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Note 1. FORMATION AND BASIS OF PRESENTATION

Organization

On August 30, 2013, Air Industries Group, Inc. (“Air Industries Delaware”) changed its state of incorporation from Delaware to Nevada as a result of a merger with and into its recently formed wholly-owned subsidiary, Air Industries Group, a Nevada corporation (“Air Industries Nevada” or “AIRI”) and the surviving entity, pursuant to an Agreement and Plan of Merger. The reincorporation was approved by the stockholders of Air Industries Delaware at its 2013 Annual Meeting of Stockholders. Air Industries Nevada is deemed to be the successor.

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

ACQUISITION

12 Months Ended

Dec. 31, 2013

Note 2. ACQUISITION

On November 6, 2013, the Company, through its WMI subsidiary, acquired all of the common stock of Miller Stuart for $142,000 of which $25,000 was due at the date of closing, with the remainder due on December 6, 2013. As a result of the acquisition, Miller Stuart became a division of WMI. Miller Stuart is a manufacturer of aerospace components whose customers include major aircraft manufacturers and the US Military. Miller Stuart specializes in electromechanical systems, harness and cable assemblies, electronic equipment and printed circuit boards. The acquisition of Miller Stuart will add to the existing customer base of AIRI and enhance the types of parts that AIRI can offer to its existing customers.

The acquisition of Miller Stuart was accounted for under FASB ASC 805, “Business Combinations”, and its results of operations have been included with WMI. The purchase price allocation is set forth below.

Fair Value of Tangible Assets acquired (including cash acquired of $7,000)	$	513,000
Liabilities assumed		(10,000	)
Negative goodwill resulting from the bargain purchase acquisition		(361,000	)
Total	$	142,000

As a result of the acquisition, the Company recognized a non-cash bargain purchase gain of $361,000 which is included in other income (expense), net in the consolidated statements of income.

On July 1, 2013, the Company through its WMI subsidiary acquired certain assets including production equipment, inventory and intangible assets of Decimal Industries, Inc. (“Decimal”). The assets are being operated as 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 acquisition not only adds to the existing customer base, but brings new capabilities to WMI and the group.

The acquisition of Decimal was accounted for under FASB ASC 805, “Business Combinations”. 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 and certain fixed assets with an approximate value of $310,000. 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 commencing in August 2013, with a final payment in the amount of $46,766. The two owners of Decimal have become employees of the Company 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 the Company’s intention to combine and relocate the operations of Decimal into WMI’s facility in Hauppauge. At December 31, 2013, $277,000 was owed to the sellers of Decimal and is included in accounts payable and accrued expenses on the consolidated balance sheet.

On March 15, 2012, the Company, through a newly created subsidiary, NTW, entered into a contract with an unrelated company formerly known as Nassau Tool Works, Inc. (“Old Nassau Tool”) and its shareholders (the “NTW Sellers”) to purchase substantially all of the assets of Old Nassau Tool, and to assume certain of its liabilities, for $12.0 million ($12,000,000), subject to a positive or negative adjustment based on net working capital at closing. The acquisition (the “NTW Acquisition”) was completed on June 20, 2012, and the assets, liabilities and the business of Old Nassau Tool are now operated through our NTW subsidiary. The two former shareholders of NTW have joined the management team of the Company pursuant to Employment Agreements.

The NTW Acquisition was financed by a combination of debt and equity. The Company increased its borrowings from its existing revolving loan and term facilities which have been expanded (see Note 9), and raised equity from a Private Placement during June 2012 (see Note 11).

Old Nassau Tool, founded in 1959, was a manufacturer of aerospace components, principally landing gear for F-16 and F-18 fighter aircraft. In recent years approximately 80% of its net sales were direct to the United States Government, specifically the United States Navy and Air Force. AIRI believes that some of its products are ultimately shipped abroad to support foreign military sales by the United States Government. NTW supplies both individual components for repair and complete landing gear for refurbishment. The balance of NTW’s net sales involve machining, turning, deep-hole drilling, and trepanning projects for other aerospace manufacturers.

The NTW Acquisition results in a larger enterprise, with greater diversification of customers and aircraft platforms. The combined company has enhanced technical capabilities which the Company believes will lead to increased sales of landing gear product to its existing and prospective customers.

The NTW Acquisition was accounted for under ASC 805, “Business Combinations.” The total purchase price was allocated to assets acquired and liabilities assumed based on a study of their relative fair values. The final valuation has been completed. The purchase price allocation is set forth below.

Fair Value of Tangible Assets acquired	$	7,941,000
Intangible assets, subject to amortization		4,975,000
Goodwill		162,000
Liabilities assumed		(660,000	)
Total	$	12,418,000

The cost of the acquisition totaled $12,418,000. The purchase price of the acquisition was as follows:

	1.	At closing, Old Nassau Tool was paid $11,400,000.
	2.	The issuance of 66,667 shares of common stock valued at $300,000.

	3.	$200,000 paid in July after the release of a lien on certain property and equipment purchased.
	4.	$518,000 to be paid as a working capital adjustment. See below.

Post closing of the NTW Acquisition, it was determined that an increase in the working capital adjustment in the amount of $518,000 was necessary and is reflected in the purchase price allocation above. In addition, in July 2012, the Company paid $107,000 of liabilities of Old Nassau Tool not assumed under the NTW Acquisition. Such amount will either be repaid or offset against amounts owed to Old Nassau Tool or the NTW Sellers. For financial statement purposes, such amount has been offset against the working capital adjustment. At both December 31, 2013 and 2012, the amount due and payable to Old Nassau Tool totaled $411,000 and is included on the consolidated balance sheet in accounts payable and accrued expenses.

SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES

12 Months Ended

Dec. 31, 2013

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. Welding 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 publically-traded companies in the aerospace industry.

Principles of Consolidation

The accompanying consolidated financial statements include accounts of the Company and its wholly-owned subsidiaries. Significant intercompany accounts and transactions have been eliminated in consolidation.

Cash and Cash Equivalents

Cash and cash equivalents include all highly liquid instruments with an original maturity of three months or less.

Accounts Receivable

Accounts receivable are reported at their outstanding unpaid principal balances net of allowances for uncollectible accounts. The Company provides for allowances for uncollectible receivables based on management's estimate of uncollectible amounts considering age, collection history, and any other factors considered appropriate. The Company writes off accounts receivable against the allowance for doubtful accounts when a balance is determined to be uncollectible.

Inventory Valuation

The Company values inventory at the lower of cost on a first-in-first-out basis or market.

AIM and NTW generally purchase inventory only when it has non-cancellable contracts for orders from its customers for finished goods. Welding generally produces pursuant to customer orders and maintains relatively low inventory levels. AIM and NTW occasionally produce finished goods in excess of purchase order quantities in anticipation of future demand; historically this excess has been used in fulfilling future purchase orders. The Company periodically evaluates inventory items that are not secured by purchase orders and establishes reserves for obsolescence accordingly. The Company also reserves for excess quantities, slow-moving goods, and for other impairments of value.

The Company presents inventory net of progress billings in accordance with the specified contractual arrangements with the United States Government, which results in the transfer of title of the related inventory from the Company to the United States Government, when such progress payments are received.

Capitalized Engineering Costs

The Company has contractual agreements with customers to produce parts, which the customers design. Though the Company has not designed and thus has no proprietary ownership of the parts, the manufacturing of these parts requires pre-production engineering and programming of the Company’s machines. The pre-production costs associated with a particular contract are capitalized and then amortized beginning with the first shipment of product pursuant to such contract. These costs are amortized on a straight-line basis over the estimated length of the contract, or if shorter, three years.

If the Company is reimbursed for all or a portion of the pre-production expenses associated with a particular contract, only the unreimbursed portion would be capitalized. The Company may also progress bill customers for certain engineering costs being incurred. Such billings are recorded as progress billings (a reduction of the associated inventory) until the appropriate revenue recognition criteria have been met. The Terms and Conditions contained in customer purchase orders may provide for liquidated damages in the event that a stop-work order is issued prior to the final delivery of the product.

Property and Equipment

Property and equipment are carried at cost net of accumulated depreciation and amortization. Repair and maintenance charges are expensed as incurred. Property, equipment, and improvements are depreciated using the straight-line method over the estimated useful lives of the assets or the particular improvements. Expenditures for repairs and improvements in excess of $1,000 that add to the productive capacity or extend the useful life of an asset are capitalized. Upon disposition, the cost and related accumulated depreciation are removed from the accounts and any related gain or loss is reflected in earnings.

Long-Lived and Intangible Assets

Identifiable intangible assets are amortized using the straight-line method over the period of expected benefit.

Long-lived assets and intangible assets subject to amortization to be held and used are reviewed for impairment whenever events or changes in circumstances indicate that the related carrying amount may be impaired. The Company records an impairment loss if the undiscounted future cash flows are found to be less than the carrying amount of the asset. If an impairment loss has occurred, a charge is recorded to reduce the carrying amount of the asset to fair value. There has been no impairment as of December 31, 2013 and 2012.

Deferred Financing Costs

Costs incurred with obtaining and executing debt arrangements are capitalized and amortized using the effective interest method over the term of the related debt.

Revenue Recognition

The Company recognizes revenue in accordance with Staff Accounting Bulletin No. 104, "Revenue Recognition." The Company recognizes revenue when products are shipped and the customer takes ownership and assumes risk of loss, collection of the relevant receivable is probable, persuasive evidence of an arrangement exists, and the sales price is fixed or determinable.

The Company recognizes certain revenues under a bill and hold arrangement with two of its large customers. For any requested bill and hold arrangement, the Company makes an evaluation as to whether the bill and hold arrangement qualifies for revenue recognition as follows:

	·	The customer requests that the transaction be on a bill and hold basis. A customer must initiate the request for any bill and hold arrangement. Upon request for a bill and hold, the Company requires a signed letter from the customer upon which the customer specifically requests the bill and hold arrangement. Upon receipt of the letter, the Company begins its evaluation process to determine whether a bill and hold arrangement can be granted.
	·	The customer has made fixed commitment to purchase in written documentation. All customers’ orders are through firm written purchase orders.


·		The goods are segregated from other inventory and are not available to fill any other customers’ orders. The Company’s goods are made to customers’ or their customer’s specifications and could not be sold to others.
	·		The risk of ownership has passed to the customer. The product is complete and ready for shipment. The earnings process is complete. An internal evaluation is made as to whether the product is complete and ready for shipment. This involves a review of the purchase order and a completed inspection process by the Company’s quality control department.

	·	The date is determined by which the Company expects payment and the Company has not modified its normal billing and credit terms for this buyer. Payment is expected as if the goods had been shipped.
	·	The customer has the expected risk of loss in the event of a decline in the market value of goods. All goods are made to firm purchase orders with fixed prices. Any decline in value would not affect the pricing of the goods. The Company has not at any point, agreed to a price reduction on a bill and hold arrangement.

