SECURITIES AND EXCHANGE COMMISSION Washington, D.C. 20549 FORM 8-K/A (Amendment No. 1) CURRENT REPORT Pursuant to Section 13 or 15(d) of the Securities Exchange Act of 1934 Date of Report (date of earliest event reported): August 24, 2007 AIR INDUSTRIES GROUP, INC. ----------------------------- (Exact Name of Registrant as Specified in its Charter) Delaware 000-29245 20-4458244 -------- --------- ---------- State of Commission IRS Employer Incorporation File Number I.D. Number 1479 North Clinton Avenue, Bay Shore, NY 11706 Address of principal executive offices Registrant's telephone number: (631) 968-5000 ------------------------------------------------------------- (Former Name or Former Address, if Changed Since Last Report) Check the appropriate box below if the Form 8-K filing is intended to simultaneously satisfy the filing obligation of the registrant under any of the following provisions (see General Instruction A.2. below): |_| Written communications pursuant to Rule 425 under the Securities Act (17 CFR 230.425) |_| Soliciting material pursuant to Rule 14a-12 under the Exchange Act (17 CFR 240.14a-12) |_| Pre-commencement communications pursuant to Rule 14d-2(b) under the Exchange Act (17 CFR 240.14d-2(b)) |_| Pre-commencement communications pursuant to Rule 13e-4(c) under the Exchange Act (17 CFR 240.13e-4(c))Explanatory Note This amendment supplements the Current Report on Form 8-K filed by Air Industries Group, Inc. ("we," "our," "us," "Gales" or the "Company") with the Securities and Exchange Commission on August 24 2007, in which we disclosed the completion of our acquisition of all the outstanding capital stock of Welding Metallurgy, Inc., to include in such report the financial statements of Welding Metallurgy, Inc. for the years ended December 31, 2006 and 2005 and the periods ended June 30, 2007 and 2006, required by Item 9.01(a) and the pro forma financial information for the years ended December 31, 2006 and 2005 and the periods ended June 30, 2007 and 2006 required by Item 9.01(b). Item 9.01 Financial Statements and Exhibits (a) Financial Statements of Business Acquired
WELDING METALLURGY, INC. FINANCIAL STATEMENTS AND SUPPLEMENTARY INFORMATION FOR THE YEARS ENDED DECEMBER 31, 2006 DECEMBER 31, 2005
WELDING METALLURGY, INC. Table of Contents For the Years Ended December 31, 2006 December 31, 2005 PAGES ----- Auditors' Report 1 Comparative Balance Sheets 2-3 Comparative Statements of Income and Retained Earnings 4 Comparative Statements of Cash Flows 5-6 Notes to Financial Statements 7-10 Supplementary Information: Comparative Schedules of Cost of Goods Sold 11 Comparative Schedules of Expenses 12
Independent Auditors' Report Board of Directors Welding Metallurgy, Inc. We have audited the accompanying Comparative Balance Sheets of Welding Metallurgy, Inc. as of December 31, 2006 and December 31, 2005 and the related Statements of Income and Retained Earnings, and Cash Flows for each of the years then ended. These financial statements are the responsibility of the Welding Metallurgy, Inc. management. Our responsibility is to express an opinion on these financial statements based on our audit. We conducted our audit in accordance with auditing standards generally accepted in the United States. Those standards require that we plan and perform the audit to obtain reasonable assurance about whether the financial statements are free of material misstatement. An audit includes examining, on a test basis, evidence supporting the amounts and disclosures in the financial statements. An audit also includes assessing the accounting principles used and significant estimates made by management, as well as evaluating the overall financial statement presentation. We believe that our audit provides a reasonable basis for our opinion. In our opinion, the financial statements referred to above present fairly, in all material respects, the financial position of Welding Metallurgy, Inc. as of December 31, 2006 and December 31, 2005, and the results of its operations and its cash flows for the years then ended in conformity with accounting principles generally accepted in the United States. Our audit was made for the purpose of forming an opinion on the basic financial statements taken as a whole. The supplementary information included in the accompanying schedules of cost of goods sold and expenses is presented only for supplementary analysis purposes. Such information has not been subjected to the inquiry and analytical procedures applied in the audit of the basic financial statements, but was compiled from information that is the representation of management, without audit or review. Accordingly, we do not express an opinion or any other form of assurance on the supplementary information. Respectfully submitted, BILDNER & GIANNASCO, LLP Certified Public Accountants Jericho, New York October 1, 2007
WELDING METALLURGY, INC. Comparative Balance Sheets DECEMBER 31, DECEMBER 31, ASSETS 2006 2005 ------------ ------------ CURRENT ASSETS Cash and Cash Equivalents $ 672,457 $ 989,340 Accounts Receivable 270,741 725,226 Inventory 220,059 212,525 Prepaid Expenses 354 1,204 ---------- ---------- TOTAL CURRENT ASSETS $1,163,611 $1,928,295 ---------- ---------- FIXED ASSETS - AT COST Property and Equipment $1,707,445 $1,456,178 Less: Accumulated Depreciation 1,217,670 1,072,012 ---------- ---------- FIXED ASSETS - NET $ 489,775 $ 384,166 ---------- ---------- OTHER ASSETS $ 20,090 $ 20,090 ---------- ---------- TOTAL ASSETS $1,673,476 $2,332,551 ========== ========== The accompanying audit report and notes are an integral part of these statements.
