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<p style="font: 10pt Times New Roman, Times, Serif; margin: 0; text-align: justify"></p>
<table cellpadding="0" cellspacing="0" style="font: 10pt Times New Roman, Times, Serif; border-collapse: collapse; width: 100%">
<tr style="vertical-align: bottom">
<td> </td><td style="font-weight: bold; padding-bottom: 1.5pt"> </td>
<td colspan="2" style="border-bottom: Black 1.5pt solid; font-weight: bold; text-align: center">December 31,<br /> 2020</td><td style="padding-bottom: 1.5pt; font-weight: bold"> </td><td style="font-weight: bold; padding-bottom: 1.5pt"> </td>
<td colspan="2" style="border-bottom: Black 1.5pt solid; font-weight: bold; text-align: center">December 31,<br /> 2019</td><td style="padding-bottom: 1.5pt; font-weight: bold"> </td></tr>
<tr style="vertical-align: bottom">
<td> </td><td> </td>
<td colspan="2"> </td><td> </td><td> </td>
<td colspan="2"> </td><td> </td></tr>
<tr style="vertical-align: bottom; background-color: rgb(204,238,255)">
<td style="width: 76%; text-align: left">Stock Options</td><td style="width: 1%"> </td>
<td style="width: 1%; text-align: left"> </td><td style="width: 9%; text-align: right">549,000</td><td style="width: 1%; text-align: left"> </td><td style="width: 1%"> </td>
<td style="width: 1%; text-align: left"> </td><td style="width: 9%; text-align: right">800,000</td><td style="width: 1%; text-align: left"> </td></tr>
<tr style="vertical-align: bottom; background-color: White">
<td style="padding-bottom: 1.5pt">Warrants</td><td style="padding-bottom: 1.5pt"> </td>
<td style="border-bottom: Black 1.5pt solid; text-align: left"> </td><td style="border-bottom: Black 1.5pt solid; text-align: right">1,909,902</td><td style="padding-bottom: 1.5pt; text-align: left"> </td><td style="padding-bottom: 1.5pt"> </td>
<td style="border-bottom: Black 1.5pt solid; text-align: left"> </td><td style="border-bottom: Black 1.5pt solid; text-align: right">1,903,000</td><td style="padding-bottom: 1.5pt; text-align: left"> </td></tr>
<tr style="vertical-align: bottom; background-color: rgb(204,238,255)">
<td style="padding-bottom: 4pt"> </td><td style="padding-bottom: 4pt"> </td>
<td style="border-bottom: Black 4pt double; text-align: left"> </td><td style="border-bottom: Black 4pt double; text-align: right">2,458,902</td><td style="padding-bottom: 4pt; text-align: left"> </td><td style="padding-bottom: 4pt"> </td>
<td style="border-bottom: Black 4pt double; text-align: left"> </td><td style="border-bottom: Black 4pt double; text-align: right">2,703,000</td><td style="padding-bottom: 4pt; text-align: left"> </td></tr></table>
<p style="font: 10pt Times New Roman, Times, Serif; margin: 0; text-align: justify"> </p>
<table cellpadding="0" cellspacing="0" style="font: 10pt Times New Roman, Times, Serif; border-collapse: collapse; width: 100%">
<tr style="vertical-align: bottom">
<td> </td><td style="font-weight: bold; padding-bottom: 1.5pt"> </td>
<td colspan="2" style="border-bottom: Black 1.5pt solid; font-weight: bold; text-align: center">December 31,<br />
2020</td><td style="padding-bottom: 1.5pt; font-weight: bold"> </td><td style="font-weight: bold; padding-bottom: 1.5pt"> </td>
<td colspan="2" style="border-bottom: Black 1.5pt solid; font-weight: bold; text-align: center">December 31, <br />
2019</td><td style="padding-bottom: 1.5pt; font-weight: bold"> </td></tr>
<tr style="vertical-align: bottom">
<td> </td><td> </td>
<td colspan="2"> </td><td> </td><td> </td>
<td colspan="2"> </td><td> </td></tr>
<tr style="vertical-align: bottom; background-color: rgb(204,238,255)">
<td style="width: 76%; text-align: left">Stock Options</td><td style="width: 1%"> </td>
<td style="width: 1%; text-align: left"> </td><td style="width: 9%; text-align: right">    -</td><td style="width: 1%; text-align: left"> </td><td style="width: 1%"> </td>
<td style="width: 1%; text-align: left"> </td><td style="width: 9%; text-align: right">570,000</td><td style="width: 1%; text-align: left"> </td></tr>
<tr style="vertical-align: bottom; background-color: White">
<td>Warrants</td><td> </td>
<td style="text-align: left"> </td><td style="text-align: right">-</td><td style="text-align: left"> </td><td> </td>
<td style="text-align: left"> </td><td style="text-align: right">500</td><td style="text-align: left"> </td></tr>
<tr style="vertical-align: bottom; background-color: rgb(204,238,255)">
<td style="text-align: left; padding-bottom: 1.5pt">Convertible notes payable</td><td style="padding-bottom: 1.5pt"> </td>
<td style="border-bottom: Black 1.5pt solid; text-align: left"> </td><td style="border-bottom: Black 1.5pt solid; text-align: right">-</td><td style="padding-bottom: 1.5pt; text-align: left"> </td><td style="padding-bottom: 1.5pt"> </td>
<td style="border-bottom: Black 1.5pt solid; text-align: left"> </td><td style="border-bottom: Black 1.5pt solid; text-align: right">5,405,000</td><td style="padding-bottom: 1.5pt; text-align: left"> </td></tr>
<tr style="vertical-align: bottom; background-color: White">
<td style="padding-bottom: 4pt"> </td><td style="padding-bottom: 4pt"> </td>
<td style="border-bottom: Black 4pt double; text-align: left"> </td><td style="border-bottom: Black 4pt double; text-align: right">-</td><td style="padding-bottom: 4pt; text-align: left"> </td><td style="padding-bottom: 4pt"> </td>
<td style="border-bottom: Black 4pt double; text-align: left"> </td><td style="border-bottom: Black 4pt double; text-align: right">5,975,500</td><td style="padding-bottom: 4pt; text-align: left"> </td></tr></table>
54573000
48226000
6347000
54573000
50097000
44659000
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50097000
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6512000
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<table cellpadding="0" cellspacing="0" style="font: 10pt Times New Roman, Times, Serif; border-collapse: collapse; width: 100%"><tr style="vertical-align: bottom"><td style="border-bottom: Black 1.5pt solid; font-weight: bold; text-align: left">Customer</td><td style="font-weight: bold; padding-bottom: 1.5pt"> </td>
<td colspan="6" style="border-bottom: Black 1.5pt solid; font-weight: bold; text-align: center">Percentage of Sales</td><td style="padding-bottom: 1.5pt; font-weight: bold"> </td></tr>
<tr style="vertical-align: bottom">
<td style="text-align: left"> </td><td style="font-weight: bold; padding-bottom: 1.5pt"> </td>
<td colspan="2" style="border-bottom: Black 1.5pt solid; font-weight: bold; text-align: center">2020</td><td style="padding-bottom: 1.5pt; font-weight: bold"> </td><td style="font-weight: bold; padding-bottom: 1.5pt"> </td>
<td colspan="2" style="border-bottom: Black 1.5pt solid; font-weight: bold; text-align: center">2019</td><td style="padding-bottom: 1.5pt; font-weight: bold"> </td></tr>
<tr style="vertical-align: bottom">
<td style="text-align: left"> </td><td> </td>
<td colspan="2" style="text-align: center"> </td><td> </td><td> </td>
<td colspan="2" style="text-align: center"> </td><td> </td></tr>
<tr style="vertical-align: bottom; background-color: rgb(204,238,255)">
<td style="width: 76%; text-align: left">1</td><td style="width: 1%"> </td>
<td style="width: 1%; text-align: left"> </td><td style="width: 9%; text-align: right">30.4</td><td style="width: 1%; text-align: left">%</td><td style="width: 1%"> </td>
<td style="width: 1%; text-align: left"> </td><td style="width: 9%; text-align: right">34.2</td><td style="width: 1%; text-align: left">%</td></tr>
<tr style="vertical-align: bottom; background-color: White">
<td style="text-align: left">2</td><td> </td>
<td style="text-align: left"> </td><td style="text-align: right">30.3</td><td style="text-align: left">%</td><td> </td>
<td style="text-align: left"> </td><td style="text-align: right">30.4</td><td style="text-align: left">%</td></tr>
<tr style="vertical-align: bottom; background-color: rgb(204,238,255)">
<td style="text-align: left">3</td><td> </td>
<td style="text-align: left"> </td><td style="text-align: right">13.2</td><td style="text-align: left">%</td><td> </td>
<td style="text-align: left"> </td><td style="text-align: right">*</td><td style="text-align: left"> </td></tr>
<tr style="vertical-align: bottom; background-color: White">
<td style="text-align: left">4</td><td> </td>
<td style="text-align: left"> </td><td style="text-align: right">**</td><td style="text-align: left"> </td><td> </td>
<td style="text-align: left"> </td><td style="text-align: right">11.4</td><td style="text-align: left">%</td></tr>
</table>
<p style="font: 10pt Times New Roman, Times, Serif; margin: 0; text-align: justify"> </p>
<table cellpadding="0" cellspacing="0" style="font: 10pt Times New Roman, Times, Serif; margin-top: 0; margin-bottom: 6pt"><tr style="vertical-align: top; text-align: justify">
<td style="width: 0.25in; text-align: left">*</td><td style="text-align: justify">Customer was less than 10% of sales at December 31, 2019.</td>
</tr>
<tr style="vertical-align: top; text-align: justify">
<td style="text-align: left">**</td><td style="text-align: justify">Customer was less than 10% of sales at December 31, 2020.</td>
</tr></table>
<p style="font: 10pt Times New Roman, Times, Serif; margin: 0; text-align: justify"></p>
<table cellpadding="0" cellspacing="0" style="font: 10pt Times New Roman, Times, Serif; border-collapse: collapse; width: 100%">
<tr style="vertical-align: bottom">
<td style="text-align: left"> </td><td style="font-weight: bold; padding-bottom: 1.5pt"> </td>
<td colspan="6" style="border-bottom: Black 1.5pt solid; font-weight: bold; text-align: center">Percentage of Receivables</td><td style="padding-bottom: 1.5pt; font-weight: bold"> </td></tr>
<tr style="vertical-align: bottom">
<td style="text-align: left"> </td><td style="font-weight: bold"> </td>
<td colspan="2" style="font-weight: bold; text-align: center">December 31,</td><td style="font-weight: bold"> </td><td style="font-weight: bold"> </td>
<td colspan="2" style="font-weight: bold; text-align: center">December 31,</td><td style="font-weight: bold"> </td></tr>
<tr style="vertical-align: bottom">
<td style="border-bottom: Black 1.5pt solid; font-weight: bold; text-align: left">Customer</td><td style="font-weight: bold; padding-bottom: 1.5pt"> </td>
<td colspan="2" style="border-bottom: Black 1.5pt solid; font-weight: bold; text-align: center">2020</td><td style="padding-bottom: 1.5pt; font-weight: bold"> </td><td style="font-weight: bold; padding-bottom: 1.5pt"> </td>
<td colspan="2" style="border-bottom: Black 1.5pt solid; font-weight: bold; text-align: center">2019</td><td style="padding-bottom: 1.5pt; font-weight: bold"> </td></tr>
<tr style="vertical-align: bottom">
<td style="text-align: left"> </td><td> </td>
<td colspan="2" style="text-align: center"> </td><td> </td><td> </td>
<td colspan="2" style="text-align: center"> </td><td> </td></tr>
<tr style="vertical-align: bottom; background-color: rgb(204,238,255)">
<td style="width: 76%; text-align: left">1</td><td style="width: 1%"> </td>
<td style="width: 1%; text-align: left"> </td><td style="width: 9%; text-align: right">57.1</td><td style="width: 1%; text-align: left">%</td><td style="width: 1%"> </td>
<td style="width: 1%; text-align: left"> </td><td style="width: 9%; text-align: right">32.7</td><td style="width: 1%; text-align: left">%</td></tr>
<tr style="vertical-align: bottom; background-color: White">
<td style="text-align: left">2</td><td> </td>
<td style="text-align: left"> </td><td style="text-align: right">12.0</td><td style="text-align: left">%</td><td> </td>
<td style="text-align: left"> </td><td style="text-align: right">10.0</td><td style="text-align: left">%</td></tr>
<tr style="vertical-align: bottom; background-color: rgb(204,238,255)">
<td style="text-align: left">3</td><td> </td>
<td style="text-align: left"> </td><td style="text-align: right">11.2</td><td style="text-align: left">%</td><td> </td>
<td style="text-align: left"> </td><td style="text-align: right">25.1</td><td style="text-align: left">%</td></tr>
</table>
<p style="font: 10pt Times New Roman, Times, Serif; margin: 0; text-align: justify"></p>
AIR INDUSTRIES GROUP
0001009891
false
--12-31
10-K
2020-12-31
FY
2020
true
false
Yes
false
001-35927
Yes
NV
-2732000
-2732000
1096000
1096000
257602
178405
178405
257602
3002000
2570000
These deferred amounts must be repaid 50% on December 31, 2021 with the remaining 50% on December 31, 2022.
<p style="font: 10pt Times New Roman, Times, Serif; margin: 0; text-align: justify"><b>Credit and Concentration Risks</b></p>
<p style="font: 10pt Times New Roman, Times, Serif; margin: 0; text-align: justify; text-indent: 0.5in"> </p>
<p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify">A large percentage of the Company's
revenues are derived from a small number of customers for U.S. Military Aviation.</p>
<p style="font: 10pt Times New Roman, Times, Serif; margin: 0; text-align: justify; text-indent: 0.5in"> </p>
<p style="font: 10pt Times New Roman, Times, Serif; margin: 0; text-align: justify">There were three customers that represented
73.9% of total sales, and three customers that represented 76.0% of total sales for the years ended December 31, 2020 and 2019,
respectively. This is set forth in the table below.</p>
<p style="font: 10pt Times New Roman, Times, Serif; margin: 0; text-align: justify; text-indent: 0.5in"> </p>
<table cellpadding="0" cellspacing="0" style="font: 10pt Times New Roman, Times, Serif; border-collapse: collapse; width: 100%">
<tr style="vertical-align: bottom">
<td style="border-bottom: Black 1.5pt solid; font-weight: bold; text-align: left">Customer</td><td style="font-weight: bold; padding-bottom: 1.5pt"> </td>
<td colspan="6" style="border-bottom: Black 1.5pt solid; font-weight: bold; text-align: center">Percentage of Sales</td><td style="padding-bottom: 1.5pt; font-weight: bold"> </td></tr>
<tr style="vertical-align: bottom">
<td style="text-align: left"> </td><td style="font-weight: bold; padding-bottom: 1.5pt"> </td>
<td colspan="2" style="border-bottom: Black 1.5pt solid; font-weight: bold; text-align: center">2020</td><td style="padding-bottom: 1.5pt; font-weight: bold"> </td><td style="font-weight: bold; padding-bottom: 1.5pt"> </td>
<td colspan="2" style="border-bottom: Black 1.5pt solid; font-weight: bold; text-align: center">2019</td><td style="padding-bottom: 1.5pt; font-weight: bold"> </td></tr>
<tr style="vertical-align: bottom">
<td style="text-align: left"> </td><td> </td>
<td colspan="2" style="text-align: center"> </td><td> </td><td> </td>
<td colspan="2" style="text-align: center"> </td><td> </td></tr>
<tr style="vertical-align: bottom; background-color: rgb(204,238,255)">
<td style="width: 76%; text-align: left">1</td><td style="width: 1%"> </td>
<td style="width: 1%; text-align: left"> </td><td style="width: 9%; text-align: right">30.4</td><td style="width: 1%; text-align: left">%</td><td style="width: 1%"> </td>
<td style="width: 1%; text-align: left"> </td><td style="width: 9%; text-align: right">34.2</td><td style="width: 1%; text-align: left">%</td></tr>
<tr style="vertical-align: bottom; background-color: White">
<td style="text-align: left">2</td><td> </td>
<td style="text-align: left"> </td><td style="text-align: right">30.3</td><td style="text-align: left">%</td><td> </td>
<td style="text-align: left"> </td><td style="text-align: right">30.4</td><td style="text-align: left">%</td></tr>
<tr style="vertical-align: bottom; background-color: rgb(204,238,255)">
<td style="text-align: left">3</td><td> </td>
<td style="text-align: left"> </td><td style="text-align: right">13.2</td><td style="text-align: left">%</td><td> </td>
<td style="text-align: left"> </td><td style="text-align: right">*</td><td style="text-align: left"> </td></tr>
<tr style="vertical-align: bottom; background-color: White">
<td style="text-align: left">4</td><td> </td>
<td style="text-align: left"> </td><td style="text-align: right">**</td><td style="text-align: left"> </td><td> </td>
<td style="text-align: left"> </td><td style="text-align: right">11.4</td><td style="text-align: left">%</td></tr>
</table>
<p style="font: 10pt Times New Roman, Times, Serif; margin: 0; text-align: justify"> </p>
<table cellpadding="0" cellspacing="0" style="font: 10pt Times New Roman, Times, Serif; margin-top: 0; margin-bottom: 6pt"><tr style="vertical-align: top; text-align: justify">
<td style="width: 0.25in; text-align: left">*</td><td style="text-align: justify">Customer was less than 10% of sales at December 31, 2019.</td>
</tr>
<tr style="vertical-align: top; text-align: justify">
<td style="text-align: left">**</td><td style="text-align: justify">Customer was less than 10% of sales at December 31, 2020.</td>
</tr></table>
<p style="font: 10pt Times New Roman, Times, Serif; margin: 0; text-align: justify"> </p>
<p style="font: 10pt Times New Roman, Times, Serif; margin: 0; text-align: justify">There were three customers that represented
80.3% of gross accounts receivable and 67.8% of gross accounts receivable at December 31, 2020 and 2019, respectively. This is
set forth in the table below.</p>
<p style="font: 10pt Times New Roman, Times, Serif; margin: 0; text-align: justify"> </p>
<table cellpadding="0" cellspacing="0" style="font: 10pt Times New Roman, Times, Serif; border-collapse: collapse; width: 100%">
<tr style="vertical-align: bottom">
<td style="text-align: left"> </td><td style="font-weight: bold; padding-bottom: 1.5pt"> </td>
<td colspan="6" style="border-bottom: Black 1.5pt solid; font-weight: bold; text-align: center">Percentage of Receivables</td><td style="padding-bottom: 1.5pt; font-weight: bold"> </td></tr>
<tr style="vertical-align: bottom">
<td style="text-align: left"> </td><td style="font-weight: bold"> </td>
<td colspan="2" style="font-weight: bold; text-align: center">December 31,</td><td style="font-weight: bold"> </td><td style="font-weight: bold"> </td>
<td colspan="2" style="font-weight: bold; text-align: center">December 31,</td><td style="font-weight: bold"> </td></tr>
<tr style="vertical-align: bottom">
<td style="border-bottom: Black 1.5pt solid; font-weight: bold; text-align: left">Customer</td><td style="font-weight: bold; padding-bottom: 1.5pt"> </td>
<td colspan="2" style="border-bottom: Black 1.5pt solid; font-weight: bold; text-align: center">2020</td><td style="padding-bottom: 1.5pt; font-weight: bold"> </td><td style="font-weight: bold; padding-bottom: 1.5pt"> </td>
<td colspan="2" style="border-bottom: Black 1.5pt solid; font-weight: bold; text-align: center">2019</td><td style="padding-bottom: 1.5pt; font-weight: bold"> </td></tr>
<tr style="vertical-align: bottom">
<td style="text-align: left"> </td><td> </td>
<td colspan="2" style="text-align: center"> </td><td> </td><td> </td>
<td colspan="2" style="text-align: center"> </td><td> </td></tr>
<tr style="vertical-align: bottom; background-color: rgb(204,238,255)">
<td style="width: 76%; text-align: left">1</td><td style="width: 1%"> </td>
<td style="width: 1%; text-align: left"> </td><td style="width: 9%; text-align: right">57.1</td><td style="width: 1%; text-align: left">%</td><td style="width: 1%"> </td>
<td style="width: 1%; text-align: left"> </td><td style="width: 9%; text-align: right">32.7</td><td style="width: 1%; text-align: left">%</td></tr>
<tr style="vertical-align: bottom; background-color: White">
<td style="text-align: left">2</td><td> </td>
<td style="text-align: left"> </td><td style="text-align: right">12.0</td><td style="text-align: left">%</td><td> </td>
<td style="text-align: left"> </td><td style="text-align: right">10.0</td><td style="text-align: left">%</td></tr>
<tr style="vertical-align: bottom; background-color: rgb(204,238,255)">
<td style="text-align: left">3</td><td> </td>
<td style="text-align: left"> </td><td style="text-align: right">11.2</td><td style="text-align: left">%</td><td> </td>
<td style="text-align: left"> </td><td style="text-align: right">25.1</td><td style="text-align: left">%</td></tr>
</table>
<p style="font: 10pt Times New Roman, Times, Serif; margin: 0; text-align: justify"></p>
<p style="font: 10pt Times New Roman, Times, Serif; margin: 0; text-align: justify"><b>Stock-Based Compensation</b></p>
<p style="font: 10pt Times New Roman, Times, Serif; margin: 0; text-align: justify; text-indent: 0.5in"> </p>
<p style="font: 10pt Times New Roman, Times, Serif; margin: 0; text-align: justify">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 and stock grants at their
closing reported market value. Stock compensation expense for employees amounted to $308,000 and $378,000 for the years ended December
31, 2020 and 2019, respectively. Stock compensation expense for directors amounted to $211,000 and $244,000 for the years ended
December 31, 2020 and 2019, respectively. Stock compensation expenses for employees and directors were included in operating expenses
on the accompanying Consolidated Statement of Operations.</p>
<p style="font: 10pt Times New Roman, Times, Serif; margin: 0; text-align: justify"><b>Goodwill</b></p>
<p style="font: 10pt Times New Roman, Times, Serif; margin: 0; text-align: justify; text-indent: 0.5in"> </p>
<p style="font: 10pt Times New Roman, Times, Serif; margin: 0; text-align: justify">Goodwill represents the excess of the acquisition
cost of businesses over the fair value of the identifiable net assets acquired. The goodwill amount of $163,000 at December 31,
2020 and 2019 relates to the acquisition of NTW.</p>
<p style="font: 10pt Times New Roman, Times, Serif; margin: 0; text-align: justify"> </p>
<p style="font: 10pt Times New Roman, Times, Serif; margin: 0; text-align: justify">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.</p>
<p style="font: 10pt Times New Roman, Times, Serif; margin: 0; text-align: justify; text-indent: 0.5in"> </p>
<p style="font: 10pt Times New Roman, Times, Serif; margin: 0; text-align: justify">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 performs a qualitative assessment in the fourth quarter of each year to determine whether it was more likely than not that
the fair value of a reporting unit is less than its carting amount.</p>
<p style="font: 10pt Times New Roman, Times, Serif; margin: 0; text-align: justify; text-indent: 0.5in"> </p>
<p style="font: 10pt Times New Roman, Times, Serif; margin: 0; text-align: justify">The Company determined that there has been
no impairment of goodwill at December 31, 2020 and 2019</p>
<p style="font: 10pt Times New Roman, Times, Serif; margin: 0; text-align: justify"><b>Recently Issued Accounting Pronouncements</b></p>
<p style="font: 10pt Times New Roman, Times, Serif; margin: 0; text-align: justify; text-indent: 0.5in"><b> </b></p>
<p style="font: 10pt Times New Roman, Times, Serif; margin: 0; text-align: justify">In August 2020, the FASB issued ASU No. 2020-06,
Debt – Debt with Conversion and Other Options (Subtopic 470-20) and Derivatives and Hedging – Contracts in Entity's
Own Equity (Subtopic 815-40) ("ASU 2020-06), which is intended to address issues identified as a result of the complexity
associated with applying GAAP for certain financial instruments with characteristics of liabilities and equity. For convertible
instruments, ASU 2020-06 reduces the number of accounting models for convertible debt instruments and convertible preferred stock,
and enhances information transparency by making targeted improvements to the disclosures for convertible instruments and earnings-per-share
guidance on the basis of feedback from financial statement users. ASU 2020-06 is effective for fiscal years, and interim periods
in those fiscal years, beginning after December 15, 2021. Early adoption is permitted, but no earlier than fiscal years beginning
after December 15, 2020, including interim periods with those fiscal years. The Company is evaluating the effect of adopting this
new accounting guidance on its financial statements.</p>
<p style="font: 10pt Times New Roman, Times, Serif; margin: 0; text-align: justify; text-indent: 0.5in"> </p>
<p style="font: 10pt Times New Roman, Times, Serif; margin: 0; text-align: justify">In December 2019, the FASB issued ASU No. 2019-12,
Income Taxes (Topic 740): Simplifying the Accounting for Income Taxes ("ASU 2019-12"), which is intended to simplify
various aspects related to accounting for income taxes. ASU 2019-12 removes certain exceptions to the general principles in Topic
740 and also clarifies and amends existing guidance to improve consistent application. This guidance is effective for fiscal years,
and interim periods within those fiscal years, beginning after December 15, 2020, with early adoption permitted. The Company is
currently evaluating the impact of this standard on its consolidated financial statements and related disclosures.</p>
<p style="font: 10pt Times New Roman, Times, Serif; margin: 0; text-align: justify"> </p>
<p style="font: 10pt Times New Roman, Times, Serif; margin: 0; text-align: justify; text-indent: 0">In June 2016, the FASB issued
ASU No. 2016-13, Financial Instruments-Credit Losses (Topic 326) ("ASU 2016-13"), which significantly changes
how entities will account for credit losses for most financial assets and certain other instruments that are not measured at fair
value through net income. ASU 2016-13 replaces the existing incurred loss model with an expected credit loss model that requires
entities to estimate an expected lifetime credit loss on most financial assets and certain other instruments. Under ASU 2016-13
credit impairment is recognized as an allowance for credit losses, rather than as a direct write-down of the amortized cost basis
of a financial asset. The impairment allowance is a valuation account deducted from the amortized cost basis of financial assets
to present the net amount expected to be collected on the financial asset. Once the new pronouncement is adopted by the Company,
the allowance for credit losses must be adjusted for management's current estimate at each reporting date. The new guidance
provides no threshold for recognition of impairment allowance. Therefore, entities must also measure expected credit losses on
assets that have a low risk of loss. For instance, trade receivables that are either current or not yet due may not require an
allowance reserve under currently generally accepted accounting principles, but under the new standard, the Company will have to
estimate an allowance for expected credit losses on trade receivables under ASU 2016-13. ASU 2016-13 is effective for annual periods,
including interim periods within those annual periods, beginning after December 15, 2022 for smaller reporting companies. Early
adoption is permitted. The Company is currently assessing the impact ASU 2016-13 will have on its consolidated financial statements.</p>
<p style="font: 10pt Times New Roman, Times, Serif; margin: 0; text-align: center; text-indent: 0.5in"> </p>
<p style="font: 10pt Times New Roman, Times, Serif; margin: 0; text-align: justify">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. </p>
<p style="font: 10pt Times New Roman, Times, Serif; margin: 0; text-align: justify"></p>
<table cellpadding="0" cellspacing="0" style="font: 10pt Times New Roman, Times, Serif; border-collapse: collapse; width: 100%">
<tr style="vertical-align: bottom">
<td> </td><td style="font-weight: bold; padding-bottom: 1.5pt"> </td>
<td colspan="2" style="border-bottom: Black 1.5pt solid; font-weight: bold; text-align: center">2020</td><td style="padding-bottom: 1.5pt; font-weight: bold"> </td><td style="font-weight: bold; padding-bottom: 1.5pt"> </td>
<td colspan="2" style="border-bottom: Black 1.5pt solid; font-weight: bold; text-align: center">2019</td><td style="padding-bottom: 1.5pt; font-weight: bold"> </td></tr>
<tr style="vertical-align: bottom">
<td> </td><td> </td>
<td colspan="2"> </td><td> </td><td> </td>
<td colspan="2"> </td><td> </td></tr>
<tr style="vertical-align: bottom; background-color: rgb(204,238,255)">
<td style="width: 76%">Weighted average shares outstanding used to compute basic earnings per share</td><td style="width: 1%"> </td>
<td style="width: 1%; text-align: left"> </td><td style="width: 9%; text-align: right">30,742,154</td><td style="width: 1%; text-align: left"> </td><td style="width: 1%"> </td>
<td style="width: 1%; text-align: left"> </td><td style="width: 9%; text-align: right">28,851,816</td><td style="width: 1%; text-align: left"> </td></tr>
<tr style="vertical-align: bottom; background-color: White">
<td style="text-align: left">Effect of dilutive stock options and warrants</td><td> </td>
<td style="text-align: left"> </td><td style="text-align: right">1,590,000</td><td style="text-align: left"> </td><td> </td>
<td style="text-align: left"> </td><td style="text-align: right">-</td><td style="text-align: left"> </td></tr>
<tr style="vertical-align: bottom; background-color: rgb(204,238,255)">
<td style="text-align: left; padding-bottom: 1.5pt">Effect of dilutive convertible notes payable</td><td style="padding-bottom: 1.5pt"> </td>
<td style="border-bottom: Black 1.5pt solid; text-align: left"> </td><td style="border-bottom: Black 1.5pt solid; text-align: right">4,414,929</td><td style="padding-bottom: 1.5pt; text-align: left"> </td><td style="padding-bottom: 1.5pt"> </td>
<td style="border-bottom: Black 1.5pt solid; text-align: left"> </td><td style="border-bottom: Black 1.5pt solid; text-align: right">-</td><td style="padding-bottom: 1.5pt; text-align: left"> </td></tr>
<tr style="vertical-align: bottom; background-color: White">
<td style="text-align: left; padding-bottom: 4pt">Weighted average shares outstanding and dilutive securities used to compute dilutive earnings per share</td><td style="padding-bottom: 4pt"> </td>
<td style="border-bottom: Black 4pt double; text-align: left"> </td><td style="border-bottom: Black 4pt double; text-align: right">36,747,083</td><td style="padding-bottom: 4pt; text-align: left"> </td><td style="padding-bottom: 4pt"> </td>
<td style="border-bottom: Black 4pt double; text-align: left"> </td><td style="border-bottom: Black 4pt double; text-align: right">28,851,816</td><td style="padding-bottom: 4pt; text-align: left"> </td></tr></table>
<table cellpadding="0" cellspacing="0" style="font: 10pt Times New Roman, Times, Serif; border-collapse: collapse; width: 100%"><tr style="vertical-align: bottom"><td></td><td style="font-weight: bold; padding-bottom: 1.5pt"> </td>
<td colspan="2" style="border-bottom: Black 1.5pt solid; font-weight: bold; text-align: center">2020</td><td style="padding-bottom: 1.5pt; font-weight: bold"> </td><td style="font-weight: bold; padding-bottom: 1.5pt"> </td>
<td colspan="2" style="border-bottom: Black 1.5pt solid; font-weight: bold; text-align: center">2019</td><td style="padding-bottom: 1.5pt; font-weight: bold"> </td></tr>
<tr style="vertical-align: bottom">
<td> </td><td> </td>
<td colspan="2"> </td><td> </td><td> </td>
<td colspan="2"> </td><td> </td></tr>
<tr style="vertical-align: bottom; background-color: rgb(204,238,255)">
<td style="width: 76%; text-align: left">Income (loss) from continuing operations - Basic</td><td style="width: 1%"> </td>
<td style="width: 1%; text-align: left">$</td><td style="width: 9%; text-align: right">1,326,000</td><td style="width: 1%; text-align: left"> </td><td style="width: 1%"> </td>
<td style="width: 1%; text-align: left">$</td><td style="width: 9%; text-align: right">(2,598,000</td><td style="width: 1%; text-align: left">)</td></tr>
<tr style="vertical-align: bottom; background-color: White">
<td style="text-align: left">Add: Convertible Note Interest for Potential Note Conversion</td><td> </td>
<td style="text-align: left"> </td><td style="text-align: right">499,000</td><td style="text-align: left"> </td><td> </td>
<td style="text-align: left"> </td><td style="text-align: right">-</td><td style="text-align: left"> </td></tr>
<tr style="vertical-align: bottom; background-color: rgb(204,238,255)">
<td style="text-align: left; padding-bottom: 1.5pt">Add: Convertible Note debt discount for Potential Note Conversion</td><td style="padding-bottom: 1.5pt"> </td>
<td style="border-bottom: Black 1.5pt solid; text-align: left"> </td><td style="border-bottom: Black 1.5pt solid; text-align: right">149,000</td><td style="padding-bottom: 1.5pt; text-align: left"> </td><td style="padding-bottom: 1.5pt"> </td>
<td style="border-bottom: Black 1.5pt solid; text-align: left"> </td><td style="border-bottom: Black 1.5pt solid; text-align: right">-</td><td style="padding-bottom: 1.5pt; text-align: left"> </td></tr>
<tr style="vertical-align: bottom; background-color: White">
<td> </td><td> </td>
<td style="text-align: left"> </td><td style="text-align: right"> </td><td style="text-align: left"> </td><td> </td>
<td style="text-align: left"> </td><td style="text-align: right"> </td><td style="text-align: left"> </td></tr>
<tr style="vertical-align: bottom; background-color: rgb(204,238,255)">
<td style="text-align: left; padding-bottom: 4pt">Income (loss) from continuing operations used to calculate diluted earnings per share</td><td style="padding-bottom: 4pt"> </td>
<td style="border-bottom: Black 4pt double; text-align: left">$</td><td style="border-bottom: Black 4pt double; text-align: right">1,974,000</td><td style="padding-bottom: 4pt; text-align: left"> </td><td style="padding-bottom: 4pt"> </td>
<td style="border-bottom: Black 4pt double; text-align: left">$</td><td style="border-bottom: Black 4pt double; text-align: right">(2,598,000</td><td style="padding-bottom: 4pt; text-align: left">)</td></tr></table>
499000
-2598000
1974000
4414929
1590000
2703000
1903000
800000
2458902
549000
1909902
5975500
500
570000
5405000
6862000
6012000
6012000
3406000
4786000
2012000
1294000
2505000
510000
233000
11606000
28000
29000
76101000
77434000
-64523000
-67257000
10206000
15109000
32000
81238000
-66161000
378000
308000
308000
378000
-2598000
1326000
28851816
30742154
28851816
36747083
<p style="font: 10pt Times New Roman, Times, Serif; margin: 0; text-align: justify"><b>Earnings (Loss) per share</b></p>
<p style="font: 10pt Times New Roman, Times, Serif; margin: 0; text-align: justify; text-indent: 0.5in"> </p>
<p style="font: 10pt Times New Roman, Times, Serif; margin: 0; text-align: justify">Basic earnings (loss) per share ("EPS")
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.</p>
<p style="font: 10pt Times New Roman, Times, Serif; margin: 0; text-align: justify"> </p>
<p style="font: 10pt Times New Roman, Times, Serif; margin: 0; text-align: justify">For purposes of calculating diluted earnings
per common share, the numerator includes net income plus interest on convertible notes payable assumed converted as of the first
day of the period. The denominator includes both the weighted-average number of shares of common stock outstanding during the period
and the number of common stock equivalents if the inclusion of such common stock equivalents is dilutive. Dilutive common stock
equivalents potentially include stock options and warrants using the treasury stock method and convertible notes payable using
the if-converted method.</p>
<p style="font: 10pt Times New Roman, Times, Serif; margin: 0; text-align: justify"> </p>
<p style="font: 10pt Times New Roman, Times, Serif; margin: 0; text-align: justify">The following is the calculation of income
(loss) from continuing operations applicable to common stockholders utilized to calculate the EPS:</p>
<p style="font: 10pt Times New Roman, Times, Serif; margin: 0; text-align: justify"> </p>
<table cellpadding="0" cellspacing="0" style="font: 10pt Times New Roman, Times, Serif; border-collapse: collapse; width: 100%">
<tr style="vertical-align: bottom">
<td> </td><td style="font-weight: bold; padding-bottom: 1.5pt"> </td>
<td colspan="2" style="border-bottom: Black 1.5pt solid; font-weight: bold; text-align: center">2020</td><td style="padding-bottom: 1.5pt; font-weight: bold"> </td><td style="font-weight: bold; padding-bottom: 1.5pt"> </td>
<td colspan="2" style="border-bottom: Black 1.5pt solid; font-weight: bold; text-align: center">2019</td><td style="padding-bottom: 1.5pt; font-weight: bold"> </td></tr>
<tr style="vertical-align: bottom">
<td> </td><td> </td>
<td colspan="2"> </td><td> </td><td> </td>
<td colspan="2"> </td><td> </td></tr>
<tr style="vertical-align: bottom; background-color: rgb(204,238,255)">
<td style="width: 76%; text-align: left">Income (loss) from continuing operations - Basic</td><td style="width: 1%"> </td>
<td style="width: 1%; text-align: left">$</td><td style="width: 9%; text-align: right">1,326,000</td><td style="width: 1%; text-align: left"> </td><td style="width: 1%"> </td>
<td style="width: 1%; text-align: left">$</td><td style="width: 9%; text-align: right">(2,598,000</td><td style="width: 1%; text-align: left">)</td></tr>
<tr style="vertical-align: bottom; background-color: White">
<td style="text-align: left">Add: Convertible Note Interest for Potential Note Conversion</td><td> </td>
<td style="text-align: left"> </td><td style="text-align: right">499,000</td><td style="text-align: left"> </td><td> </td>
<td style="text-align: left"> </td><td style="text-align: right">-</td><td style="text-align: left"> </td></tr>
<tr style="vertical-align: bottom; background-color: rgb(204,238,255)">
<td style="text-align: left; padding-bottom: 1.5pt">Add: Convertible Note debt discount for Potential Note Conversion</td><td style="padding-bottom: 1.5pt"> </td>
<td style="border-bottom: Black 1.5pt solid; text-align: left"> </td><td style="border-bottom: Black 1.5pt solid; text-align: right">149,000</td><td style="padding-bottom: 1.5pt; text-align: left"> </td><td style="padding-bottom: 1.5pt"> </td>
<td style="border-bottom: Black 1.5pt solid; text-align: left"> </td><td style="border-bottom: Black 1.5pt solid; text-align: right">-</td><td style="padding-bottom: 1.5pt; text-align: left"> </td></tr>
<tr style="vertical-align: bottom; background-color: White">
<td> </td><td> </td>
<td style="text-align: left"> </td><td style="text-align: right"> </td><td style="text-align: left"> </td><td> </td>
<td style="text-align: left"> </td><td style="text-align: right"> </td><td style="text-align: left"> </td></tr>
<tr style="vertical-align: bottom; background-color: rgb(204,238,255)">
<td style="text-align: left; padding-bottom: 4pt">Income (loss) from continuing operations used to calculate diluted earnings per share</td><td style="padding-bottom: 4pt"> </td>
<td style="border-bottom: Black 4pt double; text-align: left">$</td><td style="border-bottom: Black 4pt double; text-align: right">1,974,000</td><td style="padding-bottom: 4pt; text-align: left"> </td><td style="padding-bottom: 4pt"> </td>
<td style="border-bottom: Black 4pt double; text-align: left">$</td><td style="border-bottom: Black 4pt double; text-align: right">(2,598,000</td><td style="padding-bottom: 4pt; text-align: left">)</td></tr>
</table>
<p style="font: 10pt Times New Roman, Times, Serif; margin: 0; text-align: justify"> </p>
<p style="font: 10pt Times New Roman, Times, Serif; margin: 0; text-align: justify">The following is a reconciliation of the denominators
of basic and diluted earnings per share computations:</p>
<p style="font: 10pt Times New Roman, Times, Serif; margin: 0; text-align: justify"> </p>
<table cellpadding="0" cellspacing="0" style="font: 10pt Times New Roman, Times, Serif; border-collapse: collapse; width: 100%">
<tr style="vertical-align: bottom">
<td> </td><td style="font-weight: bold; padding-bottom: 1.5pt"> </td>
<td colspan="2" style="border-bottom: Black 1.5pt solid; font-weight: bold; text-align: center">2020</td><td style="padding-bottom: 1.5pt; font-weight: bold"> </td><td style="font-weight: bold; padding-bottom: 1.5pt"> </td>
<td colspan="2" style="border-bottom: Black 1.5pt solid; font-weight: bold; text-align: center">2019</td><td style="padding-bottom: 1.5pt; font-weight: bold"> </td></tr>
<tr style="vertical-align: bottom">
<td> </td><td> </td>
<td colspan="2"> </td><td> </td><td> </td>
<td colspan="2"> </td><td> </td></tr>
<tr style="vertical-align: bottom; background-color: rgb(204,238,255)">
<td style="width: 76%">Weighted average shares outstanding used to compute basic earnings per share</td><td style="width: 1%"> </td>
<td style="width: 1%; text-align: left"> </td><td style="width: 9%; text-align: right">30,742,154</td><td style="width: 1%; text-align: left"> </td><td style="width: 1%"> </td>
<td style="width: 1%; text-align: left"> </td><td style="width: 9%; text-align: right">28,851,816</td><td style="width: 1%; text-align: left"> </td></tr>
<tr style="vertical-align: bottom; background-color: White">
<td style="text-align: left">Effect of dilutive stock options and warrants</td><td> </td>
<td style="text-align: left"> </td><td style="text-align: right">1,590,000</td><td style="text-align: left"> </td><td> </td>
<td style="text-align: left"> </td><td style="text-align: right">-</td><td style="text-align: left"> </td></tr>
<tr style="vertical-align: bottom; background-color: rgb(204,238,255)">
<td style="text-align: left; padding-bottom: 1.5pt">Effect of dilutive convertible notes payable</td><td style="padding-bottom: 1.5pt"> </td>
<td style="border-bottom: Black 1.5pt solid; text-align: left"> </td><td style="border-bottom: Black 1.5pt solid; text-align: right">4,414,929</td><td style="padding-bottom: 1.5pt; text-align: left"> </td><td style="padding-bottom: 1.5pt"> </td>
<td style="border-bottom: Black 1.5pt solid; text-align: left"> </td><td style="border-bottom: Black 1.5pt solid; text-align: right">-</td><td style="padding-bottom: 1.5pt; text-align: left"> </td></tr>
<tr style="vertical-align: bottom; background-color: White">
<td style="text-align: left; padding-bottom: 4pt">Weighted average shares outstanding and dilutive securities used to compute dilutive earnings per share</td><td style="padding-bottom: 4pt"> </td>
<td style="border-bottom: Black 4pt double; text-align: left"> </td><td style="border-bottom: Black 4pt double; text-align: right">36,747,083</td><td style="padding-bottom: 4pt; text-align: left"> </td><td style="padding-bottom: 4pt"> </td>
<td style="border-bottom: Black 4pt double; text-align: left"> </td><td style="border-bottom: Black 4pt double; text-align: right">28,851,816</td><td style="padding-bottom: 4pt; text-align: left"> </td></tr>
</table>
<p style="font: 10pt Times New Roman, Times, Serif; margin: 0; text-align: justify"> </p>
<p style="font: 10pt Times New Roman, Times, Serif; margin: 0; text-align: justify">The following securities have been excluded
from the calculation as the exercise price was greater than the average market price of the common shares:</p>
<p style="font: 10pt Times New Roman, Times, Serif; margin: 0; text-align: justify"> </p>
<table cellpadding="0" cellspacing="0" style="font: 10pt Times New Roman, Times, Serif; border-collapse: collapse; width: 100%">
<tr style="vertical-align: bottom">
<td> </td><td style="font-weight: bold; padding-bottom: 1.5pt"> </td>
<td colspan="2" style="border-bottom: Black 1.5pt solid; font-weight: bold; text-align: center">December 31,<br /> 2020</td><td style="padding-bottom: 1.5pt; font-weight: bold"> </td><td style="font-weight: bold; padding-bottom: 1.5pt"> </td>
<td colspan="2" style="border-bottom: Black 1.5pt solid; font-weight: bold; text-align: center">December 31,<br /> 2019</td><td style="padding-bottom: 1.5pt; font-weight: bold"> </td></tr>
<tr style="vertical-align: bottom">
<td> </td><td> </td>
<td colspan="2"> </td><td> </td><td> </td>
<td colspan="2"> </td><td> </td></tr>
<tr style="vertical-align: bottom; background-color: rgb(204,238,255)">
<td style="width: 76%; text-align: left">Stock Options</td><td style="width: 1%"> </td>
<td style="width: 1%; text-align: left"> </td><td style="width: 9%; text-align: right">549,000</td><td style="width: 1%; text-align: left"> </td><td style="width: 1%"> </td>
<td style="width: 1%; text-align: left"> </td><td style="width: 9%; text-align: right">800,000</td><td style="width: 1%; text-align: left"> </td></tr>
<tr style="vertical-align: bottom; background-color: White">
<td style="padding-bottom: 1.5pt">Warrants</td><td style="padding-bottom: 1.5pt"> </td>
<td style="border-bottom: Black 1.5pt solid; text-align: left"> </td><td style="border-bottom: Black 1.5pt solid; text-align: right">1,909,902</td><td style="padding-bottom: 1.5pt; text-align: left"> </td><td style="padding-bottom: 1.5pt"> </td>
<td style="border-bottom: Black 1.5pt solid; text-align: left"> </td><td style="border-bottom: Black 1.5pt solid; text-align: right">1,903,000</td><td style="padding-bottom: 1.5pt; text-align: left"> </td></tr>
<tr style="vertical-align: bottom; background-color: rgb(204,238,255)">
<td style="padding-bottom: 4pt"> </td><td style="padding-bottom: 4pt"> </td>
<td style="border-bottom: Black 4pt double; text-align: left"> </td><td style="border-bottom: Black 4pt double; text-align: right">2,458,902</td><td style="padding-bottom: 4pt; text-align: left"> </td><td style="padding-bottom: 4pt"> </td>
<td style="border-bottom: Black 4pt double; text-align: left"> </td><td style="border-bottom: Black 4pt double; text-align: right">2,703,000</td><td style="padding-bottom: 4pt; text-align: left"> </td></tr>
</table>
<p style="font: 10pt Times New Roman, Times, Serif; margin: 0; text-align: justify"> </p>
<p style="font: 10pt Times New Roman, Times, Serif; margin: 0; text-align: justify">The following securities have been excluded
from the calculation even though the exercise price was less than the average market price of the common shares because the effect
of including these potential shares was anti-dilutive due to the net loss incurred during the years:</p>
<p style="font: 10pt Times New Roman, Times, Serif; margin: 0; text-align: justify"> </p>
<table cellpadding="0" cellspacing="0" style="font: 10pt Times New Roman, Times, Serif; border-collapse: collapse; width: 100%">
<tr style="vertical-align: bottom">
<td> </td><td style="font-weight: bold; padding-bottom: 1.5pt"> </td>
<td colspan="2" style="border-bottom: Black 1.5pt solid; font-weight: bold; text-align: center">December 31,<br />
2020</td><td style="padding-bottom: 1.5pt; font-weight: bold"> </td><td style="font-weight: bold; padding-bottom: 1.5pt"> </td>
<td colspan="2" style="border-bottom: Black 1.5pt solid; font-weight: bold; text-align: center">December 31, <br />
2019</td><td style="padding-bottom: 1.5pt; font-weight: bold"> </td></tr>
<tr style="vertical-align: bottom">
<td> </td><td> </td>
<td colspan="2"> </td><td> </td><td> </td>
<td colspan="2"> </td><td> </td></tr>
<tr style="vertical-align: bottom; background-color: rgb(204,238,255)">
<td style="width: 76%; text-align: left">Stock Options</td><td style="width: 1%"> </td>
<td style="width: 1%; text-align: left"> </td><td style="width: 9%; text-align: right">    -</td><td style="width: 1%; text-align: left"> </td><td style="width: 1%"> </td>
<td style="width: 1%; text-align: left"> </td><td style="width: 9%; text-align: right">570,000</td><td style="width: 1%; text-align: left"> </td></tr>
<tr style="vertical-align: bottom; background-color: White">
<td>Warrants</td><td> </td>
<td style="text-align: left"> </td><td style="text-align: right">-</td><td style="text-align: left"> </td><td> </td>
<td style="text-align: left"> </td><td style="text-align: right">500</td><td style="text-align: left"> </td></tr>
<tr style="vertical-align: bottom; background-color: rgb(204,238,255)">
<td style="text-align: left; padding-bottom: 1.5pt">Convertible notes payable</td><td style="padding-bottom: 1.5pt"> </td>
<td style="border-bottom: Black 1.5pt solid; text-align: left"> </td><td style="border-bottom: Black 1.5pt solid; text-align: right">-</td><td style="padding-bottom: 1.5pt; text-align: left"> </td><td style="padding-bottom: 1.5pt"> </td>
<td style="border-bottom: Black 1.5pt solid; text-align: left"> </td><td style="border-bottom: Black 1.5pt solid; text-align: right">5,405,000</td><td style="padding-bottom: 1.5pt; text-align: left"> </td></tr>
<tr style="vertical-align: bottom; background-color: White">
<td style="padding-bottom: 4pt"> </td><td style="padding-bottom: 4pt"> </td>
<td style="border-bottom: Black 4pt double; text-align: left"> </td><td style="border-bottom: Black 4pt double; text-align: right">-</td><td style="padding-bottom: 4pt; text-align: left"> </td><td style="padding-bottom: 4pt"> </td>
<td style="border-bottom: Black 4pt double; text-align: left"> </td><td style="border-bottom: Black 4pt double; text-align: right">5,975,500</td><td style="padding-bottom: 4pt; text-align: left"> </td></tr></table>
<p style="font: 10pt Times New Roman, Times, Serif; margin: 0; text-align: justify"><b>Note 1. FORMATION AND BASIS OF PRESENTATION</b></p>
<p style="font: 10pt Times New Roman, Times, Serif; margin: 0; text-align: justify; text-indent: 0.5in"> </p>
<p style="font: 10pt Times New Roman, Times, Serif; margin: 0; text-align: justify"><b>Organization</b></p>
<p style="font: 10pt Times New Roman, Times, Serif; margin: 0; text-align: justify; text-indent: 0.5in"> </p>
<p style="font: 10pt Times New Roman, Times, Serif; margin: 0; text-align: justify">Air Industries Group is a Nevada corporation
("AIRI"). As of and for the year ended December 31, 2020 and 2019, the accompanying consolidated financial statements
presented are those of AIRI, and its wholly-owned subsidiaries; Air Industries Machining Corp. ("AIM"), Nassau Tool
Works, Inc. ("NTW"), and The Sterling Engineering Corporation ("Sterling"), (together, the "Company").