The Company had approximately $773,000 or 1.2% of net sales that were billed but not shipped under such bill and hold arrangements as of December 31, 2013.

Payments received in advance from customers for products delivered are recorded as customer deposits until earned, at which time revenue is recognized. The Terms and Conditions contained in our customer purchase orders often provide for liquidated damages in the event that a stop work order is issued prior to the final delivery. The Company utilizes a Returned Merchandise Authorization or RMA process for determining whether to accept returned products. Customer requests to return products are reviewed by the contracts department and if the request is approved, a credit is issued upon receipt of the product. Net sales represent gross sales less returns and allowances.

Use of Estimates

In preparing the financial statements, management is required to make estimates and assumptions that affect the reported amounts in the financial statements and accompanying notes. The more significant management estimates are the useful lives of property and equipment, provisions for inventory obsolescence, accrued expenses and whether to accrue for various contingencies. Actual results could differ from those estimates. Changes in facts and circumstances may result in revised estimates, which are recorded in the period in which they become known.

Credit and Concentration Risks

There were three customers that represented 56.0% and 65.3% of total sales for the years ended December 31, 2013 and 2012, respectively. This is set forth in the table below.

Customer	Percentage of Sales
	2013	2012

1	27.7	27.6
2	18.3	26.3
3	10.0	**
4	*	11.4

* Customer was less than 10% of sales for the year ended December 31, 2013
** Customer was less than 10% of sales for the year ended December 31, 2012

There were two customers that represented 42.9% of gross accounts receivable at December 31, 2013 and three customers that represented 54.6% of gross accounts receivable at December 31, 2012. This is set forth in the table below.

Customer	Percentage of Receivables
	December	December
	2013	2012
1	22.8	18.6
2	20.1	10.7
3	*	25.3

* Customer was less than 10% of Gross Accounts Receivable December 31, 2013

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

Income Taxes

The Company accounts for income taxes in accordance with accounting guidance now codified as FASB ASC 740, "Income Taxes," which requires that the Company recognize deferred tax liabilities and assets based on the differences between the financial statement carrying amounts and the tax bases of assets and liabilities, using enacted tax rates in effect in the years the differences are expected to reverse. Deferred income tax benefit (expense) results from the change in net deferred tax assets or deferred tax liabilities. A valuation allowance is recorded when it is more likely than not that some or all deferred tax assets will not be realized.

The Company accounts for uncertainties in income taxes under the provisions of FASB ASC 740-10-05, "Accounting for Uncertainty in Income Taxes." The ASC clarifies the accounting for uncertainty in income taxes recognized in an enterprise's financial statements. The ASC prescribes a recognition threshold and measurement attribute for the financial statement recognition and measurement of a tax position taken or expected to be taken in a tax return. The ASC provides guidance on de-recognition, classification, interest and penalties, accounting in interim periods, disclosure and transition.

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 calculations 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:


	2013		2012

Weighted average shares outstanding used to compute basic earning per share		5,739,014		4,680,581
Effect of dilutive stock options and warrants		193,712		78,665
Weighted average shares outstanding and dilutive securities used to compute dilutive earnings per share		5,932,726		4,759,246

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

	December 31,		December 31,
	2013		2012

Stock Options		24,548		11,948
Warrants		-		118,835
		24,548		130,783

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.

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 Welding ($291,000) and 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 reduce the fair value of the reporting unit below its carrying amount.

The Company accounts for the impairment of goodwill under the provisions of ASU 2011-08 (“ASU 2011-08”), “Intangibles Goodwill and Other (Topic 350): Testing Goodwill for Impairment.” ASU 2011-08 updated the guidance on the periodic testing of goodwill for impairment. The updated guidance gives companies the option to perform a qualitative assessment to determine whether it is more likely than not that the fair value of a reporting unit is less than its carrying amount.

The Company performs impairment testing for goodwill annually, or more frequently when indicators of impairment exist. As discussed above, the Company adopted ASU 2011-08 and performed a qualitative assessment in the fourth quarter of 2013 to determine whether it was more likely than not that the fair value of each of Welding and NTW was less than its carrying amount.

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

Freight Out

Freight out is included in operating expenses and amounted to $64,000 and $82,000 for the years ended December 31, 2013 and 2012, respectively.

JOBS Act

On April 5, 2012, the JOBS Act was signed into law. The JOBS Act contains provisions that, among other things, reduce certain reporting requirements for qualifying public companies. As an “emerging growth company,” we may, under Section 7(a)(2)(B) of the Securities Act, delay adoption of new or revised accounting standards applicable to public companies until such standards would otherwise apply to private companies. We may take advantage of this extended transition period until the first to occur of the date that we (i) are no longer an "emerging growth company" or (ii) affirmatively and irrevocably opt out of this extended transition period. We have elected to take advantage of the benefits of this extended transition period. Until the date that we are no longer an "emerging growth company" or affirmatively and irrevocably opt out of the exemption provided by Securities Act Section 7(a)(2)(B), upon issuance of a new or revised accounting standard that applies to our consolidated financial statements and that has a different effective date for public and private companies, we will disclose the date on which adoption is required for non-emerging growth companies and the date on which we will adopt the recently issued accounting standard.

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 consolidated financial statements.

Reclassifications

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

Subsequent Events

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

ACCOUNTS RECEIVABLE

12 Months Ended

Dec. 31, 2013

Note 4. ACCOUNTS RECEIVABLE

The components of accounts receivable at December 31, are detailed as follows:

	December 31,			December 31,
	2013			2012

Accounts Receivable Gross	$	9,367,000		$	12,336,000
Allowance for Doubtful Accounts		(783,000	)		(705,000	)
Accounts Receivable Net	$	8,584,000		$	11,631,000

The allowance for doubtful accounts for the years ended December 31, 2013 and 2012 is as follows:

	Balance at		Charged to Costs		Deductions From		Balance at End of
	Beginning of Year		and Expenses		Reserves		Year
Year ended December 31, 2013
Allowance for Doubtful Accounts	$	705,000	$	400,000	$	322,000	$	783,000
Year ended December 31, 2012
Allowance for Doubtful Accounts	$	950,000	$	262,000	$	507,000	$	705,000

INVENTORY

12 Months Ended

Dec. 31, 2013

Note 5. INVENTORY

The components of inventory at December 31, consisted of the following:

	December 31,			December 31,
	2013			2012

Raw Materials	$	6,002,000		$	6,105,000
Work In Progress		15,665,000			16,730,000
Finished Goods		7,712,000			6,653,000
Progress Payments Received		(416,000	)		(525,000	)
Inventory Reserve		(2,741,000	)		(2,224,000	)
Total Inventory	$	26,222,000		$	26,739,000

The Company periodically evaluates inventory and establishes reserves for obsolescence, excess quantities, slow-moving goods, and for other impairment of value. The Company presents inventory net of progress billings in accordance with the specified contractual arrangements with the United States Government, which results in the transfer of title of the related inventory from the Company to the United States Government, when such progress payments are received.

PROPERTY AND EQUIPMENT

12 Months Ended

Dec. 31, 2013

Note 6. PROPERTY AND EQUIPMENT

The components of property and equipment at December 31, consisted of the following:

	December 31,			December 31,
	2013			2012

Machinery and Equipment	$	6,251,000		$	5,801,000		5 - 8 years
Capital Lease Machinery and Equipment		5,261,000			4,503,000		5 - 8 years
Tools and Instruments		5,009,000			3,968,000		1.5 - 7 years
Automotive Equipment		59,000			55,000		5 years
Furniture and Fixtures		257,000			232,000		5 - 8 years
Leasehold Improvements		646,000			612,000		Term of Lease
Computers and Software		357,000			318,000		4-6 years
Total Property and Equipment		17,840,000			15,489,000
Less: Accumulated Depreciation		(11,317,000	)		(9,606,000	)
Property and Equipment, net	$	6,523,000		$	5,883,000

Depreciation expense for the years ended December 31, 2013 and 2012 was approximately $1,711,000 and $1,557,000, respectively.

INTANGIBLE ASSETS

12 Months Ended

Dec. 31, 2013

Note 7. INTANGIBLE ASSETS

The components of the intangibles assets at December 31, consisted of the following:

	December 31,			December 31,
	2013			2012

Customer Relationships	$	5,815,000		$	5,815,000		5 to 14 years
Trade Names		770,000			770,000		20 years
Technical Know-how		660,000			660,000		10 years
Non-Compete		50,000			50,000		5 years
Professional Certifications		15,000			15,000		.25 to 2 years
Total Intangible Assets		7,310,000			7,310,000
Less: Accumulated Amortization		(2,584,000	)		(1,421,000	)
Intangible Assets, net	$	4,726,000		$	5,889,000

The expense for amortization of the intangibles for the years ended December 31, 2013 and 2012 was approximately $1,163,000 and $693,000, respectively.

Future amortization of intangibles is as follows:

For the year ending	Amount
December 31, 2014	$	1,163,000
December 31, 2015		1,163,000
December 30, 2016		1,163,000
December 31, 2017		617,000
December 31, 2018		102,000
Thereafter		518,000
Total	$	4,726,000

SALE AND LEASEBACK TRANSACTION

12 Months Ended

Dec. 31, 2013

Note 8. SALE AND LEASEBACK TRANSACTION

On October 24, 2006, the Company consummated a Sale - Leaseback Arrangement, whereby the Company sold the buildings and real property comprising its corporate headquarters in Bay Shore, New York (the "Property") for a purchase price of $6,200,000. The Company accounted for the transaction under the provisions of FASB ASC 840-40, “Leases – Sale-Leaseback Transactions.” The Company realized a gain on the sale of $1,051,000 of which $300,000 was recognized during the year ended December 31, 2006. The remaining $751,000 is being recognized ratably over the remaining term of the twenty year lease at approximately $38,000 per year. The gain is included in Other Income in the accompanying Consolidated Statement of Income. The unrecognized portion of the gain in the amount of $485,000 and $523,000 as of December 31, 2013 and 2012, respectively, is classified as Deferred Gain on Sale in the accompanying Consolidated Balance Sheet.