WELDING METALLURGY, INC. Comparative Balance Sheets LIABILITIES AND DECEMBER 31, DECEMBER 31, STOCKHOLDERS' EQUITY 2006 2005 ------------ ------------ CURRENT LIABILITIES Accounts Payable $ 171,947 $ 212,678 Notes Payable - Current Portion 93,731 -- Accrued Operating Expenses 34,850 29,376 ---------- ---------- TOTAL CURRENT LIABILITIES $ 300,528 $ 242,054 ---------- ---------- LONG-TERM LIABILITIES Notes Payable - Long Term $ 90,737 $ -- ---------- ---------- TOTAL LONG-TERM LIABILITIES $ 90,737 $ -- ---------- ---------- TOTAL LIABILITIES $ 391,265 $ 242,054 ---------- ---------- COMMITMENTS AND CONTINGENCIES STOCKHOLDERS' EQUITY Common Stock (No par value; 200 shares authorized; 100 shares issued and outstanding) $ 437 $ 437 Retained Earnings 1,281,774 2,090,060 ---------- ---------- TOTAL STOCKHOLDERS' EQUITY $1,282,211 $2,090,497 ---------- ---------- TOTAL LIABILITIES AND STOCKHOLDERS' EQUITY $1,673,476 $2,332,551 ========== ==========
WELDING METALLURGY, INC. Comparative Statements of Income and Retained Earnings FOR THE YEAR ENDED ------------------ DECEMBER 31, DECEMBER 31, 2006 2005 ------------ ------------ REVENUE $4,456,376 $5,252,414 ---------- ---------- COST OF GOODS SOLD $2,011,151 $2,682,565 ---------- ---------- GROSS PROFIT $2,445,225 $2,569,849 ---------- ---------- EXPENSES Selling, General, and Administrative $1,966,350 $1,581,247 Interest 2,480 -- Franchise Tax 425 425 ---------- ---------- TOTAL EXPENSES $1,969,255 $1,581,672 ---------- ---------- NET INCOME FROM OPERATIONS $ 475,970 $ 988,177 INTEREST INCOME 53,744 63,038 ---------- ---------- NET INCOME FOR YEAR $ 529,714 $1,051,215 DISTRIBUTIONS (1,338,000) (2,585,000) RETAINED EARNINGS, BEGINNING OF YEAR 2,090,060 3,623,845 ---------- ---------- RETAINED EARNINGS, END OF YEAR $1,281,774 $2,090,060 ========== ========== The accompanying audit report and notes are an integral part of these statements.
WELDING METALLURGY, INC. Comparative Statements of Cash Flows FOR THE YEAR ENDED ------------------ DECEMBER 31, DECEMBER 31, 2006 2005 ---- ---- CASH FLOWS FROM OPERATING ACTIVITIES Net Income for Year $ 529,714 $ 1,051,215 Adjustments to Reconcile Net Income to Net Cash Provided by Operating Activities: Depreciation 145,657 133,104 Changes in Assets and Liabilities: (Increase) Decrease In - Accounts Receivable 454,485 593,341 Inventory (7,534) (100,670) Prepaid Expenses 850 14,796 Other Current Assets -- (11,340) Increase (Decrease) In - Accounts Payable (40,730) 80,769 Accrued Operating Costs 5,474 8,433 ----------- ----------- NET CASH PROVIDED BY OPERATING ACTIVITIES (Forward) $ 1,087,916 $ 1,769,648 ----------- ----------- CASH FLOWS FROM INVESTING ACTIVITIES Purchase of Equipment $ (251,267) $ (100,449) ----------- ----------- NET CASH (USED) BY INVESTING ACTIVITIES (Forward) $ (251,267) $ (100,449) ----------- -----------
WELDING METALLURGY, INC. Comparative Statements of Cash Flows (Continued) FOR THE YEAR ENDED ----------------- DECEMBER 31, DECEMBER 31, 2006 2005 ---- ---- NET CASH PROVIDED BY OPERATING ACTIVITIES (Forward) $ 1,087,916 $ 1,769,648 ----------- ----------- NET CASH (USED) BY INVESTING ACTIVITIES (Forward) $ (251,267) $ (100,449) ----------- ----------- CASH FLOWS FROM FINANCING ACTIVITIES Increase in Bank Debt $ 184,468 $ -- Distributions (1,338,000) (2,585,000) ----------- ----------- NET CASH (USED) BY FINANCING ACTIVITIES $(1,153,532) $(2,585,000) ----------- ----------- NET (DECREASE) IN CASH AND CASH EQUIVALENTS $ (316,883) $ (915,801) CASH AND CASH EQUIVALENTS, BEGINNING OF YEAR 989,340 1,905,141 ----------- ----------- CASH AND CASH EQUIVALENTS, END OF YEAR $ 672,457 $ 989,340 =========== =========== Supplemental Disclosure of Cash Flow Information: Interest Paid $ 2,480 $ -- ----------- ----------- Income Taxes Paid $ 425 $ 425 ----------- ----------- The accompanying audit report and notes are an integral part of these statements.
SUPPLEMENTARY INFORMATION
WELDING METALLURGY, INC. Comparative Schedules of Costs of Goods Sold FOR THE YEAR ENDED ------------------ DECEMBER 31, DECEMBER 31, 2006 2005 ---- ---- COST OF GOODS SOLD Inventory, Beginning $ 212,525 $ 236,623 Purchases, Hardware & Materials & Sub Contracting 669,841 1,188,875 Direct Labor 422,190 475,717 Manufacturing Overhead 926,654 993,875 ---------- ---------- $2,231,210 $2,895,090 Less: Inventory, Ending 220,059 212,525 ---------- ---------- COST OF GOODS SOLD $2,011,151 $2,682,565 ---------- ---------- MANUFACTURING OVERHEAD Rent $ 59,533 $ 81,942 Supplies 66,287 98,637 Equipment Rental 5,084 5,224 Utilities 28,377 27,268 Repairs and Maintenance 6,917 15,783 Depreciation 158,232 133,576 Truck and Auto 11,945 10,352 Supervisor and Quality Control 458,931 478,340 Payroll Taxes 131,348 142,753 ---------- ---------- TOTAL MANUFACTURING OVERHEAD $ 926,654 $ 993,875 ========== ========== The accompanying audit report and notes are an integral part of these statements.
WELDING METALLURGY, INC. Comparative Schedules of Expenses FOR THE YEAR ENDED ------------------ DECEMBER 31, DECEMBER 31, 2006 2005 ---- ---- SELLING, GENERAL, AND ADMINISTRATIVE EXPENSES Advertising $ 1,012 $ -- Travel 29,243 28,744 Auto Leases 24,311 11,651 Entertainment 18,352 13,170 Freight and Delivery 30,173 32,286 Officers' Salaries 1,221,500 763,000 Other Wages 357,900 466,897 Employee Benefits -- 52,232 Office Supplies 21,349 31,838 Computer Expense 47,492 40,187 Insurance 51,842 33,925 Hospitalization 48,077 36,616 Outside Services 60,327 11,283 Telephone 6,914 6,854 Dues and Subscriptions 1,806 7,066 Licenses and Fees 800 809 Seminars 11,315 7,848 Professional Fees 16,645 15,853 Holiday Party 14,734 3,449 Donations 1,695 13,505 Security -- 127 Bank Charges 863 3,907 ---------- ---------- TOTAL SELLING, GENERAL, AND ADMINISTRATIVE EXPENSES $1,966,350 $1,581,247 ========== ========== The accompanying audit report and notes are an integral part of these statements.