The results of Eur-Pac Corporation ("EPC") and Electronic Connection Corporation ("ECC") are included in
loss from discontinued operations, since operations ceased on March 31, 2019. See Note 2 for details of discontinued operations.</p>
<p style="font: 10pt Times New Roman, Times, Serif; margin: 0; text-align: justify; text-indent: 0.5in"> </p>
<p style="font: 10pt Times New Roman, Times, Serif; margin: 0; text-align: justify"><b>Closing EPC and ECC</b></p>
<p style="font: 10pt Times New Roman, Times, Serif; margin: 0; text-align: justify; text-indent: 0.5in"> </p>
<p style="font: 10pt Times New Roman, Times, Serif; margin: 0; text-align: justify">The Company completed its shut-down of EPC
and ECC and closed related operations on March 31, 2019. The results of both EPC and ECC are included in loss from discontinued
operations.</p>
<p style="font: 10pt Times New Roman, Times, Serif; margin: 0; text-align: justify"> </p>
<p style="font: 10pt Times New Roman, Times, Serif; margin: 0"><b>Impact of Covid-19 </b></p>
<p style="font: 10pt Times New Roman, Times, Serif; margin: 0; text-align: justify"><b> </b></p>
<p style="font: 10pt Times New Roman, Times, Serif; margin: 0; text-align: justify">On March 11, 2020, the World Health Organization
announced that infections caused by the coronavirus disease of 2019 ("COVID-19") had become pandemic, and on March
13, 2020, the U.S. President announced a national emergency relating to the disease. National, state and local authorities have
adopted various regulations and orders, including mandates on the number of people that may gather in one location and closing
non-essential businesses. To date, the Company has been deemed an essential business and has not curtailed its operations.</p>
<p style="font: 10pt Times New Roman, Times, Serif; margin: 0; text-align: justify; text-indent: 0.5in"> </p>
<p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify">The measures adopted by various governments
and agencies, as well as the decision by many individuals and businesses to voluntarily shut down or self-quarantine, had and are
expected to continue to have serious adverse impacts on domestic and foreign economies of uncertain severity and duration. The
effectiveness of economic stabilization efforts adopted by governments and their willingness to adopt further measures is uncertain.
The overall economic impact of the COVID-19 pandemic has been highly negative to the general economy and has been particularly
negative on the commercial travel industry and commercial aerospace industries.</p>
<p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify"> </p>
<p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify">In accordance with the Department of Defense
guidance issued in March 2020 designating the Defense Industrial Base as a critical infrastructure workforce, the Company's
facilities have continued to operate in support of essential products and services required to meet national security commitments
to the U.S. government and the U.S. military, however, facility closures or work slowdowns or temporary stoppages could occur.</p>
<p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify"> </p>
<p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify">The Company, its employees, suppliers and
customers, and the global community continue to face challenges and the Company cannot predict how this dynamic situation will
evolve or the impact it will have. Throughout 2020 many of the Company's suppliers were forced to reduce staffing or temporarily
close their facilities due to COVID-19, which impacted the Company's delivery schedules. While this has largely been resolved
the Company cannot predict what future impacts will occur, particularly if new variants of Covid-19 result in a substantial increase
in new cases and governments elect to reimpose strict safety measures.</p>
<p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify"> </p>
<p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify">The Company has implemented procedures
to promote employee safety including more frequent and enhanced cleaning and adjusted schedules and work flows to support physical
distancing. These actions have resulted in increased operating costs. Suppliers are also experiencing liquidity pressures and disruptions
to their operations as a result of COVID-19. Although operating conditions have substantially returned to pre-COVID-19 conditions,
an increase in COVID-19 infections or changes in governmental regulations may force the Company to close or reduce operations as
a result in future periods.</p>
<p style="font: 10pt Times New Roman, Times, Serif; margin: 0; text-align: justify"> </p>
<p style="font: 10pt Times New Roman, Times, Serif; margin: 0; text-align: justify">On March 27, 2020, the Coronavirus Aid, Relief
and Economic Security Act ("CARES Act") was signed into law. The CARES Act provides aid to small businesses through
programs administered by the Small Business Administration ("SBA"). The CARES Act includes, among other things, provisions
relating to payroll tax credits and deferrals, net operating loss carryback periods, alternative minimum tax credits and technical
corrections to tax depreciation methods for qualified improvement property. The CARES Act also established a Paycheck Protection
Program ("PPP"), whereby certain small businesses are eligible for a loan to fund payroll expenses, rent, and related
costs.</p>
<p style="font: 10pt Times New Roman, Times, Serif; margin: 0; text-align: justify; text-indent: 0.5in"> </p>
<p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify">In May 2020, AIM, NTW and Sterling (each
a "Borrower") entered into government subsidized loans with Sterling National Bank ("SNB") as the lender
in an aggregate principal amount of approximately $2.4 million ("SBA Loans"). Each SBA Loan is evidenced by a promissory
note. At least 60% of the proceeds of each Loan must be used for payroll and payroll-related costs, in accordance with the applicable
provisions of the federal statute authorizing the loan program administered by the SBA and the rules promulgated thereunder (the
"Loan Program"). The Borrowers applied to SNB for forgiveness and SNB approved and submitted the forgiveness applications
to the SBA which approved the forgiveness in accordance with the applicable provisions of the federal statute authorizing the Loan
Program. See Note 9.</p>
<p style="font: 10pt Times New Roman, Times, Serif; margin: 0; text-align: justify; text-indent: 0.5in"> </p>
<p style="font: 10pt Times New Roman, Times, Serif; margin: 0; text-align: justify">The Company has elected to defer the deposit
and payment of employer's portion of Social Security taxes pursuant to Section 2302 of the CARES Act. These deferred amounts
must be repaid 50% on December 31, 2021 with the remaining 50% on December 31, 2022. As of December 31, 2020, the Company has deferred
$627,000, which is classified as Deferred payroll tax liability – CARES Act on the accompanying Consolidated Balance Sheet.</p>
<p style="font: 10pt Times New Roman, Times, Serif; margin: 0; text-align: justify; text-indent: 0.5in"> </p>
<p style="font: 10pt Times New Roman, Times, Serif; margin: 0; text-align: justify">In addition, as a result of the passage of
the CARES Act, the Company received a tax refund of $1,416,000 from the filing of a net operating loss carryback claim. See Note
15.</p>
<p style="font: 10pt Times New Roman, Times, Serif; margin: 0; text-align: justify"> </p>
<p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify; text-indent: 0in">The Company did not
qualify for any significant new benefits in the recently enacted the American Rescue Plan Act of 2021 ("Rescue Act")
and does not expect to qualify for any significant new government benefits that might be enacted.</p>
<p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-indent: 0in; text-align: justify"> </p>
<p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-indent: 0in; text-align: justify">Based on its expectations that sales in
fiscal 2021 will be higher than the level achieved in fiscal 2020, confirmed orders, funds generated from operations, amounts received
under government subsidized loan programs and amounts available under its credit facility, the Company believes it will have sufficient
cash on hand to support its activities through April 1, 2022.</p>
<p style="font: 10pt Times New Roman, Times, Serif; margin: 0; text-align: center; text-indent: 0.5in"> </p>
<p style="font: 10pt Times New Roman, Times, Serif; margin: 0; text-align: justify"><b>Subsequent Events</b></p>
<p style="font: 10pt Times New Roman, Times, Serif; margin: 0; text-align: justify; text-indent: 0.5in"> </p>
<p style="font: 10pt Times New Roman, Times, Serif; margin: 0; text-align: justify">Management has evaluated subsequent events
through the date of this filing.</p>
AIM, NTW and Sterling (each a "Borrower") entered into government subsidized loans with Sterling National Bank ("SNB") as the lender in an aggregate principal amount of approximately $2.4 million ("SBA Loans"). Each SBA Loan is evidenced by a promissory note. At least 60% of the proceeds of each Loan must be used for payroll and payroll-related costs, in accordance with the applicable provisions of the federal statute authorizing the loan program administered by the SBA and the rules promulgated thereunder (the "Loan Program").
627000
132000
105000
27000
155000
-128000
3000
3000
230000
-134000
-230000
1380684
1380684
2000000
<p style="font: 10pt Times New Roman, Times, Serif; margin: 0; text-align: justify; text-indent: 0.5in"></p>
<p style="font: 10pt Times New Roman, Times, Serif; margin: 0; text-align: justify"><b>Note 4. ACCOUNTS RECEIVABLE</b></p>
<p style="font: 10pt Times New Roman, Times, Serif; margin: 0; text-align: justify; text-indent: 0.5in"> </p>
<p style="font: 10pt Times New Roman, Times, Serif; margin: 0; text-align: justify">The components of accounts receivable at December
31, are detailed as follows:</p>
<p style="font: 10pt Times New Roman, Times, Serif; margin: 0; text-align: justify"> </p>
<table cellpadding="0" cellspacing="0" style="font: 10pt Times New Roman, Times, Serif; border-collapse: collapse; width: 100%">
<tr style="vertical-align: bottom">
<td> </td><td style="font-weight: bold; padding-bottom: 1.5pt"> </td>
<td colspan="2" style="border-bottom: Black 1.5pt solid; font-weight: bold; text-align: center">December 31,<br /> 2020</td><td style="padding-bottom: 1.5pt; font-weight: bold"> </td><td style="font-weight: bold; padding-bottom: 1.5pt"> </td>
<td colspan="2" style="border-bottom: Black 1.5pt solid; font-weight: bold; text-align: center">December 31,<br /> 2019</td><td style="padding-bottom: 1.5pt; font-weight: bold"> </td></tr>
<tr style="vertical-align: bottom">
<td> </td><td> </td>
<td colspan="2" style="text-align: center"> </td><td> </td><td> </td>
<td colspan="2" style="text-align: center"> </td><td> </td></tr>
<tr style="vertical-align: bottom; background-color: rgb(204,238,255)">
<td style="width: 76%; text-align: left">Accounts Receivable Gross</td><td style="width: 1%"> </td>
<td style="width: 1%; text-align: left">$</td><td style="width: 9%; text-align: right">9,762,000</td><td style="width: 1%; text-align: left"> </td><td style="width: 1%"> </td>
<td style="width: 1%; text-align: left">$</td><td style="width: 9%; text-align: right">8,717,000</td><td style="width: 1%; text-align: left"> </td></tr>
<tr style="vertical-align: bottom; background-color: White">
<td style="text-align: left; padding-bottom: 1.5pt">Allowance for Doubtful Accounts</td><td style="padding-bottom: 1.5pt"> </td>
<td style="border-bottom: Black 1.5pt solid; text-align: left"> </td><td style="border-bottom: Black 1.5pt solid; text-align: right">(964,000</td><td style="padding-bottom: 1.5pt; text-align: left">)</td><td style="padding-bottom: 1.5pt"> </td>
<td style="border-bottom: Black 1.5pt solid; text-align: left"> </td><td style="border-bottom: Black 1.5pt solid; text-align: right">(859,000</td><td style="padding-bottom: 1.5pt; text-align: left">)</td></tr>
<tr style="vertical-align: bottom; background-color: rgb(204,238,255)">
<td style="text-align: left; padding-bottom: 4pt">Accounts Receivable Net</td><td style="padding-bottom: 4pt"> </td>
<td style="border-bottom: Black 4pt double; text-align: left">$</td><td style="border-bottom: Black 4pt double; text-align: right">8,798,000</td><td style="padding-bottom: 4pt; text-align: left"> </td><td style="padding-bottom: 4pt"> </td>
<td style="border-bottom: Black 4pt double; text-align: left">$</td><td style="border-bottom: Black 4pt double; text-align: right">7,858,000</td><td style="padding-bottom: 4pt; text-align: left"> </td></tr>
</table>
<p style="font: 10pt Times New Roman, Times, Serif; margin: 0; text-align: justify"> </p>
<p style="font: 10pt Times New Roman, Times, Serif; margin: 0; text-align: justify">The allowance for doubtful accounts for the
years ended December 31, 2020 and 2019 is as follows:</p>
<p style="font: 10pt Times New Roman, Times, Serif; margin: 0; text-align: justify"> </p>
<table cellpadding="0" cellspacing="0" style="font: 10pt Times New Roman, Times, Serif; border-collapse: collapse; width: 100%">
<tr style="vertical-align: bottom">
<td> </td><td> </td>
<td colspan="2" style="text-align: center"> </td><td> </td><td style="font-weight: bold"> </td>
<td colspan="2" style="font-weight: bold; text-align: center">Charged</td><td style="font-weight: bold"> </td><td> </td>
<td colspan="2" style="text-align: center"> </td><td> </td><td> </td>
<td colspan="2" style="text-align: center"> </td><td> </td></tr>
<tr style="vertical-align: bottom">
<td> </td><td style="font-weight: bold"> </td>
<td colspan="2" style="font-weight: bold; text-align: center">Balance at</td><td style="font-weight: bold"> </td><td style="font-weight: bold"> </td>
<td colspan="2" style="font-weight: bold; text-align: center">to</td><td style="font-weight: bold"> </td><td style="font-weight: bold"> </td>
<td colspan="2" style="font-weight: bold; text-align: center">Deductions</td><td style="font-weight: bold"> </td><td style="font-weight: bold"> </td>
<td colspan="2" style="font-weight: bold; text-align: center">Balance at</td><td style="font-weight: bold"> </td></tr>
<tr style="vertical-align: bottom">
<td> </td><td style="font-weight: bold"> </td>
<td colspan="2" style="font-weight: bold; text-align: center">Beginning of</td><td style="font-weight: bold"> </td><td style="font-weight: bold"> </td>
<td colspan="2" style="font-weight: bold; text-align: center">Costs and</td><td style="font-weight: bold"> </td><td style="font-weight: bold"> </td>
<td colspan="2" style="font-weight: bold; text-align: center">from</td><td style="font-weight: bold"> </td><td style="font-weight: bold"> </td>
<td colspan="2" style="font-weight: bold; text-align: center">End of</td><td style="font-weight: bold"> </td></tr>
<tr style="vertical-align: bottom">
<td> </td><td style="font-weight: bold; padding-bottom: 1.5pt"> </td>
<td colspan="2" style="border-bottom: Black 1.5pt solid; font-weight: bold; text-align: center">Year</td><td style="padding-bottom: 1.5pt; font-weight: bold"> </td><td style="font-weight: bold; padding-bottom: 1.5pt"> </td>
<td colspan="2" style="border-bottom: Black 1.5pt solid; font-weight: bold; text-align: center">Expenses</td><td style="padding-bottom: 1.5pt; font-weight: bold"> </td><td style="font-weight: bold; padding-bottom: 1.5pt"> </td>
<td colspan="2" style="border-bottom: Black 1.5pt solid; font-weight: bold; text-align: center">Reserves</td><td style="padding-bottom: 1.5pt; font-weight: bold"> </td><td style="font-weight: bold; padding-bottom: 1.5pt"> </td>
<td colspan="2" style="border-bottom: Black 1.5pt solid; font-weight: bold; text-align: center">Year</td><td style="padding-bottom: 1.5pt; font-weight: bold"> </td></tr>
<tr style="vertical-align: bottom">
<td style="padding-bottom: 0"> </td><td style="font-weight: bold; padding-bottom: 0"> </td>
<td colspan="2" style="font-weight: bold; text-align: center; padding-bottom: 0"> </td><td style="padding-bottom: 0; font-weight: bold"> </td><td style="font-weight: bold; padding-bottom: 0"> </td>
<td colspan="2" style="font-weight: bold; text-align: center; padding-bottom: 0"> </td><td style="padding-bottom: 0; font-weight: bold"> </td><td style="font-weight: bold; padding-bottom: 0"> </td>
<td colspan="2" style="font-weight: bold; text-align: center; padding-bottom: 0"> </td><td style="padding-bottom: 0; font-weight: bold"> </td><td style="font-weight: bold; padding-bottom: 0"> </td>
<td colspan="2" style="font-weight: bold; text-align: center; padding-bottom: 0"> </td><td style="padding-bottom: 0; font-weight: bold"> </td></tr>
<tr style="vertical-align: bottom; background-color: rgb(204,238,255)">
<td style="width: 52%; text-align: left">Year ended December 31, 2020 Allowance for Doubtful Accounts</td><td style="width: 1%"> </td>
<td style="width: 1%; text-align: left">$</td><td style="width: 9%; text-align: right">859,000</td><td style="width: 1%; text-align: left"> </td><td style="width: 1%"> </td>
<td style="width: 1%; text-align: left">$</td><td style="width: 9%; text-align: right">483,000</td><td style="width: 1%; text-align: left"> </td><td style="width: 1%"> </td>
<td style="width: 1%; text-align: left">$</td><td style="width: 9%; text-align: right">378,000</td><td style="width: 1%; text-align: left"> </td><td style="width: 1%"> </td>
<td style="width: 1%; text-align: left">$</td><td style="width: 9%; text-align: right">964,000</td><td style="width: 1%; text-align: left"> </td></tr>
<tr style="vertical-align: bottom; background-color: White">
<td style="text-align: left">Year ended December 31, 2019 Allowance for Doubtful Accounts</td><td> </td>
<td style="text-align: left">$</td><td style="text-align: right">524,000</td><td style="text-align: left"> </td><td> </td>
<td style="text-align: left">$</td><td style="text-align: right">556,000</td><td style="text-align: left"> </td><td> </td>
<td style="text-align: left">$</td><td style="text-align: right">221,000</td><td style="text-align: left"> </td><td> </td>
<td style="text-align: left">$</td><td style="text-align: right">859,000</td><td style="text-align: left"> </td></tr></table>
<p style="font: 10pt Times New Roman, Times, Serif; margin: 0; text-align: justify"><b>Note 5. INVENTORY</b></p>
<p style="font: 10pt Times New Roman, Times, Serif; margin: 0; text-align: justify; text-indent: 0.5in"> </p>
<p style="font: 10pt Times New Roman, Times, Serif; margin: 0; text-align: justify">The components of inventory at December 31,
consisted of the following:</p>
<p style="font: 10pt Times New Roman, Times, Serif; margin: 0; text-align: justify"> </p>
<table cellpadding="0" cellspacing="0" style="font: 10pt Times New Roman, Times, Serif; border-collapse: collapse; width: 100%">
<tr style="vertical-align: bottom">
<td> </td><td style="font-weight: bold"> </td>
<td colspan="2" style="font-weight: bold; text-align: center">December 31,</td><td style="font-weight: bold"> </td><td style="font-weight: bold"> </td>
<td colspan="2" style="font-weight: bold; text-align: center">December 31,</td><td style="font-weight: bold"> </td></tr>
<tr style="vertical-align: bottom">
<td> </td><td style="font-weight: bold; padding-bottom: 1.5pt"> </td>
<td colspan="2" style="border-bottom: Black 1.5pt solid; font-weight: bold; text-align: center">2020</td><td style="padding-bottom: 1.5pt; font-weight: bold"> </td><td style="font-weight: bold; padding-bottom: 1.5pt"> </td>
<td colspan="2" style="border-bottom: Black 1.5pt solid; font-weight: bold; text-align: center">2019</td><td style="padding-bottom: 1.5pt; font-weight: bold"> </td></tr>
<tr style="vertical-align: bottom">
<td> </td><td> </td>
<td colspan="2"> </td><td> </td><td> </td>
<td colspan="2"> </td><td> </td></tr>
<tr style="vertical-align: bottom; background-color: rgb(204,238,255)">
<td style="width: 76%; text-align: left">Raw Materials</td><td style="width: 1%"> </td>
<td style="width: 1%; text-align: left">$</td><td style="width: 9%; text-align: right">3,951,000</td><td style="width: 1%; text-align: left"> </td><td style="width: 1%"> </td>
<td style="width: 1%; text-align: left">$</td><td style="width: 9%; text-align: right">4,574,000</td><td style="width: 1%; text-align: left"> </td></tr>
<tr style="vertical-align: bottom; background-color: White">
<td style="text-align: left">Work In Progress</td><td> </td>
<td style="text-align: left"> </td><td style="text-align: right">21,933,000</td><td style="text-align: left"> </td><td> </td>
<td style="text-align: left"> </td><td style="text-align: right">18,452,000</td><td style="text-align: left"> </td></tr>
<tr style="vertical-align: bottom; background-color: rgb(204,238,255)">
<td style="text-align: left">Finished Goods</td><td> </td>
<td style="text-align: left"> </td><td style="text-align: right">8,831,000</td><td style="text-align: left"> </td><td> </td>
<td style="text-align: left"> </td><td style="text-align: right">9,810,000</td><td style="text-align: left"> </td></tr>
<tr style="vertical-align: bottom; background-color: White">
<td style="padding-bottom: 1.5pt">Reserve</td><td style="padding-bottom: 1.5pt"> </td>
<td style="border-bottom: Black 1.5pt solid; text-align: left"> </td><td style="border-bottom: Black 1.5pt solid; text-align: right">(2,595,000</td><td style="padding-bottom: 1.5pt; text-align: left">)</td><td style="padding-bottom: 1.5pt"> </td>
<td style="border-bottom: Black 1.5pt solid; text-align: left"> </td><td style="border-bottom: Black 1.5pt solid; text-align: right">(4,190,000</td><td style="padding-bottom: 1.5pt; text-align: left">)</td></tr>
<tr style="vertical-align: bottom; background-color: rgb(204,238,255)">
<td style="text-align: left; padding-bottom: 4pt">Total Inventory</td><td style="padding-bottom: 4pt"> </td>
<td style="border-bottom: Black 4pt double; text-align: left">$</td><td style="border-bottom: Black 4pt double; text-align: right">32,120,000</td><td style="padding-bottom: 4pt; text-align: left"> </td><td style="padding-bottom: 4pt"> </td>
<td style="border-bottom: Black 4pt double; text-align: left">$</td><td style="border-bottom: Black 4pt double; text-align: right">28,646,000</td><td style="padding-bottom: 4pt; text-align: left"> </td></tr>
</table>
<p style="font: 10pt Times New Roman, Times, Serif; margin: 0"> </p>
<p style="font: 10pt Times New Roman, Times, Serif; margin: 0; text-align: justify">The Company periodically evaluates inventory and establishes reserves
for obsolescence, excess quantities, slow-moving goods, and for other impairment of value.</p>
<p style="font: 10pt Times New Roman, Times, Serif; margin: 0"><b>Note 6. PROPERTY AND EQUIPMENT</b></p>
<p style="font: 10pt Times New Roman, Times, Serif; margin: 0; text-align: justify; text-indent: 0.5in"> </p>
<p style="font: 10pt Times New Roman, Times, Serif; margin: 0; text-align: justify">The components of property and equipment at
December 31, consisted of the following:</p>
<p style="font: 10pt Times New Roman, Times, Serif; margin: 0; text-align: justify"> </p>
<table cellpadding="0" cellspacing="0" style="font: 10pt Times New Roman, Times, Serif; border-collapse: collapse; width: 100%">
<tr style="vertical-align: bottom">
<td> </td><td style="font-weight: bold"> </td>
<td colspan="2" style="font-weight: bold; text-align: center">December 31,</td><td style="font-weight: bold"> </td><td style="font-weight: bold"> </td>
<td colspan="2" style="font-weight: bold; text-align: center">December 31,</td><td style="font-weight: bold"> </td></tr>
<tr style="vertical-align: bottom">
<td> </td><td style="font-weight: bold; padding-bottom: 1.5pt"> </td>
<td colspan="2" style="border-bottom: Black 1.5pt solid; font-weight: bold; text-align: center">2020</td><td style="padding-bottom: 1.5pt; font-weight: bold"> </td><td style="font-weight: bold; padding-bottom: 1.5pt"> </td>
<td colspan="2" style="border-bottom: Black 1.5pt solid; font-weight: bold; text-align: center">2019</td><td style="padding-bottom: 1.5pt; font-weight: bold"> </td></tr>
<tr style="vertical-align: bottom">
<td> </td><td> </td>
<td colspan="2" style="text-align: center"> </td><td> </td><td> </td>
<td colspan="2" style="text-align: center"> </td><td> </td></tr>
<tr style="vertical-align: bottom; background-color: rgb(204,238,255)">
<td style="width: 76%">Land</td><td style="width: 1%"> </td>
<td style="width: 1%; text-align: left">$</td><td style="width: 9%; text-align: right">300,000</td><td style="width: 1%; text-align: left"> </td><td style="width: 1%"> </td>
<td style="width: 1%; text-align: left">$</td><td style="width: 9%; text-align: right">300,000</td><td style="width: 1%; text-align: left"> </td></tr>
<tr style="vertical-align: bottom; background-color: White">
<td style="text-align: left">Buildings and Improvements</td><td> </td>
<td style="text-align: left"> </td><td style="text-align: right">1,683,000</td><td style="text-align: left"> </td><td> </td>
<td style="text-align: left"> </td><td style="text-align: right">1,650,000</td><td style="text-align: left"> </td></tr>
<tr style="vertical-align: bottom; background-color: rgb(204,238,255)">
<td style="text-align: left">Machinery and Equipment</td><td> </td>
<td style="text-align: left"> </td><td style="text-align: right">21,686,000</td><td style="text-align: left"> </td><td> </td>
<td style="text-align: left"> </td><td style="text-align: right">18,450,000</td><td style="text-align: left"> </td></tr>
<tr style="vertical-align: bottom; background-color: White">
<td style="text-align: left">Finance Lease Machinery and Equipment</td><td> </td>
<td style="text-align: left"> </td><td style="text-align: right">78,000</td><td style="text-align: left"> </td><td> </td>
<td style="text-align: left"> </td><td style="text-align: right">296,000</td><td style="text-align: left"> </td></tr>
<tr style="vertical-align: bottom; background-color: rgb(204,238,255)">
<td style="text-align: left">Tools and Instruments</td><td> </td>
<td style="text-align: left"> </td><td style="text-align: right">12,116,000</td><td style="text-align: left"> </td><td> </td>
<td style="text-align: left"> </td><td style="text-align: right">11,021,000</td><td style="text-align: left"> </td></tr>
<tr style="vertical-align: bottom; background-color: White">
<td style="text-align: left">Automotive Equipment</td><td> </td>
<td style="text-align: left"> </td><td style="text-align: right">200,000</td><td style="text-align: left"> </td><td> </td>
<td style="text-align: left"> </td><td style="text-align: right">177,000</td><td style="text-align: left"> </td></tr>
<tr style="vertical-align: bottom; background-color: rgb(204,238,255)">
<td style="text-align: left">Furniture and Fixtures</td><td> </td>
<td style="text-align: left"> </td><td style="text-align: right">290,000</td><td style="text-align: left"> </td><td> </td>
<td style="text-align: left"> </td><td style="text-align: right">290,000</td><td style="text-align: left"> </td></tr>
<tr style="vertical-align: bottom; background-color: White">
<td style="text-align: left">Leasehold Improvements</td><td> </td>
<td style="text-align: left"> </td><td style="text-align: right">855,000</td><td style="text-align: left"> </td><td> </td>
<td style="text-align: left"> </td><td style="text-align: right">530,000</td><td style="text-align: left"> </td></tr>
<tr style="vertical-align: bottom; background-color: rgb(204,238,255)">
<td style="text-align: left; padding-bottom: 1.5pt">Computers and Software</td><td style="padding-bottom: 1.5pt"> </td>
<td style="border-bottom: Black 1.5pt solid; text-align: left"> </td><td style="border-bottom: Black 1.5pt solid; text-align: right">436,000</td><td style="padding-bottom: 1.5pt; text-align: left"> </td><td style="padding-bottom: 1.5pt"> </td>
<td style="border-bottom: Black 1.5pt solid; text-align: left"> </td><td style="border-bottom: Black 1.5pt solid; text-align: right">425,000</td><td style="padding-bottom: 1.5pt; text-align: left"> </td></tr>
<tr style="vertical-align: bottom; background-color: White">
<td style="text-align: left">Total Property and Equipment</td><td> </td>
<td style="text-align: left"> </td><td style="text-align: right">37,644,000</td><td style="text-align: left"> </td><td> </td>
<td style="text-align: left"> </td><td style="text-align: right">33,139,000</td><td style="text-align: left"> </td></tr>
<tr style="vertical-align: bottom; background-color: rgb(204,238,255)">
<td style="text-align: left; padding-bottom: 1.5pt">Less: Accumulated Depreciation</td><td style="padding-bottom: 1.5pt"> </td>
<td style="border-bottom: Black 1.5pt solid; text-align: left"> </td><td style="border-bottom: Black 1.5pt solid; text-align: right">(28,063,000</td><td style="padding-bottom: 1.5pt; text-align: left">)</td><td style="padding-bottom: 1.5pt"> </td>
<td style="border-bottom: Black 1.5pt solid; text-align: left"> </td><td style="border-bottom: Black 1.5pt solid; text-align: right">(25,561,000</td><td style="padding-bottom: 1.5pt; text-align: left">)</td></tr>
<tr style="vertical-align: bottom; background-color: White">
<td style="text-align: left; padding-bottom: 4pt">Property and Equipment, net</td><td style="padding-bottom: 4pt"> </td>
<td style="border-bottom: Black 4pt double; text-align: left">$</td><td style="border-bottom: Black 4pt double; text-align: right">9,581,000</td><td style="padding-bottom: 4pt; text-align: left"> </td><td style="padding-bottom: 4pt"> </td>
<td style="border-bottom: Black 4pt double; text-align: left">$</td><td style="border-bottom: Black 4pt double; text-align: right">7,578,000</td><td style="padding-bottom: 4pt; text-align: left"> </td></tr>
</table>
<p style="font: 10pt Times New Roman, Times, Serif; margin: 0; text-align: justify"> </p>
<p style="font: 10pt Times New Roman, Times, Serif; margin: 0; text-align: justify">Depreciation expense for the years ended December
31, 2020 and 2019 was approximately $2,570,000 and $3,002,000, respectively. Assets held under finance lease obligations are depreciated
over the shorter of their related lease terms or their estimated productive lives. Depreciation of assets under finance leases
is included in depreciation expense for 2020 and 2019. Accumulated depreciation on these assets was approximately $28,000 and $289,000
as of December 31, 2020 and 2019, respectively.</p>
<p style="font: 10pt Times New Roman, Times, Serif; margin: 0; text-align: justify; text-indent: 0.5in"></p>
<p style="font: 10pt Times New Roman, Times, Serif; margin: 0; text-align: justify"><b>Note 7. ACCOUNTS PAYABLE AND ACCRUED EXPENSES</b></p>
<p style="font: 10pt Times New Roman, Times, Serif; margin: 0; text-align: justify; text-indent: 0.5in"> </p>
<p style="font: 10pt Times New Roman, Times, Serif; margin: 0; text-align: justify">The components of accounts payable and accrued
expenses at December 31, are detailed as follows:</p>
<p style="font: 10pt Times New Roman, Times, Serif; margin: 0; text-align: justify"> </p>
<table cellpadding="0" cellspacing="0" style="font: 10pt Times New Roman, Times, Serif; border-collapse: collapse; width: 100%">
<tr style="vertical-align: bottom">
<td> </td><td style="font-weight: bold; padding-bottom: 1.5pt"> </td>
<td colspan="2" style="border-bottom: Black 1.5pt solid; font-weight: bold; text-align: center">December 31,<br />
2020</td><td style="padding-bottom: 1.5pt; font-weight: bold"> </td><td style="font-weight: bold; padding-bottom: 1.5pt"> </td>
<td colspan="2" style="border-bottom: Black 1.5pt solid; font-weight: bold; text-align: center">December 31,<br />
2019</td><td style="padding-bottom: 1.5pt; font-weight: bold"> </td></tr>
<tr style="vertical-align: bottom">
<td> </td><td> </td>
<td colspan="2"> </td><td> </td><td> </td>
<td colspan="2"> </td><td> </td></tr>
<tr style="vertical-align: bottom; background-color: rgb(204,238,255)">
<td style="width: 76%; text-align: left">Accounts Payable</td><td style="width: 1%"> </td>
<td style="width: 1%; text-align: left">$</td><td style="width: 9%; text-align: right">7,240,000</td><td style="width: 1%; text-align: left"> </td><td style="width: 1%"> </td>
<td style="width: 1%; text-align: left">$</td><td style="width: 9%; text-align: right">6,576,000</td><td style="width: 1%; text-align: left"> </td></tr>
<tr style="vertical-align: bottom; background-color: White">
<td style="text-align: left">Accrued Payroll</td><td> </td>
<td style="text-align: left"> </td><td style="text-align: right">663,000</td><td style="text-align: left"> </td><td> </td>
<td style="text-align: left"> </td><td style="text-align: right">444,000</td><td style="text-align: left"> </td></tr>
<tr style="vertical-align: bottom; background-color: rgb(204,238,255)">
<td style="text-align: left">Accrued Interest - related parties</td><td> </td>
<td style="text-align: left"> </td><td style="text-align: right">400,000</td><td style="text-align: left"> </td><td> </td>
<td style="text-align: left"> </td><td style="text-align: right">210,000</td><td style="text-align: left"> </td></tr>
<tr style="vertical-align: bottom; background-color: White">
<td style="text-align: left">Accrued Interest - others</td><td> </td>
<td style="text-align: left"> </td><td style="text-align: right">42,000</td><td style="text-align: left"> </td><td> </td>
<td style="text-align: left"> </td><td style="text-align: right">294,000</td><td style="text-align: left"> </td></tr>
<tr style="vertical-align: bottom; background-color: rgb(204,238,255)">
<td style="text-align: left; padding-bottom: 1.5pt">Accrued expenses - other</td><td style="padding-bottom: 1.5pt"> </td>
<td style="border-bottom: Black 1.5pt solid; text-align: left"> </td><td style="border-bottom: Black 1.5pt solid; text-align: right">337,000</td><td style="padding-bottom: 1.5pt; text-align: left"> </td><td style="padding-bottom: 1.5pt"> </td>
<td style="border-bottom: Black 1.5pt solid; text-align: left"> </td><td style="border-bottom: Black 1.5pt solid; text-align: right">581,000</td><td style="padding-bottom: 1.5pt; text-align: left"> </td></tr>
<tr style="vertical-align: bottom; background-color: White">
<td style="text-align: left; padding-bottom: 4pt">Accounts Payable and accrued expenses</td><td style="padding-bottom: 4pt"> </td>
<td style="border-bottom: Black 4pt double; text-align: left">$</td><td style="border-bottom: Black 4pt double; text-align: right">8,682,000</td><td style="padding-bottom: 4pt; text-align: left"> </td><td style="padding-bottom: 4pt"> </td>
<td style="border-bottom: Black 4pt double; text-align: left">$</td><td style="border-bottom: Black 4pt double; text-align: right">8,105,000</td><td style="padding-bottom: 4pt; text-align: left"> </td></tr></table>
<p style="font: 10pt Times New Roman, Times, Serif; margin: 0; text-align: justify"></p>
<table cellpadding="0" cellspacing="0" style="font: 10pt Times New Roman, Times, Serif; border-collapse: collapse; width: 100%">
<tr style="vertical-align: bottom">
<td> </td><td style="font-weight: bold; padding-bottom: 1.5pt"> </td>
<td colspan="2" style="border-bottom: Black 1.5pt solid; font-weight: bold; text-align: center">December 31,<br /> 2020</td><td style="padding-bottom: 1.5pt; font-weight: bold"> </td><td style="font-weight: bold; padding-bottom: 1.5pt"> </td>
<td colspan="2" style="border-bottom: Black 1.5pt solid; font-weight: bold; text-align: center">December 31,<br /> 2019</td><td style="padding-bottom: 1.5pt; font-weight: bold"> </td></tr>
<tr style="vertical-align: bottom">
<td> </td><td> </td>
<td colspan="2" style="text-align: center"> </td><td> </td><td> </td>
<td colspan="2" style="text-align: center"> </td><td> </td></tr>
<tr style="vertical-align: bottom; background-color: rgb(204,238,255)">
<td style="width: 76%; text-align: left">Accounts Receivable Gross</td><td style="width: 1%"> </td>
<td style="width: 1%; text-align: left">$</td><td style="width: 9%; text-align: right">9,762,000</td><td style="width: 1%; text-align: left"> </td><td style="width: 1%"> </td>
<td style="width: 1%; text-align: left">$</td><td style="width: 9%; text-align: right">8,717,000</td><td style="width: 1%; text-align: left"> </td></tr>
<tr style="vertical-align: bottom; background-color: White">
<td style="text-align: left; padding-bottom: 1.5pt">Allowance for Doubtful Accounts</td><td style="padding-bottom: 1.5pt"> </td>
<td style="border-bottom: Black 1.5pt solid; text-align: left"> </td><td style="border-bottom: Black 1.5pt solid; text-align: right">(964,000</td><td style="padding-bottom: 1.5pt; text-align: left">)</td><td style="padding-bottom: 1.5pt"> </td>
<td style="border-bottom: Black 1.5pt solid; text-align: left"> </td><td style="border-bottom: Black 1.5pt solid; text-align: right">(859,000</td><td style="padding-bottom: 1.5pt; text-align: left">)</td></tr>
<tr style="vertical-align: bottom; background-color: rgb(204,238,255)">
<td style="text-align: left; padding-bottom: 4pt">Accounts Receivable Net</td><td style="padding-bottom: 4pt"> </td>
<td style="border-bottom: Black 4pt double; text-align: left">$</td><td style="border-bottom: Black 4pt double; text-align: right">8,798,000</td><td style="padding-bottom: 4pt; text-align: left"> </td><td style="padding-bottom: 4pt"> </td>
<td style="border-bottom: Black 4pt double; text-align: left">$</td><td style="border-bottom: Black 4pt double; text-align: right">7,858,000</td><td style="padding-bottom: 4pt; text-align: left"> </td></tr></table>
<p style="font: 10pt Times New Roman, Times, Serif; margin: 0; text-align: justify"></p>
<table cellpadding="0" cellspacing="0" style="font: 10pt Times New Roman, Times, Serif; border-collapse: collapse; width: 100%">
<tr style="vertical-align: bottom">
<td> </td><td> </td>
<td colspan="2" style="text-align: center"> </td><td> </td><td style="font-weight: bold"> </td>
<td colspan="2" style="font-weight: bold; text-align: center">Charged</td><td style="font-weight: bold"> </td><td> </td>
<td colspan="2" style="text-align: center"> </td><td> </td><td> </td>
<td colspan="2" style="text-align: center"> </td><td> </td></tr>
<tr style="vertical-align: bottom">
<td> </td><td style="font-weight: bold"> </td>
<td colspan="2" style="font-weight: bold; text-align: center">Balance at</td><td style="font-weight: bold"> </td><td style="font-weight: bold"> </td>
<td colspan="2" style="font-weight: bold; text-align: center">to</td><td style="font-weight: bold"> </td><td style="font-weight: bold"> </td>
<td colspan="2" style="font-weight: bold; text-align: center">Deductions</td><td style="font-weight: bold"> </td><td style="font-weight: bold"> </td>
<td colspan="2" style="font-weight: bold; text-align: center">Balance at</td><td style="font-weight: bold"> </td></tr>
<tr style="vertical-align: bottom">
<td> </td><td style="font-weight: bold"> </td>
<td colspan="2" style="font-weight: bold; text-align: center">Beginning of</td><td style="font-weight: bold"> </td><td style="font-weight: bold"> </td>
<td colspan="2" style="font-weight: bold; text-align: center">Costs and</td><td style="font-weight: bold"> </td><td style="font-weight: bold"> </td>
<td colspan="2" style="font-weight: bold; text-align: center">from</td><td style="font-weight: bold"> </td><td style="font-weight: bold"> </td>
<td colspan="2" style="font-weight: bold; text-align: center">End of</td><td style="font-weight: bold"> </td></tr>
<tr style="vertical-align: bottom">
<td> </td><td style="font-weight: bold; padding-bottom: 1.5pt"> </td>
<td colspan="2" style="border-bottom: Black 1.5pt solid; font-weight: bold; text-align: center">Year</td><td style="padding-bottom: 1.5pt; font-weight: bold"> </td><td style="font-weight: bold; padding-bottom: 1.5pt"> </td>
<td colspan="2" style="border-bottom: Black 1.5pt solid; font-weight: bold; text-align: center">Expenses</td><td style="padding-bottom: 1.5pt; font-weight: bold"> </td><td style="font-weight: bold; padding-bottom: 1.5pt"> </td>
<td colspan="2" style="border-bottom: Black 1.5pt solid; font-weight: bold; text-align: center">Reserves</td><td style="padding-bottom: 1.5pt; font-weight: bold"> </td><td style="font-weight: bold; padding-bottom: 1.5pt"> </td>
<td colspan="2" style="border-bottom: Black 1.5pt solid; font-weight: bold; text-align: center">Year</td><td style="padding-bottom: 1.5pt; font-weight: bold"> </td></tr>
<tr style="vertical-align: bottom">
<td style="padding-bottom: 0"> </td><td style="font-weight: bold; padding-bottom: 0"> </td>
<td colspan="2" style="font-weight: bold; text-align: center; padding-bottom: 0"> </td><td style="padding-bottom: 0; font-weight: bold"> </td><td style="font-weight: bold; padding-bottom: 0"> </td>
<td colspan="2" style="font-weight: bold; text-align: center; padding-bottom: 0"> </td><td style="padding-bottom: 0; font-weight: bold"> </td><td style="font-weight: bold; padding-bottom: 0"> </td>
<td colspan="2" style="font-weight: bold; text-align: center; padding-bottom: 0"> </td><td style="padding-bottom: 0; font-weight: bold"> </td><td style="font-weight: bold; padding-bottom: 0"> </td>
<td colspan="2" style="font-weight: bold; text-align: center; padding-bottom: 0"> </td><td style="padding-bottom: 0; font-weight: bold"> </td></tr>
<tr style="vertical-align: bottom; background-color: rgb(204,238,255)">
<td style="width: 52%; text-align: left">Year ended December 31, 2020 Allowance for Doubtful Accounts</td><td style="width: 1%"> </td>
<td style="width: 1%; text-align: left">$</td><td style="width: 9%; text-align: right">859,000</td><td style="width: 1%; text-align: left"> </td><td style="width: 1%"> </td>
<td style="width: 1%; text-align: left">$</td><td style="width: 9%; text-align: right">483,000</td><td style="width: 1%; text-align: left"> </td><td style="width: 1%"> </td>
<td style="width: 1%; text-align: left">$</td><td style="width: 9%; text-align: right">378,000</td><td style="width: 1%; text-align: left"> </td><td style="width: 1%"> </td>
<td style="width: 1%; text-align: left">$</td><td style="width: 9%; text-align: right">964,000</td><td style="width: 1%; text-align: left"> </td></tr>
<tr style="vertical-align: bottom; background-color: White">
<td style="text-align: left">Year ended December 31, 2019 Allowance for Doubtful Accounts</td><td> </td>
<td style="text-align: left">$</td><td style="text-align: right">524,000</td><td style="text-align: left"> </td><td> </td>
<td style="text-align: left">$</td><td style="text-align: right">556,000</td><td style="text-align: left"> </td><td> </td>
<td style="text-align: left">$</td><td style="text-align: right">221,000</td><td style="text-align: left"> </td><td> </td>
<td style="text-align: left">$</td><td style="text-align: right">859,000</td><td style="text-align: left"> </td></tr></table>
<table cellpadding="0" cellspacing="0" style="font: 10pt Times New Roman, Times, Serif; border-collapse: collapse; width: 100%"><tr style="vertical-align: bottom"><td> </td><td style="font-weight: bold"> </td>
<td colspan="2" style="font-weight: bold; text-align: center">December 31,</td><td style="font-weight: bold"> </td><td style="font-weight: bold"> </td>
<td colspan="2" style="font-weight: bold; text-align: center">December 31,</td><td style="font-weight: bold"> </td></tr>
<tr style="vertical-align: bottom">
<td> </td><td style="font-weight: bold; padding-bottom: 1.5pt"> </td>
<td colspan="2" style="border-bottom: Black 1.5pt solid; font-weight: bold; text-align: center">2020</td><td style="padding-bottom: 1.5pt; font-weight: bold"> </td><td style="font-weight: bold; padding-bottom: 1.5pt"> </td>
<td colspan="2" style="border-bottom: Black 1.5pt solid; font-weight: bold; text-align: center">2019</td><td style="padding-bottom: 1.5pt; font-weight: bold"> </td></tr>
<tr style="vertical-align: bottom">
<td> </td><td> </td>
<td colspan="2"> </td><td> </td><td> </td>
<td colspan="2"> </td><td> </td></tr>
<tr style="vertical-align: bottom; background-color: rgb(204,238,255)">
<td style="width: 76%; text-align: left">Raw Materials</td><td style="width: 1%"> </td>
<td style="width: 1%; text-align: left">$</td><td style="width: 9%; text-align: right">3,951,000</td><td style="width: 1%; text-align: left"> </td><td style="width: 1%"> </td>
<td style="width: 1%; text-align: left">$</td><td style="width: 9%; text-align: right">4,574,000</td><td style="width: 1%; text-align: left"> </td></tr>
<tr style="vertical-align: bottom; background-color: White">
<td style="text-align: left">Work In Progress</td><td> </td>
<td style="text-align: left"> </td><td style="text-align: right">21,933,000</td><td style="text-align: left"> </td><td> </td>
<td style="text-align: left"> </td><td style="text-align: right">18,452,000</td><td style="text-align: left"> </td></tr>
<tr style="vertical-align: bottom; background-color: rgb(204,238,255)">
<td style="text-align: left">Finished Goods</td><td> </td>
<td style="text-align: left"> </td><td style="text-align: right">8,831,000</td><td style="text-align: left"> </td><td> </td>
<td style="text-align: left"> </td><td style="text-align: right">9,810,000</td><td style="text-align: left"> </td></tr>
<tr style="vertical-align: bottom; background-color: White">
<td style="padding-bottom: 1.5pt">Reserve</td><td style="padding-bottom: 1.5pt"> </td>
<td style="border-bottom: Black 1.5pt solid; text-align: left"> </td><td style="border-bottom: Black 1.5pt solid; text-align: right">(2,595,000</td><td style="padding-bottom: 1.5pt; text-align: left">)</td><td style="padding-bottom: 1.5pt"> </td>
<td style="border-bottom: Black 1.5pt solid; text-align: left"> </td><td style="border-bottom: Black 1.5pt solid; text-align: right">(4,190,000</td><td style="padding-bottom: 1.5pt; text-align: left">)</td></tr>
<tr style="vertical-align: bottom; background-color: rgb(204,238,255)">
<td style="text-align: left; padding-bottom: 4pt">Total Inventory</td><td style="padding-bottom: 4pt"> </td>
<td style="border-bottom: Black 4pt double; text-align: left">$</td><td style="border-bottom: Black 4pt double; text-align: right">32,120,000</td><td style="padding-bottom: 4pt; text-align: left"> </td><td style="padding-bottom: 4pt"> </td>
<td style="border-bottom: Black 4pt double; text-align: left">$</td><td style="border-bottom: Black 4pt double; text-align: right">28,646,000</td><td style="padding-bottom: 4pt; text-align: left"> </td></tr></table>
<p style="font: 10pt Times New Roman, Times, Serif; margin: 0; text-align: justify; text-indent: 0.5in"></p>
<p style="font: 10pt Times New Roman, Times, Serif; margin: 0; text-align: justify"></p>
<table cellpadding="0" cellspacing="0" style="font: 10pt Times New Roman, Times, Serif; border-collapse: collapse; width: 100%">
<tr style="vertical-align: bottom">
<td> </td><td style="font-weight: bold; padding-bottom: 1.5pt"> </td>
<td colspan="2" style="border-bottom: Black 1.5pt solid; font-weight: bold; text-align: center">December 31,<br />
2020</td><td style="padding-bottom: 1.5pt; font-weight: bold"> </td><td style="font-weight: bold; padding-bottom: 1.5pt"> </td>
<td colspan="2" style="border-bottom: Black 1.5pt solid; font-weight: bold; text-align: center">December 31,<br />
2019</td><td style="padding-bottom: 1.5pt; font-weight: bold"> </td></tr>
<tr style="vertical-align: bottom">
<td> </td><td> </td>
<td colspan="2"> </td><td> </td><td> </td>
<td colspan="2"> </td><td> </td></tr>
<tr style="vertical-align: bottom; background-color: rgb(204,238,255)">
<td style="width: 76%; text-align: left">Accounts Payable</td><td style="width: 1%"> </td>
<td style="width: 1%; text-align: left">$</td><td style="width: 9%; text-align: right">7,240,000</td><td style="width: 1%; text-align: left"> </td><td style="width: 1%"> </td>
<td style="width: 1%; text-align: left">$</td><td style="width: 9%; text-align: right">6,576,000</td><td style="width: 1%; text-align: left"> </td></tr>
<tr style="vertical-align: bottom; background-color: White">
<td style="text-align: left">Accrued Payroll</td><td> </td>
<td style="text-align: left"> </td><td style="text-align: right">663,000</td><td style="text-align: left"> </td><td> </td>
<td style="text-align: left"> </td><td style="text-align: right">444,000</td><td style="text-align: left"> </td></tr>
<tr style="vertical-align: bottom; background-color: rgb(204,238,255)">
<td style="text-align: left">Accrued Interest - related parties</td><td> </td>
<td style="text-align: left"> </td><td style="text-align: right">400,000</td><td style="text-align: left"> </td><td> </td>
<td style="text-align: left"> </td><td style="text-align: right">210,000</td><td style="text-align: left"> </td></tr>
<tr style="vertical-align: bottom; background-color: White">
<td style="text-align: left">Accrued Interest - others</td><td> </td>
<td style="text-align: left"> </td><td style="text-align: right">42,000</td><td style="text-align: left"> </td><td> </td>
<td style="text-align: left"> </td><td style="text-align: right">294,000</td><td style="text-align: left"> </td></tr>
<tr style="vertical-align: bottom; background-color: rgb(204,238,255)">
<td style="text-align: left; padding-bottom: 1.5pt">Accrued expenses - other</td><td style="padding-bottom: 1.5pt"> </td>
<td style="border-bottom: Black 1.5pt solid; text-align: left"> </td><td style="border-bottom: Black 1.5pt solid; text-align: right">337,000</td><td style="padding-bottom: 1.5pt; text-align: left"> </td><td style="padding-bottom: 1.5pt"> </td>
<td style="border-bottom: Black 1.5pt solid; text-align: left"> </td><td style="border-bottom: Black 1.5pt solid; text-align: right">581,000</td><td style="padding-bottom: 1.5pt; text-align: left"> </td></tr>
<tr style="vertical-align: bottom; background-color: White">
<td style="text-align: left; padding-bottom: 4pt">Accounts Payable and accrued expenses</td><td style="padding-bottom: 4pt"> </td>
<td style="border-bottom: Black 4pt double; text-align: left">$</td><td style="border-bottom: Black 4pt double; text-align: right">8,682,000</td><td style="padding-bottom: 4pt; text-align: left"> </td><td style="padding-bottom: 4pt"> </td>
<td style="border-bottom: Black 4pt double; text-align: left">$</td><td style="border-bottom: Black 4pt double; text-align: right">8,105,000</td><td style="padding-bottom: 4pt; text-align: left"> </td></tr></table>
<p style="font: 10pt Times New Roman, Times, Serif; margin: 0; text-align: justify"></p>
<table cellpadding="0" cellspacing="0" style="font: 10pt Times New Roman, Times, Serif; border-collapse: collapse; width: 100%">
<tr style="vertical-align: bottom">
<td> </td><td style="font-weight: bold"> </td>
<td colspan="2" style="font-weight: bold; text-align: center">December 31,</td><td style="font-weight: bold"> </td><td style="font-weight: bold"> </td>
<td colspan="2" style="font-weight: bold; text-align: center">December 31,</td><td style="font-weight: bold"> </td></tr>
<tr style="vertical-align: bottom">
<td> </td><td style="font-weight: bold; padding-bottom: 1.5pt"> </td>
<td colspan="2" style="border-bottom: Black 1.5pt solid; font-weight: bold; text-align: center">2020</td><td style="padding-bottom: 1.5pt; font-weight: bold"> </td><td style="font-weight: bold; padding-bottom: 1.5pt"> </td>
<td colspan="2" style="border-bottom: Black 1.5pt solid; font-weight: bold; text-align: center">2019</td><td style="padding-bottom: 1.5pt; font-weight: bold"> </td></tr>
<tr style="vertical-align: bottom">
<td> </td><td> </td>
<td colspan="2" style="text-align: center"> </td><td> </td><td> </td>
<td colspan="2" style="text-align: center"> </td><td> </td></tr>
<tr style="vertical-align: bottom; background-color: rgb(204,238,255)">
<td style="width: 76%">Land</td><td style="width: 1%"> </td>
<td style="width: 1%; text-align: left">$</td><td style="width: 9%; text-align: right">300,000</td><td style="width: 1%; text-align: left"> </td><td style="width: 1%"> </td>
<td style="width: 1%; text-align: left">$</td><td style="width: 9%; text-align: right">300,000</td><td style="width: 1%; text-align: left"> </td></tr>
<tr style="vertical-align: bottom; background-color: White">
<td style="text-align: left">Buildings and Improvements</td><td> </td>
<td style="text-align: left"> </td><td style="text-align: right">1,683,000</td><td style="text-align: left"> </td><td> </td>
<td style="text-align: left"> </td><td style="text-align: right">1,650,000</td><td style="text-align: left"> </td></tr>
<tr style="vertical-align: bottom; background-color: rgb(204,238,255)">
<td style="text-align: left">Machinery and Equipment</td><td> </td>
<td style="text-align: left"> </td><td style="text-align: right">21,686,000</td><td style="text-align: left"> </td><td> </td>
<td style="text-align: left"> </td><td style="text-align: right">18,450,000</td><td style="text-align: left"> </td></tr>
<tr style="vertical-align: bottom; background-color: White">
<td style="text-align: left">Finance Lease Machinery and Equipment</td><td> </td>
<td style="text-align: left"> </td><td style="text-align: right">78,000</td><td style="text-align: left"> </td><td> </td>
<td style="text-align: left"> </td><td style="text-align: right">296,000</td><td style="text-align: left"> </td></tr>
<tr style="vertical-align: bottom; background-color: rgb(204,238,255)">
<td style="text-align: left">Tools and Instruments</td><td> </td>
<td style="text-align: left"> </td><td style="text-align: right">12,116,000</td><td style="text-align: left"> </td><td> </td>
<td style="text-align: left"> </td><td style="text-align: right">11,021,000</td><td style="text-align: left"> </td></tr>
<tr style="vertical-align: bottom; background-color: White">
<td style="text-align: left">Automotive Equipment</td><td> </td>
<td style="text-align: left"> </td><td style="text-align: right">200,000</td><td style="text-align: left"> </td><td> </td>
<td style="text-align: left"> </td><td style="text-align: right">177,000</td><td style="text-align: left"> </td></tr>
<tr style="vertical-align: bottom; background-color: rgb(204,238,255)">
<td style="text-align: left">Furniture and Fixtures</td><td> </td>
<td style="text-align: left"> </td><td style="text-align: right">290,000</td><td style="text-align: left"> </td><td> </td>
<td style="text-align: left"> </td><td style="text-align: right">290,000</td><td style="text-align: left"> </td></tr>
<tr style="vertical-align: bottom; background-color: White">
<td style="text-align: left">Leasehold Improvements</td><td> </td>
<td style="text-align: left"> </td><td style="text-align: right">855,000</td><td style="text-align: left"> </td><td> </td>
<td style="text-align: left"> </td><td style="text-align: right">530,000</td><td style="text-align: left"> </td></tr>
<tr style="vertical-align: bottom; background-color: rgb(204,238,255)">
<td style="text-align: left; padding-bottom: 1.5pt">Computers and Software</td><td style="padding-bottom: 1.5pt"> </td>
<td style="border-bottom: Black 1.5pt solid; text-align: left"> </td><td style="border-bottom: Black 1.5pt solid; text-align: right">436,000</td><td style="padding-bottom: 1.5pt; text-align: left"> </td><td style="padding-bottom: 1.5pt"> </td>
<td style="border-bottom: Black 1.5pt solid; text-align: left"> </td><td style="border-bottom: Black 1.5pt solid; text-align: right">425,000</td><td style="padding-bottom: 1.5pt; text-align: left"> </td></tr>
<tr style="vertical-align: bottom; background-color: White">
<td style="text-align: left">Total Property and Equipment</td><td> </td>
<td style="text-align: left"> </td><td style="text-align: right">37,644,000</td><td style="text-align: left"> </td><td> </td>
<td style="text-align: left"> </td><td style="text-align: right">33,139,000</td><td style="text-align: left"> </td></tr>
<tr style="vertical-align: bottom; background-color: rgb(204,238,255)">
<td style="text-align: left; padding-bottom: 1.5pt">Less: Accumulated Depreciation</td><td style="padding-bottom: 1.5pt"> </td>
<td style="border-bottom: Black 1.5pt solid; text-align: left"> </td><td style="border-bottom: Black 1.5pt solid; text-align: right">(28,063,000</td><td style="padding-bottom: 1.5pt; text-align: left">)</td><td style="padding-bottom: 1.5pt"> </td>
<td style="border-bottom: Black 1.5pt solid; text-align: left"> </td><td style="border-bottom: Black 1.5pt solid; text-align: right">(25,561,000</td><td style="padding-bottom: 1.5pt; text-align: left">)</td></tr>
<tr style="vertical-align: bottom; background-color: White">
<td style="text-align: left; padding-bottom: 4pt">Property and Equipment, net</td><td style="padding-bottom: 4pt"> </td>
<td style="border-bottom: Black 4pt double; text-align: left">$</td><td style="border-bottom: Black 4pt double; text-align: right">9,581,000</td><td style="padding-bottom: 4pt; text-align: left"> </td><td style="padding-bottom: 4pt"> </td>
<td style="border-bottom: Black 4pt double; text-align: left">$</td><td style="border-bottom: Black 4pt double; text-align: right">7,578,000</td><td style="padding-bottom: 4pt; text-align: left"> </td></tr></table>
8717000
9762000
556000
483000
221000
378000
4574000
3951000
18452000
21933000
9810000
8831000
18450000
11021000
177000
290000
530000
425000
1650000
300000
296000
33139000
37644000
300000
1683000
21686000
78000
12116000
200000
290000
855000
436000
25561000
28063000
289000
28000
6576000
7240000
444000
663000
210000
400000
294000
42000
581000
337000
4190000
2595000
<p style="font: 10pt Times New Roman, Times, Serif; margin: 0; text-align: justify"><b>Principal Business Activity</b></p>
<p style="font: 10pt Times New Roman, Times, Serif; margin: 0; text-align: justify; text-indent: 0.5in"> </p>
<p style="font: 10pt Times New Roman, Times, Serif; margin: 0; text-align: justify">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. NTW is a manufacturer of aerospace components, principally landing gear for F-16 and F-18 fighter aircraft.