Simultaneous with the closing of the sale of the Property, the Company entered into a 20-year triple-net lease (the "Lease") with the Purchaser for the property. Base annual rent is approximately $540,000 for the first five years, $560,000 for the sixth year, and thereafter increases 3% per year. The Lease grants AIM an option to renew the Lease for an additional period of five years. The Company has on deposit with the Purchaser $127,500 as security for the performance of its obligations under the Lease. In addition, the Company deposited $393,000 with the landlord as security for the completion of certain repairs and upgrades to the Property. This amount is included in the caption Deferred Finance costs, net, Deposit and Other Assets on the accompanying Consolidated Balance Sheet. Pursuant to the terms of the Lease, the Company is required to pay all of the costs associated with the operation of the facilities, including, without limitation, insurance, taxes and maintenance. The lease also contains customary representations, warranties, obligations, conditions and indemnification provisions and grants the Purchaser customary remedies upon a breach of the lease by the Company, including the right to terminate the Lease and hold the Company liable for any deficiency in future rent. See Note 13 Commitments and Contingencies.

NOTES PAYABLE AND CAPITAL LEASE OBLIGATIONS

12 Months Ended

Dec. 31, 2013

Note 9. NOTES PAYABLE AND CAPITAL LEASE OBLIGATIONS

Notes payable and capital lease obligations consist of the following:

	December 31,			December 31,
	2013			2012

Revolving credit note payable to PNC Bank N.A. ("PNC")	$	12,029,000		$	15,667,000
Term loan, PNC		1,948,000			3,748,000
Capital lease obligations		1,787,000			2,060,000
Notes payable to sellers of WMI		732,000			1,376,000
Junior subordinated notes		1,000,000			1,000,000
Subtotal		17,496,000			23,851,000
Less: Current portion of notes and capital obligations		(14,969,000	)		(19,211,000	)
Notes payable and capital lease obligations, net of current portion	$	2,527,000		$	4,640,000

PNC Bank N.A. ("PNC")

The Company has a credit facility with PNC (the "Loan Facility") secured by substantially all of its assets. The Loan Facility has been amended many times during its term. The Company entered into the latest amendment to the Loan Facility in December 2013 and paid an amendment fee of $25,000. The Loan Facility now provides for maximum borrowings of $22,000,000 consisting of the following:

	(i)	a $20,000,000 revolving loan (includes inventory sub-limit of $12,500,000) and
	(ii)	a $1,948,000 term loan.

Under the terms of the Loan Facility 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 and (b) the sum of the Eurodollar Rate plus two and one half of one percent (2.50%) with respect to Eurodollar Rate Loans. Prior to the amendment the revolving credit note bore interest at the sum of the Alternate Base Rate plus three quarters of one percent (0.75%) with respect to Domestic Rate Loans and (b) the sum of the Eurodollar Rate plus two and three quarters of one percent (2.75%) with respect to Eurodollar Rate Loans. The revolving credit note had an interest rate of 4.0% and 5.50% per annum at December 31, 2013 and 2012, respectively, and an outstanding balance of $12,030,000 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 revolving loans and we then borrow according to a borrowing base. As such, the Company generally has no cash on hand. Because the revolving loans contain a subjective acceleration clause which could permit PNC to require repayment prior to maturity, the loans are classified with the current portion of notes and capital lease obligations.

Under the terms of the Loan Facility, 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 percent (3.00%) 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 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. 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 December 31, 2013. At December 31, 2013 and 2012, the balance due under the term loan was $1,948,000 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 the 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 December 31, 2013 and 2012, the Company was in compliance with all terms of the Loan Facility.

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 December 31, 2013 the future minimum principal payments for the term loan are as follows:

For the year ending	Amount
December 31, 2014	$	1,800,000
December 31, 2015		148,000
PNC Term Loan Payable		1,948,000
Less: Current portion		(1,800,000	)
Long-term portion	$	148,000

Interest expense related to these credit facilities amounted to approximately $928,000 and $1,006,000 for the years ended December 31, 2013 and 2012, respectively.

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 $1,787,000 and $2,060,000 as of December 31, 2013 and 2012, respectively, with various interest rates ranging from 7.0% to 9.5%

As of December 31, 2013, the aggregate future minimum lease payments, including imputed interest, with remaining terms of greater than one year are as follows:

For the year ending	Amount
December 31, 2014	$	569,000
December 31, 2015		569,000
December 31, 2016		466,000
December 31, 2017		315,000
December 31, 2018		144,000
Total future minimum lease payments		2,063,000
Less: imputed interest		(276,000	)
Less: current portion		(449,000	)
Total Long Term Portion	$	1,338,000

On July 1, 2013, coincident with the acquisition of Decimal, the Company satisfied approximately $454,000 of capital leases that had maturities of less than one year remaining. As a result of this satisfaction, PNC now has the first lien on the equipment that was previously leased under the capital leases.

Notes Payable - Sellers

As of December 31, 2013 and 2012, the balance owed to the sellers of Welding is:

	December 31,			December 31,
	2013			2012

Former Welding Stockholders	$	732,000		$	1,376,000
Less: Current Portion		(691,000	)		(644,000	)
Total long-term portion	$	41,000		$	732,000

In connection with the acquisition of Welding on August 24, 2007, the Company incurred a note payable (“Note”) to the former stockholders of Welding. 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 Welding. It was agreed that all interest that had been accrued and not yet paid under prior arrangements would be capitalized into the principal balance of the note, 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 December 31, 2013 and 2012, the balance owed under the note was $732,000 and $1,376,000, respectively.

As of December 31, 2013, the future minimum payments for the note payable to the former stockholders of Welding are as follows:

For the year ending	Amount
December 31, 2014	$	691,000
December 31, 2015		41,000
Former WMI Stockholders Notes Payable		732,000
Less: Current portion		(691,000	)
Long-term portion	$	41,000

Interest expense related to notes payable to the former stockholder was $76,000 and $119,000 for the years ended December 31, 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, the Company 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, the Company issued 867,461 shares of its Common Stock in exchange for approximately $5,204,000 of its Junior Subordinated Notes. On July 26, 2012, the Company repaid $115,000 of its 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 on the Junior Subordinated Notes at both December 31, 2013 and 2012 amounted to $1,000,000.

Interest expense on the Junior Subordinated Notes amounted to $120,000 and $439,000 for the years ended December 31, 2013 and 2012, respectively.

ACCOUNTS PAYABLE AND ACCRUED EXPENSES

12 Months Ended

Dec. 31, 2013

Note 10. ACCOUNTS PAYABLE AND ACCRUED EXPENSES

The components of accounts payable at December 31, are detailed as follows:

	December 31,		December 31,
	2013		2012

Accounts Payable	$	5,142,000	$	5,713,000
Accrued Expenses		793,000		697,000
Due to Decimal sellers		277,000		-
Due to NTW sellers		411,000		411,000
Accrued Interest		84,000		138,000
Accrued Payroll		118,000		99,000
401K payable		30,000		19,000
Totals	$	6,855,000	$	7,077,000

STOCKHOLDERS' EQUITY

12 Months Ended

Dec. 31, 2013

Note 11. STOCKHOLDERS' EQUITY

Common Stock Issuances

On October 28, 2013, the Company sold 133,000 shares of its common stock pursuant to a Common Stock Purchase Agreement for $7.50 a share for gross proceeds of $997,000. The Company reserves the right to pay Taglich Brothers a placement agent fee in connection with the sale in an amount not to exceed $20,000.

The Purchase and Sale Agreement contained a provision such that if at any time prior to April 30, 2014, the Company, in a transaction in which it receives gross proceeds in excess of $1,000,000, issues or otherwise sells or distributes shares of its preferred stock, common stock or options, warrants, rights or other securities to purchase or convertible into shares of its preferred stock or common stock, hereinafter, the “New Securities,” (other than compensatory options to purchase no more than 500,000 shares issued to the directors, employees or regularly engaged consultants of the Company) at its option, the buyer may elect to return all, but not less than all, of the shares to the Company and subscribe for the New Securities to be sold or distributed by the Company. In such event, the buyer shall receive the number of New Securities as is equal to the result obtained by dividing the Aggregate Purchase Price by the price per share at which the New Securities are being sold by the Company.

During June and July of 2012, the Company issued 1,185,851 shares of its Common Stock in a Private Placement to Accredited Investors. The Company received $6,528,000 net of commissions and expenses.

Our agent, Taglich Brothers, received commissions in the amount of approximately $569,000, along with 12,000 shares of common stock, and warrants to purchase approximately 119,000 shares of Common Stock at $6.30. The Company also paid approximately $18,000 of legal fees on behalf of Taglich Brothers.

The proceeds from the sale of the Common Stock were used to finance the NTW Acquisition.

On June 29, 2012, in conjunction with the Private Placement, we issued 867,461 shares of our common stock in exchange for approximately $5,204,000 of our Junior Subordinated Notes.

As part of the NTW Acquisition, we issued 66,667 shares of common stock to the stockholders of Old Nassau Tool.

Dividends

On October 17, 2012, the Board of Directors approved and the Company announced a quarterly dividend of $0.0625 per common share to be paid on November 15, 2012 to all shareholders of record as of the close of business on October 31, 2012. The approximate amount of the dividend paid was $359,000.

On March 11, 2013, the Board of Directors approved and the Company announced a quarterly dividend of $0.0625 per common share to be 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 is $359,000

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.

On September 17, 2013, the Board of Directors approved and the Company announced a quarterly dividend of $0.125 per common share paid on October 15, 2013 to all shareholders of record as of the close of business on September 30, 2013. The approximate amount of the dividend was $716,000.

On December 30, 2013, the Board of Directors approved and the Company announced a quarterly dividend of $0.125 per common share paid on January 24, 2014 to all shareholders of record as of the close of business on January 9, 2014. The approximate amount of the divided was $717,000.

Derivative Liabilities

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.”

Warrants Issued To Taglich Brothers

As discussed above, 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 consolidated statement of income. The Company did not account for the derivative liability in its consolidated financial statements as it was determined to not be material.

Down Round Feature

As discussed above, the Company issued shares of common stock under a Common Stock Purchase Agreement which contained a “down round” feature. Based on an evaluation as discussed in ASC No. 815-15, “Embedded Derivatives” and ASC No. 815-40-15, “Contracts in Entity’s Own Equity - Scope and Scope Exceptions,” the Company determined that the down round feature in the common stock issued was not considered indexed to its own stock because neither the occurrence of a sale of equity securities by the issuer at market nor the issuance of another equity contract with a lower strike price is an input to the fair value of a fixed-for-fixed option or forward on equity shares. As such, the down round feature should be bifurcated from the common stock and accounted for as a derivative liability.

The Company did not value the derivative liability at October 25, 2013, the date of consummation of the Stock Purchase Agreement. One of the key determinants of the Company’s decision to not value the derivative liability was the high likelihood that a future financing would not occur that would trigger the down round feature. Whether a future equity financing would occur would be determined by the cash needs of the Company and management’s willingness to trigger the down round feature. As of September 30, 2013, the Company was operating profitably and had generated net cash through operations for the trailing nine months of $3,556,000. Further, at such time the Company was not anticipating any material acquisitions or significant capital expenditures that would require the Company to seek additional cash financing. Moreover, although the Company might seek additional capital to complete a new acquisition, it was only likely to seek to complete an acquisition if it was accretive to earnings. If triggering the down round feature would render an acquisition dilutive rather than accretive, it was unlikely that the acquisition would be made until after the down round feature expired.