WELDING METALLURGY, INC. Notes to Financial Statements For the Years Ended December 31, 2006 December 31, 2005 1 - SIGNIFICANT ACCOUNTING POLICIES Background of Company Welding Metallurgy, Inc. ("the Company") is a New York Subchapter S corporation and is 100% owned by the Gantt family. The Company is in the business of welding, inspecting, and metal fabrication as a supplier to firms in the aircraft and rotorcraft businesses that are part of the defense industry. The company operates in a single, leased 10,000 sq. ft. facility in West Babylon, NY and all of its sales are to US companies. There are 25 full time employees. As a Subchapter S corporation, the Company is not taxed as a separate legal entity; its profits pass through to the owners and become part of the owners' taxable income. Accordingly, the Company records no income tax expense on its books and pays no corporate income taxes. Cash & Cash Equivalents Cash and cash equivalents include all highly liquid debt instruments with an original maturity of three month or less. Cash consists of aggregate cash balances in the Company's bank accounts and cash equivalents consist primarily of money market accounts. Accounts Receivable Receivables are generally due within 30 days. The company sells to a small number of customers who are major suppliers to the defense industry. Management has determined that no reserve for bad debts is required for the balances presented. Concentration of Credit Risk Financial instruments that potentially subject the Company to concentrations of credit risk consist of trade accounts receivable. The Company grants credits to its customers, which are located in the United States. Inventory Inventory is stated at the lower of cost-or market, on a FIFO basis.
1 - SIGNIFICANT ACCOUNTING POLICIES - (Continued) Property and Equipment Property and equipment are carried at cost less accumulated depreciation and amortization. The Company maintains a policy to capitalize all property and equipment purchases in excess of $1,000. 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. Repair and maintenance charges are expensed as incurred. Property under a capital lease is capitalized and amortized over the lease terms. Upon disposition, the cost and related accumulated depreciation are removed from the accounts and any related gain or loss is reflected in earnings. Property, Plant and Equipment The Company depreciates all property, plant, and equipment over 7 years using the double declining balance method of depreciation. Expenditures for repairs and maintenance are expensed and major betterments are capitalized. Impairment of Long-Lived Assets The Company reviews long-lived assets for impairment at the facility level annually or when events or circumstances indicate that the carrying value of such assets may not be fully recoverable. Impairment is evaluated based on the sum of undiscounted estimated future cash flows expected to result from use of the assets compared to their carrying value. If impairment is recognized, the carrying value of the impaired asset is reduced to its fair value, based on discounted estimated future cash flows. Finance Costs Costs connected with obtaining and executing debt arrangements are capitalized and amortized on the straight-line basis over the term of the related debt. Revenue Recognition Sales are recorded at the time of shipment. Pre-acceptance inspections by customers are generally performed at the Company's plant before a part is released for shipment. Expenses Selling, general, and administrative costs are charged to expenses as incurred. 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, unamortized finance costs, accrued expenses, and 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.
1 - SIGNIFICANT ACCOUNTING POLICIES - (Continued) Fair Value of Financial Instruments The Company has estimated the fair value of financial instruments using available market information and other valuation methodologies in accordance with Statement of Financial Accounting Standards No. 107, "Disclosures about Fair Value of Financial Instruments." Management of the Company believes that the fair value of financial instruments, consisting of cash, accounts receivable, accounts payable and accrued liabilities, approximates carrying value due to the immediate or short-term maturity associated with these instruments and that the notes payable is carried at fair value in that it carries interest rates that are comparable to similar instruments with similar maturities. Income Taxes The Company has elected to be taxed as a Small Business Corporation and, consequently, no Federal tax liability is reflected on the Comparative Statements of Income and Retained Earnings. 2 - INVENTORY Inventory consists of the following: 2006 2005 ---- ---- Raw Materials $ 40,235 $ 47,635 Work in Progress 173,456 154,664 Finished Goods 6,368 10,226 --------- --------- $ 220,059 $ 212,525 ========= ========= 3 - NOTES PAYABLE - BANK The Company financed the acquisition of certain machinery with a financial institution in an amount of $200,000. The terms of the agreement are 23 monthly payments of $9,006.22 which includes interest at a rate of 7.46%. Principal payments over the next two years are as follows: 2007 $ 93,731 2008 $ 90,737 Subsequent to the Balance Sheet date, this note was satisfied from the purchaser as part of the "Purchase Agreement" (see Note 6).
4 - EMPLOYEE BENEFITS The Company had offered eligible employees the option of investing in a tax-deferred Individual Retirement Account (IRA). This plan was intended to be used in combination with their Social Security benefits and personal resources to provide them with supplemental income upon retirement. The Plan was terminated in October 2005. 5 - COMMITMENTS AND CONTINGENCIES The Company presently leases manufacturing and office facilities under a lease expiring on December 31, 2007 at an annual rental of approximately $62,400 plus utilities and annual escalation adjustments for real estate taxes. This lease is between the Company and Prime Real Estate Inc. 6 - SUBSEQUENT EVENTS On March 9, 2007, the Company entered into a Stock Purchase Agreement ("Welding Metallurgy, Inc.") with Gales Industries Incorporated, a Delaware Corporation, and the holders of all of the outstanding shares of Welding Metallurgy, Inc. (the "Shareholder"). Pursuant to the Welding Metallurgy Inc. Agreement, subject to the satisfaction of various terms and conditions, the Company will acquire from the Shareholders all of the issued and outstanding capital stock of Welding Metallurgy, Inc.
