5. PROPERTY AND EQUIPMENT (Details) - USD ($)	6 Months Ended
5. PROPERTY AND EQUIPMENT (Details) - USD ($)	Jun. 30, 2013	Dec. 31, 2012
Total Property and Equipment	$ 15,535,000	$ 15,489,000
Less: Accumulated Depreciation	(10,406,000)	(9,606,000)
Property and Equipment, net	5,129,000	5,883,000
Machinery and Equipment
Total Property and Equipment	$ 5,818,000	5,801,000
Machinery and Equipment \| Minimum
Property Plant And Equipment Useful Life	5 years
Machinery and Equipment \| Maximum
Property Plant And Equipment Useful Life	8 years
Capital Lease Machinery and Equipment
Total Property and Equipment	$ 4,503,000	4,503,000
Capital Lease Machinery and Equipment \| Minimum
Property Plant And Equipment Useful Life	5 years
Capital Lease Machinery and Equipment \| Maximum
Property Plant And Equipment Useful Life	8 years
Tools and Instruments
Total Property and Equipment	$ 3,984,000	3,968,000
Tools and Instruments \| Minimum
Property Plant And Equipment Useful Life	1 year 6 months
Tools and Instruments \| Maximum
Property Plant And Equipment Useful Life	7 years
Automotive Equipment
Total Property and Equipment	$ 55,000	55,000
Property Plant And Equipment Useful Life	5 years
Furniture and Fixtures
Total Property and Equipment	$ 232,000	232,000
Furniture and Fixtures \| Minimum
Property Plant And Equipment Useful Life	5 years
Furniture and Fixtures \| Maximum
Property Plant And Equipment Useful Life	8 years
Leasehold Improvements
Total Property and Equipment	$ 612,000	612,000
Leasehold Improvements \| Minimum
Property Plant And Equipment Useful Life	0 years
Leasehold Improvements \| Maximum
Property Plant And Equipment Useful Life	0 years
Computers and Software
Total Property and Equipment	$ 331,000	$ 318,000
Computers and Software \| Minimum
Property Plant And Equipment Useful Life	4 years
Computers and Software \| Maximum
Property Plant And Equipment Useful Life	6 years

5. PROPERTY AND EQUIPMENT (Details Narrative) - USD ($)	6 Months Ended
5. PROPERTY AND EQUIPMENT (Details Narrative) - USD ($)	Jun. 30, 2013	Jun. 30, 2012
Property, Plant and Equipment [Abstract]
Depreciation expense	$ 801,000	$ 715,000

6. INTANGIBLE ASSETS (Details) - USD ($)	Jun. 30, 2013	Dec. 31, 2012
Intangible Assets Details
Customer Relationships	$ 5,815,000	$ 5,815,000
Trade Names	770,000	770,000
Technical Know-how	660,000	660,000
Non-Compete	50,000	50,000
Professional Certifications	15,000	15,000
Total Intangible Assets	7,310,000	7,310,000
Less: Accumulated Amortization	(2,002,000)	(1,421,000)
Intangible Assets, net	$ 5,308,000	$ 5,889,000

6. INTANGIBLE ASSETS (Details Narrative) - USD ($)	6 Months Ended
6. INTANGIBLE ASSETS (Details Narrative) - USD ($)	Jun. 30, 2013	Jun. 30, 2012
Notes to Financial Statements
Amortization of the intangibles	$ 582,000	$ 84,000

7. NOTES PAYABLE AND CAPITAL LEASE OBLIGATIONS (Details) - USD ($)	Jun. 30, 2013	Dec. 31, 2012
Notes Payable And Capital Lease Obligations Details
Revolving credit notes payable to PNC Bank N.A. ("PNC") and secured by substantially all assets	$ 13,535,000	$ 15,667,000
Term loan, PNC	2,848,000	3,748,000
Capital lease obligations	1,686,000	2,060,000
Notes payable to sellers of acquired business	1,059,000	1,376,000
Junior subordinated notes	1,000,000	1,000,000
Subtotal	20,128,000	23,851,000
Less: Current portion of notes and capital obligations	(16,746,000)	(19,211,000)
Notes payable and capital lease obligations, net of current portion	$ 3,382,000	$ 4,640,000

- Definition

The carrying value as of the balance sheet date of the current and noncurrent portions of long-term obligations drawn from a line of credit, which is a bank's commitment to make loans up to a specific amount. Examples of items that might be included in the application of this element may consist of letters of credit, standby letters of credit, and revolving credit arrangements, under which borrowings can be made up to a maximum amount as of any point in time conditional on satisfaction of specified terms before, as of and after the date of drawdowns on the line. Includes short-term obligations that would normally be classified as current liabilities but for which (a) postbalance sheet date issuance of a long term obligation to refinance the short term obligation on a long term basis, or (b) the enterprise has entered into a financing agreement that clearly permits the enterprise to refinance the short-term obligation on a long term basis and the following conditions are met (1) the agreement does not expire within 1 year and is not cancelable by the lender except for violation of an objectively determinable provision, (2) no violation exists at the BS date, and (3) the lender has entered into the financing agreement is expected to be financially capable of honoring the agreement.