Under generally accepted accounting principals, the Company is required to mark-to-market the derivative liability at the end of each reporting period. The Company did not value the derivative liability at December 31, 2013. At such date, the Company determined that it was still not likely that an equity financing would occur prior to April 30, 2014, the expiration date of the down round feature. Such conclusion was based upon the discussion noted above. In addition the Company had remained profitable through the fourth quarter of 2013, continued to generate significant cash from operations and had significant availability under its revolving credit facility. Moreover, although the Company might seek additional equity capital to complete a new acquisition, it was only likely to seek to complete an acquisition if it was accretive to earnings. If triggering the down round feature would render an acquisition dilutive rather than accretive, it was unlikely that the acquisition would be made until after the down round feature expired.

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))
-URI http://asc.fasb.org/extlink&oid=26873400&loc=d3e23780-122690

Reference 2: http://www.xbrl.org/2003/role/presentationRef
-Publisher FASB
-Name Accounting Standards Codification
-Topic 505
-SubTopic 10
-Section 50
-Paragraph 4
-URI http://asc.fasb.org/extlink&oid=6928386&loc=d3e21484-112644

Reference 3: http://www.xbrl.org/2003/role/presentationRef
-Publisher FASB
-Name Accounting Standards Codification
-Topic 310
-SubTopic 10
-Section S99
-Paragraph 2
-Subparagraph (SAB TOPIC 4.E)
-URI http://asc.fasb.org/extlink&oid=27010918&loc=d3e74512-122707

Reference 4: http://www.xbrl.org/2003/role/presentationRef
-Publisher FASB
-Name Accounting Standards Codification
-Topic 505
-SubTopic 10
-Section 50
-Paragraph 5
-URI http://asc.fasb.org/extlink&oid=6928386&loc=d3e21488-112644

Reference 5: http://www.xbrl.org/2003/role/presentationRef
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-Name Accounting Standards Codification
-Topic 210
-SubTopic 10
-Section S99
-Paragraph 1
-Subparagraph (SX 210.5-02.29-31)
-URI http://asc.fasb.org/extlink&oid=6877327&loc=d3e13212-122682

Reference 6: http://www.xbrl.org/2003/role/presentationRef
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-Subparagraph (SAB TOPIC 4.C)
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Reference 7: http://www.xbrl.org/2003/role/presentationRef
-Publisher FASB
-Name Accounting Standards Codification
-Topic 505
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-URI http://asc.fasb.org/extlink&oid=6928386&loc=d3e21506-112644

Reference 8: http://www.xbrl.org/2003/role/presentationRef
-Publisher FASB
-Name Accounting Standards Codification
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-Paragraph 1
-Subparagraph (SX 210.3-04)
-URI http://asc.fasb.org/extlink&oid=27012166&loc=d3e187085-122770

Reference 9: http://www.xbrl.org/2003/role/presentationRef
-Publisher FASB
-Name Accounting Standards Codification
-Topic 505
-SubTopic 30
-Section 50
-Paragraph 2
-URI http://asc.fasb.org/extlink&oid=6405834&loc=d3e23285-112656

Reference 10: http://www.xbrl.org/2003/role/presentationRef
-Publisher FASB
-Name Accounting Standards Codification
-Topic 505
-SubTopic 10
-Section 50
-Paragraph 3
-URI http://asc.fasb.org/extlink&oid=6928386&loc=d3e21475-112644

Reference 11: http://www.xbrl.org/2003/role/presentationRef
-Publisher FASB
-Name Accounting Standards Codification
-Glossary Preferred Stock
-URI http://asc.fasb.org/extlink&oid=6521494

Reference 12: http://www.xbrl.org/2003/role/presentationRef
-Publisher FASB
-Name Accounting Standards Codification
-Topic 505
-SubTopic 10
-Section 50
-Paragraph 2
-URI http://asc.fasb.org/extlink&oid=6928386&loc=d3e21463-112644

Reference 13: http://www.xbrl.org/2003/role/presentationRef
-Publisher FASB
-Name Accounting Standards Codification
-Topic 505
-SubTopic 10
-Section 50
-Paragraph 11
-URI http://asc.fasb.org/extlink&oid=6928386&loc=d3e21564-112644

Reference 14: http://www.xbrl.org/2003/role/presentationRef
-Publisher SEC
-Name Regulation S-X (SX)
-Number 210
-Section 08
-Paragraph d
-Article 4

Reference 15: http://www.xbrl.org/2003/role/presentationRef
-Publisher SEC
-Name Regulation S-X (SX)
-Number 210
-Section 02
-Paragraph 29, 30, 31
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Reference 16: http://www.xbrl.org/2003/role/presentationRef
-Publisher SEC
-Name Staff Accounting Bulletin (SAB)
-Number Topic 4
-Section E

Reference 17: http://www.xbrl.org/2003/role/presentationRef
-Publisher SEC
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Reference 18: http://www.xbrl.org/2003/role/presentationRef
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Reference 19: http://www.xbrl.org/2003/role/presentationRef
-Publisher SEC
-Name Regulation S-X (SX)
-Number 210
-Section 04
-Article 3

+ Details

EMPLOYEE BENEFITS PLANS

12 Months Ended

Dec. 31, 2013

Note 12. EMPLOYEE BENEFITS PLANS

The Company employs both union and non-union employees and maintains several benefit plans.

Union

Substantially the entire workforce at AIM is subject to a union contract with the United Service Workers Union TUJAT Local 355, EIN 11-1772919 (the "Union"). The contract expires on December 31, 2015.

Medical benefits for union employees are provided through a policy with Insperity, the costs of which are substantially borne by the Company. In addition, the Company is obligated to make contributions for union dues and a security fund (defined contribution plan) for the benefit of each union employee. Contributions to the security fund amounted to $247,000 and $267,000 for the years ended December 31, 2013 and 2012, respectively.

The Company adopted ASU No. 2011-09, "Compensation - Retirement Benefits-Multiemployer Plans (Subtopic 715-80): Disclosures about an Employer's Participation in a Multiemployer Plan" ("ASU 2011-09"). ASU 2011-09 requires additional disclosures about an employer's participation in a multiemployer pension plan. Previously, disclosures were limited primarily to the historical contributions made to the plans. ASU 2011-09 applies to nongovernmental entities that participate in multiemployer plans. The Union’s retirement plan is a defined contribution plan. As such, the Company is not responsible for the obligations of other companies in the Union’s retirement plan and no further disclosures are required.

Others

All other Company employees, including those of Welding and NTW, are covered under a co-employment agreement with Insperity.

The Company has two defined contribution plans under Section 401(k) of the Internal Revenue Code (the "Plans"). Pursuant to the Plans, qualified employees may contribute a percentage of their pretax eligible compensation to the Plan. The Company does not match any contributions that employees may make to either Plan.

COMMITMENTS AND CONTINGENCIES

12 Months Ended

Dec. 31, 2013

Note 13. COMMITMENTS AND CONTINGENCIES

Real Estate Leases

The Company leases its facilities under various operating lease agreements, which contain renewal options and escalation provisions. Rent expense was $1,978,000 and $1,570,000 for the years ended December 31, 2013 and 2012, respectively. The Company is responsible for paying all operating costs under the terms of the leases. As of December 31, 2013, the aggregate future minimum lease payments are as follows:

	Plant Avenue		Fifth Avenue		Lamar Street		Reith Street
For the year ending	Annual Rent		Annual Rent		Annual Rent		Annual Rent		Total Rents
December 31, 2014	$	614,000	$	664,000	$	360,000	$	36,000	$	1,674,000
December 31, 2015		633,000		684,000		360,000		-	$	1,677,000
December 31, 2016		-		704,000		360,000		-	$	1,064,000
December 31, 2017		-		725,000		360,000		-	$	1,085,000
December 31, 2018		-		747,000		300,000		-	$	1,047,000
Thereafter		-		6,601,000				-	$	6,601,000
Total Rents	$	1,247,000	$	10,125,000	$	1,740,000	$	36,000	$	13,148,000

The leases provide for scheduled increases in base rent. Rent expense is charged to operations using the straight-line method over the term of the lease which results in rent expense being charged to operations at inception of the lease in excess of required lease payments. This excess is shown as deferred rent in the accompanying consolidated balance sheets.

One of the Company’s former subsidiaries was located in the Plant Avenue facility and following discontinuing operations, a portion of the facility was vacant. The Company recorded a charge for $579,000 at December 31, 2009 representing the estimated discounted future cost of part of the Plant Avenue facility.

As of December 31, 2013, the estimated discounted future cost will be charged to expense as follows:

For the year ending	Amount
December 31, 2014	$	71,000
December 31, 2015		56,000
Total future minimum lease payments		127,000
Less: current portion		(71,000	)
Total Long-Term Portion	$	56,000

On July 1, 2010, the Company entered into a sublease with a third party to rent a portion of the vacant space at the Plant Avenue facility. Under the terms of the sublease, the sub-tenant occupied approximately 17,787 square feet for the months of July 2010 through October 2010. Beginning in November 2010, the sub-tenant occupied approximately 27,787 square feet. The space was being subleased for $3.00 per square foot, with a discount in the first month of 50%. The sublease was a month-to-month lease and could be terminated by either party with 90 days written notice. This sublease was terminated on June 30, 2013.