WELDING METALLURGY, INC. COMBINED FINANCIAL STATEMENTS AND SUPPLEMENTARY INFORMATION JUNE 30, 2007
WELDING METALLURGY, INC. Index to Report June 30, 2007 PAGES ----- Accountants' Report 1 Comparative Balance Sheets 2-3 Comparative Statements of Income and Retained Earnings 4 Comparative Statements of Cash Flows 5-6 Supplementary Information: Comparative Schedules of Cost of Goods Sold 7 Comparative Schedules of Expenses 8
Independent Accountants' Report Board of Directors Welding Metallurgy, Inc. Gentlemen: We have compiled the accompanying Comparative Balance Sheets of Welding Metallurgy, Inc. as of June 30, 2007 and June 30, 2006 and the related Comparative Statements of Income and Retained Earnings and Cash Flows for the period then ended, as well as the accompanying Schedules of Costs of Goods Sold and Expenses in accordance with Statements on Standards for Accounting and Review Services issued by the American Institute of Certified Public Accountants. A compilation is limited to presenting in the form of financial statements and supplementary schedules information that is the representation of management. We have not audited nor reviewed the accompanying financial statements and supplementary schedules and, accordingly, we do not express an opinion or any other form of assurance on them. Management has elected to omit all the disclosures required by generally accepted accounting principles. If the omitted disclosures were included in the financial statements, they might influence users' conclusions about the Company's financial position, results of operations, and cash flows. Accordingly, these financial statements are not designed for persons who are not informed about such matters. Respectfully submitted, BILDNER & GIANNASCO, LLP Certified Public Accountants Jericho, New York November 7, 2007
WELDING METALLURGY, INC. Comparative Balance Sheets JUNE 30, JUNE 30, ASSETS 2007 2006 CURRENT ASSETS Cash and Cash Equivalents $ 385,595 $1,841,987 Accounts Receivable 534,050 939,847 Inventory 382,851 151,818 Prepaid Expenses -- 6,849 ---------- ---------- TOTAL CURRENT ASSETS $1,302,496 $2,940,501 ---------- ---------- FIXED ASSETS - AT COST Property and Equipment $1,716,659 $1,456,178 Less: Accumulated Depreciation 1,288,627 1,151,128 ---------- ---------- FIXED ASSETS - NET $ 428,032 $ 305,050 ---------- ---------- OTHER ASSETS Loan Receivable -- 20,090 ---------- ---------- TOTAL ASSETS $1,730,528 $3,265,641 ========== ========== The accompanying audit report and notes are an integral part of these statements.
WELDING METALLURGY, INC. Comparative Balance Sheets LIABILITIES AND JUNE 30, JUNE 30, STOCKHOLDERS' EQUITY 2007 2006 CURRENT LIABILITIES Accounts Payable $ 185,259 $ 86,264 Due to Air Industries Mach -- -- Due to Air Industries Group -- -- Loan Payable - Officers 83,672 -- Accrued Operating Expenses 2,390 3,243 ---------- ---------- TOTAL CURRENT LIABILITIES $ 271,321 $ 89,507 ---------- ---------- LONG-TERM LIABILITIES Notes Payable - Long Term $ 136,641 $ -- ---------- ---------- TOTAL LONG-TERM LIABILITIES $ 136,641 $ -- ---------- ---------- TOTAL LIABILITIES $ 407,962 $ 89,507 ---------- ---------- COMMITMENTS AND CONTINGENCIES STOCKHOLDERS' EQUITY Common Stock ($300 par value; 100 shares authorized and outstanding) $ 437 $ 437 Equity -- -- Retained Earnings 1,322,129 3,175,697 ---------- ---------- TOTAL STOCKHOLDERS' EQUITY $1,322,566 $3,176,134 ---------- ---------- TOTAL LIABILITIES AND STOCKHOLDERS' EQUITY $1,730,528 $3,265,641 ========== ==========
WELDING METALLURGY, INC. Comparative Statements of Income and Retained Earnings FOR THE PERIOD ENDED -------------------- JUNE 30, JUNE 30, 2007 2006 ---- ---- REVENUE $ 1,798,084 $ 2,616,241 ----------- ----------- COST OF GOODS SOLD $ 970,964 $ 1,046,496 ----------- ----------- GROSS PROFIT $ 827,120 $ 1,569,745 ----------- ----------- EXPENSES Selling, General, and Administrative $ 577,201 $ 409,078 Interest Expense 6,211 -- Franchise Tax -- -- ----------- ----------- TOTAL EXPENSES $ 583,412 $ 409,078 ----------- ----------- NET INCOME FROM OPERATIONS $ 243,708 $ 1,160,667 INTEREST INCOME 9,343 18,970 ----------- ----------- NET INCOME FOR PERIOD $ 253,051 $ 1,179,637 DISTRIBUTIONS (212,696) (94,000) RETAINED EARNINGS, BEGINNING OF PERIOD 1,281,774 2,090,060 ----------- ----------- RETAINED EARNINGS, END OF PERIOD $ 1,322,129 $ 3,175,697 =========== ===========
WELDING METALLURGY, INC. Comparative Statements of Cash Flows FOR THE PERIOD ENDED -------------------- JUNE 30, JUNE 30, 2007 2006 ---- ---- CASH FLOWS FROM OPERATING ACTIVITIES Net Income for Period $ 253,051 $ 1,179,637 Adjustments to Reconcile Net Income to Net Cash Provided by Operating Activities: Depreciation 70,956 79,116 Changes in Assets and Liabilities: (Increase) Decrease In - Accounts Receivable (263,309) (214,621) Inventory (162,792) 60,707 Prepaid Expenses 354 (5,645) Other Current Assets 20,090 -- Increase (Decrease) In - Accounts Payable 13,313 (126,414) Intercompany Payable -- -- Accrued Operating Costs (32,460) (26,133) ----------- ----------- NET CASH PROVIDED (USED) BY OPERATING ACTIVITIES (Forward) $ (100,797) $ 946,647 ----------- ----------- CASH FLOWS FROM INVESTING ACTIVITIES Purchase of Equipment $ (9,214) $ -- ----------- ----------- NET CASH (USED) BY INVESTING ACTIVITIES (Forward) $ (9,214) $ -- ----------- -----------