+ References + Details

7. NOTES PAYABLE AND CAPITAL LEASE OBLIGATIONS (Details 1)	Jun. 30, 2013 USD ($)
Notes Payable And Capital Lease Obligations Details 1
June 30, 2014	$ 1,800,000
June 30, 2015	1,048,000
PNC Term Loan Payable	2,848,000
Less: Current portion	(1,800,000)
Long-term portion	$ 1,048,000

7. NOTES PAYABLE AND CAPITAL LEASE OBLIGATIONS (Details 2)	Jun. 30, 2013 USD ($)
Notes Payable And Capital Lease Obligations Details 2
June 30, 2014	$ 861,000
June 30, 2015	401,000
June 30, 2016	397,000
June 30, 2017	189,000
June 30, 2018	47,000
Total future minimum lease payments	1,895,000
Less: imputed interest	(209,000)
Less: current portion	(744,000)
Total Long Term Portion	$ 942,000

7. NOTES PAYABLE AND CAPITAL LEASE OBLIGATIONS (Details 3) - USD ($)	Jun. 30, 2013	Dec. 31, 2012
Notes Payable And Capital Lease Obligations Details 3
Former Welding Stockholders	$ 1,059,000	$ 1,376,000
Less: Current Portion	(667,000)	(644,000)
Total long-term portion	$ 392,000	$ 732,000

7. NOTES PAYABLE AND CAPITAL LEASE OBLIGATIONS (Details 4)	Jun. 30, 2013 USD ($)
Future minimum payments for the note payable to the former stockholders of Welding:
June 30, 2014	$ 667,000
June 30, 2015	392,000
Former WMI Stockholders Notes Payable	1,059,000
Less: Current portion	(667,000)
Long-term portion	$ 392,000

10. INCOME TAXES (Details) - USD ($)	3 Months Ended		6 Months Ended
10. INCOME TAXES (Details) - USD ($)	Jun. 30, 2013	Jun. 30, 2012	Jun. 30, 2013	Jun. 30, 2012
Current
Federal			$ 707,000	$ 485,000
Federal AMT			212,000	163,000
State			919,000	648,000
Total Expense	$ 430,000	$ 363,000	919,000	648,000
Federal
State
Total Deferred Taxes
Net Expense for Income Taxes			$ 919,000	$ 648,000

10. INCOME TAXES (Details 1) - USD ($)	Jun. 30, 2013	Dec. 31, 2012
Deferred tax assets:
Capital loss carry forwards	$ 1,088,000	$ 1,088,000
Section 1231 loss carry forward	86,000	86,000
Bad debts	315,000	282,000
Stock based compensation - options and restricted stock	509,000	506,000
Capitalized engineering costs	474,000	447,000
Account payable, accrued expenses and reserves	9,000	9,000
Deferred rent	438,000	423,000
Amortization - NTW Transaction	277,000	138,000
Inventory - 263A adjustment	747,000	569,000
Lease Impairment	67,000	85,000
Deferred gain on sale of real estate	202,000	209,000
Total deferred tax assets before valuation allowance	4,212,000	3,842,000
Valuation allowance	(2,770,000)	(2,269,000)
Total deferred tax assets after valuation allowance	1,442,000	1,573,000
Deferred tax liabilities:
Property and equipment	(896,000)	(997,000)
Goodwill - NTW Transaction	(4,000)
Amortization - Welding Transaction	(542,000)	(576,000)
Total Deferred Tax Liability	(1,442,000)	(1,573,000)
Net deferred tax asset

10. INCOME TAXES (Details Narrative) - USD ($)	6 Months Ended
10. INCOME TAXES (Details Narrative) - USD ($)	Jun. 30, 2013	Dec. 31, 2012
Valuation allowance	$ 2,770,000	$ 2,269,000
Capital Loss Carry forward
capital loss carry forward	$ 2,719,000
capital loss carry forward expiry date	Expires in fiscal 2015

11. SEGMENT REPORTING (Details) - USD ($)	3 Months Ended		6 Months Ended
11. SEGMENT REPORTING (Details) - USD ($)	Jun. 30, 2013	Jun. 30, 2012	Jun. 30, 2013	Jun. 30, 2012	Dec. 31, 2012
Gross Profit	$ 1,078,000	$ 1,296,000	$ 2,257,000	$ 2,892,000
Provision for Taxes			919,000	648,000
Assets	50,847,000		50,847,000		$ 53,156,000
AIM
Net Sales	8,188,000	11,585,000	15,666,000	23,728,000
Gross Profit	1,599,000	2,193,000	3,059,000	4,439,000
Pre Tax Income	594,000	794,000	1,088,000	1,706,000
Assets	23,645,000	27,159,000	23,645,000	27,159,000
WMI
Net Sales	3,307,000	3,142,000	6,446,000	7,037,000
Gross Profit	894,000	1,044,000	1,743,000	2,069,000
Pre Tax Income	7,000	165,000	(5,000)	658,000
Assets	9,477,000	8,746,000	9,477,000	8,746,000
NTW
Net Sales	3,144,000	513,000	6,853,000	513,000
Gross Profit	1,137,000	199,000	2,476,000	199,000
Pre Tax Income	228,000	154,000	721,000	154,000
Assets	13,247,000	13,366,000	13,247,000	13,366,000
Corporate
Net Sales
Gross Profit
Pre Tax Income	(173,000)	(431,000)	(380,000)	(731,000)
Elimination of Assets		(6,596,000)		(6,596,000)
Assets	11,074,000	50,847,000	11,074,000	50,847,000
Consolidated
Net Sales	14,639,000	15,240,000	28,965,000	31,278,000
Gross Profit	3,630,000	3,436,000	7,278,000	6,707,000
Pre Tax Income	656,000	682,000	1,424,000	1,787,000
Provision for Taxes	430,000	363,000	919,000	648,000
Net Income	226,000	319,000	505,000	1,139,000
Elimination of Assets		(13,860,000)		(13,860,000)
Assets	$ 50,847,000	$ 52,271,000	$ 50,847,000	$ 52,271,000