Sterling manufactures components and provides services for jet engines and ground-power turbines. The Company's customers
consist mainly of publicly traded companies in the aerospace industry.</p>
<p style="font: 10pt Times New Roman, Times, Serif; margin: 0; text-align: justify"><b>Principles of Consolidation</b></p>
<p style="font: 10pt Times New Roman, Times, Serif; margin: 0; text-align: justify; text-indent: 0.5in"> </p>
<p style="font: 10pt Times New Roman, Times, Serif; margin: 0; text-align: justify">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.</p>
<p style="font: 10pt Times New Roman, Times, Serif; margin: 0"><b>Discontinued Operations</b></p>
<p style="font: 10pt Times New Roman, Times, Serif; margin: 0; text-indent: 0.5in"> </p>
<p style="font: 10pt Times New Roman, Times, Serif; margin: 0; text-align: justify">Prior to the closure of EPC and ECC, the results
of operations were included in continuing operations, once it was determined to close both subsidiaries, the results were reclassified
to discontinued operations (see "Note 2 – Discontinued Operations").</p>
<p style="font: 10pt Times New Roman, Times, Serif; margin: 0; text-align: justify"><b>Cash and Cash Equivalents</b></p>
<p style="font: 10pt Times New Roman, Times, Serif; margin: 0; text-align: justify; text-indent: 0.5in"> </p>
<p style="font: 10pt Times New Roman, Times, Serif; margin: 0; text-align: justify">Cash and cash equivalents include all highly
liquid instruments with an original maturity of three months or less.</p>
<p style="font: 10pt Times New Roman, Times, Serif; margin: 0; text-align: justify"><b>Accounts Receivable</b></p>
<p style="font: 10pt Times New Roman, Times, Serif; margin: 0; text-align: justify; text-indent: 0.5in"> </p>
<p style="font: 10pt Times New Roman, Times, Serif; margin: 0; text-align: justify">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.</p>
<p style="font: 10pt Times New Roman, Times, Serif; margin: 0; text-align: justify"><b>Going Concern</b></p>
<p style="font: 10pt Times New Roman, Times, Serif; margin: 0; text-align: justify; text-indent: 0.5in"> </p>
<p style="font: 10pt Times New Roman, Times, Serif; margin: 0; text-align: justify">At each reporting period, the Company evaluates
whether there are conditions or events that raise substantial doubt about its ability to continue as a going concern within one
year after the date that the financial statements are issued. We are required to make certain additional disclosures if we conclude
that substantial doubt exists and such concerns are not alleviated by our plans or when our plans alleviate substantial doubt about
our ability to continue as a going concern. The evaluation entails analyzing prospective operating budgets and forecasts for expectations
of our cash needs and comparing those needs to the current cash and cash equivalent balance and expectations regarding cash to
be generated over the following year. We concluded that substantial doubt of going concern did not exist. See Note 1 – Impact
of COVID-19 for a further discussion.</p>
<p style="font: 10pt Times New Roman, Times, Serif; margin: 0; text-align: justify"><b>Property and Equipment</b></p>
<p style="font: 10pt Times New Roman, Times, Serif; margin: 0; text-align: justify; text-indent: 0.5in"> </p>
<p style="font: 10pt Times New Roman, Times, Serif; margin: 0; text-align: justify">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 $10,000 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.</p>
<p style="font: 10pt Times New Roman, Times, Serif; margin: 0; text-align: justify"><b>Long-Lived and Intangible Assets</b></p>
<p style="font: 10pt Times New Roman, Times, Serif; margin: 0; text-align: justify; text-indent: 0.5in"> </p>
<p style="font: 10pt Times New Roman, Times, Serif; margin: 0; text-align: justify">Identifiable intangible assets are amortized
using the straight-line method over the period of expected benefit.</p>
<p style="font: 10pt Times New Roman, Times, Serif; margin: 0; text-align: justify; text-indent: 0.5in"> </p>
<p style="font: 10pt Times New Roman, Times, Serif; margin: 0; text-align: justify">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. For the year ended December 31, 2019 the Company recorded an impairment charge of $275,000 included in
continuing operations. See Note 10 – Operating Lease Liabilities.</p>
<p style="font: 10pt Times New Roman, Times, Serif; margin: 0; text-align: justify"><b>Deferred Financing Costs</b></p>
<p style="font: 10pt Times New Roman, Times, Serif; margin: 0; text-align: justify; text-indent: 0.5in"> </p>
<p style="font: 10pt Times New Roman, Times, Serif; margin: 0; text-align: justify">Costs incurred with obtaining and executing
revolving debt arrangements are capitalized and recorded in current assets and amortized using the effective interest method over
the term of the related debt. Costs incurred with obtaining and executing other debt arrangements are presented as a direct deduction
from the carrying value of the associated debt and also amortized using the effective interest method over the term of the related
debt. The amortization of financing costs is included in interest and financing costs in the statement of operations.</p>
<p style="font: 10pt Times New Roman, Times, Serif; margin: 0; text-align: justify"><b>Derivative Liabilities</b></p>
<p style="font: 10pt Times New Roman, Times, Serif; margin: 0; text-align: justify; text-indent: 0.5in"> </p>
<p style="font: 10pt Times New Roman, Times, Serif; margin: 0; text-align: justify">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.</p>
<p style="font: 10pt Times New Roman, Times, Serif; margin: 0; text-align: justify"><b>Revenue Recognition</b></p>
<p style="font: 10pt Times New Roman, Times, Serif; margin: 0; text-align: justify; text-indent: 0.5in"><b> </b></p>
<p style="font: 10pt Times New Roman, Times, Serif; margin: 0; text-align: justify">The Company accounts for revenue recognition
in accordance with accounting guidance codified as FASB ASC 606 "Revenue from Contracts with Customers" ("ASC
606"), as amended regarding revenue from contracts with customers. Under the standard an entity is required to recognize
revenue to depict the transfer of promised goods to customers in an amount that reflects the consideration to which the entity
expects to be entitled in exchange for those goods.</p>
<p style="font: 10pt Times New Roman, Times, Serif; margin: 0; text-align: justify; text-indent: 0.5in"> </p>
<p style="font: 10pt Times New Roman, Times, Serif; margin: 0; text-align: justify">Under ASC 606, revenue is recognized as the
customer obtains control of the goods and services promised in the contract (i.e., performance obligations). In evaluating our
contracts with our customers under ASC 606, we have determined that there is no future performance obligation once delivery has
occurred.</p>
<p style="font: 10pt Times New Roman, Times, Serif; margin: 0; text-align: justify; text-indent: 0.5in"> </p>
<p style="font: 10pt Times New Roman, Times, Serif; margin: 0; text-align: justify">The Company's revenues are primarily derived from consideration
paid by customers for tangible goods. The Company analyzes its different goods by segment to determine the appropriate basis for
revenue recognition, as described below. There are no material upfront costs for operations that are incurred from contracts with
customers.</p>
<p style="font: 10pt Times New Roman, Times, Serif; margin: 0; text-indent: 27pt"> </p>
<p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify">The Company's rights to payments
for goods transferred to customers are conditional only on the passage of time and not on any other criteria. Payment terms and
conditions vary by contract, although terms generally include a requirement of payment within 30 to 75 days.</p>
<p style="font: 10pt Times New Roman, Times, Serif; margin: 0; text-align: justify; text-indent: 0.5in"> </p>
<p style="font: 10pt Times New Roman, Times, Serif; margin: 0; text-align: justify">Payments received in advance from customers
are recorded as deferred revenue 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.</p>
<p style="font: 10pt Times New Roman, Times, Serif; margin: 0; text-align: justify"><b>Use of Estimates</b></p>
<p style="font: 10pt Times New Roman, Times, Serif; margin: 0; text-align: justify; text-indent: 0.5in"> </p>
<p style="font: 10pt Times New Roman, Times, Serif; margin: 0; text-align: justify">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 allowance for doubtful accounts, 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.</p>
<p style="font: 10pt Times New Roman, Times, Serif; margin: 0; text-align: justify"><b>Cash and Cash equivalents</b></p>
<p style="font: 10pt Times New Roman, Times, Serif; margin: 0; text-align: justify"> </p>
<p style="font: 10pt Times New Roman, Times, Serif; margin: 0; text-align: justify">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.</p>
<p style="font: 10pt Times New Roman, Times, Serif; margin: 0; text-align: justify"><b>Major Suppliers</b></p>
<p style="font: 10pt Times New Roman, Times, Serif; margin: 0; text-align: justify"> </p>
<p style="font: 10pt Times New Roman, Times, Serif; margin: 0; text-align: justify">The Company has several key sole-source suppliers
of various parts that are important for one or more of its products. These suppliers are its only source for such parts and, therefore,
in the event any of them were to go out of business or be unable to provide parts for any reason, its business could be severely
harmed.</p>
<p style="font: 10pt Times New Roman, Times, Serif; margin: 0; text-align: justify"><b>Income Taxes</b></p>
<p style="font: 10pt Times New Roman, Times, Serif; margin: 0; text-align: justify; text-indent: 0.5in"> </p>
<p style="font: 10pt Times New Roman, Times, Serif; margin: 0; text-align: justify">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.</p>
<p style="font: 10pt Times New Roman, Times, Serif; margin: 0; text-align: justify"> </p>
<p style="font: 10pt Times New Roman, Times, Serif; margin: 0; text-align: justify">The provision for, or benefit from, income
taxes includes deferred taxes resulting from the temporary differences in income for financial and tax purposes using the liability
method. Such temporary differences result primarily from the differences in the carrying value of assets and liabilities. Future
realization of deferred income tax assets requires sufficient taxable income within the carryback, carryforward period available
under tax law. We evaluate, on a quarterly basis whether, based on all available evidence, it is probable that the deferred income
tax assets are realizable. Valuation allowances are established when it is more likely than not that the tax benefit of the deferred
tax asset will not be realized. The evaluation, as prescribed by ASC 740-10, "Income Taxes," includes the consideration
of all available evidence, both positive and negative, regarding historical operating results including recent years with reported
losses, the estimated timing of future reversals of existing taxable temporary differences, estimated future taxable income exclusive
of reversing temporary differences and carryforwards, and potential tax planning strategies which may be employed to prevent an
operating loss or tax credit carryforward from expiring unused.</p>
<p style="font: 10pt Times New Roman, Times, Serif; margin: 0; text-align: justify; text-indent: 0.5in"> </p>
<p style="font: 10pt Times New Roman, Times, Serif; margin: 0; text-align: justify">The Company accounts for uncertainties in income
taxes under the provisions of FASB ASC 740-10-05 (the "Subtopic"). The Subtopic clarifies the accounting for uncertainty
in income taxes recognized in an enterprise's financial statements. The Subtopic 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 Subtopic provides guidance on the de-recognition, classification, interest and penalties, accounting in interim periods, disclosure
and transition.</p>
<p style="font: 10pt Times New Roman, Times, Serif; margin: 0; text-align: justify"><b>Freight Out</b></p>
<p style="font: 10pt Times New Roman, Times, Serif; margin: 0; text-align: justify; text-indent: 0.5in"> </p>
<p style="font: 10pt Times New Roman, Times, Serif; margin: 0; text-align: justify">Freight out is included in operating expenses
and amounted to $91,000 and $134,000 for the years ended December 31, 2020 and 2019, respectively.</p>
<p style="font: 10pt Times New Roman, Times, Serif; margin: 0; text-align: justify"><b>Reclassifications</b></p>
<p style="font: 10pt Times New Roman, Times, Serif; margin: 0; text-align: justify; text-indent: 0.5in"> </p>
<p style="font: 10pt Times New Roman, Times, Serif; margin: 0; text-align: justify">Reclassifications occurred to certain 2019 amounts to conform
to the 2020 classification. These reclassifications had no impact on the statement of operations.</p>
1770000
1770000
-1770000
<p style="font: 10pt Times New Roman, Times, Serif; margin: 0"></p>
<table cellpadding="0" cellspacing="0" style="font: 10pt Times New Roman, Times, Serif; border-collapse: collapse; width: 100%">
<tr style="vertical-align: bottom">
<td style="border-bottom: Black 1.5pt solid; font-weight: bold">Description</td><td style="font-weight: bold; padding-bottom: 1.5pt"> </td>
<td colspan="2" style="border-bottom: Black 1.5pt solid; font-weight: bold; text-align: center">Balance at<br /> Beginning <br /> of Year</td><td style="padding-bottom: 1.5pt; font-weight: bold"> </td><td style="font-weight: bold; padding-bottom: 1.5pt"> </td>
<td colspan="2" style="border-bottom: Black 1.5pt solid; font-weight: bold; text-align: center">Charges to<br /> Loss on Sale<br /> of Subsidiary</td><td style="padding-bottom: 1.5pt; font-weight: bold"> </td><td style="font-weight: bold; padding-bottom: 1.5pt"> </td>
<td colspan="2" style="border-bottom: Black 1.5pt solid; font-weight: bold; text-align: center">Deductions</td><td style="padding-bottom: 1.5pt; font-weight: bold"> </td><td style="font-weight: bold; padding-bottom: 1.5pt"> </td>
<td colspan="2" style="border-bottom: Black 1.5pt solid; font-weight: bold; text-align: center">Balance at<br /> end of year</td><td style="padding-bottom: 1.5pt; font-weight: bold"> </td></tr>
<tr style="vertical-align: bottom">
<td style="padding-left: 10pt; text-align: left; text-indent: -10pt">Valuation reserve deducted from Prepaid Expenses and Other Current Assets:</td><td> </td>
<td colspan="2" style="text-align: right"> </td><td> </td><td> </td>
<td colspan="2" style="text-align: right"> </td><td> </td><td> </td>
<td colspan="2" style="text-align: right"> </td><td> </td><td> </td>
<td colspan="2" style="text-align: right"> </td><td> </td></tr>
<tr style="vertical-align: bottom; background-color: rgb(204,238,255)">
<td style="width: 52%">Year ended December 31, 2020</td><td style="width: 1%"> </td>
<td style="width: 1%; text-align: left">$</td><td style="width: 9%; text-align: right">1,770,000</td><td style="width: 1%; text-align: left"> </td><td style="width: 1%"> </td>
<td style="width: 1%; text-align: left">$</td><td style="width: 9%; text-align: right">           -</td><td style="width: 1%; text-align: left"> </td><td style="width: 1%"> </td>
<td style="width: 1%; text-align: left">$</td><td style="width: 9%; text-align: right">(1,770,000</td><td style="width: 1%; text-align: left">)</td><td style="width: 1%"> </td>
<td style="width: 1%; text-align: left">$</td><td style="width: 9%; text-align: right">-</td><td style="width: 1%; text-align: left"> </td></tr>
<tr style="vertical-align: bottom; background-color: White">
<td>Year ended December 31, 2019</td><td> </td>
<td style="text-align: left">$</td><td style="text-align: right">1,770,000</td><td style="text-align: left"> </td><td> </td>
<td style="text-align: left">$</td><td style="text-align: right">-</td><td style="text-align: left"> </td><td> </td>
<td style="text-align: left">$</td><td style="text-align: right">-</td><td style="text-align: left"> </td><td> </td>
<td style="text-align: left">$</td><td style="text-align: right">1,770,000</td><td style="text-align: left"> </td></tr></table>
3
3
3
3
Customer was less than 10% of sales at December 31, 2019.
Customer was less than 10% of sales at December 31, 2020.
378000
244000
308000
211000
10000
134000
91000
<p style="font: 10pt Times New Roman, Times, Serif; margin: 0; text-align: justify"><b>Note 8. SALE AND LEASEBACK TRANSACTION</b></p>
<p style="font: 10pt Times New Roman, Times, Serif; margin: 0; text-align: justify; text-indent: 0.5in"> </p>
<p style="font: 10pt Times New Roman, Times, Serif; margin: 0; text-align: justify">On October 24, 2006, the Company consummated
a Sale - Leaseback Arrangement, whereby the Company sold the buildings and real property located in Bay Shore, New York (the "Bay
Shore Property") for a purchase price of $6,200,000. 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
Statements of Operations. The unrecognized portion of the gain in the amount of $219,000 and $257,000 as of December 31, 2020 and
2019, respectively, is classified as Deferred Gain on Sale in the accompanying Consolidated Balance Sheets.</p>
<p style="font: 10pt Times New Roman, Times, Serif; margin: 0; text-align: justify"> </p>
<p style="font: 10pt Times New Roman, Times, Serif; margin: 0; text-align: justify">Simultaneous with the closing of the sale of
the Bay Shore 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 the Company an option to renew the Lease for an additional period of five years. The Company has
on deposit with the purchaser of $89,000 as security for the performance of its obligations under the Lease. In addition, at December
31, 2019, the Company had on deposit $150,000 with the landlord as security for the completion of certain repairs and upgrades
to the Bay Shore Property. In 2020, the landlord utilized the amounts on deposit to install air conditioning throughout the manufacturing
facility. At December 31, 2019, this amount was included in the caption Deferred Finance costs, Net, Deposit and Other Assets in
the accompanying Consolidated Balance Sheets. 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 10 – Operating Lease Liabilities.</p>
<p style="font: 10pt Times New Roman, Times, Serif; margin: 0; text-align: justify; text-indent: 0.5in"> </p>
<p style="font: 10pt Times New Roman, Times, Serif; margin: 0; text-align: justify">The Company accounted for these transactions
under the provisions of FASB ASC 840-40, "Leases-Sale-Leaseback Transactions". </p>
38000
38000
300000
1051000
The remaining $751,000 is being recognized ratably over the remaining term of the twenty - year lease at approximately $38,000 per year.
Simultaneous with the closing of the sale of the Bay Shore 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 the Company an option to renew the Lease for an additional period of five years. The Company has on deposit with the purchaser of $89,000 as security for the performance of its obligations under the Lease. In addition, at December 31, 2019, the Company had on deposit $150,000 with the landlord as security for the completion of certain repairs and upgrades to the Bay Shore Property.
6200000
12543000
15649000
3800000
5558000
5617000
22000
6000
385000
48000
48000
6862000
6012000
2338000
25950000
27273000
22544000
16475000
3406000
10798000
<table cellpadding="0" cellspacing="0" style="font: 10pt Times New Roman, Times, Serif; border-collapse: collapse; width: 100%"><tr style="vertical-align: bottom"><td></td><td style="font-weight: bold"> </td>
<td colspan="2" style="font-weight: bold; text-align: center">December 31,</td><td style="font-weight: bold"> </td><td style="font-weight: bold"> </td>
<td colspan="2" style="font-weight: bold; text-align: center">December 31,</td><td style="font-weight: bold"> </td></tr>
<tr style="vertical-align: bottom">
<td> </td><td style="font-weight: bold; padding-bottom: 1.5pt"> </td>
<td colspan="2" style="border-bottom: Black 1.5pt solid; font-weight: bold; text-align: center">2020</td><td style="padding-bottom: 1.5pt; font-weight: bold"> </td><td style="font-weight: bold; padding-bottom: 1.5pt"> </td>
<td colspan="2" style="border-bottom: Black 1.5pt solid; font-weight: bold; text-align: center">2019</td><td style="padding-bottom: 1.5pt; font-weight: bold"> </td></tr>
<tr style="vertical-align: bottom">
<td> </td><td> </td>
<td colspan="2"> </td><td> </td><td> </td>
<td colspan="2"> </td><td> </td></tr>
<tr style="vertical-align: bottom; background-color: rgb(204,238,255)">
<td style="width: 76%; text-align: left">Revolving credit note payable to Sterling National Bank ("SNB")</td><td style="width: 1%"> </td>
<td style="width: 1%; text-align: left">$</td><td style="width: 9%; text-align: right">15,649,000</td><td style="width: 1%; text-align: left"> </td><td style="width: 1%"> </td>
<td style="width: 1%; text-align: left">$</td><td style="width: 9%; text-align: right">12,543,000</td><td style="width: 1%; text-align: left"> </td></tr>
<tr style="vertical-align: bottom; background-color: White">
<td style="text-align: left">Term loan, SNB</td><td> </td>
<td style="text-align: left"> </td><td style="text-align: right">5,558,000</td><td style="text-align: left"> </td><td> </td>
<td style="text-align: left"> </td><td style="text-align: right">3,800,000</td><td style="text-align: left"> </td></tr>
<tr style="vertical-align: bottom; background-color: rgb(204,238,255)">
<td style="text-align: left">Finance lease obligations</td><td> </td>
<td style="text-align: left"> </td><td style="text-align: right">6,000</td><td style="text-align: left"> </td><td> </td>
<td style="text-align: left"> </td><td style="text-align: right">22,000</td><td style="text-align: left"> </td></tr>
<tr style="vertical-align: bottom; background-color: White">
<td style="text-align: left">Loans Payable - financed assets</td><td> </td>
<td style="text-align: left"> </td><td style="text-align: right">48,000</td><td style="text-align: left"> </td><td> </td>
<td style="text-align: left"> </td><td style="text-align: right">385,000</td><td style="text-align: left"> </td></tr>
<tr style="vertical-align: bottom; background-color: rgb(204,238,255)">
<td style="text-align: left">Related party notes payable, net of debt discount</td><td> </td>
<td style="text-align: left"> </td><td style="text-align: right">6,012,000</td><td style="text-align: left"> </td><td> </td>
<td style="text-align: left"> </td><td style="text-align: right">6,862,000</td><td style="text-align: left"> </td></tr>
<tr style="vertical-align: bottom; background-color: White">
<td style="text-align: left; padding-bottom: 1.5pt">Convertible notes payable-third parties, net of debt discount</td><td style="padding-bottom: 1.5pt"> </td>
<td style="border-bottom: Black 1.5pt solid; text-align: left"> </td><td style="border-bottom: Black 1.5pt solid; text-align: right">-</td><td style="padding-bottom: 1.5pt; text-align: left"> </td><td style="padding-bottom: 1.5pt"> </td>
<td style="border-bottom: Black 1.5pt solid; text-align: left"> </td><td style="border-bottom: Black 1.5pt solid; text-align: right">2,338,000</td><td style="padding-bottom: 1.5pt; text-align: left"> </td></tr>
<tr style="vertical-align: bottom; background-color: rgb(204,238,255)">
<td>Subtotal</td><td> </td>
<td style="text-align: left"> </td><td style="text-align: right">27,273,000</td><td style="text-align: left"> </td><td> </td>
<td style="text-align: left"> </td><td style="text-align: right">25,950,000</td><td style="text-align: left"> </td></tr>
<tr style="vertical-align: bottom; background-color: White">
<td style="text-align: left; padding-bottom: 1.5pt">Less: Current portion of notes payable, related party notes payable and finance lease obligations</td><td style="padding-bottom: 1.5pt"> </td>
<td style="border-bottom: Black 1.5pt solid; text-align: left"> </td><td style="border-bottom: Black 1.5pt solid; text-align: right">(16,475,000</td><td style="padding-bottom: 1.5pt; text-align: left">)</td><td style="padding-bottom: 1.5pt"> </td>
<td style="border-bottom: Black 1.5pt solid; text-align: left"> </td><td style="border-bottom: Black 1.5pt solid; text-align: right">(22,544,000</td><td style="padding-bottom: 1.5pt; text-align: left">)</td></tr>
<tr style="vertical-align: bottom; background-color: rgb(204,238,255)">
<td style="text-align: left; padding-bottom: 4pt">Notes payable, related party notes payable and finance lease obligations, net of current portion</td><td style="padding-bottom: 4pt"> </td>
<td style="border-bottom: Black 4pt double; text-align: left">$</td><td style="border-bottom: Black 4pt double; text-align: right">10,798,000</td><td style="padding-bottom: 4pt; text-align: left"> </td><td style="padding-bottom: 4pt"> </td>
<td style="border-bottom: Black 4pt double; text-align: left">$</td><td style="border-bottom: Black 4pt double; text-align: right">3,406,000</td><td style="padding-bottom: 4pt; text-align: left"> </td></tr></table>
<p style="font: 10pt Times New Roman, Times, Serif; margin: 0; text-align: justify"></p>
<table cellpadding="0" cellspacing="0" style="font: 10pt Times New Roman, Times, Serif; border-collapse: collapse; width: 100%">
<tr style="vertical-align: bottom">
<td style="border-bottom: Black 1.5pt solid; font-weight: bold"><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0"><b>For
the year ending</b></p></td><td style="font-weight: bold; padding-bottom: 1.5pt"> </td>
<td colspan="2" style="border-bottom: Black 1.5pt solid; font-weight: bold; text-align: center">Amount</td><td style="padding-bottom: 1.5pt; font-weight: bold"> </td></tr>
<tr style="vertical-align: bottom; background-color: rgb(204,238,255)">
<td style="width: 88%">December 31, 2021</td><td style="width: 1%"> </td>
<td style="width: 1%; text-align: left">$</td><td style="width: 9%; text-align: right">812,000</td><td style="width: 1%; text-align: left"> </td></tr>
<tr style="vertical-align: bottom; background-color: White">
<td style="padding-bottom: 1.5pt">December 31, 2022</td><td style="padding-bottom: 1.5pt"> </td>
<td style="border-bottom: Black 1.5pt solid; text-align: left"> </td><td style="border-bottom: Black 1.5pt solid; text-align: right">4,805,000</td><td style="padding-bottom: 1.5pt; text-align: left"> </td></tr>
<tr style="vertical-align: bottom; background-color: rgb(204,238,255)">
<td style="text-align: left">SNB Term Loans payable</td><td> </td>
<td style="text-align: left"> </td><td style="text-align: right">5,617,000</td><td style="text-align: left"> </td></tr>
<tr style="vertical-align: bottom; background-color: White">
<td style="text-align: left; padding-bottom: 1.5pt">Less: debt issuance costs</td><td style="padding-bottom: 1.5pt"> </td>
<td style="border-bottom: Black 1.5pt solid; text-align: left"> </td><td style="border-bottom: Black 1.5pt solid; text-align: right">(59,000</td><td style="padding-bottom: 1.5pt; text-align: left">)</td></tr>
<tr style="vertical-align: bottom; background-color: rgb(204,238,255)">
<td style="text-align: left">Total SNB Term loan payable, net of debt issuance costs</td><td> </td>
<td style="text-align: left"> </td><td style="text-align: right">5,558,000</td><td style="text-align: left"> </td></tr>
<tr style="vertical-align: bottom; background-color: White">
<td style="text-align: left; padding-bottom: 1.5pt">Less: Current portion of SNB term loan payable</td><td style="padding-bottom: 1.5pt"> </td>
<td style="border-bottom: Black 1.5pt solid; text-align: left"> </td><td style="border-bottom: Black 1.5pt solid; text-align: right">812,000</td><td style="padding-bottom: 1.5pt; text-align: left"> </td></tr>
<tr style="vertical-align: bottom; background-color: rgb(204,238,255)">
<td style="text-align: left; padding-bottom: 4pt">Total long-term portion of SNB term loan payable</td><td style="padding-bottom: 4pt"> </td>
<td style="border-bottom: Black 4pt double; text-align: left">$</td><td style="border-bottom: Black 4pt double; text-align: right">4,746,000</td><td style="padding-bottom: 4pt; text-align: left"> </td></tr>
</table>
<p style="font: 10pt Times New Roman, Times, Serif; margin: 0; text-align: justify"></p>
<p style="margin: 0pt"></p>
<table cellpadding="0" cellspacing="0" style="font: 10pt Times New Roman, Times, Serif; border-collapse: collapse; width: 100%">
<tr style="vertical-align: bottom">
<td style="border-bottom: Black 1.5pt solid; font-weight: bold"><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0"><b>For
the year ending</b></p></td><td style="font-weight: bold; padding-bottom: 1.5pt"> </td>
<td colspan="2" style="border-bottom: Black 1.5pt solid; font-weight: bold; text-align: center">Amount</td><td style="padding-bottom: 1.5pt; font-weight: bold"> </td></tr>
<tr style="vertical-align: bottom; background-color: rgb(204,238,255)">
<td style="width: 88%">December 31, 2021</td><td style="width: 1%"> </td>
<td style="width: 1%; text-align: left">$</td><td style="width: 9%; text-align: right">9,000</td><td style="width: 1%; text-align: left"> </td></tr>
<tr style="vertical-align: bottom; background-color: White">
<td>December 31, 2022</td><td> </td>
<td style="text-align: left"> </td><td style="text-align: right">9,000</td><td style="text-align: left"> </td></tr>
<tr style="vertical-align: bottom; background-color: rgb(204,238,255)">
<td>December 31, 2023</td><td> </td>
<td style="text-align: left"> </td><td style="text-align: right">9,000</td><td style="text-align: left"> </td></tr>
<tr style="vertical-align: bottom; background-color: White">
<td>December 31, 2024</td><td> </td>
<td style="text-align: left"> </td><td style="text-align: right">9,000</td><td style="text-align: left"> </td></tr>
<tr style="vertical-align: bottom; background-color: rgb(204,238,255)">
<td>December 31, 2025</td><td> </td>
<td style="text-align: left"> </td><td style="text-align: right">9,000</td><td style="text-align: left"> </td></tr>
<tr style="vertical-align: bottom; background-color: White">
<td style="padding-bottom: 1.5pt">Thereafter</td><td style="padding-bottom: 1.5pt"> </td>
<td style="border-bottom: Black 1.5pt solid; text-align: left"> </td><td style="border-bottom: Black 1.5pt solid; text-align: right">3,000</td><td style="padding-bottom: 1.5pt; text-align: left"> </td></tr>
<tr style="vertical-align: bottom; background-color: rgb(204,238,255)">
<td style="text-align: left">Loans Payable - financed assets</td><td> </td>
<td style="text-align: left"> </td><td style="text-align: right">48,000</td><td style="text-align: left"> </td></tr>
<tr style="vertical-align: bottom; background-color: White">
<td style="text-align: left; padding-bottom: 1.5pt">Less: Current portion</td><td style="padding-bottom: 1.5pt"> </td>
<td style="border-bottom: Black 1.5pt solid; text-align: left"> </td><td style="border-bottom: Black 1.5pt solid; text-align: right">9,000</td><td style="padding-bottom: 1.5pt; text-align: left"> </td></tr>
<tr style="vertical-align: bottom; background-color: rgb(204,238,255)">
<td style="padding-bottom: 4pt">Long-term portion</td><td style="padding-bottom: 4pt"> </td>
<td style="border-bottom: Black 4pt double; text-align: left">$</td><td style="border-bottom: Black 4pt double; text-align: right">39,000</td><td style="padding-bottom: 4pt; text-align: left"> </td></tr>
</table>
<p style="margin: 0pt"> </p>
812000
4805000
59000
5558000
812000
9000
9000
9000
9000
9000
3000
39000
4812000
2666000
1905000
241000
1200000
1600000
1250000
350000
100000
1000000
<p style="font: 10pt Times New Roman, Times, Serif; margin: 0; text-align: justify"><b>Note 10. OPERATING LEASE LIABILITIES</b></p>
<p style="font: 10pt Times New Roman, Times, Serif; margin: 0; text-align: justify; text-indent: 0.5in"><b> </b></p>
<p style="font: 10pt Times New Roman, Times, Serif; margin: 0; text-align: justify">The Company leases substantially all of its
office space, technology equipment and office equipment used to conduct its business. The Company adopted ASC 842 effective January
1, 2019. For contracts entered into on or after the effective date, at the inception of a contract it assesses whether the contract
is, or contains, a lease. The Company's assessment is based on: (1) whether the contract involves the use of a distinct identified
asset, (2) whether its obtains the right to substantially all the economic benefit from the use of the asset throughout the period,
and (3) whether it has the right to direct the use of the asset. At inception of a lease, the Company allocates the consideration
in the contract to each lease component based on its relative stand-alone price to determine the lease payments. Leases entered
into prior to January 1, 2019, are accounted for under ASC 840 and were not reassessed.</p>
<p style="font: 10pt Times New Roman, Times, Serif; margin: 0"> </p>
<p style="font: 10pt Times New Roman, Times, Serif; margin: 0; text-align: justify">The aggregate undiscounted cash flows of operating
lease payments, with remaining terms greater than one year are as follows:</p>
<p style="font: 10pt Times New Roman, Times, Serif; margin: 0; text-align: justify"> </p>
<table cellpadding="0" cellspacing="0" style="font: 10pt Times New Roman, Times, Serif; border-collapse: collapse; width: 100%">
<tr style="vertical-align: bottom">
<td><b>For the year ended</b></td><td style="font-weight: bold; padding-bottom: 1.5pt"> </td>
<td colspan="2" style="border-bottom: Black 1.5pt solid; font-weight: bold; text-align: center">Amount</td><td style="padding-bottom: 1.5pt; font-weight: bold"> </td></tr>
<tr style="vertical-align: bottom; background-color: rgb(204,238,255)">
<td style="width: 88%">December 31, 2021</td><td style="width: 1%"> </td>
<td style="width: 1%; text-align: left">$</td><td style="width: 9%; text-align: right">1,080,000</td><td style="width: 1%; text-align: left"> </td></tr>
<tr style="vertical-align: bottom; background-color: White">
<td>December 31, 2022</td><td> </td>
<td style="text-align: left"> </td><td style="text-align: right">1,007,000</td><td style="text-align: left"> </td></tr>
<tr style="vertical-align: bottom; background-color: rgb(204,238,255)">
<td>December 31, 2023</td><td> </td>
<td style="text-align: left"> </td><td style="text-align: right">1,038,000</td><td style="text-align: left"> </td></tr>
<tr style="vertical-align: bottom; background-color: White">
<td>December 31, 2024</td><td> </td>
<td style="text-align: left"> </td><td style="text-align: right">1,070,000</td><td style="text-align: left"> </td></tr>
<tr style="vertical-align: bottom; background-color: rgb(204,238,255)">
<td>December 31, 2025</td><td> </td>
<td style="text-align: left"> </td><td style="text-align: right">992,000</td><td style="text-align: left"> </td></tr>
<tr style="vertical-align: bottom; background-color: White">
<td style="padding-bottom: 1.5pt">Thereafter</td><td style="padding-bottom: 1.5pt"> </td>
<td style="border-bottom: Black 1.5pt solid; text-align: left"> </td><td style="border-bottom: Black 1.5pt solid; text-align: right">730,000</td><td style="padding-bottom: 1.5pt; text-align: left"> </td></tr>
<tr style="vertical-align: bottom; background-color: rgb(204,238,255)">
<td style="text-align: left">Total future minimum lease payments</td><td> </td>
<td style="text-align: left"> </td><td style="text-align: right">5,917,000</td><td style="text-align: left"> </td></tr>
<tr style="vertical-align: bottom; background-color: White">
<td style="text-align: left; padding-bottom: 1.5pt">Less: discount</td><td style="padding-bottom: 1.5pt"> </td>
<td style="border-bottom: Black 1.5pt solid; text-align: left"> </td><td style="border-bottom: Black 1.5pt solid; text-align: right">(1,289,000</td><td style="padding-bottom: 1.5pt; text-align: left">)</td></tr>
<tr style="vertical-align: bottom; background-color: rgb(204,238,255)">
<td style="text-align: left">Total operating lease maturities</td><td> </td>
<td style="text-align: left"> </td><td style="text-align: right">4,628,000</td><td style="text-align: left"> </td></tr>
<tr style="vertical-align: bottom; background-color: White">
<td style="text-align: left; padding-bottom: 1.5pt">Less: current portion of operating lease liabilities</td><td style="padding-bottom: 1.5pt"> </td>
<td style="border-bottom: Black 1.5pt solid; text-align: left"> </td><td style="border-bottom: Black 1.5pt solid; text-align: right">(701,000</td><td style="padding-bottom: 1.5pt; text-align: left">)</td></tr>
<tr style="vertical-align: bottom; background-color: rgb(204,238,255)">
<td style="text-align: left; padding-bottom: 4pt">Total long term portion of operating lease maturities</td><td style="padding-bottom: 4pt"> </td>
<td style="border-bottom: Black 4pt double; text-align: left">$</td><td style="border-bottom: Black 4pt double; text-align: right">3,927,000</td><td style="padding-bottom: 4pt; text-align: left"> </td></tr>
</table>
<p style="font: 10pt Times New Roman, Times, Serif; margin: 0; text-align: justify"> </p>
<table cellpadding="0" cellspacing="0" style="font: 10pt Times New Roman, Times, Serif; border-collapse: collapse; width: 100%">
<tr style="vertical-align: bottom">
<td> </td>
<td> </td>
<td colspan="2" style="white-space: nowrap; text-align: center"><font style="font: 10pt Times New Roman, Times, Serif"><b>December 31,</b></font></td>
<td> </td>
<td> </td>
<td colspan="2" style="white-space: nowrap; text-align: center"><font style="font: 10pt Times New Roman, Times, Serif"><b>December 31,</b></font></td>
<td> </td></tr>
<tr style="vertical-align: bottom">
<td> </td>
<td> </td>
<td colspan="2" style="border-bottom: black 1.5pt solid; text-align: center"><font style="font: 10pt Times New Roman, Times, Serif"><b>2020</b></font></td>
<td> </td>
<td> </td>
<td colspan="2" style="border-bottom: black 1.5pt solid; text-align: center"><font style="font: 10pt Times New Roman, Times, Serif"><b>2019</b></font></td>
<td> </td></tr>
<tr style="vertical-align: bottom; background-color: #CCEEFF">
<td style="width: 76%"><font style="font: 10pt Times New Roman, Times, Serif">Weighted Average Remaining Lease Term - in years</font></td>
<td style="width: 1%"> </td>
<td style="width: 1%"> </td>
<td style="width: 9%; text-align: right"><font style="font: 10pt Times New Roman, Times, Serif">5.53</font></td>
<td style="width: 1%"> </td>
<td style="width: 1%"> </td>
<td style="width: 1%"> </td>
<td style="width: 9%; text-align: right"><font style="font: 10pt Times New Roman, Times, Serif">6.32</font></td>
<td style="width: 1%"> </td></tr>
<tr style="vertical-align: bottom; background-color: white">
<td><font style="font: 10pt Times New Roman, Times, Serif">Weighted Average discount rate - %</font></td>
<td> </td>
<td> </td>
<td style="text-align: right"><font style="font: 10pt Times New Roman, Times, Serif">8.89</font></td>
<td><font style="font: 10pt Times New Roman, Times, Serif">%</font></td>
<td> </td>
<td> </td>
<td style="text-align: right"><font style="font: 10pt Times New Roman, Times, Serif">9.50</font></td>
<td><font style="font: 10pt Times New Roman, Times, Serif">%</font></td></tr>
</table>
<p style="font: 10pt Times New Roman, Times, Serif; margin: 0; text-align: justify"> </p>
<p style="font: 10pt Times New Roman, Times, Serif; margin: 0; text-align: justify">As part of the effort to reduce costs, corporate
executive offices were moved to an existing 5.4-acre corporate campus in Bay Shore, New York. The Company remains liable under
the lease for the office in Hauppauge, New York which is now vacant. This lease has a term which ends January 2022. The annual
rent was approximately $113,000 for the lease year which began in January 2019 and increases by approximately 3% per annum each
year thereafter. Accordingly, the Company recognized an impairment of $275,000 to its Operating Lease Right-of-Use-Asset for the
year ended December 31, 2019.</p>
<p style="font: 10pt Times New Roman, Times, Serif; margin: 0; text-align: justify"> </p>
<p style="font: 10pt Times New Roman, Times, Serif; margin: 0; text-align: justify">NTW's warehouse lease was terminated
in May 2020 by its landlord under the terms of its lease agreement. Additionally, the Company entered into a new lease agreement
for warehouse space in Bohemia, NY. The new lease term commenced on April 1, 2020 and expires on May 31, 2025. During the first
year of the lease, the monthly rent is $10,964 and increases 3% each year thereafter. The final two months are equal installments
of $1,746.</p>
<p style="font: 10pt Times New Roman, Times, Serif; margin: 0; text-align: justify"> </p>
<p style="font: 10pt Times New Roman, Times, Serif; margin: 0; text-align: justify">Rent expense for the years ended December 31,
2020 and 2019 was $1,173,000 and $1,193,000, respectively.</p>
<table cellpadding="0" cellspacing="0" style="font: 10pt Times New Roman, Times, Serif; border-collapse: collapse; width: 100%"><tr style="vertical-align: bottom"><td> </td>
<td> </td>
<td colspan="2" style="white-space: nowrap; text-align: center"><font style="font: 10pt Times New Roman, Times, Serif"><b>December 31,</b></font></td>
<td> </td>
<td> </td>
<td colspan="2" style="white-space: nowrap; text-align: center"><font style="font: 10pt Times New Roman, Times, Serif"><b>December 31,</b></font></td>
<td> </td></tr>
<tr style="vertical-align: bottom">
<td> </td>
<td> </td>
<td colspan="2" style="border-bottom: black 1.5pt solid; text-align: center"><font style="font: 10pt Times New Roman, Times, Serif"><b>2020</b></font></td>
<td> </td>
<td> </td>
<td colspan="2" style="border-bottom: black 1.5pt solid; text-align: center"><font style="font: 10pt Times New Roman, Times, Serif"><b>2019</b></font></td>
<td> </td></tr>
<tr style="vertical-align: bottom; background-color: #CCEEFF">
<td style="width: 76%"><font style="font: 10pt Times New Roman, Times, Serif">Weighted Average Remaining Lease Term - in years</font></td>
<td style="width: 1%"> </td>
<td style="width: 1%"> </td>
<td style="width: 9%; text-align: right"><font style="font: 10pt Times New Roman, Times, Serif">5.53</font></td>
<td style="width: 1%"> </td>
<td style="width: 1%"> </td>
<td style="width: 1%"> </td>
<td style="width: 9%; text-align: right"><font style="font: 10pt Times New Roman, Times, Serif">6.32</font></td>
<td style="width: 1%"> </td></tr>
<tr style="vertical-align: bottom; background-color: white">
<td><font style="font: 10pt Times New Roman, Times, Serif">Weighted Average discount rate - %</font></td>
<td> </td>
<td> </td>
<td style="text-align: right"><font style="font: 10pt Times New Roman, Times, Serif">8.89</font></td>
<td><font style="font: 10pt Times New Roman, Times, Serif">%</font></td>
<td> </td>
<td> </td>
<td style="text-align: right"><font style="font: 10pt Times New Roman, Times, Serif">9.50</font></td>
<td><font style="font: 10pt Times New Roman, Times, Serif">%</font></td></tr></table>
<table cellpadding="0" cellspacing="0" style="font: 10pt Times New Roman, Times, Serif; border-collapse: collapse; width: 100%"><tr style="vertical-align: bottom"><td><b>For the year ended</b></td><td style="font-weight: bold; padding-bottom: 1.5pt"> </td>
<td colspan="2" style="border-bottom: Black 1.5pt solid; font-weight: bold; text-align: center">Amount</td><td style="padding-bottom: 1.5pt; font-weight: bold"> </td></tr>
<tr style="vertical-align: bottom; background-color: rgb(204,238,255)">
<td style="width: 88%">December 31, 2021</td><td style="width: 1%"> </td>
<td style="width: 1%; text-align: left">$</td><td style="width: 9%; text-align: right">1,080,000</td><td style="width: 1%; text-align: left"> </td></tr>
<tr style="vertical-align: bottom; background-color: White">
<td>December 31, 2022</td><td> </td>
<td style="text-align: left"> </td><td style="text-align: right">1,007,000</td><td style="text-align: left"> </td></tr>
<tr style="vertical-align: bottom; background-color: rgb(204,238,255)">
<td>December 31, 2023</td><td> </td>
<td style="text-align: left"> </td><td style="text-align: right">1,038,000</td><td style="text-align: left"> </td></tr>
<tr style="vertical-align: bottom; background-color: White">
<td>December 31, 2024</td><td> </td>
<td style="text-align: left"> </td><td style="text-align: right">1,070,000</td><td style="text-align: left"> </td></tr>
<tr style="vertical-align: bottom; background-color: rgb(204,238,255)">
<td>December 31, 2025</td><td> </td>
<td style="text-align: left"> </td><td style="text-align: right">992,000</td><td style="text-align: left"> </td></tr>
<tr style="vertical-align: bottom; background-color: White">
<td style="padding-bottom: 1.5pt">Thereafter</td><td style="padding-bottom: 1.5pt"> </td>
<td style="border-bottom: Black 1.5pt solid; text-align: left"> </td><td style="border-bottom: Black 1.5pt solid; text-align: right">730,000</td><td style="padding-bottom: 1.5pt; text-align: left"> </td></tr>
<tr style="vertical-align: bottom; background-color: rgb(204,238,255)">
<td style="text-align: left">Total future minimum lease payments</td><td> </td>
<td style="text-align: left"> </td><td style="text-align: right">5,917,000</td><td style="text-align: left"> </td></tr>
<tr style="vertical-align: bottom; background-color: White">
<td style="text-align: left; padding-bottom: 1.5pt">Less: discount</td><td style="padding-bottom: 1.5pt"> </td>
<td style="border-bottom: Black 1.5pt solid; text-align: left"> </td><td style="border-bottom: Black 1.5pt solid; text-align: right">(1,289,000</td><td style="padding-bottom: 1.5pt; text-align: left">)</td></tr>
<tr style="vertical-align: bottom; background-color: rgb(204,238,255)">
<td style="text-align: left">Total operating lease maturities</td><td> </td>
<td style="text-align: left"> </td><td style="text-align: right">4,628,000</td><td style="text-align: left"> </td></tr>
<tr style="vertical-align: bottom; background-color: White">
<td style="text-align: left; padding-bottom: 1.5pt">Less: current portion of operating lease liabilities</td><td style="padding-bottom: 1.5pt"> </td>
<td style="border-bottom: Black 1.5pt solid; text-align: left"> </td><td style="border-bottom: Black 1.5pt solid; text-align: right">(701,000</td><td style="padding-bottom: 1.5pt; text-align: left">)</td></tr>
<tr style="vertical-align: bottom; background-color: rgb(204,238,255)">
<td style="text-align: left; padding-bottom: 4pt">Total long term portion of operating lease maturities</td><td style="padding-bottom: 4pt"> </td>
<td style="border-bottom: Black 4pt double; text-align: left">$</td><td style="border-bottom: Black 4pt double; text-align: right">3,927,000</td><td style="padding-bottom: 4pt; text-align: left"> </td></tr></table>
P6Y3M26D
P5Y6M10D
0.0950
0.0889
1080000
1007000
1038000
1070000
992000
730000
5917000
-1289000
4628000
-701000
The Company entered into a new lease agreement for warehouse space in Bohemia, NY. The new lease term commenced on April 1, 2020 and expires on May 31, 2025. During the first year of the lease, the monthly rent is $10,964 and increases 3% each year thereafter. The final two months are equal installments of $1,746.