WELDING METALLURGY, INC. Comparative Statements of Cash Flows (Continued) FOR THE PERIOD ENDED -------------------- JUNE 30, JUNE 30, 2007 2006 ---- ---- NET CASH PROVIDED (USED) BY OPERATING ACTIVITIES (Forward) $ (100,797) $ 946,647 ----------- ----------- NET CASH (USED) BY INVESTING ACTIVITIES (Forward) $ (9,214) $ -- ----------- ----------- CASH FLOWS FROM FINANCING ACTIVITIES (Decrease) in Bank Debt $ (47,827) $ -- (Decrease) in Notes Payable - Officers 83,672 -- Distributions (212,696) (94,000) ----------- ----------- NET CASH (USED) BY FINANCING ACTIVITIES $ (176,851) $ (94,000) ----------- ----------- NET INCREASE (DECREASE) IN CASH AND CASH EQUIVALENTS $ (286,862) $ 852,647 CASH AND CASH EQUIVALENTS, BEGINNING OF PERIOD 672,457 989,340 ----------- ----------- CASH AND CASH EQUIVALENTS, END OF PERIOD $ 385,595 $ 1,841,987 =========== =========== Supplemental Disclosure of Cash Flow Information: Interest Paid $ 6,211 $ -- ----------- ----------- Income Taxes Paid $ -- $ -- ----------- -----------
SUPPLEMENTARY INFORMATION
WELDING METALLURGY, INC. Comparative Schedules of Cost of Goods Sold FOR THE PERIOD ENDED -------------------- JUNE 30, JUNE 30, 2007 2006 COST OF GOODS SOLD Inventory, Beginning $ 220,059 $ 212,525 Purchases, Hardware, Materials & Sub-Contracting 649,331 337,565 Direct Labor 192,738 190,046 Manufacturing Overhead 291,687 458,178 ---------- ---------- $1,353,815 $1,198,314 Less: Inventory, Ending 382,851 151,818 ---------- ---------- COST OF GOODS SOLD $ 970,964 $1,046,496 ========== ========== MANUFACTURING OVERHEAD Rent $ 46,783 $ 26,775 Supplies 24,461 20,141 Equipment Rental 2,542 2,542 Utilities 15,136 16,225 Repairs and Maintenance 2,586 1,487 Depreciation 70,956 79,116 Supervisor and Quality Control 123,335 305,563 Payroll Taxes 5,888 6,329 ---------- ---------- TOTAL MANUFACTURING OVERHEAD $ 291,687 $ 458,178 ========== ==========
WELDING METALLURGY, INC. Comparative Schedules of Expenses FOR THE PERIOD ENDED -------------------- JUNE 30, JUNE 30, 2007 2006 SELLING, GENERAL AND ADMINISTRATIVE EXPENSES Travel 9,986 10,319 Auto 10,953 11,181 Entertainment 4,179 7,581 Freight and Delivery 9,634 18,099 Officers' Salaries 225,000 60,500 Other Wages 188,385 208,814 Office Supplies 9,268 17,589 Computer Expense 18,411 11,792 Insurance 2,536 2,500 Hospitalization 24,249 16,127 Telephone 3,453 3,415 Advertising -- 1,012 Dues and Subscriptions 4,056 1,506 Licenses and Fees 100 100 Seminars 900 1,315 Professional Fees 61,151 6,418 Outside Services -- 28,247 Holiday Party 411 254 Donations 4,268 1,118 Bank Charges 261 1,191 -------- -------- TOTAL SELLING, GENERAL AND ADMINISTRATIVE EXPENSES $577,201 $409,078 ======== ========
(b) Pro forma financial information Air Industries Group, Inc. (AIRI.ob) Unaudited Pro Forma Consolidated Comparative Balance Sheet December 31, 2006 Welding Metallurgy, AIRI Welding AIRI Consolidated Inc. Adjustments Consolidated ----------------- ----------- ----------- ------------ ASSETS Current Assets Cash and Cash Equivalents $ 3,049,140 $ 672,457 $ 609,832 (a) $ 4,331,429 Accounts Receivable (Net of Allowance for Doubtful Accounts of $176,458 for AIRI) 5,901,904 270,741 6,172,645 Inventory 18,070,514 220,059 18,290,573 Prepaid Expenses and Other Current Assets 260,567 354 260,921 Deposits 180,456 -- -- 180,456 --------------------------------------------- ----------- Total Current Assets 27,462,581 1,163,611 609,832 29,236,024 Property, Plant, and Equipment, net 3,697,311 489,775 4,187,086 Deferred Financing Costs 369,048 -- -- 369,048 Other Assets 64,373 20,090 84,463 Goodwill 6,671,410 -- 4,849,989 (b)(l) 11,521,399 Deposits 471,293 -- -- 471,293 --------------------------------------------- ----------- TOTAL ASSETS $38,736,016 $ 1,673,476 $ 5,459,821 $45,869,313 ============================================= =========== Current Liabilities Accounts Payable and Accrued Expenses $ 9,966,048 $ 206,797 (432,730) (h)(k) $ 9,740,115 Notes Payable Current Portion 127,776 93,731 (93,731) (c) 127,776 Notes Payable - Revolver 5,027,463 -- 5,027,463 Subordinated Note - SCCF 4,500,000 (j) 4,500,000 Notes Payable - Sellers Sigma - Current Portion 553,804 -- 553,804 Notes Payable - Sellers Welding Metallurgy - Current Portion -- -- 1,000,000 (d) 1,000,000 Capital Lease Obligations - Current Portion 407,228 -- 407,228 Due to Sellers AIM 53,694 -- 53,694 Dividends Payable 120,003 -- 120,003 Deferred Gain on Sale - Current Portion 38,033 -- 38,033 Income Taxes Payable 653,426 -- 328,978 (i) 982,404 --------------------------------------------- ----------- Total current liabilities 16,947,475 300,528 5,302,517 22,550,520 Long term liabilities Due to Sellers - Sigma - Net of Current Portion -- -- -- Notes Payable - Net of Current Portion 1,833,799 90,737 (90,737) (c) 1,833,799 Notes Payable - Sellers AIM - Net of Current Portion 1,290,562 -- 1,290,562 Notes Payable - Sellers Sigma - Net of Current Portion 722,807 -- 722,807 Notes Payable - Sellers Welding Metallurgy - Net of Current Portion 1,000,000 (d) 1,000,000 Capital Lease Obligations - Net of Current Portion 552,589 -- 552,589 Deferred Tax Liability 512,937 -- 512,937 Deferred Gain on Sale - Net of Current Portion 713,118 -- 713,118 Deferred Rent 39,371 -- 39,371 --------------------------------------------- ----------- TOTAL LIABILITIES $22,612,658 $ 391,265 $ 6,211,780 $29,215,703 Commitments and Contingencies Stockholders' Equity Preferred Stock - 8,003,716 shares authorized Series A Convertible Preferred - $.001 Par value, 1,000 Shares authorized, 900 shares Issued and 0 Outstanding Series B Convertible Preferred - $.001 Par value, 2,000,000 Shares Authorized, 802,300 Shares Issued and Outstanding