INCOME TAXES

12 Months Ended

Dec. 31, 2013

Note 14. INCOME TAXES

The provision for income taxes as at December 31, are set forth below:

	2013			2012

Current
Federal	$	1,135,000		$	1,093,000
State		339,000			354,000
Prior year overaccruals
Federal		(185,000	)		-
State		(223,000	)		-
Total Expense		1,066,000			1,447,000

Deferred Tax Benefit		(1,236,000	)		-

Net (Benefit) Expense for Income Taxes	$	(170,000	)	$	1,447,000

The following is a reconciliation of our income tax rate computed using the federal statutory rate to our actual income tax rate as of December 31,

	2013			2012

Federal Tax Rate		34	%		34	%
Effect of State Taxes		6	%		8	%
State Franchise Taxes		1	%		0	%
Net Operating Loss Carry Forward		0	%		-9	%
Permanent Differences		-3	%		0	%
Prior Year over accrual - Federal		-5	%		0	%
Prior Year Over Accrual - State		-4	%		0	%
Change in Valuation Allowance		-35	%		0	%
Others		1	%		3	%
Total		-5	%		36	%

The components of net deferred tax assets as of December 31, are set forth below:

	December 31,			December 31,
	2013			2012

Deferred tax assets:
Current:
Bad debts		313,000			282,000
Inventory - 263A adjustment		729,000			569,000
Account payable, accrued expenses and reserves		9,000			9,000
Total current deferred tax asset before valuation allowance		1,051,000			860,000
Valuation Allowance		-			(860,000	)
Total current deferred tax asset after valuation allowance	$	1,051,000		$	-

Non- Current
Capital loss carry forwards	$	1,088,000		$	1,088,000
Section 1231 loss carry forward		4,000			86,000
Stock based compensation - options and restricted stock		521,000			506,000
Capitalized engineering costs		503,000			447,000
Deferred rent		453,000			423,000
Amortization - NTW Transaction		475,000			138,000
Lease Impairment		51,000			85,000
Deferred gain on sale of real estate		194,000			209,000
Total deferred tax assets before valuation allowance		3,289,000			2,982,000
Valuation allowance		(1,092,000	)		(1,409,000	)
Total deferred tax assets after valuation allowance		2,197,000			1,573,000

Deferred tax liabilities:
Property and equipment		(1,497,000	)		(997,000	)
Goodwill - NTW Transaction		(7,000	)		-
Amortization - Welding Transaction		(508,000	)		(576,000	)
Total Deferred Tax Liability		(2,012,000	)		(1,573,000	)

Net deferred tax asset	$	1,236,000		$	-

During 2013, the Company determined that it no longer needed to provide a valuation allowance on the net deferred tax assets except for the capital loss and section 1231 loss carryforwards. This was based upon the fact that management believes that the net deferred tax assets are more likely than not to be realized. The valuation allowance at December 31, 2013 and 2012 amounted to $1,092,000 and $2,269,000, respectively.

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

At December 31, 2013 and 2012, the Company had no material unrecognized tax benefits and no adjustments to liabilities or operations were required. The Company does not expect that its unrecognized tax benefits will materially increase within the next twelve months. The Company recognizes interest and penalties related to uncertain tax positions in interest expense. As of December 31, 2013 and 2012, the Company has not recorded any provisions for accrued interest and penalties related to uncertain tax positions.

In certain cases, the Company's uncertain tax positions are related to tax years that remain subject to examination by the relevant tax authorities. The Company files federal and state income tax returns in jurisdictions with varying statutes of limitations. The 2010 through 2013 tax years generally remain subject to examination by federal and state tax authorities.

STOCK OPTIONS AND WARRANTS

12 Months Ended

Dec. 31, 2013

Note 15. STOCK OPTIONS AND WARRANTS

Stock-Based Compensation

On June 3, 2013, the Company's Board of Directors adopted and on July 29, 2013, the Company’s stockholders approved the 2013 Equity Incentive Plan (the “2013 Plan”). The 2013 Plan is virtually identical to and replaced the 2010 Equity Incentive Plan which was adopted in July 2010. The Company reserved 600,000 shares of its Common Stock for various issuances. The 2013 Plan permits the Company to grant non-qualified and incentive stock options to employees, directors, and consultants.

During the years ended December 31, 2013 and 2012, the Board of Directors approved the issuance of 13,500 and 21,000 options, respectively, to the non-employee members of the Company’s Board of Directors. These options vested immediately.

On October 1, 2013, the Board of Directors approved the issuance of 99,747 options, to certain management employees. These options vest ratably over three years. There were no employee options issued during 2012.

The Company recorded expenses of $38,000 and $101,000 in its consolidated statement of income for the years ended December 31, 2013 and 2012, respectively, and such amounts were included as a component of general and administrative expense.

The fair values of stock options granted were estimated using the Black-Sholes option-pricing model with the following assumptions for the years ended December 31:

	2013			2012
Risk-free interest rates		0.71 - 1.75	%		0.66 - 0.73	%
Expected life		5			5
Expected volatility		25	%		25	%
Dividend yield		5.6	%		-

Weighted-average grant date fair value per share	$	0.83		$	1.31

The expected life is the number of years that the Company estimates, based upon history, that options will be outstanding prior to exercise or forfeiture. Expected life is determined using the “simplified method” permitted by Staff Accounting Bulletin No. 107. In addition to the inputs referenced above regarding the option pricing model, the Company adjusts the stock-based compensation expense for estimated forfeiture rates that are revised prospectively according to forfeiture experience. The stock volatility factor is based on the New York Stock Exchange ARCA Defense Index. The Company did not use the volatility rate for its common stock as the Company determined that its common stock is thinly traded.

A summary of the status of the Company's stock options as of December 31, 2013, and changes during the two years then ended are presented below.

	Options			Wtd. Avg. Exercise Price
Balance, December 31, 2011		306,316		$	10.27
Granted during the period		21,000			5.61
Exercised during the period		-			-
Terminated/Expired during the period		-			-
Balance, December 31, 2012		327,316		$	10.27
Granted during the period		113,247			6.85
Exercised during the period		(18,523	)		4.50
Terminated/Expired during the period		-			-
Balance, December 31, 2013		422,040		$	9.34

Exercisable at December 31, 2013		340,838		$	10.05

The following table summarizes information about stock options at December 31, 2013:

Range of Exercise Prices	Remaining Number Outstanding		Wtd. Avg. Life	Wtd. Avg. Exercise Price
$0.00 - 5.00		275,535	2 years	$	4.40
$5.01 - 90.00		132,597	6 years		7.45
$90.01 - 100.00		5,888	1 years		92.18
$100.01 - 110.00		833	1 years		108.00
$110.01 - 170.00		3,529	1 years		111.89
$170.01 - 200.00		3,958	1 years		181.00
		422,340	3 years	$	9.34

As of December 31, 2013, there was $140,000 of unrecognized compensation cost related to non-vested stock option awards, which is to be recognized over the remaining weighted average vesting period of four years.

The aggregate intrinsic value at December 31, 2013 was $1,565,785. The aggregate intrinsic value was calculated based on the positive difference between the closing market price of the Company’s Common Stock and the exercise price of the underlying options.

Warrants

The following tables summarize the Company's outstanding warrants as of December 31, 2013 and changes during the two years then ended:

	Warrants			Wtd. Avg. Exercise Price
Balance, December 31, 2011		19,865		$	99.26
Granted during the period		118,585			6.30
Exercised during the period		-			-
Terminated/Expired during the period		(19,615	)		99.97
Balance, December 31, 2012		118,835		$	99.26
Granted during the period		-			-
Exercised during the period		-			-
Terminated/Expired during the period		(250)			43.60
Balance, December 31, 2013		118,585		$	6.30

Exercisable at December 31, 2013		118,835		$	6.30

The following table summarizes information about warrants at December 31, 2013:

Exercise Price	Warrants		Wtd. Avg. Life	Wtd. Avg. Exercise Price
$6.30		118,585	3 years	$	6.30
		118,585	3 years	$	6.30

RELATED PARTY TRANSACTIONS	12 Months Ended
RELATED PARTY TRANSACTIONS	Dec. 31, 2013
Notes to Financial Statements
Note 16. RELATED PARTY TRANSACTIONS	In connection with the offering of the Company’s Common Stock to accredited investors in June and July 2012, Taglich Brothers, placement agent for the offering,received commissions in the amount of approximately $569,000, along with 12,000 shares of common stock, and warrants to purchase approximately 119,000 shares of Common Stock at $6.30. The Company also paid approximately $18,000 of legal fees on behalf of Taglich Brothers.

The entire disclosure for related party transactions. Examples of related party transactions include transactions between (a) a parent company and its subsidiary; (b) subsidiaries of a common parent; (c) and entity and its principal owners; and (d) affiliates.

SEGMENT REPORTING

12 Months Ended

Dec. 31, 2013

Note 17. 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. For segment reporting purposes, Miller Stuart is included with WMI. 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 on January 1, 2013, the Company began to allocate all of the corporate selling and general and administrative costs of AIRI to 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 during the first six months of 2012 and 50% to AIM and 25% each to each of WMI and NTW beginning with the third quarter of 2012.

Year Ended December 31,
		2013			2012

*AIM*
	Net Sales	$	34,997,000		$	42,075,000
	Gross Profit		6,305,000			8,218,000
	Pre Tax Income		2,368,000			3,260,000
	Assets		21,889,000			24,673,000

*WMI*
	Net Sales		13,630,000			14,907,000
	Gross Profit		3,482,000			4,030,000
	Pre Tax Loss		(203,000	)		1,138,000
	Assets		11,619,000			10,818,000

*NTW*
	Net Sales		14,206,000			7,233,000
	Gross Profit		5,448,000			2,610,000
	Pre Tax Income		1,905,000			796,000
	Assets		11,318,000			14,410,000

*Corporate*
	Net Sales		-			-
	Gross Profit		-			-
	Pre Tax Loss		(501,000	)		(1,199,000	)
	Assets		9,647,000			13,200,000

*Consolidated*
	Net Sales		62,833,000			64,215,000
	Gross Profit		15,235,000			14,858,000
	Pre Tax Income		3,569,000			3,995,000
	Provision for Taxes		(170,000	)		1,447,000
	Net Income		3,739,000			2,548,000
	Elimination of Assets		(4,301,000	)		(9,945,000	)
	Assets		50,172,000			53,156,000

Summary Of Significant Accounting Policies Policies

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
-SubTopic 10
-Section 50
-Paragraph 34
-URI http://asc.fasb.org/extlink&oid=6534315&loc=d3e8981-108599

Reference 2: http://www.xbrl.org/2003/role/presentationRef
-Publisher FASB
-Name Accounting Standards Codification
-Topic 280
-SubTopic 10
-Section 50
-Paragraph 41
-URI http://asc.fasb.org/extlink&oid=6534315&loc=d3e9038-108599

Reference 3: http://www.xbrl.org/2003/role/presentationRef
-Publisher FASB
-Name Accounting Standards Codification
-Topic 280
-SubTopic 10
-Section 50
-Paragraph 33
-URI http://asc.fasb.org/extlink&oid=6534315&loc=d3e8971-108599

Reference 4: http://www.xbrl.org/2003/role/presentationRef
-Publisher FASB
-Name Accounting Standards Codification
-Topic 280
-SubTopic 10
-Section 50
-Paragraph 12
-URI http://asc.fasb.org/extlink&oid=6534315&loc=d3e8595-108599

Reference 5: http://www.xbrl.org/2003/role/presentationRef
-Publisher FASB
-Name Accounting Standards Codification
-Topic 280
-SubTopic 10
-Section 50
-Paragraph 1
-URI http://asc.fasb.org/extlink&oid=6534315&loc=d3e8380-108599