1193000
1173000
113000
0.03
275000
5.4
800000
602000
322000
-282000
-402000
-3000
-3000
599000
319000
363000
The Company entered into a "Purchase Agreement" with 15 accredited investors (the "Purchasers"), including Michael and Robert Taglich, pursuant to which the Company assigned to the Purchasers all of their rights, title and interest to the remaining $1,137,000 of the $1,500,000 in payments due from Meyer for the sale of AMK (the "Remaining Amount") for an immediate payment of $800,000, including $100,000 from each of Michael and Robert Taglich, and $75,000 for the benefit of the children of Michael Taglich. The timing of the payments is based upon the net sales of AMK. If the Purchasers have not received the entire Remaining Amount by March 31, 2023, they have the right to demand payment of their pro rata portion of the unpaid Remaining Amount from the Company ("Put Right"). To the extent the Purchasers exercise their Put Right, the remaining payments from Meyer will be retained by the Company.
800000
0.12
0.18
0.12
<p style="font: 10pt Times New Roman, Times, Serif; margin: 0"><b>Note 11. LIABILITY RELATED TO THE SALE OF FUTURE PROCEEDS FROM
DISPOSITION OF SUBSIDIARY</b></p>
<p style="font: 10pt Times New Roman, Times, Serif; margin: 0; text-align: justify; text-indent: 0.5in"> </p>
<p style="font: 10pt Times New Roman, Times, Serif; margin: 0; text-align: justify">In connection with the sale of the Company's
wholly-owned subsidiary, AMK Welding, Inc. ("AMK") to Meyer Tool, Inc., ("Meyer") in 2017, Meyer was obligated
to pay the Company within 30 days after the end of each calendar quarter, commencing April 1, 2017, an amount equal to five (5%)
percent of the net sales of AMK for that quarter until the aggregate payments made to the Company (the "Meyer Agreement")
equals $1,500,000 (the "Maximum Amount").</p>
<p style="font: 10pt Times New Roman, Times, Serif; margin: 0; text-align: justify; text-indent: 0.5in"> </p>
<p style="font: 10pt Times New Roman, Times, Serif; margin: 0; text-align: justify">As of December 31, 2018, the Company received
an aggregate of $363,000 under the Meyer Agreement.</p>
<p style="font: 10pt Times New Roman, Times, Serif; margin: 0; text-align: justify; text-indent: 0.5in"> </p>
<p style="font: 10pt Times New Roman, Times, Serif; margin: 0; text-align: justify">In order to increase liquidity, on January
15, 2019, the Company entered into a "Purchase Agreement" with 15 accredited investors (the "Purchasers"),
including Michael and Robert Taglich, pursuant to which the Company assigned to the Purchasers all of their rights, title and interest
to the remaining $1,137,000 of the $1,500,000 in payments due from Meyer for the sale of AMK (the "Remaining Amount")
for an immediate payment of $800,000, including $100,000 from each of Michael and Robert Taglich, and $75,000 for the benefit of
the children of Michael Taglich. The timing of the payments is based upon the net sales of AMK. If the Purchasers have not received
the entire Remaining Amount by March 31, 2023, they have the right to demand payment of their pro rata portion of the unpaid Remaining
Amount from the Company ("Put Right"). To the extent the Purchasers exercise their Put Right, the remaining payments
from Meyer will be retained by the Company.</p>
<p style="font: 10pt Times New Roman, Times, Serif; margin: 0; text-align: justify"> </p>
<p style="font: 10pt Times New Roman, Times, Serif; margin: 0; text-align: justify">The Purchasers have agreed to pay Taglich
Brothers, Inc. a fee equal to 2% per annum of the purchase price paid by such Purchasers, payable quarterly, to be deducted from the
payments of the Remaining Amount, for acting as paying agent in connection with the payments from Meyer.</p>
<p style="font: 10pt Times New Roman, Times, Serif; margin: 0; text-align: justify; text-indent: 0.5in"> </p>
<p style="font: 10pt Times New Roman, Times, Serif; margin: 0; text-align: justify">Although the Company sold all of its rights
to the Remaining Amount, as a result of its obligation to the Purchasers, the Company is required to account for the Remaining
Amount or portion thereof as income when earned. The Company recorded the $800,000 in proceeds as a liability on its consolidated
balance sheet, net of transaction costs of $3,000. Transaction costs will be amortized to interest expense over the estimated life
of the Purchase Agreement.</p>
<p style="font: 10pt Times New Roman, Times, Serif; margin: 0; text-align: justify; text-indent: 0.5in"> </p>
<p style="font: 10pt Times New Roman, Times, Serif; margin: 0; text-align: justify">As payments are remitted to the Purchasers,
the balance of the recorded liability will be effectively repaid over the life of the Purchase Agreement. To determine the amortization
of the recorded liability, the Company is required to estimate the total amount of future payment to be received by the Purchasers.
The Company estimates that the entire Remaining Amount will be received, and accordingly, the Remaining Amount less the $800,000
purchase price received (the "Discount") will be amortized into the liability balance and recorded as interest expense.
The Discount will be amortized through the earliest date that the Purchasers can exercise their Put Right, using the straight line
method (which is not materially different than the effective interest method) over the estimated life of the Purchase Agreement
with the Purchasers. Periodically, the Company will assess the estimated payments to be made to the Purchasers related to the Meyer
Agreement, and to the extent the amount or timing of the payments is materially different from their original estimates, the Company
will prospectively adjust the amortization of the liability. The amount or timing of the payments from Meyer are not within the
Company's control. Since the inception of the Purchase Agreement, the Company estimates the effective annual interest rate
over the life of the agreement to be approximately 18%.</p>
<p style="font: 10pt Times New Roman, Times, Serif; margin: 0; text-align: justify; text-indent: 0.5in"> </p>
<p style="font: 10pt Times New Roman, Times, Serif; margin: 0; text-align: justify">The liability is classified between the current
and non-current portion of liability related to sale of future proceeds from disposition of subsidiary based on the estimated recognition
of the payments to be received by the purchasers in the next 12 months from the financial statements reporting date.</p>
<p style="font: 10pt Times New Roman, Times, Serif; margin: 0; text-align: justify; text-indent: 0.5in"> </p>
<p style="font: 10pt Times New Roman, Times, Serif; margin: 0; text-align: justify">The table below shows the activity within the
liability account for the years ended December 31, 2020 and 2019:</p>
<p style="font: 10pt Times New Roman, Times, Serif; margin: 0; text-align: justify"> </p>
<table cellpadding="0" cellspacing="0" style="font: 10pt Times New Roman, Times, Serif; border-collapse: collapse; width: 100%">
<tr style="vertical-align: bottom">
<td> </td><td style="font-weight: bold; padding-bottom: 1.5pt"> </td>
<td colspan="2" style="border-bottom: Black 1.5pt solid; font-weight: bold; text-align: center">December 31,<br /> 2020</td><td style="padding-bottom: 1.5pt; font-weight: bold"> </td><td style="font-weight: bold; padding-bottom: 1.5pt"> </td>
<td colspan="2" style="border-bottom: Black 1.5pt solid; font-weight: bold; text-align: center">December 31,<br /> 2019</td><td style="padding-bottom: 1.5pt; font-weight: bold"> </td></tr>
<tr style="vertical-align: bottom; background-color: rgb(204,238,255)">
<td style="width: 76%; text-align: left">Cash received from sale of future proceeds from disposition of subsidiary</td><td style="width: 1%"> </td>
<td style="width: 1%; text-align: left">$</td><td style="width: 9%; text-align: right">-</td><td style="width: 1%; text-align: left"> </td><td style="width: 1%"> </td>
<td style="width: 1%; text-align: left">$</td><td style="width: 9%; text-align: right">800,000</td><td style="width: 1%; text-align: left"> </td></tr>
<tr style="vertical-align: bottom; background-color: White">
<td style="text-align: left">Liabilities related to sale of future proceeds from disposition of subsidiary – beginning balance</td><td> </td>
<td style="text-align: left"> </td><td style="text-align: right">602,000</td><td style="text-align: left"> </td><td> </td>
<td style="text-align: left"> </td><td style="text-align: right">-</td><td style="text-align: left"> </td></tr>
<tr style="vertical-align: bottom; background-color: rgb(204,238,255)">
<td style="text-align: left">Non-Cash other income recognized</td><td> </td>
<td style="text-align: left"> </td><td style="text-align: right">(402,000</td><td style="text-align: left">)</td><td> </td>
<td style="text-align: left"> </td><td style="text-align: right">(282,000</td><td style="text-align: left">)</td></tr>
<tr style="vertical-align: bottom; background-color: White">
<td style="text-align: left; padding-bottom: 1.5pt">Non-Cash interest expense recognized</td><td style="padding-bottom: 1.5pt"> </td>
<td style="border-bottom: Black 1.5pt solid; text-align: left"> </td><td style="border-bottom: Black 1.5pt solid; text-align: right">122,000</td><td style="padding-bottom: 1.5pt; text-align: left"> </td><td style="padding-bottom: 1.5pt"> </td>
<td style="border-bottom: Black 1.5pt solid; text-align: left"> </td><td style="border-bottom: Black 1.5pt solid; text-align: right">84,000</td><td style="padding-bottom: 1.5pt; text-align: left"> </td></tr>
<tr style="vertical-align: bottom; background-color: rgb(204,238,255)">
<td style="text-align: left">Liabilities related to sale of future proceeds from disposition of subsidiary – ending balance</td><td> </td>
<td style="text-align: left"> </td><td style="text-align: right">322,000</td><td style="text-align: left"> </td><td> </td>
<td style="text-align: left"> </td><td style="text-align: right">602,000</td><td style="text-align: left"> </td></tr>
<tr style="vertical-align: bottom; background-color: White">
<td style="text-align: left; padding-bottom: 1.5pt">Less: unamortized transaction costs</td><td style="padding-bottom: 1.5pt"> </td>
<td style="border-bottom: Black 1.5pt solid; text-align: left"> </td><td style="border-bottom: Black 1.5pt solid; text-align: right">(3,000</td><td style="padding-bottom: 1.5pt; text-align: left">)</td><td style="padding-bottom: 1.5pt"> </td>
<td style="border-bottom: Black 1.5pt solid; text-align: left"> </td><td style="border-bottom: Black 1.5pt solid; text-align: right">(3,000</td><td style="padding-bottom: 1.5pt; text-align: left">)</td></tr>
<tr style="vertical-align: bottom; background-color: rgb(204,238,255)">
<td style="text-align: left; padding-bottom: 4pt">Liability related to sale of future proceeds from disposition of subsidiary, net</td><td style="padding-bottom: 4pt"> </td>
<td style="border-bottom: Black 4pt double; text-align: left">$</td><td style="border-bottom: Black 4pt double; text-align: right">319,000</td><td style="padding-bottom: 4pt; text-align: left"> </td><td style="padding-bottom: 4pt"> </td>
<td style="border-bottom: Black 4pt double; text-align: left">$</td><td style="border-bottom: Black 4pt double; text-align: right">599,000</td><td style="padding-bottom: 4pt; text-align: left"> </td></tr></table>
<table cellpadding="0" cellspacing="0" style="font: 10pt Times New Roman, Times, Serif; border-collapse: collapse; width: 100%"><tr style="vertical-align: bottom"><td> </td><td style="font-weight: bold; padding-bottom: 1.5pt"> </td>
<td colspan="2" style="border-bottom: Black 1.5pt solid; font-weight: bold; text-align: center">December 31,<br /> 2020</td><td style="padding-bottom: 1.5pt; font-weight: bold"> </td><td style="font-weight: bold; padding-bottom: 1.5pt"> </td>
<td colspan="2" style="border-bottom: Black 1.5pt solid; font-weight: bold; text-align: center">December 31,<br /> 2019</td><td style="padding-bottom: 1.5pt; font-weight: bold"> </td></tr>
<tr style="vertical-align: bottom; background-color: rgb(204,238,255)">
<td style="width: 76%; text-align: left">Cash received from sale of future proceeds from disposition of subsidiary</td><td style="width: 1%"> </td>
<td style="width: 1%; text-align: left">$</td><td style="width: 9%; text-align: right">-</td><td style="width: 1%; text-align: left"> </td><td style="width: 1%"> </td>
<td style="width: 1%; text-align: left">$</td><td style="width: 9%; text-align: right">800,000</td><td style="width: 1%; text-align: left"> </td></tr>
<tr style="vertical-align: bottom; background-color: White">
<td style="text-align: left">Liabilities related to sale of future proceeds from disposition of subsidiary – beginning balance</td><td> </td>
<td style="text-align: left"> </td><td style="text-align: right">602,000</td><td style="text-align: left"> </td><td> </td>
<td style="text-align: left"> </td><td style="text-align: right">-</td><td style="text-align: left"> </td></tr>
<tr style="vertical-align: bottom; background-color: rgb(204,238,255)">
<td style="text-align: left">Non-Cash other income recognized</td><td> </td>
<td style="text-align: left"> </td><td style="text-align: right">(402,000</td><td style="text-align: left">)</td><td> </td>
<td style="text-align: left"> </td><td style="text-align: right">(282,000</td><td style="text-align: left">)</td></tr>
<tr style="vertical-align: bottom; background-color: White">
<td style="text-align: left; padding-bottom: 1.5pt">Non-Cash interest expense recognized</td><td style="padding-bottom: 1.5pt"> </td>
<td style="border-bottom: Black 1.5pt solid; text-align: left"> </td><td style="border-bottom: Black 1.5pt solid; text-align: right">122,000</td><td style="padding-bottom: 1.5pt; text-align: left"> </td><td style="padding-bottom: 1.5pt"> </td>
<td style="border-bottom: Black 1.5pt solid; text-align: left"> </td><td style="border-bottom: Black 1.5pt solid; text-align: right">84,000</td><td style="padding-bottom: 1.5pt; text-align: left"> </td></tr>
<tr style="vertical-align: bottom; background-color: rgb(204,238,255)">
<td style="text-align: left">Liabilities related to sale of future proceeds from disposition of subsidiary – ending balance</td><td> </td>
<td style="text-align: left"> </td><td style="text-align: right">322,000</td><td style="text-align: left"> </td><td> </td>
<td style="text-align: left"> </td><td style="text-align: right">602,000</td><td style="text-align: left"> </td></tr>
<tr style="vertical-align: bottom; background-color: White">
<td style="text-align: left; padding-bottom: 1.5pt">Less: unamortized transaction costs</td><td style="padding-bottom: 1.5pt"> </td>
<td style="border-bottom: Black 1.5pt solid; text-align: left"> </td><td style="border-bottom: Black 1.5pt solid; text-align: right">(3,000</td><td style="padding-bottom: 1.5pt; text-align: left">)</td><td style="padding-bottom: 1.5pt"> </td>
<td style="border-bottom: Black 1.5pt solid; text-align: left"> </td><td style="border-bottom: Black 1.5pt solid; text-align: right">(3,000</td><td style="padding-bottom: 1.5pt; text-align: left">)</td></tr>
<tr style="vertical-align: bottom; background-color: rgb(204,238,255)">
<td style="text-align: left; padding-bottom: 4pt">Liability related to sale of future proceeds from disposition of subsidiary, net</td><td style="padding-bottom: 4pt"> </td>
<td style="border-bottom: Black 4pt double; text-align: left">$</td><td style="border-bottom: Black 4pt double; text-align: right">319,000</td><td style="padding-bottom: 4pt; text-align: left"> </td><td style="padding-bottom: 4pt"> </td>
<td style="border-bottom: Black 4pt double; text-align: left">$</td><td style="border-bottom: Black 4pt double; text-align: right">599,000</td><td style="padding-bottom: 4pt; text-align: left"> </td></tr></table>
145000
180000
15000
2778
51224
137000
134000
<p style="font: 10pt Times New Roman, Times, Serif; margin: 0; text-align: justify"><b>Note 13. EMPLOYEE BENEFITS PLANS</b></p>
<p style="font: 10pt Times New Roman, Times, Serif; margin: 0; text-align: justify; text-indent: 0.5in"> </p>
<p style="font: 10pt Times New Roman, Times, Serif; margin: 0; text-align: justify">The Company employs both union and non-union
employees and maintains several benefit plans.</p>
<p style="font: 10pt Times New Roman, Times, Serif; margin: 0; text-align: justify; text-indent: 0.5in"> </p>
<p style="font: 10pt Times New Roman, Times, Serif; margin: 0; text-align: justify"><b>Union</b></p>
<p style="font: 10pt Times New Roman, Times, Serif; margin: 0; text-align: justify; text-indent: 0.5in"> </p>
<p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify">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 Agreement was renewed as of December 31, 2018 and expires on December 31, 2021 and covers all of AIM's production personnel,
of which there are approximately 93 people. AIM is required to make a monthly contribution to each of the Union's United
Welfare Fund and the United Services Worker's Security Fund. This is the only pension benefit required by the Agreement and
the Company is not obligated for any future defined benefit to retirees. The Agreement contains a "no-strike" clause,
whereby, during the term of the Agreement, the Union will not strike and AIM will not lockout its employees. Medical benefits for
union employees are provided through a policy with Insperity Services, Inc. ("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 $134,000 and $137,000 for the years
ended December 31, 2020 and 2019, respectively.</p>
<p style="font: 10pt Times New Roman, Times, Serif; margin: 0; text-align: justify; text-indent: 0.5in"> </p>
<p style="font: 10pt Times New Roman, Times, Serif; margin: 0; text-align: justify">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.</p>
<p style="font: 10pt Times New Roman, Times, Serif; margin: 0; text-align: justify; text-indent: 0.5in"><b> </b></p>
<p style="font: 10pt Times New Roman, Times, Serif; margin: 0; text-align: justify"><b>Others</b></p>
<p style="font: 10pt Times New Roman, Times, Serif; margin: 0; text-align: justify; text-indent: 0.5in"> </p>
<p style="font: 10pt Times New Roman, Times, Serif; margin: 0; text-align: justify">All of the Company's employees are covered
under a co-employment agreement with Insperity, a professional employer organization ("PEO") that provides out-sourced
human resource services.</p>
<p style="font: 10pt Times New Roman, Times, Serif; margin: 0; text-align: justify; text-indent: 0.5in"> </p>
<p style="font: 10pt Times New Roman, Times, Serif; margin: 0; text-align: justify">The Company has a 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 pre-tax eligible compensation to the Plan. The Company does not match any contributions that employees may
make to the Plans.</p>
<p style="font: 10pt Times New Roman, Times, Serif; margin: 0; text-align: justify"><b>Note 14. CONTINGENCIES</b></p>
<p style="font: 10pt Times New Roman, Times, Serif; margin: 0; text-align: justify; text-indent: 0.5in"> </p>
<p style="font: 10pt Times New Roman, Times, Serif; margin: 0; text-align: justify">A number of actions have been commenced against
the Company by vendors, landlords and former landlords, including a third party claim as a result of an injury suffered on a portion
of a leased property not occupied by the Company. As certain of these claims represent amounts included in accounts payable they
are not specifically discussed herein.</p>
<p style="font: 10pt Times New Roman, Times, Serif; margin: 0; text-align: justify; text-indent: 0.5in"> </p>
<p style="font: 10pt Times New Roman, Times, Serif; margin: 0; text-align: justify">Contract Pharmacal
Corp. commenced an action on October 2, 2018, relating to a Sublease entered into between the Company and Contract Pharmacal in
May 2018 with respect to the property that was formerly occupied by Welding Metallurgy, Inc., at 110 Plant Avenue, Hauppauge, New
York. In the action Contract Pharmacal seeks damages for an amount in excess of $1,000,000 for our failure to make the entire premises
available by the Sublease commencement date. The Company disputes the validity of the claims asserted by Contract Pharmacal and
believes it has meritorious defenses to those claims. The pace of litigation in the civil courts in New York has been slowed by
the impact of Covid-19. The Court has ordered us and Contract Pharmacal to complete discovery, which is ongoing.</p>
<p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify"> </p>
<p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify">On December 20, 2018, the Company completed
the sale of all of the outstanding shares of its subsidiary, WMI, to CPI.</p>
<p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify">There ensued a dispute with CPI regarding
amounts it claimed were due based upon the value it ascribed to the inventory as of the closing date. On December 23, 2020 the
Company and CPI reached an agreement to settle the working capital dispute. Pursuant to the settlement, the escrow agent released
to CPI the balance of $ 1,380,684 remaining in the escrow account which had been established at the closing and the Company and
CPI exchanged mutual releases customary in the circumstances.</p>
<p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify"> </p>
<p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify">From time to time the Company may be engaged
in various lawsuits and legal proceedings in the ordinary course of business. The Company is currently not aware of any legal proceedings
the ultimate outcome of which, in its judgment based on information currently available, would have a material adverse effect on
its business, financial condition or operating results. There are no proceedings in which any of the Company's directors,
officers or affiliates, or any registered or beneficial stockholder of its common stock, is an adverse party or has a material
interest adverse to our interest.</p>
1000000
-1416000
37000
4000
37000
-1412000
0.2100
0.2100
-0.0111
-0.0090
-0.0333
1.5965
0.0062
1.9734
0.0154
0.0000
-0.2013
-3.9363
8017000
6594000
216000
252000
268000
341000
150000
277000
323000
336000
12000
4000
442000
495000
1000000
1250000
84000
132000
165000
158000
1431000
1813000
329000
292000
1628000
2150000
146000
400000
1774000
2550000
10663000
9394000
1416000
<p style="font: 10pt Times New Roman, Times, Serif; margin: 0"><b>Note 17. SEGMENT REPORTING</b></p>
<p style="font: 10pt Times New Roman, Times, Serif; margin: 0; text-align: justify; text-indent: 0.5in"> </p>
<p style="font: 10pt Times New Roman, Times, Serif; margin: 0; text-align: justify">In accordance with FASB ASC 280, "Segment
Reporting" ("ASC 280"), the Company discloses financial and descriptive information about its reportable operating
segments. Operating segments are components of an enterprise about which separate financial information is available and regularly
evaluated by the chief operating decision maker in deciding how to allocate resources and in assessing performance.</p>
<p style="font: 10pt Times New Roman, Times, Serif; margin: 0; text-align: justify; text-indent: 0.5in"> </p>
<p style="font: 10pt Times New Roman, Times, Serif; margin: 0; text-align: justify">The Company follows ASC 280, which establishes
standards for reporting information about operating segments in annual and interim financial statements, and requires that companies
report financial and descriptive information about their reportable segments based on a management approach. ASC 280 also establishes
standards for related disclosures about products and services, geographic areas and major customers.</p>
<p style="font: 10pt Times New Roman, Times, Serif; margin: 0; text-align: justify; text-indent: 0.5in"> </p>
<p style="font: 10pt Times New Roman, Times, Serif; margin: 0; text-align: justify">The Company currently divides its operations
into two operating segments: Complex Machining which consists of AIM and NTW and Turbine Engine Components which consists of Sterling.
Along with its operating subsidiaries, the Company reports the results of our corporate division as an independent segment.</p>
<p style="font: 10pt Times New Roman, Times, Serif; margin: 0; text-align: justify; text-indent: 0.5in"> </p>
<p style="font: 10pt Times New Roman, Times, Serif; margin: 0; text-align: justify">The accounting policies of each of the segments
are the same as those described in Note 3 – Summary of Significant Accounting Policies. Intersegment transfers are recorded
at the transferors cost, and there is no intercompany profit or loss on intersegment transfers. We evaluate performance based on
revenue, gross profit contribution and assets employed.</p>
<p style="font: 10pt Times New Roman, Times, Serif; margin: 0; text-align: justify"> </p>
<p style="font: 10pt Times New Roman, Times, Serif; margin: 0; text-align: justify">Financial information about the Company's
reporting segments for the years ended December 31, 2020 and 2019 are as follows:</p>
<p style="font: 10pt Times New Roman, Times, Serif; margin: 0"> </p>
<table cellpadding="0" cellspacing="0" style="font: 10pt Times New Roman, Times, Serif; border-collapse: collapse; width: 100%">
<tr style="vertical-align: bottom">
<td> </td><td style="font-weight: bold; padding-bottom: 1.5pt"> </td>
<td colspan="6" style="border-bottom: Black 1.5pt solid; font-weight: bold; text-align: center">Year Ended December 31,</td><td style="padding-bottom: 1.5pt; font-weight: bold"> </td></tr>
<tr style="vertical-align: bottom">
<td> </td><td style="font-weight: bold; padding-bottom: 1.5pt"> </td>
<td colspan="2" style="border-bottom: Black 1.5pt solid; font-weight: bold; text-align: center">2020</td><td style="padding-bottom: 1.5pt; font-weight: bold"> </td><td style="font-weight: bold; padding-bottom: 1.5pt"> </td>
<td colspan="2" style="border-bottom: Black 1.5pt solid; font-weight: bold; text-align: center">2019</td><td style="padding-bottom: 1.5pt; font-weight: bold"> </td></tr>
<tr style="vertical-align: bottom">
<td> </td><td> </td>
<td colspan="2"> </td><td> </td><td> </td>
<td colspan="2"> </td><td> </td></tr>
<tr style="vertical-align: bottom; background-color: White">
<td style="text-align: left">COMPLEX MACHINING</td><td> </td>
<td style="text-align: left"> </td><td style="text-align: right"> </td><td style="text-align: left"> </td><td> </td>
<td style="text-align: left"> </td><td style="text-align: right"> </td><td style="text-align: left"> </td></tr>
<tr style="vertical-align: bottom; background-color: rgb(204,238,255)">
<td style="width: 76%; text-align: left">Net Sales</td><td style="width: 1%"> </td>
<td style="width: 1%; text-align: left">$</td><td style="width: 9%; text-align: right">44,659,000</td><td style="width: 1%; text-align: left"> </td><td style="width: 1%"> </td>
<td style="width: 1%; text-align: left">$</td><td style="width: 9%; text-align: right">48,226,000</td><td style="width: 1%; text-align: left"> </td></tr>
<tr style="vertical-align: bottom; background-color: White">
<td style="text-align: left">Gross Profit</td><td> </td>
<td style="text-align: left"> </td><td style="text-align: right">6,493,000</td><td style="text-align: left"> </td><td> </td>
<td style="text-align: left"> </td><td style="text-align: right">8,669,000</td><td style="text-align: left"> </td></tr>
<tr style="vertical-align: bottom; background-color: rgb(204,238,255)">
<td style="text-align: left">Pre Tax Income from continuing operations</td><td> </td>
<td style="text-align: left"> </td><td style="text-align: right">4,965,000</td><td style="text-align: left"> </td><td> </td>
<td style="text-align: left"> </td><td style="text-align: right">5,266,000</td><td style="text-align: left"> </td></tr>
<tr style="vertical-align: bottom; background-color: White">
<td>Assets</td><td> </td>
<td style="text-align: left"> </td><td style="text-align: right">51,368,000</td><td style="text-align: left"> </td><td> </td>
<td style="text-align: left"> </td><td style="text-align: right">45,268,000</td><td style="text-align: left"> </td></tr>
<tr style="vertical-align: bottom; background-color: rgb(204,238,255)">
<td> </td><td> </td>
<td style="text-align: left"> </td><td style="text-align: right"> </td><td style="text-align: left"> </td><td> </td>
<td style="text-align: left"> </td><td style="text-align: right"> </td><td style="text-align: left"> </td></tr>
<tr style="vertical-align: bottom; background-color: White">
<td style="text-align: left">TURBINE ENGINE COMPONENTS</td><td> </td>
<td style="text-align: left"> </td><td style="text-align: right"> </td><td style="text-align: left"> </td><td> </td>
<td style="text-align: left"> </td><td style="text-align: right"> </td><td style="text-align: left"> </td></tr>
<tr style="vertical-align: bottom; background-color: rgb(204,238,255)">
<td style="text-align: left">Net Sales</td><td> </td>
<td style="text-align: left"> </td><td style="text-align: right">5,438,000</td><td style="text-align: left"> </td><td> </td>
<td style="text-align: left"> </td><td style="text-align: right">6,347,000</td><td style="text-align: left"> </td></tr>
<tr style="vertical-align: bottom; background-color: White">
<td style="text-align: left">Gross Profit</td><td> </td>
<td style="text-align: left"> </td><td style="text-align: right">19,000</td><td style="text-align: left"> </td><td> </td>
<td style="text-align: left"> </td><td style="text-align: right">473,000</td><td style="text-align: left"> </td></tr>
<tr style="vertical-align: bottom; background-color: rgb(204,238,255)">
<td style="text-align: left">Pre Tax Loss from continuing operations</td><td> </td>
<td style="text-align: left"> </td><td style="text-align: right">(31,000</td><td style="text-align: left">)</td><td> </td>
<td style="text-align: left"> </td><td style="text-align: right">(500,000</td><td style="text-align: left">)</td></tr>
<tr style="vertical-align: bottom; background-color: White">
<td>Assets</td><td> </td>
<td style="text-align: left"> </td><td style="text-align: right">3,899,000</td><td style="text-align: left"> </td><td> </td>
<td style="text-align: left"> </td><td style="text-align: right">5,005,000</td><td style="text-align: left"> </td></tr>
<tr style="vertical-align: bottom; background-color: rgb(204,238,255)">
<td> </td><td> </td>
<td style="text-align: left"> </td><td style="text-align: right"> </td><td style="text-align: left"> </td><td> </td>
<td style="text-align: left"> </td><td style="text-align: right"> </td><td style="text-align: left"> </td></tr>
<tr style="vertical-align: bottom; background-color: White">
<td>CORPORATE</td><td> </td>
<td style="text-align: left"> </td><td style="text-align: right"> </td><td style="text-align: left"> </td><td> </td>
<td style="text-align: left"> </td><td style="text-align: right"> </td><td style="text-align: left"> </td></tr>
<tr style="vertical-align: bottom; background-color: rgb(204,238,255)">
<td style="text-align: left">Net Sales</td><td> </td>
<td style="text-align: left"> </td><td style="text-align: right">-</td><td style="text-align: left"> </td><td> </td>
<td style="text-align: left"> </td><td style="text-align: right">-</td><td style="text-align: left"> </td></tr>
<tr style="vertical-align: bottom; background-color: White">
<td style="text-align: left">Gross Profit</td><td> </td>
<td style="text-align: left"> </td><td style="text-align: right">-</td><td style="text-align: left"> </td><td> </td>
<td style="text-align: left"> </td><td style="text-align: right">-</td><td style="text-align: left"> </td></tr>
<tr style="vertical-align: bottom; background-color: rgb(204,238,255)">
<td style="text-align: left">Pre Tax Loss from continuing operations</td><td> </td>
<td style="text-align: left"> </td><td style="text-align: right">(5,020,000</td><td style="text-align: left">)</td><td> </td>
<td style="text-align: left"> </td><td style="text-align: right">(7,327,000</td><td style="text-align: left">)</td></tr>
<tr style="vertical-align: bottom; background-color: White">
<td>Assets</td><td> </td>
<td style="text-align: left"> </td><td style="text-align: right">2,510,000</td><td style="text-align: left"> </td><td> </td>
<td style="text-align: left"> </td><td style="text-align: right">817,000</td><td style="text-align: left"> </td></tr>
<tr style="vertical-align: bottom; background-color: rgb(204,238,255)">
<td> </td><td> </td>
<td style="text-align: left"> </td><td style="text-align: right"> </td><td style="text-align: left"> </td><td> </td>
<td style="text-align: left"> </td><td style="text-align: right"> </td><td style="text-align: left"> </td></tr>
<tr style="vertical-align: bottom; background-color: White">
<td>CONSOLIDATED</td><td> </td>
<td style="text-align: left"> </td><td style="text-align: right"> </td><td style="text-align: left"> </td><td> </td>
<td style="text-align: left"> </td><td style="text-align: right"> </td><td style="text-align: left"> </td></tr>
<tr style="vertical-align: bottom; background-color: rgb(204,238,255)">
<td style="text-align: left">Net Sales</td><td> </td>
<td style="text-align: left"> </td><td style="text-align: right">50,097,000</td><td style="text-align: left"> </td><td> </td>
<td style="text-align: left"> </td><td style="text-align: right">54,573,000</td><td style="text-align: left"> </td></tr>
<tr style="vertical-align: bottom; background-color: White">
<td style="text-align: left">Gross Profit</td><td> </td>
<td style="text-align: left"> </td><td style="text-align: right">6,512,000</td><td style="text-align: left"> </td><td> </td>
<td style="text-align: left"> </td><td style="text-align: right">9,142,000</td><td style="text-align: left"> </td></tr>
<tr style="vertical-align: bottom; background-color: rgb(204,238,255)">
<td style="text-align: left">Pre Tax Loss from continuing operations</td><td> </td>
<td style="text-align: left"> </td><td style="text-align: right">(86,000</td><td style="text-align: left">)</td><td> </td>
<td style="text-align: left"> </td><td style="text-align: right">(2,561,000</td><td style="text-align: left">)</td></tr>
<tr style="vertical-align: bottom; background-color: White">
<td style="text-align: left">(Benefit from) provision for Income Taxes</td><td> </td>
<td style="text-align: left"> </td><td style="text-align: right">(1,412,000</td><td style="text-align: left">)</td><td> </td>
<td style="text-align: left"> </td><td style="text-align: right">37,000</td><td style="text-align: left"> </td></tr>
<tr style="vertical-align: bottom; background-color: rgb(204,238,255)">
<td style="text-align: left">Loss from Discontinued Operations, net of taxes</td><td> </td>
<td style="text-align: left"> </td><td style="text-align: right">(230,000</td><td style="text-align: left">)</td><td> </td>
<td style="text-align: left"> </td><td style="text-align: right">(134,000</td><td style="text-align: left">)</td></tr>
<tr style="vertical-align: bottom; background-color: White">
<td style="text-align: left">Net Income (Loss)</td><td> </td>
<td style="text-align: left"> </td><td style="text-align: right">1,096,000</td><td style="text-align: left"> </td><td> </td>
<td style="text-align: left"> </td><td style="text-align: right">(2,732,000</td><td style="text-align: left">)</td></tr>
<tr style="vertical-align: bottom; background-color: rgb(204,238,255)">
<td>Assets</td><td> </td>
<td style="text-align: left">$</td><td style="text-align: right">57,777,000</td><td style="text-align: left"> </td><td> </td>
<td style="text-align: left">$</td><td style="text-align: right">51,090,000</td><td style="text-align: left"> </td></tr>
</table>
<p style="font: 10pt Times New Roman, Times, Serif; margin: 0"></p>
<p style="font: 10pt Times New Roman, Times, Serif; margin: 0"></p>
<table cellpadding="0" cellspacing="0" style="font: 10pt Times New Roman, Times, Serif; border-collapse: collapse; width: 100%">
<tr style="vertical-align: bottom">
<td> </td><td style="font-weight: bold; padding-bottom: 1.5pt"> </td>
<td colspan="6" style="border-bottom: Black 1.5pt solid; font-weight: bold; text-align: center">Year Ended December 31,</td><td style="padding-bottom: 1.5pt; font-weight: bold"> </td></tr>
<tr style="vertical-align: bottom">
<td> </td><td style="font-weight: bold; padding-bottom: 1.5pt"> </td>
<td colspan="2" style="border-bottom: Black 1.5pt solid; font-weight: bold; text-align: center">2020</td><td style="padding-bottom: 1.5pt; font-weight: bold"> </td><td style="font-weight: bold; padding-bottom: 1.5pt"> </td>
<td colspan="2" style="border-bottom: Black 1.5pt solid; font-weight: bold; text-align: center">2019</td><td style="padding-bottom: 1.5pt; font-weight: bold"> </td></tr>
<tr style="vertical-align: bottom">
<td> </td><td> </td>
<td colspan="2"> </td><td> </td><td> </td>
<td colspan="2"> </td><td> </td></tr>
<tr style="vertical-align: bottom; background-color: White">
<td style="text-align: left">COMPLEX MACHINING</td><td> </td>
<td style="text-align: left"> </td><td style="text-align: right"> </td><td style="text-align: left"> </td><td> </td>
<td style="text-align: left"> </td><td style="text-align: right"> </td><td style="text-align: left"> </td></tr>
<tr style="vertical-align: bottom; background-color: rgb(204,238,255)">
<td style="width: 76%; text-align: left">Net Sales</td><td style="width: 1%"> </td>
<td style="width: 1%; text-align: left">$</td><td style="width: 9%; text-align: right">44,659,000</td><td style="width: 1%; text-align: left"> </td><td style="width: 1%"> </td>
<td style="width: 1%; text-align: left">$</td><td style="width: 9%; text-align: right">48,226,000</td><td style="width: 1%; text-align: left"> </td></tr>
<tr style="vertical-align: bottom; background-color: White">
<td style="text-align: left">Gross Profit</td><td> </td>
<td style="text-align: left"> </td><td style="text-align: right">6,493,000</td><td style="text-align: left"> </td><td> </td>
<td style="text-align: left"> </td><td style="text-align: right">8,669,000</td><td style="text-align: left"> </td></tr>
<tr style="vertical-align: bottom; background-color: rgb(204,238,255)">
<td style="text-align: left">Pre Tax Income from continuing operations</td><td> </td>
<td style="text-align: left"> </td><td style="text-align: right">4,965,000</td><td style="text-align: left"> </td><td> </td>
<td style="text-align: left"> </td><td style="text-align: right">5,266,000</td><td style="text-align: left"> </td></tr>
<tr style="vertical-align: bottom; background-color: White">
<td>Assets</td><td> </td>
<td style="text-align: left"> </td><td style="text-align: right">51,368,000</td><td style="text-align: left"> </td><td> </td>
<td style="text-align: left"> </td><td style="text-align: right">45,268,000</td><td style="text-align: left"> </td></tr>
<tr style="vertical-align: bottom; background-color: rgb(204,238,255)">
<td> </td><td> </td>
<td style="text-align: left"> </td><td style="text-align: right"> </td><td style="text-align: left"> </td><td> </td>
<td style="text-align: left"> </td><td style="text-align: right"> </td><td style="text-align: left"> </td></tr>
<tr style="vertical-align: bottom; background-color: White">
<td style="text-align: left">TURBINE ENGINE COMPONENTS</td><td> </td>
<td style="text-align: left"> </td><td style="text-align: right"> </td><td style="text-align: left"> </td><td> </td>
<td style="text-align: left"> </td><td style="text-align: right"> </td><td style="text-align: left"> </td></tr>
<tr style="vertical-align: bottom; background-color: rgb(204,238,255)">
<td style="text-align: left">Net Sales</td><td> </td>
<td style="text-align: left"> </td><td style="text-align: right">5,438,000</td><td style="text-align: left"> </td><td> </td>
<td style="text-align: left"> </td><td style="text-align: right">6,347,000</td><td style="text-align: left"> </td></tr>
<tr style="vertical-align: bottom; background-color: White">
<td style="text-align: left">Gross Profit</td><td> </td>
<td style="text-align: left"> </td><td style="text-align: right">19,000</td><td style="text-align: left"> </td><td> </td>
<td style="text-align: left"> </td><td style="text-align: right">473,000</td><td style="text-align: left"> </td></tr>
<tr style="vertical-align: bottom; background-color: rgb(204,238,255)">
<td style="text-align: left">Pre Tax Loss from continuing operations</td><td> </td>
<td style="text-align: left"> </td><td style="text-align: right">(31,000</td><td style="text-align: left">)</td><td> </td>
<td style="text-align: left"> </td><td style="text-align: right">(500,000</td><td style="text-align: left">)</td></tr>
<tr style="vertical-align: bottom; background-color: White">
<td>Assets</td><td> </td>
<td style="text-align: left"> </td><td style="text-align: right">3,899,000</td><td style="text-align: left"> </td><td> </td>
<td style="text-align: left"> </td><td style="text-align: right">5,005,000</td><td style="text-align: left"> </td></tr>
<tr style="vertical-align: bottom; background-color: rgb(204,238,255)">
<td> </td><td> </td>
<td style="text-align: left"> </td><td style="text-align: right"> </td><td style="text-align: left"> </td><td> </td>
<td style="text-align: left"> </td><td style="text-align: right"> </td><td style="text-align: left"> </td></tr>
<tr style="vertical-align: bottom; background-color: White">
<td>CORPORATE</td><td> </td>
<td style="text-align: left"> </td><td style="text-align: right"> </td><td style="text-align: left"> </td><td> </td>
<td style="text-align: left"> </td><td style="text-align: right"> </td><td style="text-align: left"> </td></tr>
<tr style="vertical-align: bottom; background-color: rgb(204,238,255)">
<td style="text-align: left">Net Sales</td><td> </td>
<td style="text-align: left"> </td><td style="text-align: right">-</td><td style="text-align: left"> </td><td> </td>
<td style="text-align: left"> </td><td style="text-align: right">-</td><td style="text-align: left"> </td></tr>
<tr style="vertical-align: bottom; background-color: White">
<td style="text-align: left">Gross Profit</td><td> </td>
<td style="text-align: left"> </td><td style="text-align: right">-</td><td style="text-align: left"> </td><td> </td>
<td style="text-align: left"> </td><td style="text-align: right">-</td><td style="text-align: left"> </td></tr>
<tr style="vertical-align: bottom; background-color: rgb(204,238,255)">
<td style="text-align: left">Pre Tax Loss from continuing operations</td><td> </td>
<td style="text-align: left"> </td><td style="text-align: right">(5,020,000</td><td style="text-align: left">)</td><td> </td>
<td style="text-align: left"> </td><td style="text-align: right">(7,327,000</td><td style="text-align: left">)</td></tr>
<tr style="vertical-align: bottom; background-color: White">
<td>Assets</td><td> </td>
<td style="text-align: left"> </td><td style="text-align: right">2,510,000</td><td style="text-align: left"> </td><td> </td>
<td style="text-align: left"> </td><td style="text-align: right">817,000</td><td style="text-align: left"> </td></tr>
<tr style="vertical-align: bottom; background-color: rgb(204,238,255)">
<td> </td><td> </td>
<td style="text-align: left"> </td><td style="text-align: right"> </td><td style="text-align: left"> </td><td> </td>
<td style="text-align: left"> </td><td style="text-align: right"> </td><td style="text-align: left"> </td></tr>
<tr style="vertical-align: bottom; background-color: White">
<td>CONSOLIDATED</td><td> </td>
<td style="text-align: left"> </td><td style="text-align: right"> </td><td style="text-align: left"> </td><td> </td>
<td style="text-align: left"> </td><td style="text-align: right"> </td><td style="text-align: left"> </td></tr>
<tr style="vertical-align: bottom; background-color: rgb(204,238,255)">
<td style="text-align: left">Net Sales</td><td> </td>
<td style="text-align: left"> </td><td style="text-align: right">50,097,000</td><td style="text-align: left"> </td><td> </td>
<td style="text-align: left"> </td><td style="text-align: right">54,573,000</td><td style="text-align: left"> </td></tr>
<tr style="vertical-align: bottom; background-color: White">
<td style="text-align: left">Gross Profit</td><td> </td>
<td style="text-align: left"> </td><td style="text-align: right">6,512,000</td><td style="text-align: left"> </td><td> </td>
<td style="text-align: left"> </td><td style="text-align: right">9,142,000</td><td style="text-align: left"> </td></tr>
<tr style="vertical-align: bottom; background-color: rgb(204,238,255)">
<td style="text-align: left">Pre Tax Loss from continuing operations</td><td> </td>
<td style="text-align: left"> </td><td style="text-align: right">(86,000</td><td style="text-align: left">)</td><td> </td>
<td style="text-align: left"> </td><td style="text-align: right">(2,561,000</td><td style="text-align: left">)</td></tr>
<tr style="vertical-align: bottom; background-color: White">
<td style="text-align: left">(Benefit from) provision for Income Taxes</td><td> </td>
<td style="text-align: left"> </td><td style="text-align: right">(1,412,000</td><td style="text-align: left">)</td><td> </td>
<td style="text-align: left"> </td><td style="text-align: right">37,000</td><td style="text-align: left"> </td></tr>
<tr style="vertical-align: bottom; background-color: rgb(204,238,255)">
<td style="text-align: left">Loss from Discontinued Operations, net of taxes</td><td> </td>
<td style="text-align: left"> </td><td style="text-align: right">(230,000</td><td style="text-align: left">)</td><td> </td>
<td style="text-align: left"> </td><td style="text-align: right">(134,000</td><td style="text-align: left">)</td></tr>
<tr style="vertical-align: bottom; background-color: White">
<td style="text-align: left">Net Income (Loss)</td><td> </td>
<td style="text-align: left"> </td><td style="text-align: right">1,096,000</td><td style="text-align: left"> </td><td> </td>
<td style="text-align: left"> </td><td style="text-align: right">(2,732,000</td><td style="text-align: left">)</td></tr>
<tr style="vertical-align: bottom; background-color: rgb(204,238,255)">
<td>Assets</td><td> </td>
<td style="text-align: left">$</td><td style="text-align: right">57,777,000</td><td style="text-align: left"> </td><td> </td>
<td style="text-align: left">$</td><td style="text-align: right">51,090,000</td><td style="text-align: left"> </td></tr>
</table>
<p style="font: 10pt Times New Roman, Times, Serif; margin: 0"></p>
-134000
-134000
-230000
-230000
2
7858000
8798000
28646000
32120000
447000
173000
15000
38245000
43611000
7578000
9581000
3623000
3510000
1481000
912000
15682000
16475000
6862000
8105000
8682000
697000
701000
38000
38000
1011000
917000
200000
200000
27000
314000
32622000
27327000
219000
181000
402000
122000
313000
40884000
42668000
29000
32000
77434000
81238000
-67257000
-66161000
51090000
57777000
0.001
0.001
3000000
3000000
0
0
0.001
0.001
60000000
60000000
29478338
31906971
29478338
31906971
The Company entered into a new loan facility ("SNB Facility") with Sterling National Bank, ("SNB") expiring on December 30, 2022. The new Loan Facility provides for a $16,000,000 revolving loan ("SNB revolving line of credit") and a term loan ("SNB term loan").