with an initial liquidation value of $8,023,000 (Authorized , Issued and Outstanding for the Proforma December 31, 2006) $ 802 $ -- $ 802 Common Stock - $.001 Par value, 120,055,746 Shares Authorized, 65,314,732 Shares Issued and Outstanding as of December 31, 2006 on a pro forma basis 67,638,348 Shares Issued and Outstanding as of December 31,2006 65,314 437 1,887 (e) 67,638 Additional Paid-In Capital 7,898,702 -- 7,898,702 Additional Paid-In Capital Series B Preferred 7,352,858 -- 7,352,858 Additional Paid-In Capital: Sigma Shares 1,891,955 -- 1,891,955 Additional Paid-In Capital: Welding Shares -- -- 564,176 (e)(f) 564,176 Retained Earnings (Accumulated Deficit) (1,086,273) 1,281,774 (1,281,774) (g) (1,086,273) Proforma net effect of P&L adjustments (see attached schedule below) -- -- (36,248) (h)(i) (36,248) --------------------------------------------- ----------- Total Stockholders' Equity 16,123,358 1,282,211 (751,959) 16,653,610 --------------------------------------------- ----------- TOTAL LIABILITIES AND STOCKHOLDERS' EQUITY $38,736,016 $ 1,673,476 $ 5,459,821 $45,869,313 ============================================= ===========
Notes to Comparative Pro Forma Consolidated & Condensed Balance Sheet (a) Represents the net proceeds from sale of SCCF Loan Agreement after completing the purchase of Welding Metallurgy and paying soft costs associated with the acquisition, along with notes of as if the deal was done on 12/31/2006 (b) Represents the goodwill resulting from the excess of the purchase price paid for the stock of Welding Metalurgy after adjusting the value of the assets acquired and liabilities assumed to reflect the purchase price if the deal was completed on 12/31/2006. (c) Represents the payoff of the note to a financial institution satisfied as part of the SPA and the former Officers of Welding Metallurgy if the deal was completed on 12/31/2006. (d) Represents the long term portion of the $2.0 MM note purchase price (due 8/31/2011; with the first installment $500,000 due 8/24/2008; bearing interest @ 7% per annum commencing 8/24/2008; with quarterly installments therafter of $125,000) accepted by the Welding Metallurgy sellers as part of the purchase. (e) Represents the elimination the of common stock portion of Welding Metallurgy Stockholders' Equity ($437) partially offset by the book value ($2324) of the pro forma 2,323,626 shares that would have been issued to the sellers as part of the purchase price if the transaction had closed on December 31,2006 (f) Represents the excess over par value of share issued to Welding Metallurgy sellers. (g) Represents the pro forma elimination of Welding Metallurgy accumulated surplus $1,281,774 (h) Represents interest accrued based on SCCF Loan Agreement $4.5MM @ prime +6 (14.25%) and elimination of $2,480 interest on former Welding Met's notes (i) Represents 40% estimated tax provision/(benefit) of Welding Met as if it was a C corporation (j) Issuance of the demand note SCCF Loan Agreement in connection with the Welding Metallurgy acquisition (k) Represents adjustment to former Welding Met Officer's salaries ($1,221,500) and adjusted for one officer now an employee of Air Industries Group, Inc earning $150,000 annual salary (l) Represents the $2.0mm note resulting from Welding Met acquisition reduced to reflect the accretion of the interest as a result of imputed interest for one year @7% ($140,000)
Air Industries Group, Inc. (AIRI.ob) Unaudited Pro Forma Combined Statement Of Income December 31, 2006 Welding AIRI Metallurgy, AIRI Welding Consolidated Inc. Adjustments Consolidated ------------ ----------- ----------- ------------ Net Sales $ 51,024,410 $ 4,456,376 $ 55,480,786 Cost of Sales 40,825,436 2,011,151 $ 42,836,587 ------------ ----------- ---------- ------------ Gross Profit 10,198,974 2,445,225 -- 12,644,199 Operating costs and expenses Selling and marketing 1,524,858 1,012 $ 1,525,870 General and administrative 6,007,640 1,965,338 (1,071,500) (k) $ 6,901,478 ------------ ----------- ---------- ------------ Income (Loss) from operations 2,666,476 478,875 1,071,500 4,216,851 Other (income) and expenses: Interest & financing costs (net) 1,230,692 (51,264) $778,770 (h)(l) $ 1,958,198 Gain on Sale of Life Insurance Policy (53,047) -- $ (53,047) Gain on Sale of Real Estate (300,037) -- $ (300,037) Other Income (435,627) -- $ (435,627) Other Expenses 247,084 425 $ 247,509 ------------ ----------- ---------- ------------ Net Income (Loss) before provision for income taxes 1,977,411 529,714 292,730 2,799,855 Provision for income taxes 1,232,915 211,886 (i) 117,092 (i) $ 1,561,893 ------------ ----------- ---------- ------------ Net Income (Loss) $ 744,496 $ 317,828 $ 175,638 $ 1,237,962 ------------ ----------- ---------- ------------ Proforma dividend attributable to preferred stockholders 561,610 561,610 ------------ ------------ Proforma net earnings attributable to common stockholders 182,886 676,352 ============ ============ Earnings per share (basic) $ 0.02 ============ Earnings per share (diluted) $ 0.01 ============ Weighted average shares outstanding (basic) 42,460,513 (m) ============ Weighted average shares outstanding (diluted) 46,803,612 (m) ============