Reference 6: http://www.xbrl.org/2003/role/presentationRef
-Publisher FASB
-Name Accounting Standards Codification
-Topic 280
-SubTopic 10
-Section 50
-Paragraph 32
-URI http://asc.fasb.org/extlink&oid=6534315&loc=d3e8933-108599

Reference 7: http://www.xbrl.org/2003/role/presentationRef
-Publisher FASB
-Name Accounting Standards Codification
-Topic 280
-SubTopic 10
-Section 50
-Paragraph 26
-URI http://asc.fasb.org/extlink&oid=6534315&loc=d3e8844-108599

Reference 8: http://www.xbrl.org/2003/role/presentationRef
-Publisher FASB
-Name Accounting Standards Codification
-Topic 280
-SubTopic 10
-Section 50
-Paragraph 35
-URI http://asc.fasb.org/extlink&oid=6534315&loc=d3e8984-108599

Reference 9: http://www.xbrl.org/2003/role/presentationRef
-Publisher FASB
-Name Accounting Standards Codification
-Topic 280
-SubTopic 10
-Section 50
-Paragraph 40
-URI http://asc.fasb.org/extlink&oid=6534315&loc=d3e9031-108599

Reference 10: http://www.xbrl.org/2003/role/presentationRef
-Publisher FASB
-Name Accounting Standards Codification
-Topic 280
-SubTopic 10
-Section 50
-Paragraph 42
-URI http://asc.fasb.org/extlink&oid=6534315&loc=d3e9054-108599

Reference 11: http://www.xbrl.org/2003/role/presentationRef
-Publisher FASB
-Name Accounting Standards Codification
-Topic 280
-SubTopic 10
-Section 50
-Paragraph 10
-URI http://asc.fasb.org/extlink&oid=6534315&loc=d3e8538-108599

Reference 12: http://www.xbrl.org/2003/role/presentationRef
-Publisher FASB
-Name Accounting Standards Codification
-Topic 280
-SubTopic 10
-Section 50
-Paragraph 29
-URI http://asc.fasb.org/extlink&oid=6534315&loc=d3e8864-108599

Reference 13: http://www.xbrl.org/2003/role/presentationRef
-Publisher FASB
-Name Accounting Standards Codification
-Topic 280
-SubTopic 10
-Section 50
-Paragraph 31
-URI http://asc.fasb.org/extlink&oid=6534315&loc=d3e8924-108599

Reference 14: http://www.xbrl.org/2003/role/presentationRef
-Publisher FASB
-Name Accounting Standards Codification
-Topic 280
-SubTopic 10
-Section 50
-Paragraph 30
-URI http://asc.fasb.org/extlink&oid=6534315&loc=d3e8906-108599

+ Details

SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (Policies)

12 Months Ended

Dec. 31, 2013

Principal Business Activity

Principles of Consolidation

Cash and Cash Equivalents

Cash and cash equivalents include all highly liquid instruments with an original maturity of three months or less.

Accounts Receivable

Inventory Valuation

The Company values inventory at the lower of cost on a first-in-first-out basis or market.

Capitalized Engineering Costs

Property and Equipment

Long-Lived and Intangible Assets

Identifiable intangible assets are amortized using the straight-line method over the period of expected benefit.

Deferred Financing Costs

Costs incurred with obtaining and executing debt arrangements are capitalized and amortized using the effective interest method over the term of the related debt.

Revenue Recognition

	·	The customer requests that the transaction be on a bill and hold basis. A customer must initiate the request for any bill and hold arrangement. Upon request for a bill and hold, the Company requires a signed letter from the customer upon which the customer specifically requests the bill and hold arrangement. Upon receipt of the letter, the Company begins its evaluation process to determine whether a bill and hold arrangement can be granted.
	·	The customer has made fixed commitment to purchase in written documentation. All customers’ orders are through firm written purchase orders.


·		The goods are segregated from other inventory and are not available to fill any other customers’ orders. The Company’s goods are made to customers’ or their customer’s specifications and could not be sold to others.
	·		The risk of ownership has passed to the customer. The product is complete and ready for shipment. The earnings process is complete. An internal evaluation is made as to whether the product is complete and ready for shipment. This involves a review of the purchase order and a completed inspection process by the Company’s quality control department.

	·	The date is determined by which the Company expects payment and the Company has not modified its normal billing and credit terms for this buyer. Payment is expected as if the goods had been shipped.
	·	The customer has the expected risk of loss in the event of a decline in the market value of goods. All goods are made to firm purchase orders with fixed prices. Any decline in value would not affect the pricing of the goods. The Company has not at any point, agreed to a price reduction on a bill and hold arrangement.

The Company had approximately $773,000 or 1.2% of net sales that were billed but not shipped under such bill and hold arrangements as of December 31, 2013.

Use of Estimates

Credit and Concentration Risks

There were three customers that represented 56.0% and 65.3% of total sales for the years ended December 31, 2013 and 2012, respectively. This is set forth in the table below.

Customer	Percentage of Sales
	2013	2012

1	27.7	27.6
2	18.3	26.3
3	10.0	**
4	*	11.4

* Customer was less than 10% of sales for the year ended December 31, 2013
** Customer was less than 10% of sales for the year ended December 31, 2012

Customer	Percentage of Receivables
	December	December
	2013	2012
1	22.8	18.6
2	20.1	10.7
3	*	25.3

* Customer was less than 10% of Gross Accounts Receivable for the year ended December 31, 2013

During the year, the Company had 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.

Income Taxes

Earnings per share

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


	2013		2012

Weighted average shares outstanding used to compute basic earning per share		5,739,014		4,680,581
Effect of dilutive stock options and warrants		193,712		78,665
Weighted average shares outstanding and dilutive securities used to compute dilutive earnings per share		5,932,726		4,759,246

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

	December 31,		December 31,
	2013		2012

Stock Options		24,548		11,948
Warrants		-		118,835
		24,548		130,783

Stock-Based Compensation

Goodwill

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

Freight Out

Freight out is included in operating expenses and amounted to $64,000 and $82,000 for the years ended December 31, 2013 and 2012, respectively.

JOBS Act

Recently Issued Accounting Pronouncements

Reclassifications

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

Subsequent Events

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

2. ACQUISITION (Tables)

12 Months Ended

Dec. 31, 2013

Dec. 31, 2012

Miller Stuart [Member]

Purchase price allocation

Fair Value of Tangible Assets acquired (including cash acquired of $7,000)	$	513,000
Liabilities assumed		(10,000	)
Negative goodwill resulting from the bargain purchase acquisition		(361,000	)
Total	$	142,000

NTW [Member]

Purchase price allocation

Fair Value of Tangible Assets acquired	$	7,941,000
Intangible assets, subject to amortization		4,975,000
Goodwill		162,000
Liabilities assumed		(660,000	)
Total	$	12,418,000

SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (Tables)

12 Months Ended

Dec. 31, 2013

Summary Of Significant Accounting Policies Tables

Credit and Concentration Risks

There were three customers that represented 56.0% and 65.3% of total sales for the years ended December 31, 2013 and 2012, respectively. This is set forth in the table below.

Customer	Percentage of Sales
	2013	2012

1	27.7	27.6
2	18.3	26.3
3	10.0	**
4	*	11.4

* Customer was less than 10% of sales for the year ended December 31, 2013
** Customer was less than 10% of sales for the year ended December 31, 2012

Customer	Percentage of Receivables
	December	December
	2013	2012
1	22.8	18.6
2	20.1	10.7
3	*	25.3

* Customer was less than 10% of Gross Accounts Receivable for the year ended December 31, 2013

Earnings per share

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


	2013		2012

Weighted average shares outstanding used to compute basic earning per share		5,739,014		4,680,581
Effect of dilutive stock options and warrants		193,712		78,665
Weighted average shares outstanding and dilutive securities used to compute dilutive earnings per share		5,932,726		4,759,246

Anti-dilutive Securities

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

	December 31,		December 31,
	2013		2012

Stock Options		24,548		11,948
Warrants		-		118,835
		24,548		130,783

ACCOUNTS RECEIVABLE (Tables)

12 Months Ended

Dec. 31, 2013

Components of accounts receivable

The components of accounts receivable at December 31, are detailed as follows:

	December 31,			December 31,
	2013			2012

Accounts Receivable Gross	$	9,367,000		$	12,336,000
Allowance for Doubtful Accounts		(783,000	)		(705,000	)
Accounts Receivable Net	$	8,584,000		$	11,631,000

Allowance for doubtful accounts

The allowance for doubtful accounts for the years ended December 31, 2013 and 2012 is as follows:

	Balance at		Charged to Costs		Deductions From		Balance at End of
	Beginning of Year		and Expenses		Reserves		Year
Year ended December 31, 2013
Allowance for Doubtful Accounts	$	705,000	$	400,000	$	322,000	$	783,000
Year ended December 31, 2012
Allowance for Doubtful Accounts	$	950,000	$	262,000	$	507,000	$	705,000

5. INVENTORY (Tables)

12 Months Ended

Dec. 31, 2013

Inventory Tables

Components of inventory

The components of inventory at December 31, consisted of the following:

	December 31,			December 31,
	2013			2012

Raw Materials	$	6,002,000		$	6,105,000
Work In Progress		15,665,000			16,730,000
Finished Goods		7,712,000			6,653,000
Progress Payments Received		(416,000	)		(525,000	)
Inventory Reserve		(2,741,000	)		(2,224,000	)
Total Inventory	$	26,222,000		$	26,739,000

PROPERTY AND EQUIPMENT (Tables)

12 Months Ended

Dec. 31, 2013

Property And Equipment Tables

Property and equipment

The components of property and equipment at December 31, consisted of the following:

	December 31,			December 31,
	2013			2012

Machinery and Equipment	$	6,251,000		$	5,801,000		5 - 8 years
Capital Lease Machinery and Equipment		5,261,000			4,503,000		5 - 8 years
Tools and Instruments		5,009,000			3,968,000		1.5 - 7 years
Automotive Equipment		59,000			55,000		5 years
Furniture and Fixtures		257,000			232,000		5 - 8 years
Leasehold Improvements		646,000			612,000		Term of Lease
Computers and Software		357,000			318,000		4-6 years
Total Property and Equipment		17,840,000			15,489,000
Less: Accumulated Depreciation		(11,317,000	)		(9,606,000	)
Property and Equipment, net	$	6,523,000		$	5,883,000

INTANGIBLE ASSETS (Tables)

12 Months Ended

Dec. 31, 2013

Intangible Assets Tables

Intangible assets

The components of the intangibles assets at December 31, consisted of the following:

	December 31,			December 31,
	2013			2012

Customer Relationships	$	5,815,000		$	5,815,000		5 to 14 years
Trade Names		770,000			770,000		20 years
Technical Know-how		660,000			660,000		10 years
Non-Compete		50,000			50,000		5 years
Professional Certifications		15,000			15,000		.25 to 2 years
Total Intangible Assets		7,310,000			7,310,000
Less: Accumulated Amortization		(2,584,000	)		(1,421,000	)
Intangible Assets, net	$	4,726,000		$	5,889,000