The terms of the SNB Facility require that, among other things, the Company maintain a specified Fixed Charge Coverage Ratio of 1.25 to 1.00 at the end of each Fiscal Quarter beginning with the Fiscal Quarter ending March 31, 2020.
The Company issued its 7% senior subordinated convertible promissory notes due December 31, 2020, each in the principal amount of $1,000,000 (together, the "7% Notes"), to Michael Taglich and Robert Taglich, each for a purchase price of $1,000,000. The 7% Notes bear interest at the rate of 7% per annum, are convertible into shares of the Company's common stock at a conversion price of $0.93 per share, subject to the anti-dilution adjustments set forth in the 7% Notes and are subordinate to the Company's indebtedness under the SNB Facility.
From November 23, 2016 through March 21, 2017, the Company received gross proceeds of $4,775,000, of which $1,950,000 were received from Robert and Michael Taglich, from the sale of an equal principal amount of its 8% Subordinated Convertible Notes (the "8% Notes"), together with warrants to purchase a total of 383,080 shares of its common stock, in private placement transactions with accredited investors (the "8% Note Offerings"). In connection with the offering of the 8% Notes, the Company issued 8% Notes in the aggregate principal amount of $382,000 to Taglich Brothers, Inc., placement agent for the 8% Note Offerings, in lieu of payment of cash compensation for sales commissions, together with warrants to purchase a total of 180,977 shares of common stock. Payment of the principal and accrued interest on the 8% Notes are junior and subordinate in right of payment to our indebtedness under the SNB Facility.
The SNB term loan provided for monthly principal installments in the amount of $45,238, payable on the first business day of each month, beginning on February 1, 2020, with a final payment of any unpaid balance of principal and interest payable on December 30, 2022. In addition, for so long as the SNB term loan remains outstanding, if Excess Cash Flow (as defined) is a positive number for any fiscal year, beginning with the year ending December 31, 2020, we shall pay to SNB an amount equal to the lesser of (i) twenty-five percent (25%) of the Excess Cash Flow for such Fiscal Year and (ii) the outstanding principal balance of the term loan. Such payment shall be made to Lender and applied to the outstanding principal balance of the term loan, on or prior to April 15 of the Fiscal Year immediately following such Fiscal Year.
Under the terms of the SNB Facility, both the SNB revolving line of credit and the SNB term loan bear an interest rate equal to 30-day LIBOR, plus 2.5% (with a floor of 3.5%).
Interest on the 2019 Notes is payable on the outstanding principal amount thereof at the rate of one percent (1%) per month, payable monthly commencing June 30, 2018. Upon the occurrence and continuation of a failure to pay accrued interest, interest shall accrue and be payable on such amount at the rate of 1.25% per month; provided that upon the occurrence and continuation of a failure to timely pay the principal amount of the 2019 Note, interest shall accrue and be payable on such principal amount at the rate of 1.25% per month and shall no longer be payable on interest accrued but unpaid. The 2019 Notes are subordinate to the Company's obligations to SNB.
Interest on the 8% Notes is payable on the outstanding principal amount thereof at the annual rate of 8%, payable quarterly commencing February 28, 2017, in cash, or at the Company's option, in additional 8% Notes, provided that if accrued interest payable on $1,269,000 principal amount of the 8% Notes issued in December 2016 is paid in additional 8% Notes, interest for that quarterly interest payment shall be calculated at the rate of 12% per annum. Upon the occurrence and continuation of an event of default, interest shall accrue at the rate of 12% per annum.
100000
15000000
16343000
21207000
2414000
586000
12543000
15649000
3800000
5558000
The Company entered into the First Amendment to Loan and Security Agreement ("First Amendment"). The terms of the agreement increase the Term Loan to $5,685,000. The repayment terms of the term loan were amended to provide monthly principal installments in the amount of $67,679 beginning on December 1, 2020, with a final payment of any unpaid balance of principal and interest payable on December 30, 2022. Additionally, the date by which certain subordinated third-party notes need to be extended by was changed from September 30, 2020 to November 30, 2020. The Company has paid an amendment fee of $20,000.
16000000
2022-12-30
0.04
150000
15000
18334
1.01
1.01
182000
100000
0.04
250000
250000
100000
1000000
2023-07-01
2020-06-30
2020-06-30
2019-05-31
1000000
In connection with the 7% Notes, the Company paid Taglich Brothers, Inc. a fee of $80,000 (4% of the purchase price of the 7% Notes), paid in the form of a promissory note having terms similar to the 7% Notes.
4% of the purchase price of the 7% Notes
0.0125
0.04
1860000
141000
380000
526000
446000
0.12
0.0
0.08
0.01
0.12
426000
1831000
1.50
1.50
1.35
2338000
0
6012000
6862000
7000
135000
226000
375000
7000
0
0
226000
385000
48000
0
2245000
580000
2026-07-20
As discussed above in connection with the Private Placement of Subordinated Notes due May 31, 2019, together with Shares of Common Stock, a $100,000 note issued to a third party in May 2018 was repaid in January 2020.
<p style="font: 10pt Times New Roman, Times, Serif; margin: 0; text-align: justify"><b>Note 16. STOCK OPTIONS AND WARRANTS</b></p>
<p style="font: 10pt Times New Roman, Times, Serif; margin: 0; text-align: justify; text-indent: 0.5in"> </p>
<p style="font: 10pt Times New Roman, Times, Serif; margin: 0; text-align: justify"><b>Stock-Based Compensation</b></p>
<p style="font: 10pt Times New Roman, Times, Serif; margin: 0; text-align: justify; text-indent: 0.5in"> </p>
<p style="font: 10pt Times New Roman, Times, Serif; margin: 0; text-align: justify"><b>Stock Options</b></p>
<p style="font: 10pt Times New Roman, Times, Serif; margin: 0; text-align: justify; text-indent: 0.5in"> </p>
<p style="font: 10pt Times New Roman, Times, Serif; margin: 0; text-align: justify">In July 2017, the Board of Directors adopted
the Company's 2017 Equity Incentive Plan ("2017 Plan") which authorized the grant of rights with respect to up
to 1,200,000 shares. The 2017 Plan was approved by affirmative vote of the Company's stockholders on October 3, 2017.</p>
<p style="font: 10pt Times New Roman, Times, Serif; margin: 0; text-align: justify; text-indent: 0.5in"> </p>
<p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify">During the year ended December 31, 2020,
the Company granted options to purchase 560,000 shares of common stock to certain of its employees and directors. The weighted
average fair value of the granted options was estimated using the Black-Scholes option pricing model with the following assumptions:
risk free interest rate of 0.22% to 1.61%; expected volatility factors of 71.5% to 75.4%; expected dividend yield of 0%; and expected
life of 2.5 to 4 years.</p>
<p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify; text-indent: 0.5in"> </p>
<p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify">During the year ended December 31, 2019,
the Company granted options to purchase 613,000 shares of common stock to certain of its employees and directors. The weighted
average fair value of the granted options was estimated using the Black-Scholes option pricing model with the following assumptions:
risk free interest rate of 1.87% to 2.60%; expected volatility factors of 65.8% to 72.4%; expected dividend yield of 0%; and expected
life of 4.9 to 6.8 years.</p>
<p style="font: 10pt Times New Roman, Times, Serif; margin: 0; text-align: justify; text-indent: 0.5in"> </p>
<p style="font: 10pt Times New Roman, Times, Serif; margin: 0; text-align: justify">The Company recorded stock based compensation expense
of $308,000 and $378,000 in its consolidated statement of operations for the years ended December 31, 2020 and 2019, respectively,
and such amounts were included as a component of general and administrative expense.</p>
<p style="font: 10pt Times New Roman, Times, Serif; margin: 0; text-align: justify; text-indent: 0.5in"> </p>
<p style="font: 10pt Times New Roman, Times, Serif; margin: 0; text-align: justify">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:</p>
<p style="font: 10pt Times New Roman, Times, Serif; margin: 0"> </p>
<table cellpadding="0" cellspacing="0" style="font: 10pt Times New Roman, Times, Serif; border-collapse: collapse; width: 100%">
<tr style="vertical-align: bottom">
<td> </td><td style="font-weight: bold; padding-bottom: 1.5pt"> </td>
<td colspan="2" style="border-bottom: Black 1.5pt solid; font-weight: bold; text-align: center">2020</td><td style="padding-bottom: 1.5pt; font-weight: bold"> </td><td style="font-weight: bold; padding-bottom: 1.5pt"> </td>
<td colspan="2" style="border-bottom: Black 1.5pt solid; font-weight: bold; text-align: center">2019</td><td style="padding-bottom: 1.5pt; font-weight: bold"> </td></tr>
<tr style="vertical-align: bottom; background-color: rgb(204,238,255)">
<td style="text-align: left">Risk-free interest rates</td><td> </td>
<td style="text-align: left"> </td><td style="text-align: right">0.22% - 1.61</td><td style="text-align: left">%</td><td> </td>
<td style="text-align: left"> </td><td style="text-align: right">1.87% - 2.60</td><td style="text-align: left">%</td></tr>
<tr style="vertical-align: bottom; background-color: White">
<td style="text-align: left">Expected life (in years)</td><td> </td>
<td style="text-align: left"> </td><td style="text-align: right">2.50 - 4.00</td><td style="text-align: left"> </td><td> </td>
<td style="text-align: left"> </td><td style="text-align: right">4.90 - 6.80</td><td style="text-align: left"> </td></tr>
<tr style="vertical-align: bottom; background-color: rgb(204,238,255)">
<td style="text-align: left">Expected volatility</td><td> </td>
<td style="text-align: left"> </td><td style="white-space: nowrap; text-align: right">71.5% - 75.4</td><td style="text-align: left">%</td><td> </td>
<td style="text-align: left"> </td><td style="white-space: nowrap; text-align: right">65.8% - 72.4</td><td style="text-align: left">%</td></tr>
<tr style="vertical-align: bottom; background-color: White">
<td style="width: 76%; text-align: left">Dividend yield</td><td style="width: 1%"> </td>
<td style="width: 1%; text-align: left"> </td><td style="width: 9%; text-align: right">0.00</td><td style="width: 1%; text-align: left">%</td><td style="width: 1%"> </td>
<td style="width: 1%; text-align: left"> </td><td style="width: 9%; text-align: right">0.00</td><td style="width: 1%; text-align: left">%</td></tr>
<tr style="vertical-align: bottom; background-color: rgb(204,238,255)">
<td> </td><td> </td>
<td style="text-align: left"> </td><td style="text-align: right"> </td><td style="text-align: left"> </td><td> </td>
<td style="text-align: left"> </td><td style="text-align: right"> </td><td style="text-align: left"> </td></tr>
<tr style="vertical-align: bottom; background-color: White">
<td>Weighted-average grant date fair value per share</td><td> </td>
<td style="text-align: left">$</td><td style="text-align: right">0.64</td><td style="text-align: left"> </td><td> </td>
<td style="text-align: left">$</td><td style="text-align: right">0.50</td><td style="text-align: left"> </td></tr>
</table>
<p style="font: 10pt Times New Roman, Times, Serif; margin: 0"> </p>
<p style="font: 10pt Times New Roman, Times, Serif; margin: 0; text-align: justify">The expected life is the number of years that
the Company estimates, based upon history, that the 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 Company's
experience.</p>
<p style="font: 10pt Times New Roman, Times, Serif; margin: 0; text-align: justify"> </p>
<p style="font: 10pt Times New Roman, Times, Serif; margin: 0; text-align: justify">A summary of the status of the Company's
stock options as of December 31, 2020 and 2019, and changes during the two years then ended are presented below.</p>
<p style="font: 10pt Times New Roman, Times, Serif; margin: 0"> </p>
<table cellpadding="0" cellspacing="0" style="font: 10pt Times New Roman, Times, Serif; border-collapse: collapse; width: 100%">
<tr style="vertical-align: bottom">
<td> </td><td> </td>
<td colspan="2" style="text-align: center"> </td><td> </td><td style="font-weight: bold"> </td>
<td colspan="2" style="font-weight: bold; text-align: center">Wtd. Avg.</td><td style="font-weight: bold"> </td></tr>
<tr style="vertical-align: bottom">
<td> </td><td> </td>
<td colspan="2" style="text-align: center"> </td><td> </td><td style="font-weight: bold"> </td>
<td colspan="2" style="font-weight: bold; text-align: center">Exercise</td><td style="font-weight: bold"> </td></tr>
<tr style="vertical-align: bottom">
<td> </td><td style="font-weight: bold; padding-bottom: 1.5pt"> </td>
<td colspan="2" style="border-bottom: Black 1.5pt solid; font-weight: bold; text-align: center">Options</td><td style="padding-bottom: 1.5pt; font-weight: bold"> </td><td style="font-weight: bold; padding-bottom: 1.5pt"> </td>
<td colspan="2" style="border-bottom: Black 1.5pt solid; font-weight: bold; text-align: center">Price</td><td style="padding-bottom: 1.5pt; font-weight: bold"> </td></tr>
<tr style="vertical-align: bottom; background-color: rgb(204,238,255)">
<td style="width: 76%">Balance, January 1, 2019</td><td style="width: 1%"> </td>
<td style="width: 1%; text-align: left"> </td><td style="width: 9%; text-align: right">838,149</td><td style="width: 1%; text-align: left"> </td><td style="width: 1%"> </td>
<td style="width: 1%; text-align: left">$</td><td style="width: 9%; text-align: right">3.08</td><td style="width: 1%; text-align: left"> </td></tr>
<tr style="vertical-align: bottom; background-color: White">
<td style="text-align: left">Granted during the period</td><td> </td>
<td style="text-align: left"> </td><td style="text-align: right">613,000</td><td style="text-align: left"> </td><td> </td>
<td style="text-align: left"> </td><td style="text-align: right">0.96</td><td style="text-align: left"> </td></tr>
<tr style="vertical-align: bottom; background-color: rgb(204,238,255)">
<td style="text-align: left">Exercised during the period</td><td> </td>
<td style="text-align: left"> </td><td style="text-align: right">(15,000</td><td style="text-align: left">)</td><td> </td>
<td style="text-align: left"> </td><td style="text-align: right">0.88</td><td style="text-align: left"> </td></tr>
<tr style="vertical-align: bottom; background-color: White">
<td style="text-align: left; padding-bottom: 1.5pt">Terminated/Expired during the period</td><td style="padding-bottom: 1.5pt"> </td>
<td style="border-bottom: Black 1.5pt solid; text-align: left"> </td><td style="border-bottom: Black 1.5pt solid; text-align: right">(66,500</td><td style="padding-bottom: 1.5pt; text-align: left">)</td><td style="padding-bottom: 1.5pt"> </td>
<td style="padding-bottom: 1.5pt; text-align: left"> </td><td style="padding-bottom: 1.5pt; text-align: right">7.46</td><td style="padding-bottom: 1.5pt; text-align: left"> </td></tr>
<tr style="vertical-align: bottom; background-color: rgb(204,238,255)">
<td>Balance, December 31, 2019</td><td> </td>
<td style="text-align: left"> </td><td style="text-align: right">1,369,649</td><td style="text-align: left"> </td><td> </td>
<td style="text-align: left">$</td><td style="text-align: right">2.01</td><td style="text-align: left"> </td></tr>
<tr style="vertical-align: bottom; background-color: White">
<td style="text-align: left">Granted during the period</td><td> </td>
<td style="text-align: left"> </td><td style="text-align: right">560,000</td><td style="text-align: left"> </td><td> </td>
<td style="text-align: left"> </td><td style="text-align: right">1.20</td><td style="text-align: left"> </td></tr>
<tr style="vertical-align: bottom; background-color: rgb(204,238,255)">
<td style="text-align: left">Exercised during the period</td><td> </td>
<td style="text-align: left"> </td><td style="text-align: right">-</td><td style="text-align: left"> </td><td> </td>
<td style="text-align: left"> </td><td style="text-align: right">-</td><td style="text-align: left"> </td></tr>
<tr style="vertical-align: bottom; background-color: White">
<td style="text-align: left; padding-bottom: 1.5pt">Terminated/Expired during the period</td><td style="padding-bottom: 1.5pt"> </td>
<td style="border-bottom: Black 1.5pt solid; text-align: left"> </td><td style="border-bottom: Black 1.5pt solid; text-align: right">(70,649</td><td style="padding-bottom: 1.5pt; text-align: left">)</td><td style="padding-bottom: 1.5pt"> </td>
<td style="padding-bottom: 1.5pt; text-align: left"> </td><td style="padding-bottom: 1.5pt; text-align: right">7.48</td><td style="padding-bottom: 1.5pt; text-align: left"> </td></tr>
<tr style="vertical-align: bottom; background-color: rgb(204,238,255)">
<td style="padding-bottom: 1.5pt">Balance, December 31, 2020</td><td style="padding-bottom: 1.5pt"> </td>
<td style="border-bottom: Black 1.5pt solid; text-align: left"> </td><td style="border-bottom: Black 1.5pt solid; text-align: right">1,859,000</td><td style="padding-bottom: 1.5pt; text-align: left"> </td><td style="padding-bottom: 1.5pt"> </td>
<td style="padding-bottom: 1.5pt; text-align: left">$</td><td style="padding-bottom: 1.5pt; text-align: right">1.56</td><td style="padding-bottom: 1.5pt; text-align: left"> </td></tr>
<tr style="vertical-align: bottom; background-color: White">
<td> </td><td> </td>
<td style="text-align: left"> </td><td style="text-align: right"> </td><td style="text-align: left"> </td><td> </td>
<td style="text-align: left"> </td><td style="text-align: right"> </td><td style="text-align: left"> </td></tr>
<tr style="vertical-align: bottom; background-color: rgb(204,238,255)">
<td>Exercisable at December 31, 2020</td><td> </td>
<td style="text-align: left"> </td><td style="text-align: right">1,488,997</td><td style="text-align: left"> </td><td> </td>
<td style="text-align: left">$</td><td style="text-align: right">1.68</td><td style="text-align: left"> </td></tr>
</table>
<p style="font: 10pt Times New Roman, Times, Serif; margin: 0"> </p>
<p style="font: 10pt Times New Roman, Times, Serif; margin: 0; text-align: justify">The following table summarizes information
about stock options at December 31, 2020:</p>
<p style="font: 10pt Times New Roman, Times, Serif; margin: 0; text-align: justify"> </p>
<table cellpadding="0" cellspacing="0" style="font: 10pt Times New Roman, Times, Serif; border-collapse: collapse; width: 100%">
<tr style="vertical-align: bottom">
<td> </td><td style="font-weight: bold"> </td>
<td colspan="2" style="font-weight: bold; text-align: center">Number</td><td style="font-weight: bold"> </td><td> </td>
<td colspan="2" style="text-align: center"> </td><td> </td><td> </td>
<td style="text-align: center"><b>Wtd. Avg,</b></td><td style="font-weight: bold"> </td>
<td colspan="2" style="font-weight: bold; text-align: center">Wtd. Avg.</td><td style="font-weight: bold"> </td></tr>
<tr style="vertical-align: bottom">
<td style="border-bottom: Black 1.5pt solid; font-weight: bold">Range of Exercise Price</td><td style="font-weight: bold; padding-bottom: 1.5pt"> </td>
<td colspan="2" style="border-bottom: Black 1.5pt solid; font-weight: bold; text-align: center">Outstanding</td><td style="padding-bottom: 1.5pt; font-weight: bold"> </td><td style="font-weight: bold; padding-bottom: 1.5pt"> </td>
<td colspan="2" style="border-bottom: Black 1.5pt solid; font-weight: bold; text-align: center">Exercisable</td><td style="padding-bottom: 1.5pt; font-weight: bold"> </td><td style="font-weight: bold; padding-bottom: 1.5pt"> </td>
<td style="border-bottom: Black 1.5pt solid; font-weight: bold; text-align: center"> Life</td><td style="font-weight: bold; padding-bottom: 1.5pt"> </td>
<td colspan="2" style="border-bottom: Black 1.5pt solid; font-weight: bold; text-align: center">Exercise Price</td><td style="padding-bottom: 1.5pt; font-weight: bold"> </td></tr>
<tr style="vertical-align: bottom; background-color: rgb(204,238,255)">
<td style="width: 52%">$0.00 - $5.00</td><td style="width: 1%"> </td>
<td style="width: 1%; text-align: left"> </td><td style="width: 9%; text-align: right">1,784,000</td><td style="width: 1%; text-align: left"> </td><td style="width: 1%"> </td>
<td style="width: 1%; text-align: left"> </td><td style="width: 9%; text-align: right">1,414,000</td><td style="width: 1%; text-align: left"> </td><td style="width: 1%"> </td>
<td style="width: 11%; text-align: center">3.69 years</td><td style="width: 1%"> </td>
<td style="width: 1%; text-align: left">$</td><td style="width: 9%; text-align: right">1.25</td><td style="width: 1%; text-align: left"> </td></tr>
<tr style="vertical-align: bottom; background-color: White">
<td style="padding-bottom: 1.5pt">$5.01 - $15.00</td><td style="padding-bottom: 1.5pt"> </td>
<td style="border-bottom: Black 1.5pt solid; text-align: left"> </td><td style="border-bottom: Black 1.5pt solid; text-align: right">75,000</td><td style="padding-bottom: 1.5pt; text-align: left"> </td><td style="padding-bottom: 1.5pt"> </td>
<td style="border-bottom: Black 1.5pt solid; text-align: left"> </td><td style="border-bottom: Black 1.5pt solid; text-align: right">75,000</td><td style="padding-bottom: 1.5pt; text-align: left"> </td><td style="padding-bottom: 1.5pt"> </td>
<td style="text-align: center; padding-bottom: 1.5pt">0.32 years</td><td style="padding-bottom: 1.5pt"> </td>
<td style="border-bottom: Black 1.5pt solid; text-align: left">$</td><td style="border-bottom: Black 1.5pt solid; text-align: right">8.85</td><td style="padding-bottom: 1.5pt; text-align: left"> </td></tr>
<tr style="vertical-align: bottom; background-color: rgb(204,238,255)">
<td style="padding-bottom: 4pt">$0.00 - $15.00</td><td style="padding-bottom: 4pt"> </td>
<td style="border-bottom: Black 4pt double; text-align: left"> </td><td style="border-bottom: Black 4pt double; text-align: right">1,859,000</td><td style="padding-bottom: 4pt; text-align: left"> </td><td style="padding-bottom: 4pt"> </td>
<td style="border-bottom: Black 4pt double; text-align: left"> </td><td style="border-bottom: Black 4pt double; text-align: right">1,489,000</td><td style="padding-bottom: 4pt; text-align: left"> </td><td style="padding-bottom: 4pt"> </td>
<td style="text-align: center; padding-bottom: 4pt">3.55 years</td><td style="padding-bottom: 4pt"> </td>
<td style="border-bottom: Black 4pt double; text-align: left">$</td><td style="border-bottom: Black 4pt double; text-align: right">1.56</td><td style="padding-bottom: 4pt; text-align: left"> </td></tr>
</table>
<p style="font: 10pt Times New Roman, Times, Serif; margin: 0; text-align: justify"> </p>
<p style="font: 10pt Times New Roman, Times, Serif; margin: 0; text-align: justify">As of December 31, 2020, there was $80,000
of unrecognized compensation cost related to non-vested stock option awards, which is to be recognized over the remaining weighted
average vesting period of 0.7 years.</p>
<p style="font: 10pt Times New Roman, Times, Serif; margin: 0; text-align: center; text-indent: 0.5in"> </p>
<p style="font: 10pt Times New Roman, Times, Serif; margin: 0; text-align: justify">The aggregate intrinsic value at December 31,
2020 was based on the Company's closing stock price of $1.23 was approximately $269,000. 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. The total number of in-the-money options exercisable as of December 31, 2020 was 205,000.</p>
<p style="font: 10pt Times New Roman, Times, Serif; margin: 0; text-align: justify; text-indent: 0.5in"> </p>
<p style="font: 10pt Times New Roman, Times, Serif; margin: 0; text-align: justify">The weighted average fair value of options
granted during the years ended December 31, 2020 and 2019 was $0.64 and $0.50 per share, respectively. The total intrinsic value
of options exercised during both the years ended December 31, 2020 and 2019 was $0. The total fair value of shares vested during
the years ended December 31, 2020 and 2019 was $237,000 and $1,210,000, respectively.</p>
<p style="font: 10pt Times New Roman, Times, Serif; margin: 0; text-align: justify; text-indent: 0.5in"><b> </b></p>
<p style="font: 10pt Times New Roman, Times, Serif; margin: 0; text-align: justify"><b>Warrants</b></p>
<p style="font: 10pt Times New Roman, Times, Serif; margin: 0; text-align: justify; text-indent: 0.5in"> </p>
<p style="font: 10pt Times New Roman, Times, Serif; margin: 0; text-align: justify">During both the years ended December 31, 2020
and 2019, the Company did not issue warrants, in connection with convertible notes payable and common stock issuances.</p>
<p style="font: 10pt Times New Roman, Times, Serif; margin: 0; text-align: justify"> </p>
<p style="font: 10pt Times New Roman, Times, Serif; margin: 0; text-align: justify">The following tables summarize the Company's
outstanding warrants as of December 31, 2020 and changes during the two years then ended:</p>
<p style="font: 10pt Times New Roman, Times, Serif; margin: 0; text-align: justify"> </p>
<table cellpadding="0" cellspacing="0" style="font: 10pt Times New Roman, Times, Serif; border-collapse: collapse; width: 100%">
<tr style="vertical-align: bottom">
<td> </td><td> </td>
<td colspan="2" style="text-align: center"> </td><td> </td><td> </td>
<td colspan="2" style="text-align: center"> </td><td> </td><td style="font-weight: bold"> </td>
<td colspan="2" style="font-weight: bold; text-align: center">Wtd. Avg.</td><td style="font-weight: bold"> </td></tr>
<tr style="vertical-align: bottom">
<td> </td><td> </td>
<td colspan="2" style="text-align: center"> </td><td> </td><td style="font-weight: bold"> </td>
<td colspan="2" style="font-weight: bold; text-align: center">Wtd. Avg.</td><td style="font-weight: bold"> </td><td style="font-weight: bold"> </td>
<td colspan="2" style="font-weight: bold; text-align: center">Remaining</td><td style="font-weight: bold"> </td></tr>
<tr style="vertical-align: bottom">
<td> </td><td> </td>
<td colspan="2" style="text-align: center"> </td><td> </td><td style="font-weight: bold"> </td>
<td colspan="2" style="font-weight: bold; text-align: center">Exercise</td><td style="font-weight: bold"> </td><td style="font-weight: bold"> </td>
<td colspan="2" style="font-weight: bold; text-align: center">Contractual</td><td style="font-weight: bold"> </td></tr>
<tr style="vertical-align: bottom">
<td> </td><td style="font-weight: bold; padding-bottom: 1.5pt"> </td>
<td colspan="2" style="border-bottom: Black 1.5pt solid; font-weight: bold; text-align: center">Warrants</td><td style="padding-bottom: 1.5pt; font-weight: bold"> </td><td style="font-weight: bold; padding-bottom: 1.5pt"> </td>
<td colspan="2" style="border-bottom: Black 1.5pt solid; font-weight: bold; text-align: center">Price</td><td style="padding-bottom: 1.5pt; font-weight: bold"> </td><td style="font-weight: bold; padding-bottom: 1.5pt"> </td>
<td colspan="2" style="border-bottom: Black 1.5pt solid; font-weight: bold; text-align: center">Life (years)</td><td style="padding-bottom: 1.5pt; font-weight: bold"> </td></tr>
<tr style="vertical-align: bottom; background-color: rgb(204,238,255)">
<td style="width: 64%">Balance, January 1, 2019</td><td style="width: 1%"> </td>
<td style="width: 1%; text-align: left"> </td><td style="width: 9%; text-align: right">2,239,762</td><td style="width: 1%; text-align: left"> </td><td style="width: 1%"> </td>
<td style="width: 1%; text-align: left">$</td><td style="width: 9%; text-align: right">3.10</td><td style="width: 1%; text-align: left"> </td><td style="width: 1%"> </td>
<td style="width: 1%; text-align: left"> </td><td style="width: 9%; text-align: right">3.35</td><td style="width: 1%; text-align: left"> </td></tr>
<tr style="vertical-align: bottom; background-color: White">
<td style="text-align: left">Granted during the period</td><td> </td>
<td style="text-align: left"> </td><td style="text-align: right">-</td><td style="text-align: left"> </td><td> </td>
<td style="text-align: left"> </td><td style="text-align: right">-</td><td style="text-align: left"> </td><td> </td>
<td style="text-align: left"> </td><td style="text-align: right">-</td><td style="text-align: left"> </td></tr>
<tr style="vertical-align: bottom; background-color: rgb(204,238,255)">
<td style="text-align: left">Terminated/Expired during the period</td><td> </td>
<td style="text-align: left"> </td><td style="text-align: right">(56,800</td><td style="text-align: left">)</td><td> </td>
<td style="text-align: left"> </td><td style="text-align: right">10.80</td><td style="text-align: left"> </td><td> </td>
<td style="text-align: left"> </td><td style="text-align: right">-</td><td style="text-align: left"> </td></tr>
<tr style="vertical-align: bottom; background-color: White">
<td>Balance, December 31, 2019</td><td> </td>
<td style="text-align: left"> </td><td style="text-align: right">2,182,962</td><td style="text-align: left"> </td><td> </td>
<td style="text-align: left">$</td><td style="text-align: right">2.90</td><td style="text-align: left"> </td><td> </td>
<td style="text-align: left"> </td><td style="text-align: right">2.43</td><td style="text-align: left"> </td></tr>
<tr style="vertical-align: bottom; background-color: rgb(204,238,255)">
<td style="text-align: left">Granted during the period</td><td> </td>
<td style="text-align: left"> </td><td style="text-align: right">-</td><td style="text-align: left"> </td><td> </td>
<td style="text-align: left"> </td><td style="text-align: right">-</td><td style="text-align: left"> </td><td> </td>
<td style="text-align: left"> </td><td style="text-align: right">-</td><td style="text-align: left"> </td></tr>
<tr style="vertical-align: bottom; background-color: White">
<td style="text-align: left; padding-bottom: 1.5pt">Terminated/Expired during the period</td><td style="padding-bottom: 1.5pt"> </td>
<td style="border-bottom: Black 1.5pt solid; text-align: left"> </td><td style="border-bottom: Black 1.5pt solid; text-align: right">-</td><td style="padding-bottom: 1.5pt; text-align: left"> </td><td style="padding-bottom: 1.5pt"> </td>
<td style="border-bottom: Black 1.5pt solid; text-align: left">$</td><td style="border-bottom: Black 1.5pt solid; text-align: right">-</td><td style="padding-bottom: 1.5pt; text-align: left"> </td><td style="padding-bottom: 1.5pt"> </td>
<td style="border-bottom: Black 1.5pt solid; text-align: left"> </td><td style="border-bottom: Black 1.5pt solid; text-align: right">-</td><td style="padding-bottom: 1.5pt; text-align: left"> </td></tr>
<tr style="vertical-align: bottom; background-color: rgb(204,238,255)">
<td style="padding-bottom: 4pt">Balance, December 31, 2020</td><td style="padding-bottom: 4pt"> </td>
<td style="border-bottom: Black 4pt double; text-align: left"> </td><td style="border-bottom: Black 4pt double; text-align: right">2,182,962</td><td style="padding-bottom: 4pt; text-align: left"> </td><td style="padding-bottom: 4pt"> </td>
<td style="border-bottom: Black 4pt double; text-align: left">$</td><td style="border-bottom: Black 4pt double; text-align: right">2.90</td><td style="padding-bottom: 4pt; text-align: left"> </td><td style="padding-bottom: 4pt"> </td>
<td style="border-bottom: Black 4pt double; text-align: left"> </td><td style="border-bottom: Black 4pt double; text-align: right">1.43</td><td style="padding-bottom: 4pt; text-align: left"> </td></tr>
<tr style="vertical-align: bottom; background-color: White">
<td> </td><td> </td>
<td style="text-align: left"> </td><td style="text-align: right"> </td><td style="text-align: left"> </td><td> </td>
<td style="text-align: left"> </td><td style="text-align: right"> </td><td style="text-align: left"> </td><td> </td>
<td style="text-align: left"> </td><td style="text-align: right"> </td><td style="text-align: left"> </td></tr>
<tr style="vertical-align: bottom; background-color: rgb(204,238,255)">
<td>Exercisable at December 31, 2020</td><td> </td>
<td style="text-align: left"> </td><td style="text-align: right">2,182,962</td><td style="text-align: left"> </td><td> </td>
<td style="text-align: left">$</td><td style="text-align: right">2.90</td><td style="text-align: left"> </td><td> </td>
<td style="text-align: left"> </td><td style="text-align: right">1.43</td><td style="text-align: left"> </td></tr></table>
<table cellpadding="0" cellspacing="0" style="font: 10pt Times New Roman, Times, Serif; border-collapse: collapse; width: 100%"><tr style="vertical-align: bottom"><td></td><td style="font-weight: bold; padding-bottom: 1.5pt"> </td>
<td colspan="2" style="border-bottom: Black 1.5pt solid; font-weight: bold; text-align: center">2020</td><td style="padding-bottom: 1.5pt; font-weight: bold"> </td><td style="font-weight: bold; padding-bottom: 1.5pt"> </td>
<td colspan="2" style="border-bottom: Black 1.5pt solid; font-weight: bold; text-align: center">2019</td><td style="padding-bottom: 1.5pt; font-weight: bold"> </td></tr>
<tr style="vertical-align: bottom; background-color: rgb(204,238,255)">
<td style="text-align: left">Risk-free interest rates</td><td> </td>
<td style="text-align: left"> </td><td style="text-align: right">0.22% - 1.61</td><td style="text-align: left">%</td><td> </td>
<td style="text-align: left"> </td><td style="text-align: right">1.87% - 2.60</td><td style="text-align: left">%</td></tr>
<tr style="vertical-align: bottom; background-color: White">
<td style="text-align: left">Expected life (in years)</td><td> </td>
<td style="text-align: left"> </td><td style="text-align: right">2.50 - 4.00</td><td style="text-align: left"> </td><td> </td>
<td style="text-align: left"> </td><td style="text-align: right">4.90 - 6.80</td><td style="text-align: left"> </td></tr>
<tr style="vertical-align: bottom; background-color: rgb(204,238,255)">
<td style="text-align: left">Expected volatility</td><td> </td>
<td style="text-align: left"> </td><td style="white-space: nowrap; text-align: right">71.5% - 75.4</td><td style="text-align: left">%</td><td> </td>
<td style="text-align: left"> </td><td style="white-space: nowrap; text-align: right">65.8% - 72.4</td><td style="text-align: left">%</td></tr>
<tr style="vertical-align: bottom; background-color: White">
<td style="width: 76%; text-align: left">Dividend yield</td><td style="width: 1%"> </td>
<td style="width: 1%; text-align: left"> </td><td style="width: 9%; text-align: right">0.00</td><td style="width: 1%; text-align: left">%</td><td style="width: 1%"> </td>
<td style="width: 1%; text-align: left"> </td><td style="width: 9%; text-align: right">0.00</td><td style="width: 1%; text-align: left">%</td></tr>
<tr style="vertical-align: bottom; background-color: rgb(204,238,255)">
<td> </td><td> </td>
<td style="text-align: left"> </td><td style="text-align: right"> </td><td style="text-align: left"> </td><td> </td>
<td style="text-align: left"> </td><td style="text-align: right"> </td><td style="text-align: left"> </td></tr>
<tr style="vertical-align: bottom; background-color: White">
<td>Weighted-average grant date fair value per share</td><td> </td>
<td style="text-align: left">$</td><td style="text-align: right">0.64</td><td style="text-align: left"> </td><td> </td>
<td style="text-align: left">$</td><td style="text-align: right">0.50</td><td style="text-align: left"> </td></tr></table>
<table cellpadding="0" cellspacing="0" style="font: 10pt Times New Roman, Times, Serif; border-collapse: collapse; width: 100%"><tr style="vertical-align: bottom"><td></td><td style="font-weight: bold"> </td>
<td colspan="2" style="font-weight: bold; text-align: center">Number</td><td style="font-weight: bold"> </td><td> </td>
<td colspan="2" style="text-align: center"> </td><td> </td><td> </td>
<td style="text-align: center"><b>Wtd. Avg,</b></td><td style="font-weight: bold"> </td>
<td colspan="2" style="font-weight: bold; text-align: center">Wtd. Avg.</td><td style="font-weight: bold"> </td></tr>
<tr style="vertical-align: bottom">
<td style="border-bottom: Black 1.5pt solid; font-weight: bold">Range of Exercise Price</td><td style="font-weight: bold; padding-bottom: 1.5pt"> </td>
<td colspan="2" style="border-bottom: Black 1.5pt solid; font-weight: bold; text-align: center">Outstanding</td><td style="padding-bottom: 1.5pt; font-weight: bold"> </td><td style="font-weight: bold; padding-bottom: 1.5pt"> </td>
<td colspan="2" style="border-bottom: Black 1.5pt solid; font-weight: bold; text-align: center">Exercisable</td><td style="padding-bottom: 1.5pt; font-weight: bold"> </td><td style="font-weight: bold; padding-bottom: 1.5pt"> </td>
<td style="border-bottom: Black 1.5pt solid; font-weight: bold; text-align: center"> Life</td><td style="font-weight: bold; padding-bottom: 1.5pt"> </td>
<td colspan="2" style="border-bottom: Black 1.5pt solid; font-weight: bold; text-align: center">Exercise Price</td><td style="padding-bottom: 1.5pt; font-weight: bold"> </td></tr>
<tr style="vertical-align: bottom; background-color: rgb(204,238,255)">
<td style="width: 52%">$0.00 - $5.00</td><td style="width: 1%"> </td>
<td style="width: 1%; text-align: left"> </td><td style="width: 9%; text-align: right">1,784,000</td><td style="width: 1%; text-align: left"> </td><td style="width: 1%"> </td>
<td style="width: 1%; text-align: left"> </td><td style="width: 9%; text-align: right">1,414,000</td><td style="width: 1%; text-align: left"> </td><td style="width: 1%"> </td>
<td style="width: 11%; text-align: center">3.69 years</td><td style="width: 1%"> </td>
<td style="width: 1%; text-align: left">$</td><td style="width: 9%; text-align: right">1.25</td><td style="width: 1%; text-align: left"> </td></tr>
<tr style="vertical-align: bottom; background-color: White">
<td style="padding-bottom: 1.5pt">$5.01 - $15.00</td><td style="padding-bottom: 1.5pt"> </td>
<td style="border-bottom: Black 1.5pt solid; text-align: left"> </td><td style="border-bottom: Black 1.5pt solid; text-align: right">75,000</td><td style="padding-bottom: 1.5pt; text-align: left"> </td><td style="padding-bottom: 1.5pt"> </td>
<td style="border-bottom: Black 1.5pt solid; text-align: left"> </td><td style="border-bottom: Black 1.5pt solid; text-align: right">75,000</td><td style="padding-bottom: 1.5pt; text-align: left"> </td><td style="padding-bottom: 1.5pt"> </td>
<td style="text-align: center; padding-bottom: 1.5pt">0.32 years</td><td style="padding-bottom: 1.5pt"> </td>
<td style="border-bottom: Black 1.5pt solid; text-align: left">$</td><td style="border-bottom: Black 1.5pt solid; text-align: right">8.85</td><td style="padding-bottom: 1.5pt; text-align: left"> </td></tr>
<tr style="vertical-align: bottom; background-color: rgb(204,238,255)">
<td style="padding-bottom: 4pt">$0.00 - $15.00</td><td style="padding-bottom: 4pt"> </td>
<td style="border-bottom: Black 4pt double; text-align: left"> </td><td style="border-bottom: Black 4pt double; text-align: right">1,859,000</td><td style="padding-bottom: 4pt; text-align: left"> </td><td style="padding-bottom: 4pt"> </td>
<td style="border-bottom: Black 4pt double; text-align: left"> </td><td style="border-bottom: Black 4pt double; text-align: right">1,489,000</td><td style="padding-bottom: 4pt; text-align: left"> </td><td style="padding-bottom: 4pt"> </td>
<td style="text-align: center; padding-bottom: 4pt">3.55 years</td><td style="padding-bottom: 4pt"> </td>
<td style="border-bottom: Black 4pt double; text-align: left">$</td><td style="border-bottom: Black 4pt double; text-align: right">1.56</td><td style="padding-bottom: 4pt; text-align: left"> </td></tr></table>
<p style="font: 10pt Times New Roman, Times, Serif; margin: 0; text-align: justify"></p>
<table cellpadding="0" cellspacing="0" style="font: 10pt Times New Roman, Times, Serif; border-collapse: collapse; width: 100%">
<tr style="vertical-align: bottom">
<td> </td><td> </td>
<td colspan="2" style="text-align: center"> </td><td> </td><td style="font-weight: bold"> </td>
<td colspan="2" style="font-weight: bold; text-align: center">Wtd. Avg.</td><td style="font-weight: bold"> </td></tr>
<tr style="vertical-align: bottom">
<td> </td><td> </td>
<td colspan="2" style="text-align: center"> </td><td> </td><td style="font-weight: bold"> </td>
<td colspan="2" style="font-weight: bold; text-align: center">Exercise</td><td style="font-weight: bold"> </td></tr>
<tr style="vertical-align: bottom">
<td> </td><td style="font-weight: bold; padding-bottom: 1.5pt"> </td>
<td colspan="2" style="border-bottom: Black 1.5pt solid; font-weight: bold; text-align: center">Options</td><td style="padding-bottom: 1.5pt; font-weight: bold"> </td><td style="font-weight: bold; padding-bottom: 1.5pt"> </td>
<td colspan="2" style="border-bottom: Black 1.5pt solid; font-weight: bold; text-align: center">Price</td><td style="padding-bottom: 1.5pt; font-weight: bold"> </td></tr>
<tr style="vertical-align: bottom; background-color: rgb(204,238,255)">
<td style="width: 76%">Balance, January 1, 2019</td><td style="width: 1%"> </td>
<td style="width: 1%; text-align: left"> </td><td style="width: 9%; text-align: right">838,149</td><td style="width: 1%; text-align: left"> </td><td style="width: 1%"> </td>
<td style="width: 1%; text-align: left">$</td><td style="width: 9%; text-align: right">3.08</td><td style="width: 1%; text-align: left"> </td></tr>
<tr style="vertical-align: bottom; background-color: White">
<td style="text-align: left">Granted during the period</td><td> </td>
<td style="text-align: left"> </td><td style="text-align: right">613,000</td><td style="text-align: left"> </td><td> </td>
<td style="text-align: left"> </td><td style="text-align: right">0.96</td><td style="text-align: left"> </td></tr>
<tr style="vertical-align: bottom; background-color: rgb(204,238,255)">
<td style="text-align: left">Exercised during the period</td><td> </td>
<td style="text-align: left"> </td><td style="text-align: right">(15,000</td><td style="text-align: left">)</td><td> </td>
<td style="text-align: left"> </td><td style="text-align: right">0.88</td><td style="text-align: left"> </td></tr>
<tr style="vertical-align: bottom; background-color: White">
<td style="text-align: left; padding-bottom: 1.5pt">Terminated/Expired during the period</td><td style="padding-bottom: 1.5pt"> </td>
<td style="border-bottom: Black 1.5pt solid; text-align: left"> </td><td style="border-bottom: Black 1.5pt solid; text-align: right">(66,500</td><td style="padding-bottom: 1.5pt; text-align: left">)</td><td style="padding-bottom: 1.5pt"> </td>
<td style="padding-bottom: 1.5pt; text-align: left"> </td><td style="padding-bottom: 1.5pt; text-align: right">7.46</td><td style="padding-bottom: 1.5pt; text-align: left"> </td></tr>
<tr style="vertical-align: bottom; background-color: rgb(204,238,255)">
<td>Balance, December 31, 2019</td><td> </td>
<td style="text-align: left"> </td><td style="text-align: right">1,369,649</td><td style="text-align: left"> </td><td> </td>
<td style="text-align: left">$</td><td style="text-align: right">2.01</td><td style="text-align: left"> </td></tr>
<tr style="vertical-align: bottom; background-color: White">
<td style="text-align: left">Granted during the period</td><td> </td>
<td style="text-align: left"> </td><td style="text-align: right">560,000</td><td style="text-align: left"> </td><td> </td>
<td style="text-align: left"> </td><td style="text-align: right">1.20</td><td style="text-align: left"> </td></tr>
<tr style="vertical-align: bottom; background-color: rgb(204,238,255)">
<td style="text-align: left">Exercised during the period</td><td> </td>
<td style="text-align: left"> </td><td style="text-align: right">-</td><td style="text-align: left"> </td><td> </td>
<td style="text-align: left"> </td><td style="text-align: right">-</td><td style="text-align: left"> </td></tr>
<tr style="vertical-align: bottom; background-color: White">
<td style="text-align: left; padding-bottom: 1.5pt">Terminated/Expired during the period</td><td style="padding-bottom: 1.5pt"> </td>
<td style="border-bottom: Black 1.5pt solid; text-align: left"> </td><td style="border-bottom: Black 1.5pt solid; text-align: right">(70,649</td><td style="padding-bottom: 1.5pt; text-align: left">)</td><td style="padding-bottom: 1.5pt"> </td>
<td style="padding-bottom: 1.5pt; text-align: left"> </td><td style="padding-bottom: 1.5pt; text-align: right">7.48</td><td style="padding-bottom: 1.5pt; text-align: left"> </td></tr>
<tr style="vertical-align: bottom; background-color: rgb(204,238,255)">
<td style="padding-bottom: 1.5pt">Balance, December 31, 2020</td><td style="padding-bottom: 1.5pt"> </td>
<td style="border-bottom: Black 1.5pt solid; text-align: left"> </td><td style="border-bottom: Black 1.5pt solid; text-align: right">1,859,000</td><td style="padding-bottom: 1.5pt; text-align: left"> </td><td style="padding-bottom: 1.5pt"> </td>
<td style="padding-bottom: 1.5pt; text-align: left">$</td><td style="padding-bottom: 1.5pt; text-align: right">1.56</td><td style="padding-bottom: 1.5pt; text-align: left"> </td></tr>
<tr style="vertical-align: bottom; background-color: White">
<td> </td><td> </td>
<td style="text-align: left"> </td><td style="text-align: right"> </td><td style="text-align: left"> </td><td> </td>
<td style="text-align: left"> </td><td style="text-align: right"> </td><td style="text-align: left"> </td></tr>
<tr style="vertical-align: bottom; background-color: rgb(204,238,255)">
<td>Exercisable at December 31, 2020</td><td> </td>
<td style="text-align: left"> </td><td style="text-align: right">1,488,997</td><td style="text-align: left"> </td><td> </td>
<td style="text-align: left">$</td><td style="text-align: right">1.68</td><td style="text-align: left"> </td></tr></table>
<p style="font: 10pt Times New Roman, Times, Serif; margin: 0; text-align: justify"></p>
<table cellpadding="0" cellspacing="0" style="font: 10pt Times New Roman, Times, Serif; border-collapse: collapse; width: 100%">
<tr style="vertical-align: bottom">
<td> </td><td> </td>
<td colspan="2" style="text-align: center"> </td><td> </td><td> </td>
<td colspan="2" style="text-align: center"> </td><td> </td><td style="font-weight: bold"> </td>
<td colspan="2" style="font-weight: bold; text-align: center">Wtd. Avg.</td><td style="font-weight: bold"> </td></tr>
<tr style="vertical-align: bottom">
<td> </td><td> </td>
<td colspan="2" style="text-align: center"> </td><td> </td><td style="font-weight: bold"> </td>
<td colspan="2" style="font-weight: bold; text-align: center">Wtd. Avg.</td><td style="font-weight: bold"> </td><td style="font-weight: bold"> </td>
<td colspan="2" style="font-weight: bold; text-align: center">Remaining</td><td style="font-weight: bold"> </td></tr>
<tr style="vertical-align: bottom">
<td> </td><td> </td>
<td colspan="2" style="text-align: center"> </td><td> </td><td style="font-weight: bold"> </td>
<td colspan="2" style="font-weight: bold; text-align: center">Exercise</td><td style="font-weight: bold"> </td><td style="font-weight: bold"> </td>
<td colspan="2" style="font-weight: bold; text-align: center">Contractual</td><td style="font-weight: bold"> </td></tr>
<tr style="vertical-align: bottom">
<td> </td><td style="font-weight: bold; padding-bottom: 1.5pt"> </td>
<td colspan="2" style="border-bottom: Black 1.5pt solid; font-weight: bold; text-align: center">Warrants</td><td style="padding-bottom: 1.5pt; font-weight: bold"> </td><td style="font-weight: bold; padding-bottom: 1.5pt"> </td>
<td colspan="2" style="border-bottom: Black 1.5pt solid; font-weight: bold; text-align: center">Price</td><td style="padding-bottom: 1.5pt; font-weight: bold"> </td><td style="font-weight: bold; padding-bottom: 1.5pt"> </td>