Notes to Comparative Pro Forma Statement Of Operations (h) Represents interest accrued based on SCCF Loan Agreement $4.5MM @ prime +6 (14.25%) and elimination of $2,480 interest on former Welding Met's notes (i) Represents 40% estimated tax provision/(benefit) of Welding Met as if it was a C corporation (j) intentionally omitted (k) Represents adjustment to former Welding Met Officer's salaries ($1,221,500) and adjusted for one officer now an employee of Air Industries Group, Inc earning $150,000 annual salary (l) Represents the $2.0mm note resulting from Welding Met acquisition reduced to reflect the accretion of the interest as a result of imputed interest for one year @7% ($140,000) imputed interest for one year @7% ($140,000) (m) adjusted for the change in the weighted average shares as a result of the proforma Welding Met Shares
Air Industries Group, Inc. (AIRI.ob) Unaudited Pro Forma Consolidated Comparative Balance Sheet June 30, 2007 Welding AIRI Metallurgy, AIRI Welding Consolidated Inc. Adjustments Consolidated ------------ ----------- ----------- ------------ ASSETS Current Assets Cash and Cash Equivalents $ 1,010,522 $ 385,595 $ (226,326) (a)(m)(o)(q) $ 1,169,791 Accounts Receivable (Net of Allowance for Doubtful Accounts of $244,597 for AIRI) 6,331,004 534,050 6,865,054 Inventory 20,360,593 382,851 20,743,444 Prepaid Expenses and Other Current Assets 261,082 - 261,082 Deposits 692,578 - - 692,578 ------------------------------------------ ------------ Total Current Assets 28,655,779 1,302,496 (226,326) 29,731,949 Property, Plant, and Equipment, net 3,394,883 428,032 3,822,915 Deferred Financing Costs 346,820 - 346,820 Other Assets 486,885 - 486,885 Goodwill 6,434,282 - 4,949,634 (b) 11,383,916 Income Taxes Receivable 60,260 - 60,260 Deposits 424,490 - 424,490 ------------------------------------------ ------------ ------------------------------------------ ------------ TOTAL ASSETS $ 39,803,399 $ 1,730,528 $ 4,723,308 $ 46,257,235 =========================================== ============ Current Liabilities Accounts Payable and Accrued Expenses $ 7,501,566 $ 187,649 103,263 (h)(k)(l)(n)(o)(p)(q) $ 7,792,478 Notes Payable Current Portion 127,776 83,672 (83,672) (c) 127,776 Notes Payable - Revolver 9,899,414 - 9,899,414 Subordinated Note - SCCF 4,500,000 (j) 4,500,000 Notes Payable - Sellers AIM- Current Portion 192,400 192,400 Notes Payable - Sellers Sigma- Current Portion 362,604 - 362,604 Notes Payable - Sellers Welding Metallurgy - Current Portion - - 500,000 (d)(m)(o)(q) 500,000 Capital Lease Obligations - Current Portion 166,397 - 166,397 Due to Sellers AIM - - - Dividends Payable 120,003 - 120,003 Deferred Gain on Sale - Current Portion 38,033 - 38,033 Income Taxes Payable - - 39,790 (i) 39,790 ------------------------------------------ ------------ Total current liabilities 18,408,193 271,321 5,059,381 23,738,895 Long term liabilities Due to Sellers - Sigma - Net of Current Portion - - - Notes Payable - Net of Current Portion 709,070 136,641 (136,641) (c) 709,070 Notes Payable - Sellers AIM - Net of Current Portion 1,074,573 - 1,074,573 Notes Payable - Sellers Sigma - Net of Current Portion 529,100 - 529,100 Notes Payable - Sellers Welding Metallurgy - Net of Current Portion 750,000 (d) 750,000 Capital Lease Obligations - Net of Current Portion 776,988 - 776,988 Deferred Tax Liability 695,379 - 695,379 Deferred Gain on Sale - Net of Current Portion 694,101 - 694,101 Deferred Rent 134,487 - 134,487 ------------------------------------------ ------------ TOTAL LIABILITIES $ 23,021,891 $ 407,962 $ 5,672,740 $ 29,102,593 Commitments and Contingencies Stockholders' Equity Preferred Stock - 8,003,716 shares authorized Series A Convertible Preferred - $.001 Par value, 1,000 Shares authorized, 900 shares Issued and 0 Outstanding Series B Convertible Preferred - $.001 Par value, 2,000,000 $ 802 $ - $ 802 Shares Authorized, 802,300 Shares Issued and Outstanding with an initial liquidation value of $8,023,000 (Authorized , Issued and Outstanding for the Proforma December 31, 2006) Common Stock - $.001 Par value, 120,055,746 Shares Authorized, 67,008,507 Shares Issued and Outstanding as of June 30, 2007 on a pro forma basis 69,100,978 Shares Issued and Outstanding as of June 30,2007 67,009 437 1,655 (e) 69,101 Additional Paid-In Capital 8,942,086 - 8,942,086 Additional Paid-In Capital Series B Preferred 7,352,858 - 7,352,858 Additional Paid-In Capital: Sigma Shares 1,891,955 - 1,891,955 Additional Paid-In Capital: Welding Shares - - 564,408 (e)(f) 564,408 Retained Earnings (Accumulated Deficit) (1,473,202) 1,322,129 (1,322,129) (g) (1,473,202) Proforma net effect of P&L adjustments (see attached schedule below) - - (193,366) (h)(i)(k)(l)(n)(p) (193,366) ------------------------------------------ ------------ Total Stockholders' Equity 16,781,508 1,322,566 (949,432) 17,154,642 ------------------------------------------ ------------ TOTAL LIABILITIES AND STOCKHOLDERS' EQUITY $ 39,803,399 $ 1,730,528 $ 4,723,308 $ 46,257,235 ========================================== ============