Future amortization of intangibles

Future amortization of intangibles is as follows:

For the year ending	Amount
December 31, 2014	$	1,163,000
December 31, 2015		1,163,000
December 30, 2016		1,163,000
December 31, 2017		617,000
December 31, 2018		102,000
Thereafter		518,000
Total	$	4,726,000

NOTES PAYABLE AND CAPITAL LEASE OBLIGATIONS (Tables)

12 Months Ended

Dec. 31, 2013

Notes Payable And Capital Lease Obligations Tables

Notes payable and capital lease obligations

Notes payable and capital lease obligations consist of the following:

	December 31,			December 31,
	2013			2012

Revolving credit note payable to PNC Bank N.A. ("PNC")	$	12,029,000		$	15,667,000
Term loan, PNC		1,948,000			3,748,000
Capital lease obligations		1,787,000			2,060,000
Notes payable to sellers of WMI		732,000			1,376,000
Junior subordinated notes		1,000,000			1,000,000
Subtotal		17,496,000			23,851,000
Less: Current portion of notes and capital obligations		(14,969,000	)		(19,211,000	)
Notes payable and capital lease obligations, net of current portion	$	2,527,000		$	4,640,000

Future minimum principal payments for term loan

As of December 31, 2013 the future minimum principal payments for the term loan are as follows:

For the year ending	Amount
December 31, 2014	$	1,800,000
December 31, 2015		148,000
PNC Term Loan Payable		1,948,000
Less: Current portion		(1,800,000	)
Long-term portion	$	148,000

Future minimum lease payments, including imputed interest

As of December 31, 2013, the aggregate future minimum lease payments, including imputed interest, with remaining terms of greater than one year are as follows:

For the year ending	Amount
December 31, 2014	$	569,000
December 31, 2015		569,000
December 31, 2016		466,000
December 31, 2017		315,000
December 31, 2018		144,000
Total future minimum lease payments		2,063,000
Less: imputed interest		(276,000	)
Less: current portion		(449,000	)
Total Long Term Portion	$	1,338,000

Notes Payable - Sellers

As of December 31, 2013 and 2012, the balance owed to the sellers of Welding is:

	December 31,			December 31,
	2013			2012

Former Welding Stockholders	$	732,000		$	1,376,000
Less: Current Portion		(691,000	)		(644,000	)
Total long-term portion	$	41,000		$	732,000

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

As of December 31, 2013, the future minimum payments for the note payable to the former stockholders of Welding are as follows:

For the year ending	Amount
December 31, 2014	$	691,000
December 31, 2015		41,000
Former WMI Stockholders Notes Payable		732,000
Less: Current portion		(691,000	)
Long-term portion	$	41,000

10. ACCOUNTS PAYABLE AND ACCRUED EXPENSES (Tables)

12 Months Ended

Dec. 31, 2013

Payables and Accruals [Abstract]

Components of accounts payable

The components of accounts payable at December 31, are detailed as follows:

	December 31,		December 31,
	2013		2012

Accounts Payable	$	5,142,000	$	5,713,000
Accrued Expenses		793,000		697,000
Due to Decimal sellers		277,000		-
Due to NTW sellers		411,000		411,000
Accrued Interest		84,000		138,000
Accrued Payroll		118,000		99,000
401K payable		30,000		19,000
Totals	$	6,855,000	$	7,077,000

13. COMMITMENTS AND CONTINGENCIES (Tables)

12 Months Ended

Dec. 31, 2013

Commitments And Contingencies Tables

Future minimum lease payments

The aggregate future minimum lease payments are as follows:

	Plant Avenue		Fifth Avenue		Lamar Street		Reith Street
For the year ending	Annual Rent		Annual Rent		Annual Rent		Annual Rent		Total Rents
December 31, 2014	$	614,000	$	664,000	$	360,000	$	36,000	$	1,674,000
December 31, 2015		633,000		684,000		360,000		-	$	1,677,000
December 31, 2016		-		704,000		360,000		-	$	1,064,000
December 31, 2017		-		725,000		360,000		-	$	1,085,000
December 31, 2018		-		747,000		300,000		-	$	1,047,000
Thereafter		-		6,601,000				-	$	6,601,000
Total Rents	$	1,247,000	$	10,125,000	$	1,740,000	$	36,000	$	13,148,000

Discontinued future cost

As of December 31, 2013, the estimated discounted future cost will be charged to expense as follows:

For the year ending	Amount
December 31, 2014	$	71,000
December 31, 2015		56,000
Total future minimum lease payments		127,000
Less: current portion		(71,000	)
Total Long-Term Portion	$	56,000

INCOME TAXES (Tables)

12 Months Ended

Dec. 31, 2013

Series B Convertible Preferred Stock par Value

Provision for income

The provision for income taxes as at December 31, are set forth below:

	2013			2012

Current
Federal	$	1,135,000		$	1,093,000
State		339,000			354,000
Prior year overaccruals
Federal		(185,000	)		-
State		(223,000	)		-
Total Expense		1,066,000			1,447,000

Deferred Tax Benefit		(1,236,000	)		-

Net (Benefit) Expense for Income Taxes	$	(170,000	)	$	1,447,000

Reconciliation of our income tax rate

The following is a reconciliation of our income tax rate computed using the federal statutory rate to our actual income tax rate as of December 31,

	2013			2012

Federal Tax Rate		34	%		34	%
Effect of State Taxes		6	%		8	%
State Franchise Taxes		1	%		0	%
Net Operating Loss Carry Forward		0	%		-9	%
Permanent Differences		-3	%		0	%
Prior Year over accrual - Federal		-5	%		0	%
Prior Year Over Accrual - State		-4	%		0	%
Change in Valuation Allowance		-35	%		0	%
Others		1	%		3	%
Total		-5	%		36	%

Deferred tax assets

The components of net deferred tax assets as of December 31, are set forth below:

	December 31,			December 31,
	2013			2012

Deferred tax assets:
Current:
Bad debts		313,000			282,000
Inventory - 263A adjustment		729,000			569,000
Account payable, accrued expenses and reserves		9,000			9,000
Total current deferred tax asset before valuation allowance		1,051,000			860,000
Valuation Allowance		-			(860,000	)
Total current deferred tax asset after valuation allowance	$	1,051,000		$	-

Non- Current
Capital loss carry forwards	$	1,088,000		$	1,088,000
Section 1231 loss carry forward		4,000			86,000
Stock based compensation - options and restricted stock		521,000			506,000
Capitalized engineering costs		503,000			447,000
Deferred rent		453,000			423,000
Amortization - NTW Transaction		475,000			138,000
Lease Impairment		51,000			85,000
Deferred gain on sale of real estate		194,000			209,000
Total deferred tax assets before valuation allowance		3,289,000			2,982,000
Valuation allowance		(1,092,000	)		(1,409,000	)
Total deferred tax assets after valuation allowance		2,197,000			1,573,000

Deferred tax liabilities:
Property and equipment		(1,497,000	)		(997,000	)
Goodwill - NTW Transaction		(7,000	)		-
Amortization - Welding Transaction		(508,000	)		(576,000	)
Total Deferred Tax Liability		(2,012,000	)		(1,573,000	)

Net deferred tax asset	$	1,236,000		$	-

15. STOCK OPTIONS AND WARRANTS (Tables)

12 Months Ended

Dec. 31, 2013

Disclosure of Compensation Related Costs, Share-based Payments [Abstract]

Fair values of stock options granted

The fair values of stock options granted were estimated using the Black-Sholes option-pricing model with the following assumptions for the years ended December 31:

	2013			2012
Risk-free interest rates		0.71 - 1.75	%		0.66 - 0.73	%
Expected life		5			5
Expected volatility		25	%		25	%
Dividend yield		5.6	%		-

Weighted-average grant date fair value per share	$	0.83		$	1.31

Company's stock options

A summary of the status of the Company's stock options as of December 31, 2013, and changes during the two years then ended are presented below.

	Options			Wtd. Avg. Exercise Price
Balance, December 31, 2011		306,316		$	10.27
Granted during the period		21,000			5.61
Exercised during the period		-			-
Terminated/Expired during the period		-			-
Balance, December 31, 2012		327,316		$	10.27
Granted during the period		113,247			6.85
Exercised during the period		(18,523	)		4.50
Terminated/Expired during the period		-			-
Balance, December 31, 2013		422,040		$	9.34

Exercisable at December 31, 2013		340,838		$	10.05

Summary information about stock options

The following table summarizes information about stock options at December 31, 2013:

Range of Exercise Prices	Remaining Number Outstanding		Wtd. Avg. Life	Wtd. Avg. Exercise Price
$0.00 - 5.00		275,535	2 years	$	4.40
$5.01 - 90.00		132,597	6 years		7.45
$90.01 - 100.00		5,888	1 years		92.18
$100.01 - 110.00		833	1 years		108.00
$110.01 - 170.00		3,529	1 years		111.89
$170.01 - 200.00		3,958	1 years		181.00
		422,340	3 years	$	9.34

Company's outstanding warrants

The following tables summarize the Company's outstanding warrants as of December 31, 2013 and changes during the two years then ended:

	Warrants			Wtd. Avg. Exercise Price
Balance, December 31, 2011		19,865		$	99.26
Granted during the period		118,585			6.30
Exercised during the period		-			-
Terminated/Expired during the period		(19,615	)		99.97
Balance, December 31, 2012		118,835		$	99.26
Granted during the period		-			-
Exercised during the period		-			-
Terminated/Expired during the period		(250)			43.60
Balance, December 31, 2013		118,585		$	6.30

Exercisable at December 31, 2013		118,835		$	6.30

Warrants

The following table summarizes information about warrants at December 31, 2013:

Exercise Price	Warrants		Wtd. Avg. Life	Wtd. Avg. Exercise Price
$6.30		118,585	3 years	$	6.30
		118,585	3 years	$	6.30

Tabular disclosure of the application of the fair value option for measurement and reporting of eligible financial assets and liabilities (as defined), as well as certain other eligible items (as defined) included in the statement of financial position, whether such option is elected for a single eligible item or a group of similar eligible items and is in addition to other disclosures concerning fair value which the company may be required to provide. Such disclosure might be expected to include: (1) for items included in the statement of financial position: (a) for each line item in the statement of financial position that includes an item or items for which the fair value option has been elected, provide the aggregate carrying amount of ineligible items included in each line item in the balance sheet, if any; (b) the difference between the aggregate fair value and the aggregate unpaid principal balance (assuming contractual principal amounts and fair value option elected) of: (i) loans and long-term receivables (other than securities otherwise reported at fair value) and (ii) long-term debt instruments; (c) for loans held as assets for which the fair value option has been elected: (i) the aggregate fair value of loans that are 90 days or more past due, (ii) if the policy is to recognize interest income separately from other changes in fair value, the aggregate fair value of loans in nonaccrual status, and (iii) the difference between the aggregate fair value and the aggregate unpaid principal balance for loans that are 90 days or more past due, in nonaccrual status, or both; (2) for items included in the income statement: (a) the amounts of gains and losses from fair value changes included in earnings and in which line in the income statement those gains and losses are reported whether or not combined with gains and losses from items required to be accounted for at fair value; (b) for loans and other receivables held as assets, the estimated amount of gains or losses included in earnings attributable to changes in instrument-specific credit risk; (c) for liabilities with fair values that have been significantly affected during the reporting period by changes in the instrument-specific credit risk, the estimated amount of gains and losses from fair value changes included in earnings that are attributable to changes in the instrument-specific credit risk; and (3) certain other disclosures as required or determined to be provided.