<td colspan="2" style="border-bottom: Black 1.5pt solid; font-weight: bold; text-align: center">Life (years)</td><td style="padding-bottom: 1.5pt; font-weight: bold"> </td></tr>
<tr style="vertical-align: bottom; background-color: rgb(204,238,255)">
<td style="width: 64%">Balance, January 1, 2019</td><td style="width: 1%"> </td>
<td style="width: 1%; text-align: left"> </td><td style="width: 9%; text-align: right">2,239,762</td><td style="width: 1%; text-align: left"> </td><td style="width: 1%"> </td>
<td style="width: 1%; text-align: left">$</td><td style="width: 9%; text-align: right">3.10</td><td style="width: 1%; text-align: left"> </td><td style="width: 1%"> </td>
<td style="width: 1%; text-align: left"> </td><td style="width: 9%; text-align: right">3.35</td><td style="width: 1%; text-align: left"> </td></tr>
<tr style="vertical-align: bottom; background-color: White">
<td style="text-align: left">Granted during the period</td><td> </td>
<td style="text-align: left"> </td><td style="text-align: right">-</td><td style="text-align: left"> </td><td> </td>
<td style="text-align: left"> </td><td style="text-align: right">-</td><td style="text-align: left"> </td><td> </td>
<td style="text-align: left"> </td><td style="text-align: right">-</td><td style="text-align: left"> </td></tr>
<tr style="vertical-align: bottom; background-color: rgb(204,238,255)">
<td style="text-align: left">Terminated/Expired during the period</td><td> </td>
<td style="text-align: left"> </td><td style="text-align: right">(56,800</td><td style="text-align: left">)</td><td> </td>
<td style="text-align: left"> </td><td style="text-align: right">10.80</td><td style="text-align: left"> </td><td> </td>
<td style="text-align: left"> </td><td style="text-align: right">-</td><td style="text-align: left"> </td></tr>
<tr style="vertical-align: bottom; background-color: White">
<td>Balance, December 31, 2019</td><td> </td>
<td style="text-align: left"> </td><td style="text-align: right">2,182,962</td><td style="text-align: left"> </td><td> </td>
<td style="text-align: left">$</td><td style="text-align: right">2.90</td><td style="text-align: left"> </td><td> </td>
<td style="text-align: left"> </td><td style="text-align: right">2.43</td><td style="text-align: left"> </td></tr>
<tr style="vertical-align: bottom; background-color: rgb(204,238,255)">
<td style="text-align: left">Granted during the period</td><td> </td>
<td style="text-align: left"> </td><td style="text-align: right">-</td><td style="text-align: left"> </td><td> </td>
<td style="text-align: left"> </td><td style="text-align: right">-</td><td style="text-align: left"> </td><td> </td>
<td style="text-align: left"> </td><td style="text-align: right">-</td><td style="text-align: left"> </td></tr>
<tr style="vertical-align: bottom; background-color: White">
<td style="text-align: left; padding-bottom: 1.5pt">Terminated/Expired during the period</td><td style="padding-bottom: 1.5pt"> </td>
<td style="border-bottom: Black 1.5pt solid; text-align: left"> </td><td style="border-bottom: Black 1.5pt solid; text-align: right">-</td><td style="padding-bottom: 1.5pt; text-align: left"> </td><td style="padding-bottom: 1.5pt"> </td>
<td style="border-bottom: Black 1.5pt solid; text-align: left">$</td><td style="border-bottom: Black 1.5pt solid; text-align: right">-</td><td style="padding-bottom: 1.5pt; text-align: left"> </td><td style="padding-bottom: 1.5pt"> </td>
<td style="border-bottom: Black 1.5pt solid; text-align: left"> </td><td style="border-bottom: Black 1.5pt solid; text-align: right">-</td><td style="padding-bottom: 1.5pt; text-align: left"> </td></tr>
<tr style="vertical-align: bottom; background-color: rgb(204,238,255)">
<td style="padding-bottom: 4pt">Balance, December 31, 2020</td><td style="padding-bottom: 4pt"> </td>
<td style="border-bottom: Black 4pt double; text-align: left"> </td><td style="border-bottom: Black 4pt double; text-align: right">2,182,962</td><td style="padding-bottom: 4pt; text-align: left"> </td><td style="padding-bottom: 4pt"> </td>
<td style="border-bottom: Black 4pt double; text-align: left">$</td><td style="border-bottom: Black 4pt double; text-align: right">2.90</td><td style="padding-bottom: 4pt; text-align: left"> </td><td style="padding-bottom: 4pt"> </td>
<td style="border-bottom: Black 4pt double; text-align: left"> </td><td style="border-bottom: Black 4pt double; text-align: right">1.43</td><td style="padding-bottom: 4pt; text-align: left"> </td></tr>
<tr style="vertical-align: bottom; background-color: White">
<td> </td><td> </td>
<td style="text-align: left"> </td><td style="text-align: right"> </td><td style="text-align: left"> </td><td> </td>
<td style="text-align: left"> </td><td style="text-align: right"> </td><td style="text-align: left"> </td><td> </td>
<td style="text-align: left"> </td><td style="text-align: right"> </td><td style="text-align: left"> </td></tr>
<tr style="vertical-align: bottom; background-color: rgb(204,238,255)">
<td>Exercisable at December 31, 2020</td><td> </td>
<td style="text-align: left"> </td><td style="text-align: right">2,182,962</td><td style="text-align: left"> </td><td> </td>
<td style="text-align: left">$</td><td style="text-align: right">2.90</td><td style="text-align: left"> </td><td> </td>
<td style="text-align: left"> </td><td style="text-align: right">1.43</td><td style="text-align: left"> </td></tr></table>
0.0187
0.0260
0.0022
0.0161
P4Y10M25D
P6Y9M18D
P2Y6M0D
P4Y0M0D
P2Y6M0D
P4Y10M25D
P4Y0M0D
P6Y9M18D
0.658
0.724
0.715
0.754
0.00
0.00
0
0
0.50
0.64
0.64
0.50
2239762
2182962
2182962
838149
1369649
1859000
613000
560000
560000
613000
56800
66500
70649
2182962
1488997
205000
1206000
3.10
2.90
2.90
3.08
2.01
1.56
0.96
1.20
0.88
10.80
7.46
7.48
2.90
1.68
P3Y4M6D
P2Y5M5D
P3Y8M9D
P0Y3M26D
P3Y6M18D
P2Y5M5D
P1Y5M5D
P1Y5M5D
0.00
5.01
0.00
5.00
15.00
15.00
1200000
80000
P0Y8M12D
1.23
269000
0
1210000
237000
0.0022
0.0187
0.0161
0.0260
0.715
0.658
0.754
0.724
45431000
43585000
8539000
7951000
275000
328000
-1439000
3115000
965000
446000
526000
672000
430000
-2598000
1326000
-0.09
0.04
0.00
-0.01
-0.09
0.05
0.00
-0.01
28851816
30742154
28851816
36747083
28392853
29478338
31906971
126000
126000
50000
639000
638000
1000
424805
244000
211000
211000
244000
52000
170300
-126000
-126000
-113000
-113000
-2000
-2000
-2732000
1096000
1096000
-2732000
145000
145000
2589000
2000
2587000
1830631
-140000
-140000
244000
211000
378000
308000
126000
627000
-275000
470000
482000
38000
38000
-136000
311000
105000
126000
1647000
1045000
-405000
3474000
33000
-274000
-49000
15000
-713000
168000
-970000
275000
601000
673000
130000
-94000
7000
-27000
-888000
-1525000
764000
3797000
-764000
-3797000
12543000
3106000
-14043000
3800000
2337000
579000
1572000
2414000
3000
1764000
18000
113000
145000
28000
1000000
100000
-186000
-385000
-81000
984000
934000
6533000
-718000
1211000
2274000
924000
22000
9000
4368000
642000
5397000
642000
1165000
52000
580000
2245000
58000
344000
9000
12437000
11944000
1774000
2550000
-10663000
-9394000
344000
58000
21369743
No
No
-60000
800000
2023-07-01
<table cellpadding="0" cellspacing="0" style="font: 10pt Times New Roman, Times, Serif; border-collapse: collapse; width: 100%"><tr style="vertical-align: bottom"><td> </td>
<td> </td>
<td colspan="2" style="border-bottom: black 1.5pt solid; white-space: nowrap">
<p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: center"><b>Michael </b></p>
<p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: center"><b>Taglich, Chairman</b></p></td>
<td> </td>
<td> </td>
<td colspan="2" style="border-bottom: black 1.5pt solid; text-align: center"><font style="font: 10pt Times New Roman, Times, Serif"><b>Robert Taglich, Director</b></font></td>
<td> </td>
<td> </td>
<td colspan="2" style="border-bottom: black 1.5pt solid; text-align: center"><font style="font: 10pt Times New Roman, Times, Serif"><b>Taglich Brothers<br />
Inc.</b></font></td>
<td> </td>
<td> </td>
<td colspan="2" style="border-bottom: black 1.5pt solid; text-align: center"><font style="font: 10pt Times New Roman, Times, Serif"><b>Total</b></font></td>
<td> </td></tr>
<tr style="vertical-align: bottom; background-color: #CCEEFF">
<td style="width: 52%"><font style="font: 10pt Times New Roman, Times, Serif">Convertible Subordinated Notes</font></td>
<td style="width: 1%"> </td>
<td style="width: 1%"><font style="font: 10pt Times New Roman, Times, Serif">$</font></td>
<td style="width: 9%; text-align: right"><font style="font: 10pt Times New Roman, Times, Serif">2,666,000</font></td>
<td style="width: 1%"> </td>
<td style="width: 1%"> </td>
<td style="width: 1%"><font style="font: 10pt Times New Roman, Times, Serif">$</font></td>
<td style="width: 9%; text-align: right"><font style="font: 10pt Times New Roman, Times, Serif">1,905,000</font></td>
<td style="width: 1%"> </td>
<td style="width: 1%"> </td>
<td style="width: 1%"><font style="font: 10pt Times New Roman, Times, Serif">$</font></td>
<td style="width: 9%; text-align: right"><font style="font: 10pt Times New Roman, Times, Serif">241,000</font></td>
<td style="width: 1%"> </td>
<td style="width: 1%"> </td>
<td style="width: 1%"><font style="font: 10pt Times New Roman, Times, Serif">$</font></td>
<td style="width: 9%; text-align: right"><font style="font: 10pt Times New Roman, Times, Serif">4,812,000</font></td>
<td style="width: 1%"> </td></tr>
<tr style="vertical-align: bottom; background-color: white">
<td><font style="font: 10pt Times New Roman, Times, Serif">Subordinated notes</font></td>
<td> </td>
<td style="border-bottom: black 1.5pt solid"> </td>
<td style="border-bottom: black 1.5pt solid; text-align: right"><font style="font: 10pt Times New Roman, Times, Serif">1,250,000</font></td>
<td> </td>
<td> </td>
<td style="border-bottom: black 1.5pt solid"> </td>
<td style="border-bottom: black 1.5pt solid; text-align: right"><font style="font: 10pt Times New Roman, Times, Serif">350,000</font></td>
<td> </td>
<td> </td>
<td style="border-bottom: black 1.5pt solid"> </td>
<td style="border-bottom: black 1.5pt solid; text-align: right"><font style="font: 10pt Times New Roman, Times, Serif">-</font></td>
<td> </td>
<td> </td>
<td style="border-bottom: black 1.5pt solid"> </td>
<td style="border-bottom: black 1.5pt solid; text-align: right"><font style="font: 10pt Times New Roman, Times, Serif">1,600,000</font></td>
<td> </td></tr>
<tr style="vertical-align: bottom; background-color: #CCEEFF">
<td style="padding-left: 9pt"><font style="font: 10pt Times New Roman, Times, Serif">Total</font></td>
<td> </td>
<td style="border-bottom: black 4.5pt double"><font style="font: 10pt Times New Roman, Times, Serif">$</font></td>
<td style="border-bottom: black 4.5pt double; text-align: right"><font style="font: 10pt Times New Roman, Times, Serif">3,916,000</font></td>
<td> </td>
<td> </td>
<td style="border-bottom: black 4.5pt double"><font style="font: 10pt Times New Roman, Times, Serif">$</font></td>
<td style="border-bottom: black 4.5pt double; text-align: right"><font style="font: 10pt Times New Roman, Times, Serif">2,255,000</font></td>
<td> </td>
<td> </td>
<td style="border-bottom: black 4.5pt double"><font style="font: 10pt Times New Roman, Times, Serif">$</font></td>
<td style="border-bottom: black 4.5pt double; text-align: right"><font style="font: 10pt Times New Roman, Times, Serif">241,000</font></td>
<td> </td>
<td> </td>
<td style="border-bottom: black 4.5pt double"><font style="font: 10pt Times New Roman, Times, Serif">$</font></td>
<td style="border-bottom: black 4.5pt double; text-align: right"><font style="font: 10pt Times New Roman, Times, Serif">6,412,000</font></td>
<td> </td></tr></table>
6412000
3916000
2255000
241000
-282000
-402000
85000
122000
1770000
<p style="font: 10pt Times New Roman, Times, Serif; margin: 0; text-align: justify"><b>Inventory Valuation</b></p>
<p style="font: 10pt Times New Roman, Times, Serif; margin: 0; text-align: justify; text-indent: 0.5in"> </p>
<p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify">The Company values inventory at the lower
of cost on a first-in-first-out basis or an estimated net realizable value. The Company does not take physical inventories at interim
quarterly reporting periods, however, a full physical inventory is taken annually. Adjustments to reconcile the annual physical
inventory to the Company's books are treated as changes in accounting estimates and are recorded in the fourth quarter.</p>
<p style="font: 10pt Times New Roman, Times, Serif; margin: 0; text-align: justify; text-indent: 0.5in"> </p>
<p style="font: 10pt Times New Roman, Times, Serif; margin: 0; text-align: justify">The Company generally purchases raw materials
and supplies uniquely suited to the production of larger more complex parts, such as landing gear, only when non-cancellable contracts
for orders have been received for finished goods. It occasionally produces larger more complex products, such as landing gear,
in excess of purchase order quantities in anticipation of future purchase order demand. Historically this excess has been used
in fulfilling future purchase orders. The Company purchases supplies and materials useful in a variety of products as deemed necessary
even though orders have not been received. The Company periodically evaluates inventory items that are not secured by purchase
orders and establishes write-downs to estimated net realizable value for obsolescence accordingly. The Company also writes-down
inventory to estimated net realizable value for excess quantities, slow-moving goods, and for other impairments of value.</p>
149000
275000
0.0000
4.5876
-0.0141
4.4222
<p style="font: 10pt Times New Roman, Times, Serif; margin: 0"><b>Note 3. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES</b></p>
<p style="font: 10pt Times New Roman, Times, Serif; margin: 0; text-align: justify; text-indent: 0.5in"><b> </b></p>
<p style="font: 10pt Times New Roman, Times, Serif; margin: 0; text-align: justify"><b>Principal Business Activity</b></p>
<p style="font: 10pt Times New Roman, Times, Serif; margin: 0; text-align: justify; text-indent: 0.5in"> </p>
<p style="font: 10pt Times New Roman, Times, Serif; margin: 0; text-align: justify">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. NTW is a manufacturer of aerospace components, principally landing gear for F-16 and F-18 fighter aircraft.
Sterling manufactures components and provides services for jet engines and ground-power turbines. The Company's customers
consist mainly of publicly traded companies in the aerospace industry.</p>
<p style="font: 10pt Times New Roman, Times, Serif; margin: 0; text-align: justify; text-indent: 0.5in"> </p>
<p style="font: 10pt Times New Roman, Times, Serif; margin: 0; text-align: justify"><b>Principles of Consolidation</b></p>
<p style="font: 10pt Times New Roman, Times, Serif; margin: 0; text-align: justify; text-indent: 0.5in"> </p>
<p style="font: 10pt Times New Roman, Times, Serif; margin: 0; text-align: justify">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.</p>
<p style="font: 10pt Times New Roman, Times, Serif; margin: 0; text-align: justify; text-indent: 0.5in"> </p>
<p style="font: 10pt Times New Roman, Times, Serif; margin: 0"><b>Discontinued Operations</b></p>
<p style="font: 10pt Times New Roman, Times, Serif; margin: 0; text-indent: 0.5in"> </p>
<p style="font: 10pt Times New Roman, Times, Serif; margin: 0; text-align: justify">Prior to the closure of EPC and ECC, the results
of operations were included in continuing operations, once it was determined to close both subsidiaries, the results were reclassified
to discontinued operations (see "Note 2 – Discontinued Operations").</p>
<p style="font: 10pt Times New Roman, Times, Serif; margin: 0; text-indent: 0.5in"> </p>
<p style="font: 10pt Times New Roman, Times, Serif; margin: 0; text-align: justify"><b>Cash and Cash Equivalents</b></p>
<p style="font: 10pt Times New Roman, Times, Serif; margin: 0; text-align: justify; text-indent: 0.5in"> </p>
<p style="font: 10pt Times New Roman, Times, Serif; margin: 0; text-align: justify">Cash and cash equivalents include all highly
liquid instruments with an original maturity of three months or less.</p>
<p style="font: 10pt Times New Roman, Times, Serif; margin: 0; text-align: center; text-indent: 0.5in"> </p>
<p style="font: 10pt Times New Roman, Times, Serif; margin: 0; text-align: justify"><b>Accounts Receivable</b></p>
<p style="font: 10pt Times New Roman, Times, Serif; margin: 0; text-align: justify; text-indent: 0.5in"> </p>
<p style="font: 10pt Times New Roman, Times, Serif; margin: 0; text-align: justify">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.</p>
<p style="font: 10pt Times New Roman, Times, Serif; margin: 0"> </p>
<p style="font: 10pt Times New Roman, Times, Serif; margin: 0; text-align: justify"><b>Going Concern</b></p>
<p style="font: 10pt Times New Roman, Times, Serif; margin: 0; text-align: justify; text-indent: 0.5in"> </p>
<p style="font: 10pt Times New Roman, Times, Serif; margin: 0; text-align: justify">At each reporting period, the Company evaluates
whether there are conditions or events that raise substantial doubt about its ability to continue as a going concern within one
year after the date that the financial statements are issued. We are required to make certain additional disclosures if we conclude
that substantial doubt exists and such concerns are not alleviated by our plans or when our plans alleviate substantial doubt about
our ability to continue as a going concern. The evaluation entails analyzing prospective operating budgets and forecasts for expectations
of our cash needs and comparing those needs to the current cash and cash equivalent balance and expectations regarding cash to
be generated over the following year. We concluded that substantial doubt of going concern did not exist. See Note 1 – Impact
of COVID-19 for a further discussion.</p>
<p style="font: 10pt Times New Roman, Times, Serif; margin: 0; text-align: justify; text-indent: 0.5in"> </p>
<p style="font: 10pt Times New Roman, Times, Serif; margin: 0; text-align: justify"><b>Inventory Valuation</b></p>
<p style="font: 10pt Times New Roman, Times, Serif; margin: 0; text-align: justify; text-indent: 0.5in"> </p>
<p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify">The Company values inventory at the lower
of cost on a first-in-first-out basis or an estimated net realizable value. The Company does not take physical inventories at interim
quarterly reporting periods, however, a full physical inventory is taken annually. Adjustments to reconcile the annual physical
inventory to the Company's books are treated as changes in accounting estimates and are recorded in the fourth quarter.</p>
<p style="font: 10pt Times New Roman, Times, Serif; margin: 0; text-align: justify; text-indent: 0.5in"> </p>
<p style="font: 10pt Times New Roman, Times, Serif; margin: 0; text-align: justify">The Company generally purchases raw materials
and supplies uniquely suited to the production of larger more complex parts, such as landing gear, only when non-cancellable contracts
for orders have been received for finished goods. It occasionally produces larger more complex products, such as landing gear,
in excess of purchase order quantities in anticipation of future purchase order demand. Historically this excess has been used
in fulfilling future purchase orders. The Company purchases supplies and materials useful in a variety of products as deemed necessary
even though orders have not been received. The Company periodically evaluates inventory items that are not secured by purchase
orders and establishes write-downs to estimated net realizable value for obsolescence accordingly. The Company also writes-down
inventory to estimated net realizable value for excess quantities, slow-moving goods, and for other impairments of value.</p>
<p style="font: 10pt Times New Roman, Times, Serif; margin: 0; text-align: justify; text-indent: 0.5in"> </p>
<p style="font: 10pt Times New Roman, Times, Serif; margin: 0; text-align: justify"><b>Prepaid Expenses and Other Current Assets</b></p>
<p style="font: 10pt Times New Roman, Times, Serif; margin: 0; text-align: justify"><b> </b></p>
<p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify">On December 23, 2020, the Company and
CPI reached an agreement to settle the working capital dispute. The settlement provided that the escrow agent would release the
balance of $ 1,380,684 remaining in the escrow account to CPI. The Company and CPI exchanged mutual releases customary in the
circumstances.</p>
<p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify"> </p>
<p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify">Prepaid expenses and other current assets
include purchase deposits, miscellaneous prepaid expenses and cash in escrow less a reserve. On December 31, 2020, the Company
settled its working capital dispute with CPI, see Note 14 - Contingencies. As a result of this settlement, the Company released
the cash that was held in escrow and therefore removed the reserve. The changes in the reserve are shown below and discussed in
Note 2 – Discontinued Operations.</p>
<p style="font: 10pt Times New Roman, Times, Serif; margin: 0"> </p>
<table cellpadding="0" cellspacing="0" style="font: 10pt Times New Roman, Times, Serif; border-collapse: collapse; width: 100%">
<tr style="vertical-align: bottom">
<td style="border-bottom: Black 1.5pt solid; font-weight: bold">Description</td><td style="font-weight: bold; padding-bottom: 1.5pt"> </td>
<td colspan="2" style="border-bottom: Black 1.5pt solid; font-weight: bold; text-align: center">Balance at<br /> Beginning <br /> of Year</td><td style="padding-bottom: 1.5pt; font-weight: bold"> </td><td style="font-weight: bold; padding-bottom: 1.5pt"> </td>
<td colspan="2" style="border-bottom: Black 1.5pt solid; font-weight: bold; text-align: center">Charges to<br /> Loss on Sale<br /> of Subsidiary</td><td style="padding-bottom: 1.5pt; font-weight: bold"> </td><td style="font-weight: bold; padding-bottom: 1.5pt"> </td>
<td colspan="2" style="border-bottom: Black 1.5pt solid; font-weight: bold; text-align: center">Deductions</td><td style="padding-bottom: 1.5pt; font-weight: bold"> </td><td style="font-weight: bold; padding-bottom: 1.5pt"> </td>
<td colspan="2" style="border-bottom: Black 1.5pt solid; font-weight: bold; text-align: center">Balance at<br /> end of year</td><td style="padding-bottom: 1.5pt; font-weight: bold"> </td></tr>
<tr style="vertical-align: bottom">
<td style="padding-left: 10pt; text-align: left; text-indent: -10pt">Valuation reserve deducted from Prepaid Expenses and Other Current Assets:</td><td> </td>
<td colspan="2" style="text-align: right"> </td><td> </td><td> </td>
<td colspan="2" style="text-align: right"> </td><td> </td><td> </td>
<td colspan="2" style="text-align: right"> </td><td> </td><td> </td>
<td colspan="2" style="text-align: right"> </td><td> </td></tr>
<tr style="vertical-align: bottom; background-color: rgb(204,238,255)">
<td style="width: 52%">Year ended December 31, 2020</td><td style="width: 1%"> </td>
<td style="width: 1%; text-align: left">$</td><td style="width: 9%; text-align: right">1,770,000</td><td style="width: 1%; text-align: left"> </td><td style="width: 1%"> </td>
<td style="width: 1%; text-align: left">$</td><td style="width: 9%; text-align: right">           -</td><td style="width: 1%; text-align: left"> </td><td style="width: 1%"> </td>
<td style="width: 1%; text-align: left">$</td><td style="width: 9%; text-align: right">(1,770,000</td><td style="width: 1%; text-align: left">)</td><td style="width: 1%"> </td>
<td style="width: 1%; text-align: left">$</td><td style="width: 9%; text-align: right">-</td><td style="width: 1%; text-align: left"> </td></tr>
<tr style="vertical-align: bottom; background-color: White">
<td>Year ended December 31, 2019</td><td> </td>
<td style="text-align: left">$</td><td style="text-align: right">1,770,000</td><td style="text-align: left"> </td><td> </td>
<td style="text-align: left">$</td><td style="text-align: right">-</td><td style="text-align: left"> </td><td> </td>
<td style="text-align: left">$</td><td style="text-align: right">-</td><td style="text-align: left"> </td><td> </td>
<td style="text-align: left">$</td><td style="text-align: right">1,770,000</td><td style="text-align: left"> </td></tr>
</table>
<p style="font: 10pt Times New Roman, Times, Serif; margin: 0; text-align: justify"> </p>
<p style="font: 10pt Times New Roman, Times, Serif; margin: 0; text-align: justify"><b>Property and Equipment</b></p>
<p style="font: 10pt Times New Roman, Times, Serif; margin: 0; text-align: justify; text-indent: 0.5in"> </p>
<p style="font: 10pt Times New Roman, Times, Serif; margin: 0; text-align: justify">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 $10,000 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.</p>
<p style="font: 10pt Times New Roman, Times, Serif; margin: 0; text-align: justify"> </p>
<p style="font: 10pt Times New Roman, Times, Serif; margin: 0; text-align: justify"><b>Long-Lived and Intangible Assets</b></p>
<p style="font: 10pt Times New Roman, Times, Serif; margin: 0; text-align: justify; text-indent: 0.5in"> </p>
<p style="font: 10pt Times New Roman, Times, Serif; margin: 0; text-align: justify">Identifiable intangible assets are amortized
using the straight-line method over the period of expected benefit.</p>
<p style="font: 10pt Times New Roman, Times, Serif; margin: 0; text-align: justify; text-indent: 0.5in"> </p>
<p style="font: 10pt Times New Roman, Times, Serif; margin: 0; text-align: justify">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. For the year ended December 31, 2019 the Company recorded an impairment charge of $275,000 included in
continuing operations. See Note 10 – Operating Lease Liabilities.</p>
<p style="font: 10pt Times New Roman, Times, Serif; margin: 0; text-align: justify; text-indent: 0.5in"> </p>
<p style="font: 10pt Times New Roman, Times, Serif; margin: 0; text-align: justify"><b>Deferred Financing Costs</b></p>
<p style="font: 10pt Times New Roman, Times, Serif; margin: 0; text-align: justify; text-indent: 0.5in"> </p>
<p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify">Costs incurred with obtaining and executing
revolving debt arrangements are capitalized and recorded in current assets and amortized using the effective interest method over
the term of the related debt. Costs incurred with obtaining and executing other debt arrangements are presented as a direct deduction
from the carrying value of the associated debt and also amortized using the effective interest method over the term of the related
debt. The amortization of financing costs is included in interest and financing costs in the statement of operations.</p>
<p style="font: 10pt Times New Roman, Times, Serif; margin: 0; text-align: justify; text-indent: 0.5in"> </p>
<p style="font: 10pt Times New Roman, Times, Serif; margin: 0; text-align: justify"><b>Derivative Liabilities</b></p>
<p style="font: 10pt Times New Roman, Times, Serif; margin: 0; text-align: justify; text-indent: 0.5in"> </p>
<p style="font: 10pt Times New Roman, Times, Serif; margin: 0; text-align: justify">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.</p>
<p style="font: 10pt Times New Roman, Times, Serif; margin: 0; text-align: justify; text-indent: 0.5in"><b> </b></p>
<p style="font: 10pt Times New Roman, Times, Serif; margin: 0; text-align: justify"><b>Revenue Recognition</b></p>
<p style="font: 10pt Times New Roman, Times, Serif; margin: 0; text-align: justify; text-indent: 0.5in"><b> </b></p>
<p style="font: 10pt Times New Roman, Times, Serif; margin: 0; text-align: justify">The Company accounts for revenue recognition
in accordance with accounting guidance codified as FASB ASC 606 "Revenue from Contracts with Customers" ("ASC
606"), as amended regarding revenue from contracts with customers. Under the standard an entity is required to recognize
revenue to depict the transfer of promised goods to customers in an amount that reflects the consideration to which the entity
expects to be entitled in exchange for those goods.</p>
<p style="font: 10pt Times New Roman, Times, Serif; margin: 0; text-align: justify; text-indent: 0.5in"> </p>
<p style="font: 10pt Times New Roman, Times, Serif; margin: 0; text-align: justify">Under ASC 606, revenue is recognized as the
customer obtains control of the goods and services promised in the contract (i.e., performance obligations). In evaluating our
contracts with our customers under ASC 606, we have determined that there is no future performance obligation once delivery has
occurred.</p>
<p style="font: 10pt Times New Roman, Times, Serif; margin: 0; text-align: justify; text-indent: 0.5in"> </p>
<p style="font: 10pt Times New Roman, Times, Serif; margin: 0; text-align: justify">The Company's revenues are primarily derived from consideration
paid by customers for tangible goods. The Company analyzes its different goods by segment to determine the appropriate basis for
revenue recognition, as described below. There are no material upfront costs for operations that are incurred from contracts with
customers.</p>
<p style="font: 10pt Times New Roman, Times, Serif; margin: 0; text-indent: 27pt"> </p>
<p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify">The Company's rights to payments
for goods transferred to customers are conditional only on the passage of time and not on any other criteria. Payment terms and
conditions vary by contract, although terms generally include a requirement of payment within 30 to 75 days.</p>
<p style="font: 10pt Times New Roman, Times, Serif; margin: 0; text-align: justify; text-indent: 0.5in"> </p>
<p style="font: 10pt Times New Roman, Times, Serif; margin: 0; text-align: justify">Payments received in advance from customers
are recorded as deferred revenue 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.</p>
<p style="font: 10pt Times New Roman, Times, Serif; margin: 0"> </p>
<p style="font: 10pt Times New Roman, Times, Serif; margin: 0; text-align: justify"><b>Use of Estimates</b></p>
<p style="font: 10pt Times New Roman, Times, Serif; margin: 0; text-align: justify; text-indent: 0.5in"> </p>
<p style="font: 10pt Times New Roman, Times, Serif; margin: 0; text-align: justify">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 allowance for doubtful accounts, 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.</p>
<p style="font: 10pt Times New Roman, Times, Serif; margin: 0; text-align: justify; text-indent: 0.5in"> </p>
<p style="font: 10pt Times New Roman, Times, Serif; margin: 0; text-align: justify"><b>Credit and Concentration Risks</b></p>
<p style="font: 10pt Times New Roman, Times, Serif; margin: 0; text-align: justify; text-indent: 0.5in"> </p>
<p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify">A large percentage of the Company's
revenues are derived from a small number of customers for U.S. Military Aviation.</p>
<p style="font: 10pt Times New Roman, Times, Serif; margin: 0; text-align: justify; text-indent: 0.5in"> </p>
<p style="font: 10pt Times New Roman, Times, Serif; margin: 0; text-align: justify">There were three customers that represented
73.9% of total sales, and three customers that represented 76.0% of total sales for the years ended December 31, 2020 and 2019,
respectively. This is set forth in the table below.</p>
<p style="font: 10pt Times New Roman, Times, Serif; margin: 0; text-align: justify; text-indent: 0.5in"> </p>
<table cellpadding="0" cellspacing="0" style="font: 10pt Times New Roman, Times, Serif; border-collapse: collapse; width: 100%">
<tr style="vertical-align: bottom">
<td style="border-bottom: Black 1.5pt solid; font-weight: bold; text-align: left">Customer</td><td style="font-weight: bold; padding-bottom: 1.5pt"> </td>
<td colspan="6" style="border-bottom: Black 1.5pt solid; font-weight: bold; text-align: center">Percentage of Sales</td><td style="padding-bottom: 1.5pt; font-weight: bold"> </td></tr>
<tr style="vertical-align: bottom">
<td style="text-align: left"> </td><td style="font-weight: bold; padding-bottom: 1.5pt"> </td>
<td colspan="2" style="border-bottom: Black 1.5pt solid; font-weight: bold; text-align: center">2020</td><td style="padding-bottom: 1.5pt; font-weight: bold"> </td><td style="font-weight: bold; padding-bottom: 1.5pt"> </td>
<td colspan="2" style="border-bottom: Black 1.5pt solid; font-weight: bold; text-align: center">2019</td><td style="padding-bottom: 1.5pt; font-weight: bold"> </td></tr>
<tr style="vertical-align: bottom">
<td style="text-align: left"> </td><td> </td>
<td colspan="2" style="text-align: center"> </td><td> </td><td> </td>
<td colspan="2" style="text-align: center"> </td><td> </td></tr>
<tr style="vertical-align: bottom; background-color: rgb(204,238,255)">
<td style="width: 76%; text-align: left">1</td><td style="width: 1%"> </td>
<td style="width: 1%; text-align: left"> </td><td style="width: 9%; text-align: right">30.4</td><td style="width: 1%; text-align: left">%</td><td style="width: 1%"> </td>
<td style="width: 1%; text-align: left"> </td><td style="width: 9%; text-align: right">34.2</td><td style="width: 1%; text-align: left">%</td></tr>
<tr style="vertical-align: bottom; background-color: White">
<td style="text-align: left">2</td><td> </td>
<td style="text-align: left"> </td><td style="text-align: right">30.3</td><td style="text-align: left">%</td><td> </td>
<td style="text-align: left"> </td><td style="text-align: right">30.4</td><td style="text-align: left">%</td></tr>
<tr style="vertical-align: bottom; background-color: rgb(204,238,255)">
<td style="text-align: left">3</td><td> </td>
<td style="text-align: left"> </td><td style="text-align: right">13.2</td><td style="text-align: left">%</td><td> </td>
<td style="text-align: left"> </td><td style="text-align: right">*</td><td style="text-align: left"> </td></tr>
<tr style="vertical-align: bottom; background-color: White">
<td style="text-align: left">4</td><td> </td>
<td style="text-align: left"> </td><td style="text-align: right">**</td><td style="text-align: left"> </td><td> </td>
<td style="text-align: left"> </td><td style="text-align: right">11.4</td><td style="text-align: left">%</td></tr>
</table>
<p style="font: 10pt Times New Roman, Times, Serif; margin: 0; text-align: justify"> </p>
<table cellpadding="0" cellspacing="0" style="font: 10pt Times New Roman, Times, Serif; margin-top: 0; margin-bottom: 6pt"><tr style="vertical-align: top; text-align: justify">
<td style="width: 0.25in; text-align: left">*</td><td style="text-align: justify">Customer was less than 10% of sales at December 31, 2019.</td>
</tr>
<tr style="vertical-align: top; text-align: justify">
<td style="text-align: left">**</td><td style="text-align: justify">Customer was less than 10% of sales at December 31, 2020.</td>
</tr></table>
<p style="font: 10pt Times New Roman, Times, Serif; margin: 0; text-align: justify"> </p>
<p style="font: 10pt Times New Roman, Times, Serif; margin: 0; text-align: justify">There were three customers that represented
80.3% of gross accounts receivable and 67.8% of gross accounts receivable at December 31, 2020 and 2019, respectively. This is
set forth in the table below.</p>
<p style="font: 10pt Times New Roman, Times, Serif; margin: 0; text-align: justify"> </p>
<table cellpadding="0" cellspacing="0" style="font: 10pt Times New Roman, Times, Serif; border-collapse: collapse; width: 100%">
<tr style="vertical-align: bottom">
<td style="text-align: left"> </td><td style="font-weight: bold; padding-bottom: 1.5pt"> </td>
<td colspan="6" style="border-bottom: Black 1.5pt solid; font-weight: bold; text-align: center">Percentage of Receivables</td><td style="padding-bottom: 1.5pt; font-weight: bold"> </td></tr>
<tr style="vertical-align: bottom">
<td style="text-align: left"> </td><td style="font-weight: bold"> </td>
<td colspan="2" style="font-weight: bold; text-align: center">December 31,</td><td style="font-weight: bold"> </td><td style="font-weight: bold"> </td>
<td colspan="2" style="font-weight: bold; text-align: center">December 31,</td><td style="font-weight: bold"> </td></tr>
<tr style="vertical-align: bottom">
<td style="border-bottom: Black 1.5pt solid; font-weight: bold; text-align: left">Customer</td><td style="font-weight: bold; padding-bottom: 1.5pt"> </td>
<td colspan="2" style="border-bottom: Black 1.5pt solid; font-weight: bold; text-align: center">2020</td><td style="padding-bottom: 1.5pt; font-weight: bold"> </td><td style="font-weight: bold; padding-bottom: 1.5pt"> </td>
<td colspan="2" style="border-bottom: Black 1.5pt solid; font-weight: bold; text-align: center">2019</td><td style="padding-bottom: 1.5pt; font-weight: bold"> </td></tr>
<tr style="vertical-align: bottom">
<td style="text-align: left"> </td><td> </td>
<td colspan="2" style="text-align: center"> </td><td> </td><td> </td>
<td colspan="2" style="text-align: center"> </td><td> </td></tr>
<tr style="vertical-align: bottom; background-color: rgb(204,238,255)">
<td style="width: 76%; text-align: left">1</td><td style="width: 1%"> </td>
<td style="width: 1%; text-align: left"> </td><td style="width: 9%; text-align: right">57.1</td><td style="width: 1%; text-align: left">%</td><td style="width: 1%"> </td>
<td style="width: 1%; text-align: left"> </td><td style="width: 9%; text-align: right">32.7</td><td style="width: 1%; text-align: left">%</td></tr>
<tr style="vertical-align: bottom; background-color: White">
<td style="text-align: left">2</td><td> </td>
<td style="text-align: left"> </td><td style="text-align: right">12.0</td><td style="text-align: left">%</td><td> </td>
<td style="text-align: left"> </td><td style="text-align: right">10.0</td><td style="text-align: left">%</td></tr>
<tr style="vertical-align: bottom; background-color: rgb(204,238,255)">
<td style="text-align: left">3</td><td> </td>
<td style="text-align: left"> </td><td style="text-align: right">11.2</td><td style="text-align: left">%</td><td> </td>
<td style="text-align: left"> </td><td style="text-align: right">25.1</td><td style="text-align: left">%</td></tr>
</table>
<p style="font: 10pt Times New Roman, Times, Serif; margin: 0; text-align: justify"> </p>
<p style="font: 10pt Times New Roman, Times, Serif; margin: 0; text-align: justify"><b>Cash and Cash equivalents</b></p>
<p style="font: 10pt Times New Roman, Times, Serif; margin: 0; text-align: justify"> </p>
<p style="font: 10pt Times New Roman, Times, Serif; margin: 0; text-align: justify">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.</p>
<p style="font: 10pt Times New Roman, Times, Serif; margin: 0; text-align: justify; text-indent: 0.5in"> </p>
<p style="font: 10pt Times New Roman, Times, Serif; margin: 0; text-align: justify"><b>Major Suppliers</b></p>
<p style="font: 10pt Times New Roman, Times, Serif; margin: 0; text-align: justify"> </p>
<p style="font: 10pt Times New Roman, Times, Serif; margin: 0; text-align: justify">The Company has several key sole-source suppliers
of various parts that are important for one or more of its products. These suppliers are its only source for such parts and, therefore,
in the event any of them were to go out of business or be unable to provide parts for any reason, its business could be severely
harmed.</p>
<p style="font: 10pt Times New Roman, Times, Serif; margin: 0; text-align: justify; text-indent: 0.5in"> </p>
<p style="font: 10pt Times New Roman, Times, Serif; margin: 0; text-align: justify"><b>Income Taxes</b></p>
<p style="font: 10pt Times New Roman, Times, Serif; margin: 0; text-align: justify; text-indent: 0.5in"> </p>
<p style="font: 10pt Times New Roman, Times, Serif; margin: 0; text-align: justify">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.</p>
<p style="font: 10pt Times New Roman, Times, Serif; margin: 0; text-align: justify"> </p>
<p style="font: 10pt Times New Roman, Times, Serif; margin: 0; text-align: justify">The provision for, or benefit from, income
taxes includes deferred taxes resulting from the temporary differences in income for financial and tax purposes using the liability
method. Such temporary differences result primarily from the differences in the carrying value of assets and liabilities. Future
realization of deferred income tax assets requires sufficient taxable income within the carryback, carryforward period available
under tax law. We evaluate, on a quarterly basis whether, based on all available evidence, it is probable that the deferred income
tax assets are realizable. Valuation allowances are established when it is more likely than not that the tax benefit of the deferred
tax asset will not be realized. The evaluation, as prescribed by ASC 740-10, "Income Taxes," includes the consideration
of all available evidence, both positive and negative, regarding historical operating results including recent years with reported
losses, the estimated timing of future reversals of existing taxable temporary differences, estimated future taxable income exclusive
of reversing temporary differences and carryforwards, and potential tax planning strategies which may be employed to prevent an
operating loss or tax credit carryforward from expiring unused.</p>
<p style="font: 10pt Times New Roman, Times, Serif; margin: 0; text-align: justify; text-indent: 0.5in"> </p>
<p style="font: 10pt Times New Roman, Times, Serif; margin: 0; text-align: justify">The Company accounts for uncertainties in income
taxes under the provisions of FASB ASC 740-10-05 (the "Subtopic"). The Subtopic clarifies the accounting for uncertainty
in income taxes recognized in an enterprise's financial statements. The Subtopic 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 Subtopic provides guidance on the de-recognition, classification, interest and penalties, accounting in interim periods, disclosure
and transition.</p>
<p style="font: 10pt Times New Roman, Times, Serif; margin: 0; text-align: justify; text-indent: 0.5in"><b> </b></p>
<p style="font: 10pt Times New Roman, Times, Serif; margin: 0; text-align: justify"><b>Earnings (Loss) per share</b></p>
<p style="font: 10pt Times New Roman, Times, Serif; margin: 0; text-align: justify; text-indent: 0.5in"> </p>
<p style="font: 10pt Times New Roman, Times, Serif; margin: 0; text-align: justify">Basic earnings (loss) per share ("EPS")
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.</p>
<p style="font: 10pt Times New Roman, Times, Serif; margin: 0; text-align: justify"> </p>
<p style="font: 10pt Times New Roman, Times, Serif; margin: 0; text-align: justify">For purposes of calculating diluted earnings
per common share, the numerator includes net income plus interest on convertible notes payable assumed converted as of the first
day of the period. The denominator includes both the weighted-average number of shares of common stock outstanding during the period
and the number of common stock equivalents if the inclusion of such common stock equivalents is dilutive. Dilutive common stock
equivalents potentially include stock options and warrants using the treasury stock method and convertible notes payable using
the if-converted method.</p>
<p style="font: 10pt Times New Roman, Times, Serif; margin: 0; text-align: justify"> </p>
<p style="font: 10pt Times New Roman, Times, Serif; margin: 0; text-align: justify">The following is the calculation of income
(loss) from continuing operations applicable to common stockholders utilized to calculate the EPS:</p>
<p style="font: 10pt Times New Roman, Times, Serif; margin: 0; text-align: justify"> </p>
<table cellpadding="0" cellspacing="0" style="font: 10pt Times New Roman, Times, Serif; border-collapse: collapse; width: 100%">
<tr style="vertical-align: bottom">
<td> </td><td style="font-weight: bold; padding-bottom: 1.5pt"> </td>
<td colspan="2" style="border-bottom: Black 1.5pt solid; font-weight: bold; text-align: center">2020</td><td style="padding-bottom: 1.5pt; font-weight: bold"> </td><td style="font-weight: bold; padding-bottom: 1.5pt"> </td>
<td colspan="2" style="border-bottom: Black 1.5pt solid; font-weight: bold; text-align: center">2019</td><td style="padding-bottom: 1.5pt; font-weight: bold"> </td></tr>
<tr style="vertical-align: bottom">
<td> </td><td> </td>
<td colspan="2"> </td><td> </td><td> </td>
<td colspan="2"> </td><td> </td></tr>
<tr style="vertical-align: bottom; background-color: rgb(204,238,255)">
<td style="width: 76%; text-align: left">Income (loss) from continuing operations - Basic</td><td style="width: 1%"> </td>
<td style="width: 1%; text-align: left">$</td><td style="width: 9%; text-align: right">1,326,000</td><td style="width: 1%; text-align: left"> </td><td style="width: 1%"> </td>
<td style="width: 1%; text-align: left">$</td><td style="width: 9%; text-align: right">(2,598,000</td><td style="width: 1%; text-align: left">)</td></tr>
<tr style="vertical-align: bottom; background-color: White">
<td style="text-align: left">Add: Convertible Note Interest for Potential Note Conversion</td><td> </td>
<td style="text-align: left"> </td><td style="text-align: right">499,000</td><td style="text-align: left"> </td><td> </td>
<td style="text-align: left"> </td><td style="text-align: right">-</td><td style="text-align: left"> </td></tr>
<tr style="vertical-align: bottom; background-color: rgb(204,238,255)">
<td style="text-align: left; padding-bottom: 1.5pt">Add: Convertible Note debt discount for Potential Note Conversion</td><td style="padding-bottom: 1.5pt"> </td>
<td style="border-bottom: Black 1.5pt solid; text-align: left"> </td><td style="border-bottom: Black 1.5pt solid; text-align: right">149,000</td><td style="padding-bottom: 1.5pt; text-align: left"> </td><td style="padding-bottom: 1.5pt"> </td>
<td style="border-bottom: Black 1.5pt solid; text-align: left"> </td><td style="border-bottom: Black 1.5pt solid; text-align: right">-</td><td style="padding-bottom: 1.5pt; text-align: left"> </td></tr>
<tr style="vertical-align: bottom; background-color: White">
<td> </td><td> </td>
<td style="text-align: left"> </td><td style="text-align: right"> </td><td style="text-align: left"> </td><td> </td>
<td style="text-align: left"> </td><td style="text-align: right"> </td><td style="text-align: left"> </td></tr>
<tr style="vertical-align: bottom; background-color: rgb(204,238,255)">
<td style="text-align: left; padding-bottom: 4pt">Income (loss) from continuing operations used to calculate diluted earnings per share</td><td style="padding-bottom: 4pt"> </td>
<td style="border-bottom: Black 4pt double; text-align: left">$</td><td style="border-bottom: Black 4pt double; text-align: right">1,974,000</td><td style="padding-bottom: 4pt; text-align: left"> </td><td style="padding-bottom: 4pt"> </td>
<td style="border-bottom: Black 4pt double; text-align: left">$</td><td style="border-bottom: Black 4pt double; text-align: right">(2,598,000</td><td style="padding-bottom: 4pt; text-align: left">)</td></tr>
</table>
<p style="font: 10pt Times New Roman, Times, Serif; margin: 0; text-align: justify"> </p>
<p style="font: 10pt Times New Roman, Times, Serif; margin: 0; text-align: justify">The following is a reconciliation of the denominators
of basic and diluted earnings per share computations:</p>
<p style="font: 10pt Times New Roman, Times, Serif; margin: 0; text-align: justify"> </p>
<table cellpadding="0" cellspacing="0" style="font: 10pt Times New Roman, Times, Serif; border-collapse: collapse; width: 100%">
<tr style="vertical-align: bottom">
<td> </td><td style="font-weight: bold; padding-bottom: 1.5pt"> </td>
<td colspan="2" style="border-bottom: Black 1.5pt solid; font-weight: bold; text-align: center">2020</td><td style="padding-bottom: 1.5pt; font-weight: bold"> </td><td style="font-weight: bold; padding-bottom: 1.5pt"> </td>
<td colspan="2" style="border-bottom: Black 1.5pt solid; font-weight: bold; text-align: center">2019</td><td style="padding-bottom: 1.5pt; font-weight: bold"> </td></tr>