Notes to Comparative Pro Forma Consolidated & Condensed Balance Sheet (a) Represents the net proceeds from sale of SCCF Loan Agreement after completing the purchase of Welding Metallurgy and paying soft costs associated with the acquisition, along with notes of Welding Metallurgy as if the deal was done on 6/30/2007 (b) Represents the goodwill resulting from the excess of the purchase price paid for the stock of Welding Metalurgy after adjusting the value of the assets acquired and liabilities assumed to reflect the purchase price if the deal was completed on 6/30/2007 (c) Represents the payoff of the note to a financial institution satisfied as part of the SPA and the former Officers of Welding Metallurgy if the deal was completed on 6/30/2007 (d) Represents the long term portion of the $2.0 MM note purchase price (due 8/31/2011; with the first installment $500,000 due 8/24/2008; bearing interest @ 7% per annum commencing 8/24/2008; with quarterly installments therafter of $125,000) accepted by the Welding Metallurgy sellers as part of the purchase. (e) Represents the elimination the of common stock portion of Welding Metallurgy Stockholders' Equity ($437) partially offset by the book value ($2092) of the pro forma 2,092,471 shares that would have been issued to the sellers as part of the purchase price if the transaction had closed on June 30,2007 (f) Represents the excess over par value of share issued to Welding Metallurgy sellers. (g) Represents the pro forma elimination of Welding Metallurgy accumulated surplus $1,322,566 (h) Represents interest accrued based on SCCF Loan Agreement $4.5MM @ prime +6 (14.25%) @ 6 months for 2007 and elimination of $6,211 interest on former Welding Met's notes (i) Represents 40% estimated tax provision/(benefit) of Welding Met as if it was a C corporation (j) Issuance of the demand note SCCF Loan Agreement in connection with the Welding Metallurgy acquisition (k) Represents elimination of Welding Met's legal fees @ 6/30/07 ($61,151) (l) Represents adjustment to former Welding Met Officer's salaries @ 6/30/07 ($225,000) and adjusted for one officer now an employee of Air Industries Group, Inc earning $150,000 annual salary for six months earning ($75,000) (m) Represents the payment of the first installment of the $2.0MM note all as principal ($500K) (n) Represents the interest accrual ($26,250) on residual principal $1.5MM note (aforementioned $2.0mm note) after initial $500K principal payment @ 7% per annum for the first qtr (o) Represents the first qtrly payment of principal and interest of $1.5MM note (aforementioned $2.0 mm note)($125,000 principal and $26,250 interest) (p) Represents the interest accrual ($24,063) on residual principal $1.375MM note (aforementioned $2.0mm note) after initial $500K principal payment and 1st qtr principal payment of $125k @ 7% per annum for the second qtr (q) Represents the first qtrly payment of principal and interest of $1.375MM note (aforementioned $2.0 mm note)($125,000 principal and $24,063 interest)
Air Industries Group, Inc. (AIRI.ob) Unaudited Pro Forma Combined Satement Of Income June 30, 2007 Welding AIRI Metallurgy, AIRI Welding Consolidated Inc. Adjustments Consolidated ------------ ----------- ----------- ------------ Net Sales $ 18,477,666 $ 1,798,084 $ 20,275,750 Cost of Sales 14,856,182 970,964 $ 15,827,146 ------------ ----------- --------- ------------ Gross Profit 3,621,484 827,120 - 4,448,604 Operating costs and expenses Selling and marketing 620,878 - $ 620,878 General and administrative 2,836,412 577,201 (211,151)(k)(l) $ 3,202,462 ------------ ----------- --------- ------------ Income (Loss) from operations 164,194 249,919 211,151 625,264 Other (income) and expenses: Interest & financing costs (net) 411,823 (3,132) $ 364,727 (h)(n)(p) $ 773,418 Gain on Sale of Life Insurance Policy - - $ - Gain on Sale of Real Estate (19,018) - $ (19,018) Other Income (9,887) - $ (9,887) Other Expenses 25,304 - $ 25,304 ------------ ----------- --------- ------------ Net Income (Loss) before provision for income taxes (244,028) 253,051 (153,576) (144,553) Provision/(Benefit) for income taxes 142,903 101,220 (i) (61,430) (i) $ 182,693 ------------ ----------- --------- ------------ Net Income (Loss) $ (386,931) $ 151,831 $ (92,146) $ (327,246) ------------ ----------- --------- ------------ Less dividend attributable to preferred stockholders 110,964 110,964 ------------ ------------ Net loss attributable to common stockholders $ (497,895) $ (438,210) ============ ============ Loss Per Share (basic and diluted) $ (0.01) ============ Weighted average shares outstanding (basic and diluted) 64,333,885 (o) ============
Notes to Comparative Pro Forma Statement Of Operations (h) Represents interest accrued based on SCCF Loan Agreement $4.5MM @ prime +6 (14.25%) @ 6 months for 2007 and elimination of $6,211 interest on former Welding Met's notes (i) Represents 40% estimated tax provision/(benefit) of Welding Met as if it was a C corporation (j) intentionally omitted (k) Represents elimination of Welding Met's legal fees ($61,151) (l) Represents adjustment to former Welding Met Officer's salaries @ 6/30/07 ($225,000) and adjusted for one officer now an employee of Air Industries Group, Inc earning $150,000 annual salary for six months earning ($75,000) (m) intentionally omitted (n) Represents the interest accrual ($26,250) on residual principal $1.5MM note (aforementioned5$2.0mminote)laftereinitial $500Knprincipalhpayment @t7% per annum for the first qtr (o) intentionally omitted (p) Represents the interest accrual ($24,063) on residual principal $1.375MM note (aforementioned $2.0mm note) after initial $500K principal payment and 1st qtr principal payment of $125k @ 7% per annum for the second qtr (q) adjusted for the change in the weighted average shares as a result of the proforma Welding Met Shares
SIGNATURES Pursuant to the requirements of the Securities Exchange Act of 1934, the Registrant has duly caused this amendment to its Current Report to be signed on its behalf by the undersigned hereunto duly authorized. Dated: November 13, 2007 AIR INDUSTRIES GROUP, INC. By: /s/ Louis A.Giusto -------------------------------------------- Name: Louis A.Giusto Title: Vice Chairman and Chief Financial Officer