Tabular disclosure of warrants or rights issued. Warrants and rights outstanding are derivative securities that give the holder the right to purchase securities (usually equity) from the issuer at a specific price within a certain time frame. Warrants are often included in a new debt issue to entice investors by a higher return potential. The main difference between warrants and call options is that warrants are issued and guaranteed by the company, whereas options are exchange instruments and are not issued by the company. Also, the lifetime of a warrant is often measured in years, while the lifetime of a typical option is measured in months. Disclose the title of issue of securities called for by warrants and rights outstanding, the aggregate amount of securities called for by warrants and rights outstanding, the date from which the warrants or rights are exercisable, and the price at which the warrant or right is exercisable.

SEGMENT REPORTING (Tables)

12 Months Ended

Dec. 31, 2013

Segment Reporting Tables

Operating segments

Financial information about the Company's operating segments for the years ended December 31, 2013 and 2012 are as follows:

Year Ended December 31,
		2013			2012

*AIM*
	Net Sales	$	34,997,000		$	42,075,000
	Gross Profit		6,305,000			8,218,000
	Pre Tax Income		2,368,000			3,260,000
	Assets		21,889,000			24,673,000

*WMI*
	Net Sales		13,630,000			14,907,000
	Gross Profit		3,482,000			4,030,000
	Pre Tax Loss		(203,000	)		1,138,000
	Assets		11,619,000			10,818,000

*NTW*
	Net Sales		14,206,000			7,233,000
	Gross Profit		5,448,000			2,610,000
	Pre Tax Income		1,905,000			796,000
	Assets		11,318,000			14,410,000

*Corporate*
	Net Sales		-			-
	Gross Profit		-			-
	Pre Tax Loss		(501,000	)		(1,199,000	)
	Assets		9,647,000			13,200,000

*Consolidated*
	Net Sales		62,833,000			64,215,000
	Gross Profit		15,235,000			14,858,000
	Pre Tax Income		3,569,000			3,995,000
	Provision for Taxes		(170,000	)		1,447,000
	Net Income		3,739,000			2,548,000
	Elimination of Assets		(4,301,000	)		(9,945,000	)
	Assets		50,172,000			53,156,000

2. ACQUISITION (Details) - USD ($)	12 Months Ended
2. ACQUISITION (Details) - USD ($)	Dec. 31, 2013	Dec. 31, 2012
Miller Stuart [Member]
Fair Value of Tangible Assets acquired (including cash acquired of $7,000 and $0)	$ 513,000
Negative goodwill resulting from the bargain purchase acquisition	(361,000)
Liabilities assumed	(10,000)
Total	$ 142,000
NTW [Member]
Fair Value of Tangible Assets acquired (including cash acquired of $7,000 and $0)		$ 7,941,000
Liabilities assumed		(660,000)
Intangible assets, subject to amortization		4,975,000
Goodwill		162,000
Total		$ 12,418,000

2. ACQUISITION (Details Narrative) - USD ($)	Dec. 31, 2013	Dec. 31, 2012
WMI
Amount due and payable to related party	$ 277,000
NTW [Member]
Amount due and payable to related party	$ 411,000	$ 411,000

SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (Details)	12 Months Ended
SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (Details)	Dec. 31, 2013	Dec. 31, 2012
Summary Of Significant Accounting Policies Details
Customer 1	27.70%	27.60%
Customer 2	18.30%	26.30%
Customer 3	10.00%	0.00%
Customer 4	0.00%	11.40%

SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (Details 1)	Dec. 31, 2013	Dec. 31, 2012
Summary Of Significant Accounting Policies Details 1
Customer 1	22.80%	18.60%
Customer 2	20.10%	10.70%
Customer 3	0.00%	25.30%

SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (Details 2) - shares	12 Months Ended
	Dec. 31, 2013	Dec. 31, 2012
Summary Of Significant Accounting Policies Details 2
Weighted average shares outstanding used to compute basic earning per share	5,739,014	4,680,581
Effect of dilutive stock options and warrants	193,712	78,665
Weighted average shares outstanding and dilutive securities used to compute dilutive earnings per share	5,932,726	4,759,246

SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (Details 3) - shares	Dec. 31, 2013	Dec. 31, 2012
Summary Of Significant Accounting Policies Details 3
Stock Options	24,548	11,948
Warrants		118,835
Anti dilutive Securities	24,548	130,783

SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (Details Narrative)	12 Months Ended
	Dec. 31, 2013 USD ($) Customer	Dec. 31, 2012 USD ($) Customer
Summary Of Significant Accounting Policies Details Narrative
Net Sales not shipped	<p style="margin: 0; text-align: justify"><font style="font: 8pt Times New Roman, Times, Serif">Company had approximately $773,000 or 1.2% of net sales that were billed but not shipped under such bill and hold arrangements.</font></p>
Impairment	$ 0	$ 0
Customers represented percentage of total sales	56.00%	65.30%
Number of Customers represented percentage of total sales \| Customer	3	3
Customers represented percentage of gross accounts receivable	42.90%	54.60%
Number of Customers represented percentage of gross accounts receivable \| Customer	2	3
Percentage of customers maximum	10.00%
Impairment of goodwill	$ 0	$ 0
Freight out	$ 64,000	$ 82,000

ACCOUNTS RECEIVABLE (Details) - USD ($)	Dec. 31, 2013	Dec. 31, 2012
Receivables [Abstract]
Accounts Receivable Gross	$ 9,367,000	$ 12,336,000
Allowance for Doubtful Accounts	(783,000)	(705,000)
Accounts Receivable Net	$ 8,584,000	$ 11,631,000

4. ACCOUNTS RECEIVABLE (Details 1) - USD ($)	12 Months Ended
4. ACCOUNTS RECEIVABLE (Details 1) - USD ($)	Dec. 31, 2013	Dec. 31, 2012
Receivables [Abstract]
Allowance for Doubtful Accounts Beginning Balance	$ 705,000	$ 950,000
Allowance for Doubtful Accounts Charged to Costs and Expenses	400,000	262,000
Allowance for Doubtful Accounts Deductions From Reserves	322,000	507,000
Allowance for Doubtful Accounts Ending Balance	$ 783,000	$ 705,000

5. INVENTORY (Details) - USD ($)	Dec. 31, 2013	Dec. 31, 2012
Inventory Details
Raw Materials	$ 6,002,000	$ 6,105,000
Work In Progress	15,665,000	16,730,000
Finished Goods	7,712,000	6,653,000
Progress Payments Received	(416,000)	(525,000)
Inventory Reserve	(2,741,000)	(2,224,000)
Total Inventory	$ 26,222,000	$ 26,739,000

PROPERTY AND EQUIPMENT (Details) - USD ($)	12 Months Ended
PROPERTY AND EQUIPMENT (Details) - USD ($)	Dec. 31, 2013	Dec. 31, 2012
Total Property and Equipment	$ 17,840,000	$ 15,489,000
Less: Accumulated Depreciation	(11,317,000)	(9,606,000)
Property and Equipment, net	6,523,000	5,883,000
Machinery and Equipment
Total Property and Equipment	$ 6,251,000	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	$ 5,261,000	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	$ 5,009,000	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	$ 59,000	55,000
Property Plant And Equipment Useful Life	5 years
Furniture and Fixtures
Total Property and Equipment	$ 257,000	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	$ 646,000	612,000
Computers and Software
Total Property and Equipment	$ 357,000	$ 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

PROPERTY AND EQUIPMENT (Details Narrative) - USD ($)	12 Months Ended
PROPERTY AND EQUIPMENT (Details Narrative) - USD ($)	Dec. 31, 2013	Dec. 31, 2012
Property, Plant and Equipment [Abstract]
Depreciation expense	$ 1,711,000	$ 1,557,000

INTANGIBLE ASSETS (Details) - USD ($)	Dec. 31, 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	(2,584,000)	(1,421,000)
Intangible Assets, net	$ 4,726,000	$ 5,889,000

7. INTANGIBLE ASSETS (Details 1)	Dec. 31, 2013 USD ($)
Goodwill and Intangible Assets Disclosure [Abstract]
December 31, 2014	$ 1,163,000
December 31, 2015	1,163,000
December 31, 2016	1,163,000
December 31, 2017	617,000
December 31, 2018	102,000
Thereafter	518,000
Total	$ 4,726,000

INTANGIBLE ASSETS (Details Narrative) - USD ($)	12 Months Ended
INTANGIBLE ASSETS (Details Narrative) - USD ($)	Dec. 31, 2013	Dec. 31, 2012
Notes to Financial Statements
Amortization of the intangibles	$ 1,163,000	$ 693,000

8. SALE AND LEASEBACK TRANSACTION (Details Narrative) - USD ($)	Dec. 31, 2013	Dec. 31, 2012
Sale And Leaseback Transaction Details Narrative
Unrecognized portion of the Sale and Leaseback gain	$ 485,000	$ 523,000

NOTES PAYABLE AND CAPITAL LEASE OBLIGATIONS (Details) - USD ($)	Dec. 31, 2013	Dec. 31, 2012
Notes Payable And Capital Lease Obligations Details
Revolving credit note payable to PNC Bank N.A. ("PNC")	$ 12,029,000	$ 15,667,000
Term loan, PNC	1,948,000	3,748,000
Capital lease obligations	1,787,000	2,060,000
Notes payable to sellers of WMI	732,000	1,376,000
Junior subordinated notes	1,000,000	1,000,000
Subtotal	17,496,000	23,851,000
Less: Current portion of notes and capital obligations	(14,969,000)	(19,211,000)
Notes payable and capital lease obligations, net of current portion	$ 2,527,000	$ 4,640,000

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.