<tr style="vertical-align: bottom">
<td> </td><td> </td>
<td colspan="2"> </td><td> </td><td> </td>
<td colspan="2"> </td><td> </td></tr>
<tr style="vertical-align: bottom; background-color: rgb(204,238,255)">
<td style="width: 76%">Weighted average shares outstanding used to compute basic earnings per share</td><td style="width: 1%"> </td>
<td style="width: 1%; text-align: left"> </td><td style="width: 9%; text-align: right">30,742,154</td><td style="width: 1%; text-align: left"> </td><td style="width: 1%"> </td>
<td style="width: 1%; text-align: left"> </td><td style="width: 9%; text-align: right">28,851,816</td><td style="width: 1%; text-align: left"> </td></tr>
<tr style="vertical-align: bottom; background-color: White">
<td style="text-align: left">Effect of dilutive stock options and warrants</td><td> </td>
<td style="text-align: left"> </td><td style="text-align: right">1,590,000</td><td style="text-align: left"> </td><td> </td>
<td style="text-align: left"> </td><td style="text-align: right">-</td><td style="text-align: left"> </td></tr>
<tr style="vertical-align: bottom; background-color: rgb(204,238,255)">
<td style="text-align: left; padding-bottom: 1.5pt">Effect of dilutive convertible notes payable</td><td style="padding-bottom: 1.5pt"> </td>
<td style="border-bottom: Black 1.5pt solid; text-align: left"> </td><td style="border-bottom: Black 1.5pt solid; text-align: right">4,414,929</td><td style="padding-bottom: 1.5pt; text-align: left"> </td><td style="padding-bottom: 1.5pt"> </td>
<td style="border-bottom: Black 1.5pt solid; text-align: left"> </td><td style="border-bottom: Black 1.5pt solid; text-align: right">-</td><td style="padding-bottom: 1.5pt; text-align: left"> </td></tr>
<tr style="vertical-align: bottom; background-color: White">
<td style="text-align: left; padding-bottom: 4pt">Weighted average shares outstanding and dilutive securities used to compute dilutive earnings per share</td><td style="padding-bottom: 4pt"> </td>
<td style="border-bottom: Black 4pt double; text-align: left"> </td><td style="border-bottom: Black 4pt double; text-align: right">36,747,083</td><td style="padding-bottom: 4pt; text-align: left"> </td><td style="padding-bottom: 4pt"> </td>
<td style="border-bottom: Black 4pt double; text-align: left"> </td><td style="border-bottom: Black 4pt double; text-align: right">28,851,816</td><td style="padding-bottom: 4pt; text-align: left"> </td></tr>
</table>
<p style="font: 10pt Times New Roman, Times, Serif; margin: 0; text-align: justify"> </p>
<p style="font: 10pt Times New Roman, Times, Serif; margin: 0; text-align: justify">The following securities have been excluded
from the calculation as the exercise price was greater than the average market price of the common shares:</p>
<p style="font: 10pt Times New Roman, Times, Serif; margin: 0; text-align: justify"> </p>
<table cellpadding="0" cellspacing="0" style="font: 10pt Times New Roman, Times, Serif; border-collapse: collapse; width: 100%">
<tr style="vertical-align: bottom">
<td> </td><td style="font-weight: bold; padding-bottom: 1.5pt"> </td>
<td colspan="2" style="border-bottom: Black 1.5pt solid; font-weight: bold; text-align: center">December 31,<br /> 2020</td><td style="padding-bottom: 1.5pt; font-weight: bold"> </td><td style="font-weight: bold; padding-bottom: 1.5pt"> </td>
<td colspan="2" style="border-bottom: Black 1.5pt solid; font-weight: bold; text-align: center">December 31,<br /> 2019</td><td style="padding-bottom: 1.5pt; font-weight: bold"> </td></tr>
<tr style="vertical-align: bottom">
<td> </td><td> </td>
<td colspan="2"> </td><td> </td><td> </td>
<td colspan="2"> </td><td> </td></tr>
<tr style="vertical-align: bottom; background-color: rgb(204,238,255)">
<td style="width: 76%; text-align: left">Stock Options</td><td style="width: 1%"> </td>
<td style="width: 1%; text-align: left"> </td><td style="width: 9%; text-align: right">549,000</td><td style="width: 1%; text-align: left"> </td><td style="width: 1%"> </td>
<td style="width: 1%; text-align: left"> </td><td style="width: 9%; text-align: right">800,000</td><td style="width: 1%; text-align: left"> </td></tr>
<tr style="vertical-align: bottom; background-color: White">
<td style="padding-bottom: 1.5pt">Warrants</td><td style="padding-bottom: 1.5pt"> </td>
<td style="border-bottom: Black 1.5pt solid; text-align: left"> </td><td style="border-bottom: Black 1.5pt solid; text-align: right">1,909,902</td><td style="padding-bottom: 1.5pt; text-align: left"> </td><td style="padding-bottom: 1.5pt"> </td>
<td style="border-bottom: Black 1.5pt solid; text-align: left"> </td><td style="border-bottom: Black 1.5pt solid; text-align: right">1,903,000</td><td style="padding-bottom: 1.5pt; text-align: left"> </td></tr>
<tr style="vertical-align: bottom; background-color: rgb(204,238,255)">
<td style="padding-bottom: 4pt"> </td><td style="padding-bottom: 4pt"> </td>
<td style="border-bottom: Black 4pt double; text-align: left"> </td><td style="border-bottom: Black 4pt double; text-align: right">2,458,902</td><td style="padding-bottom: 4pt; text-align: left"> </td><td style="padding-bottom: 4pt"> </td>
<td style="border-bottom: Black 4pt double; text-align: left"> </td><td style="border-bottom: Black 4pt double; text-align: right">2,703,000</td><td style="padding-bottom: 4pt; text-align: left"> </td></tr>
</table>
<p style="font: 10pt Times New Roman, Times, Serif; margin: 0; text-align: justify"> </p>
<p style="font: 10pt Times New Roman, Times, Serif; margin: 0; text-align: justify">The following securities have been excluded
from the calculation even though the exercise price was less than the average market price of the common shares because the effect
of including these potential shares was anti-dilutive due to the net loss incurred during the years:</p>
<p style="font: 10pt Times New Roman, Times, Serif; margin: 0; text-align: justify"> </p>
<table cellpadding="0" cellspacing="0" style="font: 10pt Times New Roman, Times, Serif; border-collapse: collapse; width: 100%">
<tr style="vertical-align: bottom">
<td> </td><td style="font-weight: bold; padding-bottom: 1.5pt"> </td>
<td colspan="2" style="border-bottom: Black 1.5pt solid; font-weight: bold; text-align: center">December 31,<br />
2020</td><td style="padding-bottom: 1.5pt; font-weight: bold"> </td><td style="font-weight: bold; padding-bottom: 1.5pt"> </td>
<td colspan="2" style="border-bottom: Black 1.5pt solid; font-weight: bold; text-align: center">December 31, <br />
2019</td><td style="padding-bottom: 1.5pt; font-weight: bold"> </td></tr>
<tr style="vertical-align: bottom">
<td> </td><td> </td>
<td colspan="2"> </td><td> </td><td> </td>
<td colspan="2"> </td><td> </td></tr>
<tr style="vertical-align: bottom; background-color: rgb(204,238,255)">
<td style="width: 76%; text-align: left">Stock Options</td><td style="width: 1%"> </td>
<td style="width: 1%; text-align: left"> </td><td style="width: 9%; text-align: right">    -</td><td style="width: 1%; text-align: left"> </td><td style="width: 1%"> </td>
<td style="width: 1%; text-align: left"> </td><td style="width: 9%; text-align: right">570,000</td><td style="width: 1%; text-align: left"> </td></tr>
<tr style="vertical-align: bottom; background-color: White">
<td>Warrants</td><td> </td>
<td style="text-align: left"> </td><td style="text-align: right">-</td><td style="text-align: left"> </td><td> </td>
<td style="text-align: left"> </td><td style="text-align: right">500</td><td style="text-align: left"> </td></tr>
<tr style="vertical-align: bottom; background-color: rgb(204,238,255)">
<td style="text-align: left; padding-bottom: 1.5pt">Convertible notes payable</td><td style="padding-bottom: 1.5pt"> </td>
<td style="border-bottom: Black 1.5pt solid; text-align: left"> </td><td style="border-bottom: Black 1.5pt solid; text-align: right">-</td><td style="padding-bottom: 1.5pt; text-align: left"> </td><td style="padding-bottom: 1.5pt"> </td>
<td style="border-bottom: Black 1.5pt solid; text-align: left"> </td><td style="border-bottom: Black 1.5pt solid; text-align: right">5,405,000</td><td style="padding-bottom: 1.5pt; text-align: left"> </td></tr>
<tr style="vertical-align: bottom; background-color: White">
<td style="padding-bottom: 4pt"> </td><td style="padding-bottom: 4pt"> </td>
<td style="border-bottom: Black 4pt double; text-align: left"> </td><td style="border-bottom: Black 4pt double; text-align: right">-</td><td style="padding-bottom: 4pt; text-align: left"> </td><td style="padding-bottom: 4pt"> </td>
<td style="border-bottom: Black 4pt double; text-align: left"> </td><td style="border-bottom: Black 4pt double; text-align: right">5,975,500</td><td style="padding-bottom: 4pt; text-align: left"> </td></tr>
</table>
<p style="font: 10pt Times New Roman, Times, Serif; margin: 0; text-align: justify"> </p>
<p style="font: 10pt Times New Roman, Times, Serif; margin: 0; text-align: justify"><b>Stock-Based Compensation</b></p>
<p style="font: 10pt Times New Roman, Times, Serif; margin: 0; text-align: justify; text-indent: 0.5in"> </p>
<p style="font: 10pt Times New Roman, Times, Serif; margin: 0; text-align: justify">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 and stock grants at their
closing reported market value. Stock compensation expense for employees amounted to $308,000 and $378,000 for the years ended December
31, 2020 and 2019, respectively. Stock compensation expense for directors amounted to $211,000 and $244,000 for the years ended
December 31, 2020 and 2019, respectively. Stock compensation expenses for employees and directors were included in operating expenses
on the accompanying Consolidated Statement of Operations.</p>
<p style="font: 10pt Times New Roman, Times, Serif; margin: 0; text-align: justify; text-indent: 0.5in"> </p>
<p style="font: 10pt Times New Roman, Times, Serif; margin: 0; text-align: justify"><b>Goodwill</b></p>
<p style="font: 10pt Times New Roman, Times, Serif; margin: 0; text-align: justify; text-indent: 0.5in"> </p>
<p style="font: 10pt Times New Roman, Times, Serif; margin: 0; text-align: justify">Goodwill represents the excess of the acquisition
cost of businesses over the fair value of the identifiable net assets acquired. The goodwill amount of $163,000 at December 31,
2020 and 2019 relates to the acquisition of NTW.</p>
<p style="font: 10pt Times New Roman, Times, Serif; margin: 0; text-align: justify"> </p>
<p style="font: 10pt Times New Roman, Times, Serif; margin: 0; text-align: justify">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.</p>
<p style="font: 10pt Times New Roman, Times, Serif; margin: 0; text-align: justify; text-indent: 0.5in"> </p>
<p style="font: 10pt Times New Roman, Times, Serif; margin: 0; text-align: justify">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 performs a qualitative assessment in the fourth quarter of each year to determine whether it was more likely than not that
the fair value of a reporting unit is less than its carting amount.</p>
<p style="font: 10pt Times New Roman, Times, Serif; margin: 0; text-align: justify; text-indent: 0.5in"> </p>
<p style="font: 10pt Times New Roman, Times, Serif; margin: 0; text-align: justify">The Company determined that there has been
no impairment of goodwill at December 31, 2020 and 2019.</p>
<p style="font: 10pt Times New Roman, Times, Serif; margin: 0; text-align: justify; text-indent: 0.5in"> </p>
<p style="font: 10pt Times New Roman, Times, Serif; margin: 0; text-align: justify"><b>Freight Out</b></p>
<p style="font: 10pt Times New Roman, Times, Serif; margin: 0; text-align: justify; text-indent: 0.5in"> </p>
<p style="font: 10pt Times New Roman, Times, Serif; margin: 0; text-align: justify">Freight out is included in operating expenses
and amounted to $91,000 and $134,000 for the years ended December 31, 2020 and 2019, respectively.</p>
<p style="font: 10pt Times New Roman, Times, Serif; margin: 0; text-align: justify; text-indent: 0.5in"> </p>
<p style="font: 10pt Times New Roman, Times, Serif; margin: 0; text-align: justify"><b>Recently Issued Accounting Pronouncements</b></p>
<p style="font: 10pt Times New Roman, Times, Serif; margin: 0; text-align: justify; text-indent: 0.5in"><b> </b></p>
<p style="font: 10pt Times New Roman, Times, Serif; margin: 0; text-align: justify">In August 2020, the FASB issued ASU No. 2020-06,
Debt – Debt with Conversion and Other Options (Subtopic 470-20) and Derivatives and Hedging – Contracts in Entity's
Own Equity (Subtopic 815-40) ("ASU 2020-06), which is intended to address issues identified as a result of the complexity
associated with applying GAAP for certain financial instruments with characteristics of liabilities and equity. For convertible
instruments, ASU 2020-06 reduces the number of accounting models for convertible debt instruments and convertible preferred stock,
and enhances information transparency by making targeted improvements to the disclosures for convertible instruments and earnings-per-share
guidance on the basis of feedback from financial statement users. ASU 2020-06 is effective for fiscal years, and interim periods
in those fiscal years, beginning after December 15, 2021. Early adoption is permitted, but no earlier than fiscal years beginning
after December 15, 2020, including interim periods with those fiscal years. The Company is evaluating the effect of adopting this
new accounting guidance on its financial statements.</p>
<p style="font: 10pt Times New Roman, Times, Serif; margin: 0; text-align: justify; text-indent: 0.5in"> </p>
<p style="font: 10pt Times New Roman, Times, Serif; margin: 0; text-align: justify">In December 2019, the FASB issued ASU No. 2019-12,
Income Taxes (Topic 740): Simplifying the Accounting for Income Taxes ("ASU 2019-12"), which is intended to simplify
various aspects related to accounting for income taxes. ASU 2019-12 removes certain exceptions to the general principles in Topic
740 and also clarifies and amends existing guidance to improve consistent application. This guidance is effective for fiscal years,
and interim periods within those fiscal years, beginning after December 15, 2020, with early adoption permitted. The Company is
currently evaluating the impact of this standard on its consolidated financial statements and related disclosures.</p>
<p style="font: 10pt Times New Roman, Times, Serif; margin: 0; text-align: justify"> </p>
<p style="font: 10pt Times New Roman, Times, Serif; margin: 0; text-align: justify; text-indent: 0">In June 2016, the FASB issued
ASU No. 2016-13, Financial Instruments-Credit Losses (Topic 326) ("ASU 2016-13"), which significantly changes
how entities will account for credit losses for most financial assets and certain other instruments that are not measured at fair
value through net income. ASU 2016-13 replaces the existing incurred loss model with an expected credit loss model that requires
entities to estimate an expected lifetime credit loss on most financial assets and certain other instruments. Under ASU 2016-13
credit impairment is recognized as an allowance for credit losses, rather than as a direct write-down of the amortized cost basis
of a financial asset. The impairment allowance is a valuation account deducted from the amortized cost basis of financial assets
to present the net amount expected to be collected on the financial asset. Once the new pronouncement is adopted by the Company,
the allowance for credit losses must be adjusted for management's current estimate at each reporting date. The new guidance
provides no threshold for recognition of impairment allowance. Therefore, entities must also measure expected credit losses on
assets that have a low risk of loss. For instance, trade receivables that are either current or not yet due may not require an
allowance reserve under currently generally accepted accounting principles, but under the new standard, the Company will have to
estimate an allowance for expected credit losses on trade receivables under ASU 2016-13. ASU 2016-13 is effective for annual periods,
including interim periods within those annual periods, beginning after December 15, 2022 for smaller reporting companies. Early
adoption is permitted. The Company is currently assessing the impact ASU 2016-13 will have on its consolidated financial statements.</p>
<p style="font: 10pt Times New Roman, Times, Serif; margin: 0; text-align: center; text-indent: 0.5in"> </p>
<p style="font: 10pt Times New Roman, Times, Serif; margin: 0; text-align: justify">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. </p>
<p style="font: 10pt Times New Roman, Times, Serif; margin: 0; text-align: justify"> </p>
<p style="font: 10pt Times New Roman, Times, Serif; margin: 0; text-align: justify"><b>Reclassifications</b></p>
<p style="font: 10pt Times New Roman, Times, Serif; margin: 0; text-align: justify; text-indent: 0.5in"> </p>
<p style="font: 10pt Times New Roman, Times, Serif; margin: 0; text-align: justify">Reclassifications occurred to certain 2019 amounts to conform
to the 2020 classification. These reclassifications had no impact on the statement of operations.</p>
<p style="font: 10pt Times New Roman, Times, Serif; margin: 0; text-align: justify"><b>Prepaid Expenses and Other Current Assets</b></p>
<p style="font: 10pt Times New Roman, Times, Serif; margin: 0; text-align: justify"><b> </b></p>
<p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify">On December 23, 2020, the Company and
CPI reached an agreement to settle the working capital dispute. The settlement provided that the escrow agent would release the
balance of $ 1,380,684 remaining in the escrow account to CPI. The Company and CPI exchanged mutual releases customary in the
circumstances.</p>
<p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify"> </p>
<p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify">Prepaid expenses and other current assets
include purchase deposits, miscellaneous prepaid expenses and cash in escrow less a reserve. On December 31, 2020, the Company
settled its working capital dispute with CPI, see Note 14 - Contingencies. As a result of this settlement, the Company released
the cash that was held in escrow and therefore removed the reserve. The changes in the reserve are shown below and discussed in
Note 2 – Discontinued Operations.</p>
<p style="font: 10pt Times New Roman, Times, Serif; margin: 0"> </p>
<table cellpadding="0" cellspacing="0" style="font: 10pt Times New Roman, Times, Serif; border-collapse: collapse; width: 100%">
<tr style="vertical-align: bottom">
<td style="border-bottom: Black 1.5pt solid; font-weight: bold">Description</td><td style="font-weight: bold; padding-bottom: 1.5pt"> </td>
<td colspan="2" style="border-bottom: Black 1.5pt solid; font-weight: bold; text-align: center">Balance at<br /> Beginning <br /> of Year</td><td style="padding-bottom: 1.5pt; font-weight: bold"> </td><td style="font-weight: bold; padding-bottom: 1.5pt"> </td>
<td colspan="2" style="border-bottom: Black 1.5pt solid; font-weight: bold; text-align: center">Charges to<br /> Loss on Sale<br /> of Subsidiary</td><td style="padding-bottom: 1.5pt; font-weight: bold"> </td><td style="font-weight: bold; padding-bottom: 1.5pt"> </td>
<td colspan="2" style="border-bottom: Black 1.5pt solid; font-weight: bold; text-align: center">Deductions</td><td style="padding-bottom: 1.5pt; font-weight: bold"> </td><td style="font-weight: bold; padding-bottom: 1.5pt"> </td>
<td colspan="2" style="border-bottom: Black 1.5pt solid; font-weight: bold; text-align: center">Balance at<br /> end of year</td><td style="padding-bottom: 1.5pt; font-weight: bold"> </td></tr>
<tr style="vertical-align: bottom">
<td style="padding-left: 10pt; text-align: left; text-indent: -10pt">Valuation reserve deducted from Prepaid Expenses and Other Current Assets:</td><td> </td>
<td colspan="2" style="text-align: right"> </td><td> </td><td> </td>
<td colspan="2" style="text-align: right"> </td><td> </td><td> </td>
<td colspan="2" style="text-align: right"> </td><td> </td><td> </td>
<td colspan="2" style="text-align: right"> </td><td> </td></tr>
<tr style="vertical-align: bottom; background-color: rgb(204,238,255)">
<td style="width: 52%">Year ended December 31, 2020</td><td style="width: 1%"> </td>
<td style="width: 1%; text-align: left">$</td><td style="width: 9%; text-align: right">1,770,000</td><td style="width: 1%; text-align: left"> </td><td style="width: 1%"> </td>
<td style="width: 1%; text-align: left">$</td><td style="width: 9%; text-align: right">           -</td><td style="width: 1%; text-align: left"> </td><td style="width: 1%"> </td>
<td style="width: 1%; text-align: left">$</td><td style="width: 9%; text-align: right">(1,770,000</td><td style="width: 1%; text-align: left">)</td><td style="width: 1%"> </td>
<td style="width: 1%; text-align: left">$</td><td style="width: 9%; text-align: right">-</td><td style="width: 1%; text-align: left"> </td></tr>
<tr style="vertical-align: bottom; background-color: White">
<td>Year ended December 31, 2019</td><td> </td>
<td style="text-align: left">$</td><td style="text-align: right">1,770,000</td><td style="text-align: left"> </td><td> </td>
<td style="text-align: left">$</td><td style="text-align: right">-</td><td style="text-align: left"> </td><td> </td>
<td style="text-align: left">$</td><td style="text-align: right">-</td><td style="text-align: left"> </td><td> </td>
<td style="text-align: left">$</td><td style="text-align: right">1,770,000</td><td style="text-align: left"> </td></tr></table>
<table cellpadding="0" cellspacing="0" style="font: 10pt Times New Roman, Times, Serif; border-collapse: collapse; width: 100%">
<tr style="vertical-align: bottom">
<td> </td><td style="font-weight: bold; padding-bottom: 1.5pt"> </td>
<td colspan="2" style="border-bottom: Black 1.5pt solid; font-weight: bold; text-align: center">2020</td><td style="padding-bottom: 1.5pt; font-weight: bold"> </td><td style="font-weight: bold; padding-bottom: 1.5pt"> </td>
<td colspan="2" style="border-bottom: Black 1.5pt solid; font-weight: bold; text-align: center">2019</td><td style="padding-bottom: 1.5pt; font-weight: bold"> </td></tr>
<tr style="vertical-align: bottom">
<td> </td><td> </td>
<td colspan="2" style="text-align: center"> </td><td> </td><td> </td>
<td colspan="2" style="text-align: center"> </td><td> </td></tr>
<tr style="vertical-align: bottom; background-color: rgb(204,238,255)">
<td style="width: 76%; text-align: left">U.S. statutory income tax rate</td><td style="width: 1%"> </td>
<td style="width: 1%; text-align: left"> </td><td style="width: 9%; text-align: right">21.00</td><td style="width: 1%; text-align: left">%</td><td style="width: 1%"> </td>
<td style="width: 1%; text-align: left"> </td><td style="width: 9%; text-align: right">21.00</td><td style="width: 1%; text-align: left">%</td></tr>
<tr style="vertical-align: bottom; background-color: White">
<td style="text-align: left">State taxes</td><td> </td>
<td style="text-align: left"> </td><td style="text-align: right">-0.90</td><td style="text-align: left">%</td><td> </td>
<td style="text-align: left"> </td><td style="text-align: right">-1.11</td><td style="text-align: left">%</td></tr>
<tr style="vertical-align: bottom; background-color: rgb(204,238,255)">
<td style="text-align: left">Permanent difference, overaccruals, and non-deductible items</td><td> </td>
<td style="text-align: left"> </td><td style="text-align: right">159.65</td><td style="text-align: left">%</td><td> </td>
<td style="text-align: left"> </td><td style="text-align: right">-3.33</td><td style="text-align: left">%</td></tr>
<tr style="vertical-align: bottom; background-color: White">
<td style="text-align: left">Rate change and provision to return true-up</td><td> </td>
<td style="text-align: left"> </td><td style="text-align: right">197.34</td><td style="text-align: left">%</td><td> </td>
<td style="text-align: left"> </td><td style="text-align: right">0.62</td><td style="text-align: left">%</td></tr>
<tr style="vertical-align: bottom; background-color: rgb(204,238,255)">
<td style="text-align: left">Expired stock options</td><td> </td>
<td style="text-align: left"> </td><td style="text-align: right">0.00</td><td style="text-align: left">%</td><td> </td>
<td style="text-align: left"> </td><td style="text-align: right">1.54</td><td style="text-align: left">%</td></tr>
<tr style="vertical-align: bottom; background-color: White">
<td style="text-align: left">Deferred tax valuation allowance</td><td> </td>
<td style="text-align: left"> </td><td style="text-align: right">-393.63</td><td style="text-align: left">%</td><td> </td>
<td style="text-align: left"> </td><td style="text-align: right">-20.13</td><td style="text-align: left">%</td></tr>
<tr style="vertical-align: bottom; background-color: rgb(204,238,255)">
<td style="text-align: left; padding-bottom: 1.5pt">Cares Act Refund</td><td style="padding-bottom: 1.5pt"> </td>
<td style="border-bottom: Black 1.5pt solid; text-align: left"> </td><td style="border-bottom: Black 1.5pt solid; text-align: right">458.76</td><td style="padding-bottom: 1.5pt; text-align: left">%</td><td style="padding-bottom: 1.5pt"> </td>
<td style="border-bottom: Black 1.5pt solid; text-align: left"> </td><td style="border-bottom: Black 1.5pt solid; text-align: right">0.00</td><td style="padding-bottom: 1.5pt; text-align: left">%</td></tr>
<tr style="vertical-align: bottom; background-color: White">
<td style="padding-bottom: 4pt">Total</td><td style="padding-bottom: 4pt"> </td>
<td style="border-bottom: Black 4pt double; text-align: left"> </td><td style="border-bottom: Black 4pt double; text-align: right">442.22</td><td style="padding-bottom: 4pt; text-align: left">%</td><td style="padding-bottom: 4pt"> </td>
<td style="border-bottom: Black 4pt double; text-align: left"> </td><td style="border-bottom: Black 4pt double; text-align: right">-1.41</td><td style="padding-bottom: 4pt; text-align: left">%</td></tr>
</table>
<table cellpadding="0" cellspacing="0" style="font: 10pt Times New Roman, Times, Serif; border-collapse: collapse; width: 100%">
<tr style="vertical-align: bottom">
<td> </td><td style="font-weight: bold"> </td>
<td colspan="2" style="font-weight: bold; text-align: center">December 31,</td><td style="font-weight: bold"> </td><td style="font-weight: bold"> </td>
<td colspan="2" style="font-weight: bold; text-align: center">December 31,</td><td style="font-weight: bold"> </td></tr>
<tr style="vertical-align: bottom">
<td> </td><td style="font-weight: bold; padding-bottom: 1.5pt"> </td>
<td colspan="2" style="border-bottom: Black 1.5pt solid; font-weight: bold; text-align: center">2020</td><td style="padding-bottom: 1.5pt; font-weight: bold"> </td><td style="font-weight: bold; padding-bottom: 1.5pt"> </td>
<td colspan="2" style="border-bottom: Black 1.5pt solid; font-weight: bold; text-align: center">2019</td><td style="padding-bottom: 1.5pt; font-weight: bold"> </td></tr>
<tr style="vertical-align: bottom">
<td>Deferred tax assets:</td><td> </td>
<td colspan="2"> </td><td> </td><td> </td>
<td colspan="2"> </td><td> </td></tr>
<tr style="vertical-align: bottom">
<td>Current:</td><td> </td>
<td colspan="2"> </td><td> </td><td> </td>
<td colspan="2"> </td><td> </td></tr>
<tr style="vertical-align: bottom; background-color: rgb(204,238,255)">
<td style="width: 76%; text-align: left">Net operation loss</td><td style="width: 1%"> </td>
<td style="width: 1%; text-align: left">$</td><td style="width: 9%; text-align: right">6,594,000</td><td style="width: 1%; text-align: left"> </td><td style="width: 1%"> </td>
<td style="width: 1%; text-align: left">$</td><td style="width: 9%; text-align: right">8,017,000</td><td style="width: 1%; text-align: left"> </td></tr>
<tr style="vertical-align: bottom; background-color: White">
<td style="text-align: left">Allowance for doubtful accounts</td><td> </td>
<td style="text-align: left"> </td><td style="text-align: right">252,000</td><td style="text-align: left"> </td><td> </td>
<td style="text-align: left"> </td><td style="text-align: right">216,000</td><td style="text-align: left"> </td></tr>
<tr style="vertical-align: bottom; background-color: rgb(204,238,255)">
<td style="text-align: left">Inventory - IRC 263A adjustment</td><td> </td>
<td style="text-align: left"> </td><td style="text-align: right">341,000</td><td style="text-align: left"> </td><td> </td>
<td style="text-align: left"> </td><td style="text-align: right">268,000</td><td style="text-align: left"> </td></tr>
<tr style="vertical-align: bottom; background-color: White">
<td style="text-align: left">Stock based compensation - options and restricted stock</td><td> </td>
<td style="text-align: left"> </td><td style="text-align: right">277,000</td><td style="text-align: left"> </td><td> </td>
<td style="text-align: left"> </td><td style="text-align: right">150,000</td><td style="text-align: left"> </td></tr>
<tr style="vertical-align: bottom; background-color: rgb(204,238,255)">
<td style="text-align: left">Capitalized engineering costs</td><td> </td>
<td style="text-align: left"> </td><td style="text-align: right">336,000</td><td style="text-align: left"> </td><td> </td>
<td style="text-align: left"> </td><td style="text-align: right">323,000</td><td style="text-align: left"> </td></tr>
<tr style="vertical-align: bottom; background-color: White">
<td style="text-align: left">Deferred rent</td><td> </td>
<td style="text-align: left"> </td><td style="text-align: right">4,000</td><td style="text-align: left"> </td><td> </td>
<td style="text-align: left"> </td><td style="text-align: right">12,000</td><td style="text-align: left"> </td></tr>
<tr style="vertical-align: bottom; background-color: rgb(204,238,255)">
<td style="text-align: left">Amortization - NTW Transaction</td><td> </td>
<td style="text-align: left"> </td><td style="text-align: right">495,000</td><td style="text-align: left"> </td><td> </td>
<td style="text-align: left"> </td><td style="text-align: right">442,000</td><td style="text-align: left"> </td></tr>
<tr style="vertical-align: bottom; background-color: White">
<td style="text-align: left">Inventory reserve</td><td> </td>
<td style="text-align: left"> </td><td style="text-align: right">1,250,000</td><td style="text-align: left"> </td><td> </td>
<td style="text-align: left"> </td><td style="text-align: right">1,000,000</td><td style="text-align: left"> </td></tr>
<tr style="vertical-align: bottom; background-color: rgb(204,238,255)">
<td style="text-align: left">Deferred gain on sale of real estate</td><td> </td>
<td style="text-align: left"> </td><td style="text-align: right">132,000</td><td style="text-align: left"> </td><td> </td>
<td style="text-align: left"> </td><td style="text-align: right">84,000</td><td style="text-align: left"> </td></tr>
<tr style="vertical-align: bottom; background-color: White">
<td style="text-align: left">Accrued Expenses</td><td> </td>
<td style="text-align: left"> </td><td style="text-align: right">158,000</td><td style="text-align: left"> </td><td> </td>
<td style="text-align: left"> </td><td style="text-align: right">165,000</td><td style="text-align: left"> </td></tr>
<tr style="vertical-align: bottom; background-color: rgb(204,238,255)">
<td style="text-align: left">Disallowed interest</td><td> </td>
<td style="text-align: left"> </td><td style="text-align: right">1,813,000</td><td style="text-align: left"> </td><td> </td>
<td style="text-align: left"> </td><td style="text-align: right">1,431,000</td><td style="text-align: left"> </td></tr>
<tr style="vertical-align: bottom; background-color: White">
<td style="text-align: left">Right of Use Asset</td><td> </td>
<td style="text-align: left"> </td><td style="text-align: right">292,000</td><td style="text-align: left"> </td><td> </td>
<td style="text-align: left"> </td><td style="text-align: right">329,000</td><td style="text-align: left"> </td></tr>
<tr style="vertical-align: bottom; background-color: rgb(204,238,255)">
<td style="text-align: left">Total non-current deferred tax asset before valuation allowance</td><td> </td>
<td style="text-align: left"> </td><td style="text-align: right">11,944,000</td><td style="text-align: left"> </td><td> </td>
<td style="text-align: left"> </td><td style="text-align: right">12,437,000</td><td style="text-align: left"> </td></tr>
<tr style="vertical-align: bottom; background-color: White">
<td style="text-align: left; padding-bottom: 1.5pt">Valuation allowance</td><td style="padding-bottom: 1.5pt"> </td>
<td style="border-bottom: Black 1.5pt solid; text-align: left"> </td><td style="border-bottom: Black 1.5pt solid; text-align: right">(9,394,000</td><td style="padding-bottom: 1.5pt; text-align: left">)</td><td style="padding-bottom: 1.5pt"> </td>
<td style="border-bottom: Black 1.5pt solid; text-align: left"> </td><td style="border-bottom: Black 1.5pt solid; text-align: right">(10,663,000</td><td style="padding-bottom: 1.5pt; text-align: left">)</td></tr>
<tr style="vertical-align: bottom; background-color: rgb(204,238,255)">
<td style="text-align: left; padding-bottom: 1.5pt">Total non-current deferred tax asset after valuation allowance</td><td style="padding-bottom: 1.5pt"> </td>
<td style="border-bottom: Black 1.5pt solid; text-align: left"> </td><td style="border-bottom: Black 1.5pt solid; text-align: right">2,550,000</td><td style="padding-bottom: 1.5pt; text-align: left"> </td><td style="padding-bottom: 1.5pt"> </td>
<td style="border-bottom: Black 1.5pt solid; text-align: left"> </td><td style="border-bottom: Black 1.5pt solid; text-align: right">1,774,000</td><td style="padding-bottom: 1.5pt; text-align: left"> </td></tr>
<tr style="vertical-align: bottom; background-color: White">
<td> </td><td> </td>
<td style="text-align: left"> </td><td style="text-align: right"> </td><td style="text-align: left"> </td><td> </td>
<td style="text-align: left"> </td><td style="text-align: right"> </td><td style="text-align: left"> </td></tr>
<tr style="vertical-align: bottom; background-color: rgb(204,238,255)">
<td style="text-align: left">Deferred tax liabilities</td><td> </td>
<td style="text-align: left"> </td><td style="text-align: right"> </td><td style="text-align: left"> </td><td> </td>
<td style="text-align: left"> </td><td style="text-align: right"> </td><td style="text-align: left"> </td></tr>
<tr style="vertical-align: bottom; background-color: White">
<td style="text-align: left">Property and equipment</td><td> </td>
<td style="text-align: left"> </td><td style="text-align: right">(2,150,000</td><td style="text-align: left">)</td><td> </td>
<td style="text-align: left"> </td><td style="text-align: right">(1,628,000</td><td style="text-align: left">)</td></tr>
<tr style="vertical-align: bottom; background-color: rgb(204,238,255)">
<td style="padding-bottom: 1.5pt">Other</td><td style="padding-bottom: 1.5pt"> </td>
<td style="border-bottom: Black 1.5pt solid; text-align: left"> </td><td style="border-bottom: Black 1.5pt solid; text-align: right">(400,000</td><td style="padding-bottom: 1.5pt; text-align: left">)</td><td style="padding-bottom: 1.5pt"> </td>
<td style="border-bottom: Black 1.5pt solid; text-align: left"> </td><td style="border-bottom: Black 1.5pt solid; text-align: right">(146,000</td><td style="padding-bottom: 1.5pt; text-align: left">)</td></tr>
<tr style="vertical-align: bottom; background-color: White">
<td style="text-align: left; padding-bottom: 1.5pt">Total deferred tax liabilities</td><td style="padding-bottom: 1.5pt"> </td>
<td style="border-bottom: Black 1.5pt solid; text-align: left"> </td><td style="border-bottom: Black 1.5pt solid; text-align: right">(2,550,000</td><td style="padding-bottom: 1.5pt; text-align: left">)</td><td style="padding-bottom: 1.5pt"> </td>
<td style="border-bottom: Black 1.5pt solid; text-align: left"> </td><td style="border-bottom: Black 1.5pt solid; text-align: right">(1,774,000</td><td style="padding-bottom: 1.5pt; text-align: left">)</td></tr>
<tr style="vertical-align: bottom; background-color: rgb(204,238,255)">
<td> </td><td> </td>
<td style="text-align: left"> </td><td style="text-align: right"> </td><td style="text-align: left"> </td><td> </td>
<td style="text-align: left"> </td><td style="text-align: right"> </td><td style="text-align: left"> </td></tr>
<tr style="vertical-align: bottom; background-color: White">
<td style="text-align: left; padding-bottom: 4pt">Net deferred tax asset</td><td style="padding-bottom: 4pt"> </td>
<td style="border-bottom: Black 4pt double; text-align: left">$</td><td style="border-bottom: Black 4pt double; text-align: right">-</td><td style="padding-bottom: 4pt; text-align: left"> </td><td style="padding-bottom: 4pt"> </td>
<td style="border-bottom: Black 4pt double; text-align: left">$</td><td style="border-bottom: Black 4pt double; text-align: right">-</td><td style="padding-bottom: 4pt; text-align: left"> </td></tr>
</table>
<table cellpadding="0" cellspacing="0" style="font: 10pt Times New Roman, Times, Serif; border-collapse: collapse; width: 100%">
<tr style="vertical-align: bottom">
<td> </td><td style="font-weight: bold"> </td>
<td colspan="2" style="font-weight: bold; text-align: center">December 31,</td><td style="font-weight: bold"> </td><td style="font-weight: bold"> </td>
<td colspan="2" style="font-weight: bold; text-align: center">December 31,</td><td style="font-weight: bold"> </td></tr>
<tr style="vertical-align: bottom">
<td> </td><td style="font-weight: bold; padding-bottom: 1.5pt"> </td>
<td colspan="2" style="border-bottom: Black 1.5pt solid; font-weight: bold; text-align: center">2020</td><td style="padding-bottom: 1.5pt; font-weight: bold"> </td><td style="font-weight: bold; padding-bottom: 1.5pt"> </td>
<td colspan="2" style="border-bottom: Black 1.5pt solid; font-weight: bold; text-align: center">2019</td><td style="padding-bottom: 1.5pt; font-weight: bold"> </td></tr>
<tr style="vertical-align: bottom; background-color: White">
<td> </td><td> </td>
<td style="text-align: left"> </td><td style="text-align: right"> </td><td style="text-align: left"> </td><td> </td>
<td style="text-align: left"> </td><td style="text-align: right"> </td><td style="text-align: left"> </td></tr>
<tr style="vertical-align: bottom; background-color: rgb(204,238,255)">
<td style="width: 76%; text-align: left">Net revenue</td><td style="width: 1%"> </td>
<td style="width: 1%; text-align: left">$</td><td style="width: 9%; text-align: right">-</td><td style="width: 1%; text-align: left"> </td><td style="width: 1%"> </td>
<td style="width: 1%; text-align: left">$</td><td style="width: 9%; text-align: right">132,000</td><td style="width: 1%; text-align: left"> </td></tr>
<tr style="vertical-align: bottom; background-color: White">
<td style="text-align: left; padding-bottom: 1.5pt">Cost of goods sold</td><td style="padding-bottom: 1.5pt"> </td>
<td style="border-bottom: Black 1.5pt solid; text-align: left"> </td><td style="border-bottom: Black 1.5pt solid; text-align: right">-</td><td style="padding-bottom: 1.5pt; text-align: left"> </td><td style="padding-bottom: 1.5pt"> </td>
<td style="border-bottom: Black 1.5pt solid; text-align: left"> </td><td style="border-bottom: Black 1.5pt solid; text-align: right">105,000</td><td style="padding-bottom: 1.5pt; text-align: left"> </td></tr>
<tr style="vertical-align: bottom; background-color: rgb(204,238,255)">
<td style="text-align: left; padding-bottom: 1.5pt">Gross profit</td><td style="padding-bottom: 1.5pt"> </td>
<td style="border-bottom: Black 1.5pt solid; text-align: left"> </td><td style="border-bottom: Black 1.5pt solid; text-align: right">-</td><td style="padding-bottom: 1.5pt; text-align: left"> </td><td style="padding-bottom: 1.5pt"> </td>
<td style="border-bottom: Black 1.5pt solid; text-align: left"> </td><td style="border-bottom: Black 1.5pt solid; text-align: right">27,000</td><td style="padding-bottom: 1.5pt; text-align: left"> </td></tr>
<tr style="vertical-align: bottom; background-color: White">
<td style="text-align: left">Operating expenses:</td><td> </td>
<td style="text-align: left"> </td><td style="text-align: right"> </td><td style="text-align: left"> </td><td> </td>
<td style="text-align: left"> </td><td style="text-align: right"> </td><td style="text-align: left"> </td></tr>
<tr style="vertical-align: bottom; background-color: rgb(204,238,255)">
<td style="text-align: left; padding-bottom: 1.5pt">Selling, general and administrative</td><td style="padding-bottom: 1.5pt"> </td>
<td style="border-bottom: Black 1.5pt solid; text-align: left"> </td><td style="border-bottom: Black 1.5pt solid; text-align: right">-</td><td style="padding-bottom: 1.5pt; text-align: left"> </td><td style="padding-bottom: 1.5pt"> </td>
<td style="border-bottom: Black 1.5pt solid; text-align: left"> </td><td style="border-bottom: Black 1.5pt solid; text-align: right">155,000</td><td style="padding-bottom: 1.5pt; text-align: left"> </td></tr>
<tr style="vertical-align: bottom; background-color: White">
<td style="text-align: left">Total operating loss</td><td> </td>
<td style="text-align: left"> </td><td style="text-align: right">-</td><td style="text-align: left"> </td><td> </td>
<td style="text-align: left"> </td><td style="text-align: right">(128,000</td><td style="text-align: left">)</td></tr>
<tr style="vertical-align: bottom; background-color: rgb(204,238,255)">
<td style="text-align: left">Interest expense</td><td> </td>
<td style="text-align: left"> </td><td style="text-align: right">-</td><td style="text-align: left"> </td><td> </td>
<td style="text-align: left"> </td><td style="text-align: right">(3,000</td><td style="text-align: left">)</td></tr>
<tr style="vertical-align: bottom; background-color: White">
<td style="text-align: left; padding-bottom: 1.5pt">Other expense</td><td style="padding-bottom: 1.5pt"> </td>
<td style="border-bottom: Black 1.5pt solid; text-align: left"> </td><td style="border-bottom: Black 1.5pt solid; text-align: right">(230,000</td><td style="padding-bottom: 1.5pt; text-align: left">)</td><td style="padding-bottom: 1.5pt"> </td>
<td style="border-bottom: Black 1.5pt solid; text-align: left"> </td><td style="border-bottom: Black 1.5pt solid; text-align: right">(3,000</td><td style="padding-bottom: 1.5pt; text-align: left">)</td></tr>
<tr style="vertical-align: bottom; background-color: rgb(204,238,255)">
<td style="text-align: left; padding-bottom: 4pt">Loss from discontinued operations before income taxes</td><td style="padding-bottom: 4pt"> </td>
<td style="border-bottom: Black 4pt double; text-align: left">$</td><td style="border-bottom: Black 4pt double; text-align: right">(230,000</td><td style="padding-bottom: 2pt; text-align: left">)</td><td style="padding-bottom: 4pt"> </td>
<td style="border-bottom: Black 4pt double; text-align: left">$</td><td style="border-bottom: Black 4pt double; text-align: right">(134,000</td><td style="padding-bottom: 2pt; text-align: left">)</td></tr>
</table>
<p style="font: 10pt Times New Roman, Times, Serif; margin: 0; text-align: justify"><b>Note 15. INCOME TAXES</b></p>
<p style="font: 10pt Times New Roman, Times, Serif; margin: 0; text-align: justify; text-indent: 0.5in"> </p>
<p style="font: 10pt Times New Roman, Times, Serif; margin: 0; text-align: justify">The provision for (benefit from) income taxes
as of December 31, is set forth below:</p>
<p style="font: 10pt Times New Roman, Times, Serif; margin: 0; text-align: justify"> </p>
<table cellpadding="0" cellspacing="0" style="font: 10pt Times New Roman, Times, Serif; border-collapse: collapse; width: 100%">
<tr style="vertical-align: bottom">
<td> </td><td style="font-weight: bold; padding-bottom: 1.5pt"> </td>
<td colspan="2" style="border-bottom: Black 1.5pt solid; font-weight: bold; text-align: center">2020</td><td style="padding-bottom: 1.5pt; font-weight: bold"> </td><td style="font-weight: bold; padding-bottom: 1.5pt"> </td>
<td colspan="2" style="border-bottom: Black 1.5pt solid; font-weight: bold; text-align: center">2019</td><td style="padding-bottom: 1.5pt; font-weight: bold"> </td></tr>
<tr style="vertical-align: bottom">
<td> </td><td> </td>
<td colspan="2" style="text-align: center"> </td><td> </td><td> </td>
<td colspan="2" style="text-align: center"> </td><td> </td></tr>
<tr style="vertical-align: bottom">
<td style="font-weight: bold">Current</td><td> </td>
<td colspan="2"> </td><td> </td><td> </td>
<td colspan="2"> </td><td> </td></tr>
<tr style="vertical-align: bottom; background-color: rgb(204,238,255)">
<td style="width: 76%; text-align: left">Federal tax refund</td><td style="width: 1%"> </td>
<td style="width: 1%; text-align: left">$</td><td style="width: 9%; text-align: right">(1,416,000</td><td style="width: 1%; text-align: left">)</td><td style="width: 1%"> </td>
<td style="width: 1%; text-align: left">$</td><td style="width: 9%; text-align: right">-</td><td style="width: 1%; text-align: left"> </td></tr>
<tr style="vertical-align: bottom; background-color: White">
<td style="padding-bottom: 1.5pt">State</td><td style="padding-bottom: 1.5pt"> </td>
<td style="border-bottom: Black 1.5pt solid; text-align: left"> </td><td style="border-bottom: Black 1.5pt solid; text-align: right">4,000</td><td style="padding-bottom: 1.5pt; text-align: left"> </td><td style="padding-bottom: 1.5pt"> </td>
<td style="border-bottom: Black 1.5pt solid; text-align: left"> </td><td style="border-bottom: Black 1.5pt solid; text-align: right">37,000</td><td style="padding-bottom: 1.5pt; text-align: left"> </td></tr>
<tr style="vertical-align: bottom; background-color: rgb(204,238,255)">
<td style="text-align: left">Total (Benefit from) Expense for Income Taxes</td><td> </td>
<td style="text-align: left"> </td><td style="text-align: right">(1,412,000</td><td style="text-align: left">)</td><td> </td>
<td style="text-align: left"> </td><td style="text-align: right">37,000</td><td style="text-align: left"> </td></tr>
<tr style="vertical-align: bottom; background-color: White">
<td style="text-align: left">Deferred Tax Benefit</td><td> </td>
<td style="text-align: left"> </td><td style="text-align: right">-</td><td style="text-align: left"> </td><td> </td>
<td style="text-align: left"> </td><td style="text-align: right">-</td><td style="text-align: left"> </td></tr>
<tr style="vertical-align: bottom; background-color: rgb(204,238,255)">
<td style="text-align: left; padding-bottom: 1.5pt">Valuation Allowance</td><td style="padding-bottom: 1.5pt"> </td>
<td style="border-bottom: Black 1.5pt solid; text-align: left"> </td><td style="border-bottom: Black 1.5pt solid; text-align: right">-</td><td style="padding-bottom: 1.5pt; text-align: left"> </td><td style="padding-bottom: 1.5pt"> </td>
<td style="border-bottom: Black 1.5pt solid; text-align: left"> </td><td style="border-bottom: Black 1.5pt solid; text-align: right">-</td><td style="padding-bottom: 1.5pt; text-align: left"> </td></tr>
<tr style="vertical-align: bottom; background-color: White">
<td style="text-align: left; padding-bottom: 4pt">Net (Benefit from) Provision for Income Taxes</td><td style="padding-bottom: 4pt"> </td>
<td style="border-bottom: Black 4pt double; text-align: left">$</td><td style="border-bottom: Black 4pt double; text-align: right">(1,412,000</td><td style="padding-bottom: 4pt; text-align: left">)</td><td style="padding-bottom: 4pt"> </td>
<td style="border-bottom: Black 4pt double; text-align: left">$</td><td style="border-bottom: Black 4pt double; text-align: right">37,000</td><td style="padding-bottom: 4pt; text-align: left"> </td></tr>
</table>
<p style="font: 10pt Times New Roman, Times, Serif; margin: 0; text-align: justify"> </p>
<p style="font: 10pt Times New Roman, Times, Serif; margin: 0; text-align: justify">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,</p>
<p style="font: 10pt Times New Roman, Times, Serif; margin: 0; text-align: justify; text-indent: 0.5in"> </p>
<table cellpadding="0" cellspacing="0" style="font: 10pt Times New Roman, Times, Serif; border-collapse: collapse; width: 100%">
<tr style="vertical-align: bottom">
<td> </td><td style="font-weight: bold; padding-bottom: 1.5pt"> </td>
<td colspan="2" style="border-bottom: Black 1.5pt solid; font-weight: bold; text-align: center">2020</td><td style="padding-bottom: 1.5pt; font-weight: bold"> </td><td style="font-weight: bold; padding-bottom: 1.5pt"> </td>
<td colspan="2" style="border-bottom: Black 1.5pt solid; font-weight: bold; text-align: center">2019</td><td style="padding-bottom: 1.5pt; font-weight: bold"> </td></tr>
<tr style="vertical-align: bottom">
<td> </td><td> </td>
<td colspan="2" style="text-align: center"> </td><td> </td><td> </td>
<td colspan="2" style="text-align: center"> </td><td> </td></tr>
<tr style="vertical-align: bottom; background-color: rgb(204,238,255)">
<td style="width: 76%; text-align: left">U.S. statutory income tax rate</td><td style="width: 1%"> </td>
<td style="width: 1%; text-align: left"> </td><td style="width: 9%; text-align: right">21.00</td><td style="width: 1%; text-align: left">%</td><td style="width: 1%"> </td>
<td style="width: 1%; text-align: left"> </td><td style="width: 9%; text-align: right">21.00</td><td style="width: 1%; text-align: left">%</td></tr>
<tr style="vertical-align: bottom; background-color: White">
<td style="text-align: left">State taxes</td><td> </td>
<td style="text-align: left"> </td><td style="text-align: right">-0.90</td><td style="text-align: left">%</td><td> </td>
<td style="text-align: left"> </td><td style="text-align: right">-1.11</td><td style="text-align: left">%</td></tr>
<tr style="vertical-align: bottom; background-color: rgb(204,238,255)">
<td style="text-align: left">Permanent difference, overaccruals, and non-deductible items</td><td> </td>
<td style="text-align: left"> </td><td style="text-align: right">159.65</td><td style="text-align: left">%</td><td> </td>
<td style="text-align: left"> </td><td style="text-align: right">-3.33</td><td style="text-align: left">%</td></tr>
<tr style="vertical-align: bottom; background-color: White">
<td style="text-align: left">Rate change and provision to return true-up</td><td> </td>
<td style="text-align: left"> </td><td style="text-align: right">197.34</td><td style="text-align: left">%</td><td> </td>
<td style="text-align: left"> </td><td style="text-align: right">0.62</td><td style="text-align: left">%</td></tr>
<tr style="vertical-align: bottom; background-color: rgb(204,238,255)">
<td style="text-align: left">Expired stock options</td><td> </td>
<td style="text-align: left"> </td><td style="text-align: right">0.00</td><td style="text-align: left">%</td><td> </td>
<td style="text-align: left"> </td><td style="text-align: right">1.54</td><td style="text-align: left">%</td></tr>
<tr style="vertical-align: bottom; background-color: White">
<td style="text-align: left">Deferred tax valuation allowance</td><td> </td>
<td style="text-align: left"> </td><td style="text-align: right">-393.63</td><td style="text-align: left">%</td><td> </td>
<td style="text-align: left"> </td><td style="text-align: right">-20.13</td><td style="text-align: left">%</td></tr>
<tr style="vertical-align: bottom; background-color: rgb(204,238,255)">
<td style="text-align: left; padding-bottom: 1.5pt">Cares Act Refund</td><td style="padding-bottom: 1.5pt"> </td>
<td style="border-bottom: Black 1.5pt solid; text-align: left"> </td><td style="border-bottom: Black 1.5pt solid; text-align: right">458.76</td><td style="padding-bottom: 1.5pt; text-align: left">%</td><td style="padding-bottom: 1.5pt"> </td>
<td style="border-bottom: Black 1.5pt solid; text-align: left"> </td><td style="border-bottom: Black 1.5pt solid; text-align: right">0.00</td><td style="padding-bottom: 1.5pt; text-align: left">%</td></tr>
<tr style="vertical-align: bottom; background-color: White">
<td style="padding-bottom: 4pt">Total</td><td style="padding-bottom: 4pt"> </td>
<td style="border-bottom: Black 4pt double; text-align: left"> </td><td style="border-bottom: Black 4pt double; text-align: right">442.22</td><td style="padding-bottom: 4pt; text-align: left">%</td><td style="padding-bottom: 4pt"> </td>
<td style="border-bottom: Black 4pt double; text-align: left"> </td><td style="border-bottom: Black 4pt double; text-align: right">-1.41</td><td style="padding-bottom: 4pt; text-align: left">%</td></tr>
</table>
<p style="font: 10pt Times New Roman, Times, Serif; margin: 0; text-align: justify; text-indent: 0.5in"> </p>
<p style="font: 10pt Times New Roman, Times, Serif; margin: 0"></p>
<p style="font: 10pt Times New Roman, Times, Serif; margin: 0">The components of net deferred tax assets at December 31, 2020 and
2019 are set forth below:</p>
<p style="font: 10pt Times New Roman, Times, Serif; margin: 0"> </p>
<table cellpadding="0" cellspacing="0" style="font: 10pt Times New Roman, Times, Serif; border-collapse: collapse; width: 100%">
<tr style="vertical-align: bottom">
<td> </td><td style="font-weight: bold"> </td>
<td colspan="2" style="font-weight: bold; text-align: center">December 31,</td><td style="font-weight: bold"> </td><td style="font-weight: bold"> </td>
<td colspan="2" style="font-weight: bold; text-align: center">December 31,</td><td style="font-weight: bold"> </td></tr>
<tr style="vertical-align: bottom">
<td> </td><td style="font-weight: bold; padding-bottom: 1.5pt"> </td>
<td colspan="2" style="border-bottom: Black 1.5pt solid; font-weight: bold; text-align: center">2020</td><td style="padding-bottom: 1.5pt; font-weight: bold"> </td><td style="font-weight: bold; padding-bottom: 1.5pt"> </td>
<td colspan="2" style="border-bottom: Black 1.5pt solid; font-weight: bold; text-align: center">2019</td><td style="padding-bottom: 1.5pt; font-weight: bold"> </td></tr>
<tr style="vertical-align: bottom">
<td>Deferred tax assets:</td><td> </td>
<td colspan="2"> </td><td> </td><td> </td>
<td colspan="2"> </td><td> </td></tr>
<tr style="vertical-align: bottom">
<td>Current:</td><td> </td>
<td colspan="2"> </td><td> </td><td> </td>
<td colspan="2"> </td><td> </td></tr>
<tr style="vertical-align: bottom; background-color: rgb(204,238,255)">
<td style="width: 76%; text-align: left">Net operation loss</td><td style="width: 1%"> </td>
<td style="width: 1%; text-align: left">$</td><td style="width: 9%; text-align: right">6,594,000</td><td style="width: 1%; text-align: left"> </td><td style="width: 1%"> </td>
<td style="width: 1%; text-align: left">$</td><td style="width: 9%; text-align: right">8,017,000</td><td style="width: 1%; text-align: left"> </td></tr>
<tr style="vertical-align: bottom; background-color: White">
<td style="text-align: left">Allowance for doubtful accounts</td><td> </td>
<td style="text-align: left"> </td><td style="text-align: right">252,000</td><td style="text-align: left"> </td><td> </td>
<td style="text-align: left"> </td><td style="text-align: right">216,000</td><td style="text-align: left"> </td></tr>
<tr style="vertical-align: bottom; background-color: rgb(204,238,255)">
<td style="text-align: left">Inventory - IRC 263A adjustment</td><td> </td>
<td style="text-align: left"> </td><td style="text-align: right">341,000</td><td style="text-align: left"> </td><td> </td>
<td style="text-align: left"> </td><td style="text-align: right">268,000</td><td style="text-align: left"> </td></tr>
<tr style="vertical-align: bottom; background-color: White">
<td style="text-align: left">Stock based compensation - options and restricted stock</td><td> </td>
<td style="text-align: left"> </td><td style="text-align: right">277,000</td><td style="text-align: left"> </td><td> </td>
<td style="text-align: left"> </td><td style="text-align: right">150,000</td><td style="text-align: left"> </td></tr>
<tr style="vertical-align: bottom; background-color: rgb(204,238,255)">
<td style="text-align: left">Capitalized engineering costs</td><td> </td>
<td style="text-align: left"> </td><td style="text-align: right">336,000</td><td style="text-align: left"> </td><td> </td>
<td style="text-align: left"> </td><td style="text-align: right">323,000</td><td style="text-align: left"> </td></tr>
<tr style="vertical-align: bottom; background-color: White">
<td style="text-align: left">Deferred rent</td><td> </td>
<td style="text-align: left"> </td><td style="text-align: right">4,000</td><td style="text-align: left"> </td><td> </td>
<td style="text-align: left"> </td><td style="text-align: right">12,000</td><td style="text-align: left"> </td></tr>
<tr style="vertical-align: bottom; background-color: rgb(204,238,255)">
<td style="text-align: left">Amortization - NTW Transaction</td><td> </td>
<td style="text-align: left"> </td><td style="text-align: right">495,000</td><td style="text-align: left"> </td><td> </td>
<td style="text-align: left"> </td><td style="text-align: right">442,000</td><td style="text-align: left"> </td></tr>
<tr style="vertical-align: bottom; background-color: White">
<td style="text-align: left">Inventory reserve</td><td> </td>
<td style="text-align: left"> </td><td style="text-align: right">1,250,000</td><td style="text-align: left"> </td><td> </td>
<td style="text-align: left"> </td><td style="text-align: right">1,000,000</td><td style="text-align: left"> </td></tr>
<tr style="vertical-align: bottom; background-color: rgb(204,238,255)">
<td style="text-align: left">Deferred gain on sale of real estate</td><td> </td>
<td style="text-align: left"> </td><td style="text-align: right">132,000</td><td style="text-align: left"> </td><td> </td>
<td style="text-align: left"> </td><td style="text-align: right">84,000</td><td style="text-align: left"> </td></tr>
<tr style="vertical-align: bottom; background-color: White">
<td style="text-align: left">Accrued Expenses</td><td> </td>
<td style="text-align: left"> </td><td style="text-align: right">158,000</td><td style="text-align: left"> </td><td> </td>
<td style="text-align: left"> </td><td style="text-align: right">165,000</td><td style="text-align: left"> </td></tr>
<tr style="vertical-align: bottom; background-color: rgb(204,238,255)">
<td style="text-align: left">Disallowed interest</td><td> </td>
<td style="text-align: left"> </td><td style="text-align: right">1,813,000</td><td style="text-align: left"> </td><td> </td>
<td style="text-align: left"> </td><td style="text-align: right">1,431,000</td><td style="text-align: left"> </td></tr>
<tr style="vertical-align: bottom; background-color: White">
<td style="text-align: left">Right of Use Asset</td><td> </td>
<td style="text-align: left"> </td><td style="text-align: right">292,000</td><td style="text-align: left"> </td><td> </td>
<td style="text-align: left"> </td><td style="text-align: right">329,000</td><td style="text-align: left"> </td></tr>
<tr style="vertical-align: bottom; background-color: rgb(204,238,255)">
<td style="text-align: left">Total non-current deferred tax asset before valuation allowance</td><td> </td>
<td style="text-align: left"> </td><td style="text-align: right">11,944,000</td><td style="text-align: left"> </td><td> </td>
<td style="text-align: left"> </td><td style="text-align: right">12,437,000</td><td style="text-align: left"> </td></tr>
<tr style="vertical-align: bottom; background-color: White">
<td style="text-align: left; padding-bottom: 1.5pt">Valuation allowance</td><td style="padding-bottom: 1.5pt"> </td>
<td style="border-bottom: Black 1.5pt solid; text-align: left"> </td><td style="border-bottom: Black 1.5pt solid; text-align: right">(9,394,000</td><td style="padding-bottom: 1.5pt; text-align: left">)</td><td style="padding-bottom: 1.5pt"> </td>
<td style="border-bottom: Black 1.5pt solid; text-align: left"> </td><td style="border-bottom: Black 1.5pt solid; text-align: right">(10,663,000</td><td style="padding-bottom: 1.5pt; text-align: left">)</td></tr>
<tr style="vertical-align: bottom; background-color: rgb(204,238,255)">
<td style="text-align: left; padding-bottom: 1.5pt">Total non-current deferred tax asset after valuation allowance</td><td style="padding-bottom: 1.5pt"> </td>
<td style="border-bottom: Black 1.5pt solid; text-align: left"> </td><td style="border-bottom: Black 1.5pt solid; text-align: right">2,550,000</td><td style="padding-bottom: 1.5pt; text-align: left"> </td><td style="padding-bottom: 1.5pt"> </td>
<td style="border-bottom: Black 1.5pt solid; text-align: left"> </td><td style="border-bottom: Black 1.5pt solid; text-align: right">1,774,000</td><td style="padding-bottom: 1.5pt; text-align: left"> </td></tr>
<tr style="vertical-align: bottom; background-color: White">
<td> </td><td> </td>
<td style="text-align: left"> </td><td style="text-align: right"> </td><td style="text-align: left"> </td><td> </td>
<td style="text-align: left"> </td><td style="text-align: right"> </td><td style="text-align: left"> </td></tr>
<tr style="vertical-align: bottom; background-color: rgb(204,238,255)">
<td style="text-align: left">Deferred tax liabilities</td><td> </td>
<td style="text-align: left"> </td><td style="text-align: right"> </td><td style="text-align: left"> </td><td> </td>
<td style="text-align: left"> </td><td style="text-align: right"> </td><td style="text-align: left"> </td></tr>
<tr style="vertical-align: bottom; background-color: White">
<td style="text-align: left">Property and equipment</td><td> </td>
<td style="text-align: left"> </td><td style="text-align: right">(2,150,000</td><td style="text-align: left">)</td><td> </td>
<td style="text-align: left"> </td><td style="text-align: right">(1,628,000</td><td style="text-align: left">)</td></tr>
<tr style="vertical-align: bottom; background-color: rgb(204,238,255)">
<td style="padding-bottom: 1.5pt">Other</td><td style="padding-bottom: 1.5pt"> </td>
<td style="border-bottom: Black 1.5pt solid; text-align: left"> </td><td style="border-bottom: Black 1.5pt solid; text-align: right">(400,000</td><td style="padding-bottom: 1.5pt; text-align: left">)</td><td style="padding-bottom: 1.5pt"> </td>
<td style="border-bottom: Black 1.5pt solid; text-align: left"> </td><td style="border-bottom: Black 1.5pt solid; text-align: right">(146,000</td><td style="padding-bottom: 1.5pt; text-align: left">)</td></tr>
<tr style="vertical-align: bottom; background-color: White">
<td style="text-align: left; padding-bottom: 1.5pt">Total deferred tax liabilities</td><td style="padding-bottom: 1.5pt"> </td>
<td style="border-bottom: Black 1.5pt solid; text-align: left"> </td><td style="border-bottom: Black 1.5pt solid; text-align: right">(2,550,000</td><td style="padding-bottom: 1.5pt; text-align: left">)</td><td style="padding-bottom: 1.5pt"> </td>
<td style="border-bottom: Black 1.5pt solid; text-align: left"> </td><td style="border-bottom: Black 1.5pt solid; text-align: right">(1,774,000</td><td style="padding-bottom: 1.5pt; text-align: left">)</td></tr>
<tr style="vertical-align: bottom; background-color: rgb(204,238,255)">
<td> </td><td> </td>
<td style="text-align: left"> </td><td style="text-align: right"> </td><td style="text-align: left"> </td><td> </td>
<td style="text-align: left"> </td><td style="text-align: right"> </td><td style="text-align: left"> </td></tr>
<tr style="vertical-align: bottom; background-color: White">
<td style="text-align: left; padding-bottom: 4pt">Net deferred tax asset</td><td style="padding-bottom: 4pt"> </td>
<td style="border-bottom: Black 4pt double; text-align: left">$</td><td style="border-bottom: Black 4pt double; text-align: right">-</td><td style="padding-bottom: 4pt; text-align: left"> </td><td style="padding-bottom: 4pt"> </td>
<td style="border-bottom: Black 4pt double; text-align: left">$</td><td style="border-bottom: Black 4pt double; text-align: right">-</td><td style="padding-bottom: 4pt; text-align: left"> </td></tr>
</table>
<p style="font: 10pt Times New Roman, Times, Serif; margin: 0"> </p>
<p style="font: 10pt Times New Roman, Times, Serif; margin: 0; text-align: justify">During the years ended December 31, 2020 and 2019, the Company recorded a valuation allowance equal to its net deferred tax assets. The Company determined that
due to a recent history of net losses, that at this time, sufficient uncertainty exists regarding the future realization of these
deferred tax assets through future taxable income. If, in the future, the Company believes that it is more likely than not that
these deferred tax benefits will be realized, the valuation allowances will be reduced or eliminated. With a full valuation allowance,
any change in the deferred tax asset or liability is fully offset by a corresponding change in the valuation allowance. At December
31, 2020 and 2019, the Company provided a valuation allowance on its net deferred tax assets of $9,394,000 and $10,663,000, respectively.</p>
<p style="font: 10pt Times New Roman, Times, Serif; margin: 0; text-align: justify; text-indent: 0.5in"> </p>
<p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify">As of December 31, 2020, the Company had
a Federal net operating loss carry forward of approximately $27,576,000, of which $22,461,000 expire in years through 2037 and
$5,115,000 that do not expire. State net operating loss carry forwards total approximately $9,458,000 (with effective rates from
5.5% to 10%), expiring in years through 2040. </p>
<p style="font: 10pt Times New Roman, Times, Serif; margin: 0; text-align: justify; text-indent: 0.5in"> </p>
<p style="font: 10pt Times New Roman, Times, Serif; margin: 0; text-align: justify">At December 31, 2020 and 2019, 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, 2020 and 2019, the Company has not recorded
any provisions for accrued interest and penalties related to uncertain tax positions.</p>
<p style="font: 10pt Times New Roman, Times, Serif; margin: 0; text-align: justify; text-indent: 0.5in"> </p>
<p style="font: 10pt Times New Roman, Times, Serif; margin: 0; text-align: justify">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 2017 through 2020 tax years generally remain
subject to examination by federal and state tax authorities.</p>
<p style="font: 10pt Times New Roman, Times, Serif; margin: 0; text-align: justify"> </p>
<p style="font: 10pt Times New Roman, Times, Serif; margin: 0"></p>
<p style="font: 10pt Times New Roman, Times, Serif; margin: 0; text-align: justify">As a result of the passage of the CARES Act,
the Company received $1,416,000 from the filing of a net operating loss carryback claim. The Company is currently evaluating the
impact of other provisions of the CARES Act on its accounting for income taxes and does not believe it has a material impact at
this time.</p>
<table cellpadding="0" cellspacing="0" style="font: 10pt Times New Roman, Times, Serif; border-collapse: collapse; width: 100%"><tr style="vertical-align: bottom"><td></td><td style="font-weight: bold; padding-bottom: 1.5pt"> </td>
<td colspan="2" style="border-bottom: Black 1.5pt solid; font-weight: bold; text-align: center">2020</td><td style="padding-bottom: 1.5pt; font-weight: bold"> </td><td style="font-weight: bold; padding-bottom: 1.5pt"> </td>
<td colspan="2" style="border-bottom: Black 1.5pt solid; font-weight: bold; text-align: center">2019</td><td style="padding-bottom: 1.5pt; font-weight: bold"> </td></tr>
<tr style="vertical-align: bottom">
<td> </td><td> </td>
<td colspan="2" style="text-align: center"> </td><td> </td><td> </td>
<td colspan="2" style="text-align: center"> </td><td> </td></tr>
<tr style="vertical-align: bottom">
<td style="font-weight: bold">Current</td><td> </td>
<td colspan="2"> </td><td> </td><td> </td>
<td colspan="2"> </td><td> </td></tr>
<tr style="vertical-align: bottom; background-color: rgb(204,238,255)">
<td style="width: 76%; text-align: left">Federal tax refund</td><td style="width: 1%"> </td>
<td style="width: 1%; text-align: left">$</td><td style="width: 9%; text-align: right">(1,416,000</td><td style="width: 1%; text-align: left">)</td><td style="width: 1%"> </td>
<td style="width: 1%; text-align: left">$</td><td style="width: 9%; text-align: right">-</td><td style="width: 1%; text-align: left"> </td></tr>
<tr style="vertical-align: bottom; background-color: White">
<td style="padding-bottom: 1.5pt">State</td><td style="padding-bottom: 1.5pt"> </td>
<td style="border-bottom: Black 1.5pt solid; text-align: left"> </td><td style="border-bottom: Black 1.5pt solid; text-align: right">4,000</td><td style="padding-bottom: 1.5pt; text-align: left"> </td><td style="padding-bottom: 1.5pt"> </td>
<td style="border-bottom: Black 1.5pt solid; text-align: left"> </td><td style="border-bottom: Black 1.5pt solid; text-align: right">37,000</td><td style="padding-bottom: 1.5pt; text-align: left"> </td></tr>
<tr style="vertical-align: bottom; background-color: rgb(204,238,255)">
<td style="text-align: left">Total (Benefit from) Expense for Income Taxes</td><td> </td>
<td style="text-align: left"> </td><td style="text-align: right">(1,412,000</td><td style="text-align: left">)</td><td> </td>
<td style="text-align: left"> </td><td style="text-align: right">37,000</td><td style="text-align: left"> </td></tr>
<tr style="vertical-align: bottom; background-color: White">
<td style="text-align: left">Deferred Tax Benefit</td><td> </td>
<td style="text-align: left"> </td><td style="text-align: right">-</td><td style="text-align: left"> </td><td> </td>
<td style="text-align: left"> </td><td style="text-align: right">-</td><td style="text-align: left"> </td></tr>
<tr style="vertical-align: bottom; background-color: rgb(204,238,255)">
<td style="text-align: left; padding-bottom: 1.5pt">Valuation Allowance</td><td style="padding-bottom: 1.5pt"> </td>
<td style="border-bottom: Black 1.5pt solid; text-align: left"> </td><td style="border-bottom: Black 1.5pt solid; text-align: right">-</td><td style="padding-bottom: 1.5pt; text-align: left"> </td><td style="padding-bottom: 1.5pt"> </td>
<td style="border-bottom: Black 1.5pt solid; text-align: left"> </td><td style="border-bottom: Black 1.5pt solid; text-align: right">-</td><td style="padding-bottom: 1.5pt; text-align: left"> </td></tr>
<tr style="vertical-align: bottom; background-color: White">
<td style="text-align: left; padding-bottom: 4pt">Net (Benefit from) Provision for Income Taxes</td><td style="padding-bottom: 4pt"> </td>
<td style="border-bottom: Black 4pt double; text-align: left">$</td><td style="border-bottom: Black 4pt double; text-align: right">(1,412,000</td><td style="padding-bottom: 4pt; text-align: left">)</td><td style="padding-bottom: 4pt"> </td>
<td style="border-bottom: Black 4pt double; text-align: left">$</td><td style="border-bottom: Black 4pt double; text-align: right">37,000</td><td style="padding-bottom: 4pt; text-align: left"> </td></tr></table>
257000
219000
3302000
4746000
4746000
0.01
Meyer was obligated to pay the Company within 30 days after the end of each calendar quarter, commencing April 1, 2017, an amount equal to five (5%) percent of the net sales of AMK for that quarter until the aggregate payments made to the Company (the "Meyer Agreement") equals $1,500,000 (the "Maximum Amount").
0.02
3000
800000
Federal net operating loss carry forward of approximately $27,576,000, of which $22,461,000 expire in years through 2037 and $5,115,000 that do not expire. State net operating loss carry forwards total approximately $9,458,000 (with effective rates from 5.5% to 10%), expiring in years through 2040.
1269649
1488997
1414000
75000
1489000
838149
1369649
1859000
1784000
75000
1859000
Non-accelerated Filer
3.08
2.01
1.56
1.25
8.85
1.56
210000
400000
2414000
<p style="font: 10pt Times New Roman, Times, Serif; margin: 0; text-align: justify; text-indent: 0.5in"></p>
<p style="font: 10pt Times New Roman, Times, Serif; margin: 0"><b>Note 2. DISCONTINUED OPERATIONS</b></p>
<p style="font: 10pt Times New Roman, Times, Serif; margin: 0; text-indent: 0.5in"> </p>
<p style="font: 10pt Times New Roman, Times, Serif; margin: 0; text-align: justify">As discussed in Note 1, the Company closed
EPC and ECC as of March 31, 2019. As required, the Company has retrospectively recast its consolidated statements of operations
and balance sheets for all periods presented. The Company has not segregated the cash flows of these subsidiaries in the consolidated
statements of cash flows. Management was also required to make certain assumptions and apply judgment to determine historical expenses
related to the discontinued operations presented in prior periods. Unless noted otherwise, discussion in the Notes to Consolidated
Financial Statements refers to the Company's continuing operations only.</p>
<p style="font: 10pt Times New Roman, Times, Serif; margin: 0; text-align: justify"> </p>
<p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify">As discussed in Note 14 on December 23,
2020, the Company and CPI Aerostructures ("CPI"), the buyer of WMI Group, reached an agreement to settle the working
capital dispute without additional litigation. The settlement provided that CPI and AIRI would instruct the escrow agent to release
the balance of $ 1,380,684 remaining in the escrow account to CPI. The Company and CPI exchanged mutual releases customary in the
circumstances. We originally placed a reserve of $1,770,000 against the $2,000,000 balance held in escrow, the remaining amount
of $230,000 was charged to discontinued operations as of and for the year ended December 31, 2020.</p>
<p style="font: 10pt Times New Roman, Times, Serif; margin: 0"> </p>
<p style="font: 10pt Times New Roman, Times, Serif; margin: 0; text-align: justify">The following table presents a reconciliation
of the major financial lines constituting the results of operations for discontinued operations to the net loss from discontinued
operations presented separately in the consolidated statement of operations:</p>
<p style="font: 10pt Times New Roman, Times, Serif; margin: 0; text-align: justify"> </p>
<table cellpadding="0" cellspacing="0" style="font: 10pt Times New Roman, Times, Serif; border-collapse: collapse; width: 100%">
<tr style="vertical-align: bottom">
<td> </td><td style="font-weight: bold"> </td>
<td colspan="2" style="font-weight: bold; text-align: center">December 31,</td><td style="font-weight: bold"> </td><td style="font-weight: bold"> </td>
<td colspan="2" style="font-weight: bold; text-align: center">December 31,</td><td style="font-weight: bold"> </td></tr>
<tr style="vertical-align: bottom">
<td> </td><td style="font-weight: bold; padding-bottom: 1.5pt"> </td>
<td colspan="2" style="border-bottom: Black 1.5pt solid; font-weight: bold; text-align: center">2020</td><td style="padding-bottom: 1.5pt; font-weight: bold"> </td><td style="font-weight: bold; padding-bottom: 1.5pt"> </td>
<td colspan="2" style="border-bottom: Black 1.5pt solid; font-weight: bold; text-align: center">2019</td><td style="padding-bottom: 1.5pt; font-weight: bold"> </td></tr>
<tr style="vertical-align: bottom; background-color: White">
<td> </td><td> </td>
<td style="text-align: left"> </td><td style="text-align: right"> </td><td style="text-align: left"> </td><td> </td>
<td style="text-align: left"> </td><td style="text-align: right"> </td><td style="text-align: left"> </td></tr>
<tr style="vertical-align: bottom; background-color: rgb(204,238,255)">
<td style="width: 76%; text-align: left">Net revenue</td><td style="width: 1%"> </td>
<td style="width: 1%; text-align: left">$</td><td style="width: 9%; text-align: right">-</td><td style="width: 1%; text-align: left"> </td><td style="width: 1%"> </td>
<td style="width: 1%; text-align: left">$</td><td style="width: 9%; text-align: right">132,000</td><td style="width: 1%; text-align: left"> </td></tr>
<tr style="vertical-align: bottom; background-color: White">
<td style="text-align: left; padding-bottom: 1.5pt">Cost of goods sold</td><td style="padding-bottom: 1.5pt"> </td>
<td style="border-bottom: Black 1.5pt solid; text-align: left"> </td><td style="border-bottom: Black 1.5pt solid; text-align: right">-</td><td style="padding-bottom: 1.5pt; text-align: left"> </td><td style="padding-bottom: 1.5pt"> </td>
<td style="border-bottom: Black 1.5pt solid; text-align: left"> </td><td style="border-bottom: Black 1.5pt solid; text-align: right">105,000</td><td style="padding-bottom: 1.5pt; text-align: left"> </td></tr>
<tr style="vertical-align: bottom; background-color: rgb(204,238,255)">
<td style="text-align: left; padding-bottom: 1.5pt">Gross profit</td><td style="padding-bottom: 1.5pt"> </td>
<td style="border-bottom: Black 1.5pt solid; text-align: left"> </td><td style="border-bottom: Black 1.5pt solid; text-align: right">-</td><td style="padding-bottom: 1.5pt; text-align: left"> </td><td style="padding-bottom: 1.5pt"> </td>
<td style="border-bottom: Black 1.5pt solid; text-align: left"> </td><td style="border-bottom: Black 1.5pt solid; text-align: right">27,000</td><td style="padding-bottom: 1.5pt; text-align: left"> </td></tr>
<tr style="vertical-align: bottom; background-color: White">
<td style="text-align: left">Operating expenses:</td><td> </td>
<td style="text-align: left"> </td><td style="text-align: right"> </td><td style="text-align: left"> </td><td> </td>
<td style="text-align: left"> </td><td style="text-align: right"> </td><td style="text-align: left"> </td></tr>
<tr style="vertical-align: bottom; background-color: rgb(204,238,255)">
<td style="text-align: left; padding-bottom: 1.5pt">Selling, general and administrative</td><td style="padding-bottom: 1.5pt"> </td>
<td style="border-bottom: Black 1.5pt solid; text-align: left"> </td><td style="border-bottom: Black 1.5pt solid; text-align: right">-</td><td style="padding-bottom: 1.5pt; text-align: left"> </td><td style="padding-bottom: 1.5pt"> </td>
<td style="border-bottom: Black 1.5pt solid; text-align: left"> </td><td style="border-bottom: Black 1.5pt solid; text-align: right">155,000</td><td style="padding-bottom: 1.5pt; text-align: left"> </td></tr>
<tr style="vertical-align: bottom; background-color: White">
<td style="text-align: left">Total operating loss</td><td> </td>
<td style="text-align: left"> </td><td style="text-align: right">-</td><td style="text-align: left"> </td><td> </td>
<td style="text-align: left"> </td><td style="text-align: right">(128,000</td><td style="text-align: left">)</td></tr>
<tr style="vertical-align: bottom; background-color: rgb(204,238,255)">
<td style="text-align: left">Interest expense</td><td> </td>
<td style="text-align: left"> </td><td style="text-align: right">-</td><td style="text-align: left"> </td><td> </td>
<td style="text-align: left"> </td><td style="text-align: right">(3,000</td><td style="text-align: left">)</td></tr>
<tr style="vertical-align: bottom; background-color: White">
<td style="text-align: left; padding-bottom: 1.5pt">Other expense</td><td style="padding-bottom: 1.5pt"> </td>
<td style="border-bottom: Black 1.5pt solid; text-align: left"> </td><td style="border-bottom: Black 1.5pt solid; text-align: right">(230,000</td><td style="padding-bottom: 1.5pt; text-align: left">)</td><td style="padding-bottom: 1.5pt"> </td>
<td style="border-bottom: Black 1.5pt solid; text-align: left"> </td><td style="border-bottom: Black 1.5pt solid; text-align: right">(3,000</td><td style="padding-bottom: 1.5pt; text-align: left">)</td></tr>
<tr style="vertical-align: bottom; background-color: rgb(204,238,255)">
<td style="text-align: left; padding-bottom: 4pt">Loss from discontinued operations before income taxes</td><td style="padding-bottom: 4pt"> </td>
<td style="border-bottom: Black 4pt double; text-align: left">$</td><td style="border-bottom: Black 4pt double; text-align: right">(230,000</td><td style="padding-bottom: 2pt; text-align: left">)</td><td style="padding-bottom: 4pt"> </td>
<td style="border-bottom: Black 4pt double; text-align: left">$</td><td style="border-bottom: Black 4pt double; text-align: right">(134,000</td><td style="padding-bottom: 2pt; text-align: left">)</td></tr></table>
<p style="font: 10pt Times New Roman, Times, Serif; margin: 0; text-align: justify"><b>Note 9. NOTES PAYABLE, RELATED PARTY NOTES
PAYABLE AND FINANCE LEASE OBLIGATIONS</b></p>
<p style="font: 10pt Times New Roman, Times, Serif; margin: 0; text-align: justify; text-indent: 0.5in"> </p>
<p style="font: 10pt Times New Roman, Times, Serif; margin: 0; text-align: justify">Notes payable, related party notes payable
and finance lease obligations consist of the following:</p>
<p style="font: 10pt Times New Roman, Times, Serif; margin: 0; text-align: justify"> </p>
<table cellpadding="0" cellspacing="0" style="font: 10pt Times New Roman, Times, Serif; border-collapse: collapse; width: 100%">
<tr style="vertical-align: bottom">
<td> </td><td style="font-weight: bold"> </td>
<td colspan="2" style="font-weight: bold; text-align: center">December 31,</td><td style="font-weight: bold"> </td><td style="font-weight: bold"> </td>
<td colspan="2" style="font-weight: bold; text-align: center">December 31,</td><td style="font-weight: bold"> </td></tr>
<tr style="vertical-align: bottom">
<td> </td><td style="font-weight: bold; padding-bottom: 1.5pt"> </td>
<td colspan="2" style="border-bottom: Black 1.5pt solid; font-weight: bold; text-align: center">2020</td><td style="padding-bottom: 1.5pt; font-weight: bold"> </td><td style="font-weight: bold; padding-bottom: 1.5pt"> </td>
<td colspan="2" style="border-bottom: Black 1.5pt solid; font-weight: bold; text-align: center">2019</td><td style="padding-bottom: 1.5pt; font-weight: bold"> </td></tr>
<tr style="vertical-align: bottom">
<td> </td><td> </td>
<td colspan="2"> </td><td> </td><td> </td>
<td colspan="2"> </td><td> </td></tr>
<tr style="vertical-align: bottom; background-color: rgb(204,238,255)">
<td style="width: 76%; text-align: left">Revolving credit note payable to Sterling National Bank ("SNB")</td><td style="width: 1%"> </td>
<td style="width: 1%; text-align: left">$</td><td style="width: 9%; text-align: right">15,649,000</td><td style="width: 1%; text-align: left"> </td><td style="width: 1%"> </td>
<td style="width: 1%; text-align: left">$</td><td style="width: 9%; text-align: right">12,543,000</td><td style="width: 1%; text-align: left"> </td></tr>
<tr style="vertical-align: bottom; background-color: White">
<td style="text-align: left">Term loan, SNB</td><td> </td>
<td style="text-align: left"> </td><td style="text-align: right">5,558,000</td><td style="text-align: left"> </td><td> </td>
<td style="text-align: left"> </td><td style="text-align: right">3,800,000</td><td style="text-align: left"> </td></tr>
<tr style="vertical-align: bottom; background-color: rgb(204,238,255)">
<td style="text-align: left">Finance lease obligations</td><td> </td>
<td style="text-align: left"> </td><td style="text-align: right">6,000</td><td style="text-align: left"> </td><td> </td>
<td style="text-align: left"> </td><td style="text-align: right">22,000</td><td style="text-align: left"> </td></tr>
<tr style="vertical-align: bottom; background-color: White">
<td style="text-align: left">Loans Payable - financed assets</td><td> </td>
<td style="text-align: left"> </td><td style="text-align: right">48,000</td><td style="text-align: left"> </td><td> </td>
<td style="text-align: left"> </td><td style="text-align: right">385,000</td><td style="text-align: left"> </td></tr>
<tr style="vertical-align: bottom; background-color: rgb(204,238,255)">
<td style="text-align: left">Related party notes payable, net of debt discount</td><td> </td>
<td style="text-align: left"> </td><td style="text-align: right">6,012,000</td><td style="text-align: left"> </td><td> </td>
<td style="text-align: left"> </td><td style="text-align: right">6,862,000</td><td style="text-align: left"> </td></tr>
<tr style="vertical-align: bottom; background-color: White">
<td style="text-align: left; padding-bottom: 1.5pt">Convertible notes payable-third parties, net of debt discount</td><td style="padding-bottom: 1.5pt"> </td>
<td style="border-bottom: Black 1.5pt solid; text-align: left"> </td><td style="border-bottom: Black 1.5pt solid; text-align: right">-</td><td style="padding-bottom: 1.5pt; text-align: left"> </td><td style="padding-bottom: 1.5pt"> </td>
<td style="border-bottom: Black 1.5pt solid; text-align: left"> </td><td style="border-bottom: Black 1.5pt solid; text-align: right">2,338,000</td><td style="padding-bottom: 1.5pt; text-align: left"> </td></tr>
<tr style="vertical-align: bottom; background-color: rgb(204,238,255)">
<td>Subtotal</td><td> </td>
<td style="text-align: left"> </td><td style="text-align: right">27,273,000</td><td style="text-align: left"> </td><td> </td>
<td style="text-align: left"> </td><td style="text-align: right">25,950,000</td><td style="text-align: left"> </td></tr>
<tr style="vertical-align: bottom; background-color: White">
<td style="text-align: left; padding-bottom: 1.5pt">Less: Current portion of notes payable, related party notes payable and finance lease obligations</td><td style="padding-bottom: 1.5pt"> </td>
<td style="border-bottom: Black 1.5pt solid; text-align: left"> </td><td style="border-bottom: Black 1.5pt solid; text-align: right">(16,475,000</td><td style="padding-bottom: 1.5pt; text-align: left">)</td><td style="padding-bottom: 1.5pt"> </td>
<td style="border-bottom: Black 1.5pt solid; text-align: left"> </td><td style="border-bottom: Black 1.5pt solid; text-align: right">(22,544,000</td><td style="padding-bottom: 1.5pt; text-align: left">)</td></tr>
<tr style="vertical-align: bottom; background-color: rgb(204,238,255)">
<td style="text-align: left; padding-bottom: 4pt">Notes payable, related party notes payable and finance lease obligations, net of current portion</td><td style="padding-bottom: 4pt"> </td>
<td style="border-bottom: Black 4pt double; text-align: left">$</td><td style="border-bottom: Black 4pt double; text-align: right">10,798,000</td><td style="padding-bottom: 4pt; text-align: left"> </td><td style="padding-bottom: 4pt"> </td>
<td style="border-bottom: Black 4pt double; text-align: left">$</td><td style="border-bottom: Black 4pt double; text-align: right">3,406,000</td><td style="padding-bottom: 4pt; text-align: left"> </td></tr>
</table>
<p style="font: 10pt Times New Roman, Times, Serif; margin: 0; text-align: justify"> </p>
<p style="font: 10pt Times New Roman, Times, Serif; margin: 0; text-align: justify"><b>Sterling National Bank ("SNB")</b></p>
<p style="font: 10pt Times New Roman, Times, Serif; margin: 0; text-align: justify; text-indent: 0.5in"> </p>
<p style="font: 10pt Times New Roman, Times, Serif; margin: 0; text-align: justify">On December 31, 2019, the Company entered into
a new loan facility ("SNB Facility") with Sterling National Bank, ("SNB") expiring on December 30, 2022.
The new loan facility provides for a $16,000,000 revolving loan ("SNB revolving line of credit") and a term loan ("SNB
term loan").</p>
<p style="font: 10pt Times New Roman, Times, Serif; margin: 0; text-align: justify"> </p>
<p style="font: 10pt Times New Roman, Times, Serif; margin: 0">Proceeds from the SNB Facility repaid the Company's outstanding
loan facility ("PNC Facility") with PNC Bank N.A. ("PNC").</p>
<p style="font: 10pt Times New Roman, Times, Serif; margin: 0"> </p>
<p style="font: 10pt Times New Roman, Times, Serif; margin: 0; text-align: justify">The formula to determine the amounts of revolving
advances permitted to be borrowed under the SNB revolving line of credit is based on a percentage of the Company's eligible
receivables and eligible inventory (as defined in the SNB Facility). Each day, the Company's cash collections are swept directly
by SNB to reduce the SNB revolving loan balance and the Company then borrows according to a borrowing base formula. The Company's
receivables are payable directly into a lockbox controlled by SNB (subject to the terms of the SNB Facility).</p>
<p style="font: 10pt Times New Roman, Times, Serif; margin: 0; text-align: justify"> </p>
<p style="font: 10pt Times New Roman, Times, Serif; margin: 0; text-align: justify">The initial repayment terms of the SNB term
loan provided for monthly principal installments in the amount of $45,238, payable on the first business day of each month, beginning
on February 1, 2020, with a final payment of any unpaid balance of principal and interest payable on December 30, 2022. In addition,
for so long as the SNB term loan remains outstanding, if Excess Cash Flow (as defined) is a positive number for any fiscal year,
beginning with the year ending December 31, 2020, the Company shall pay to SNB an amount equal to the lesser of (i) twenty-five
percent (25%) of the Excess Cash Flow for such Fiscal Year and (ii) the outstanding principal balance of the term loan. Such payment
shall be made to SNB and applied to the outstanding principal balance of the term loan, on or prior to April 15 of the Fiscal Year
immediately following such Fiscal Year.</p>
<p style="font: 10pt Times New Roman, Times, Serif; margin: 0"> </p>
<p style="font: 10pt Times New Roman, Times, Serif; margin: 0; text-align: justify">On November 6, 2020, the Company entered into
the First Amendment to Loan and Security Agreement ("First Amendment"). The terms of the agreement increase the Term
Loan to $5,685,000. The repayment terms of the term loan were amended to provide monthly principal installments in the amount of
$67,679 beginning on December 1, 2020, with a final payment of any unpaid balance of principal and interest payable on December
30, 2022. Additionally, the date by which certain subordinated third-party notes need to be extended by was changed from September
30, 2020 to November 30, 2020. The Company has paid an amendment fee of $20,000.</p>
<p style="font: 10pt Times New Roman, Times, Serif; margin: 0; text-align: justify"> </p>
<p style="font: 10pt Times New Roman, Times, Serif; margin: 0; text-align: justify">The Company may voluntarily prepay balances
under the SNB Facility. Any prepayment of less than all of the outstanding principal of the SNB term loan is applied to the principal
of the SNB term loan.</p>
<p style="font: 10pt Times New Roman, Times, Serif; margin: 0; text-align: justify"> </p>
<p style="font: 10pt Times New Roman, Times, Serif; margin: 0; text-align: justify">The terms of the SNB Facility require that, among other things,
the Company maintain a specified Fixed Charge Coverage Ratio of 1.25 to 1.00 at the end of each Fiscal Quarter beginning with the
Fiscal Quarter ending March 31, 2020. In addition, the Company is limited in the amount of Capital Expenditures it can make. As
of December 31, 2020, the Company was in compliance with all loan covenants. The SNB Facility also restricts the amount of dividends
the Company may pay to its stockholders. Substantially all of the Company's assets are pledged as collateral under the SNB
Facility.</p>
<p style="font: 10pt Times New Roman, Times, Serif; margin: 0; text-indent: 0.5in"> </p>
<p style="font: 10pt Times New Roman, Times, Serif; margin: 0; text-align: justify">The aggregate payments for the term note at
December 31, 2020 are as follows:</p>
<p style="font: 10pt Times New Roman, Times, Serif; margin: 0; text-align: justify"> </p>
<table cellpadding="0" cellspacing="0" style="font: 10pt Times New Roman, Times, Serif; border-collapse: collapse; width: 100%">
<tr style="vertical-align: bottom">
<td style="border-bottom: Black 1.5pt solid; font-weight: bold"><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0"><b>For
the year ending</b></p></td><td style="font-weight: bold; padding-bottom: 1.5pt"> </td>
<td colspan="2" style="border-bottom: Black 1.5pt solid; font-weight: bold; text-align: center">Amount</td><td style="padding-bottom: 1.5pt; font-weight: bold"> </td></tr>
<tr style="vertical-align: bottom; background-color: rgb(204,238,255)">
<td style="width: 88%">December 31, 2021</td><td style="width: 1%"> </td>
<td style="width: 1%; text-align: left">$</td><td style="width: 9%; text-align: right">812,000</td><td style="width: 1%; text-align: left"> </td></tr>
<tr style="vertical-align: bottom; background-color: White">
<td style="padding-bottom: 1.5pt">December 31, 2022</td><td style="padding-bottom: 1.5pt"> </td>
<td style="border-bottom: Black 1.5pt solid; text-align: left"> </td><td style="border-bottom: Black 1.5pt solid; text-align: right">4,805,000</td><td style="padding-bottom: 1.5pt; text-align: left"> </td></tr>
<tr style="vertical-align: bottom; background-color: rgb(204,238,255)">
<td style="text-align: left">SNB Term Loans payable</td><td> </td>
<td style="text-align: left"> </td><td style="text-align: right">5,617,000</td><td style="text-align: left"> </td></tr>
<tr style="vertical-align: bottom; background-color: White">
<td style="text-align: left; padding-bottom: 1.5pt">Less: debt issuance costs</td><td style="padding-bottom: 1.5pt"> </td>
<td style="border-bottom: Black 1.5pt solid; text-align: left"> </td><td style="border-bottom: Black 1.5pt solid; text-align: right">(59,000</td><td style="padding-bottom: 1.5pt; text-align: left">)</td></tr>
<tr style="vertical-align: bottom; background-color: rgb(204,238,255)">
<td style="text-align: left">Total SNB Term loan payable, net of debt issuance costs</td><td> </td>
<td style="text-align: left"> </td><td style="text-align: right">5,558,000</td><td style="text-align: left"> </td></tr>
<tr style="vertical-align: bottom; background-color: White">
<td style="text-align: left; padding-bottom: 1.5pt">Less: Current portion of SNB term loan payable</td><td style="padding-bottom: 1.5pt"> </td>
<td style="border-bottom: Black 1.5pt solid; text-align: left"> </td><td style="border-bottom: Black 1.5pt solid; text-align: right">812,000</td><td style="padding-bottom: 1.5pt; text-align: left"> </td></tr>
<tr style="vertical-align: bottom; background-color: rgb(204,238,255)">
<td style="text-align: left; padding-bottom: 4pt">Total long-term portion of SNB term loan payable</td><td style="padding-bottom: 4pt"> </td>
<td style="border-bottom: Black 4pt double; text-align: left">$</td><td style="border-bottom: Black 4pt double; text-align: right">4,746,000</td><td style="padding-bottom: 4pt; text-align: left"> </td></tr>
</table>
<p style="font: 10pt Times New Roman, Times, Serif; margin: 0; text-align: justify"> </p>
<p style="font: 10pt Times New Roman, Times, Serif; margin: 0; text-align: justify">Under the terms of the SNB Facility, both the
SNB revolving line of credit and the SNB term loan bear an interest rate equal to 30-day LIBOR, plus 2.5% (with a floor of 3.5%).</p>
<p style="font: 10pt Times New Roman, Times, Serif; margin: 0; text-align: justify"> </p>
<p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify">As of December 31, 2020, the Company's
debt to SNB in the amount of $21,207,000 consisted of the SNB revolving line of credit note in the amount of $15,649,000 and the
SNB term loan in the amount of $5,558,000. Interest expense for the year ending December 31, 2020 amounted to $586,000 for this
credit facility.</p>
<p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify; text-indent: 0.5in"> </p>
<p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify">As of December 31, 2019, the Company's debt to SNB in
the amount of $16,343,000 consisted of the SNB revolving line of credit note in the amount of $12,543,000 and the SNB term loan
in the amount of $3,800,000. No interest expense was incurred on the SNB Facility during 2019.</p>
<p style="font: 10pt Times New Roman, Times, Serif; margin: 0; text-align: center; text-indent: 0.5in"> </p>
<p style="font: 10pt Times New Roman, Times, Serif; margin: 0; text-align: justify"><b>PNC Bank N.A. ("PNC")</b></p>
<p style="font: 10pt Times New Roman, Times, Serif; margin: 0; text-align: justify; text-indent: 0.5in"> </p>
<p style="font: 10pt Times New Roman, Times, Serif; margin: 0; text-align: justify">The Company previously maintained a financing
facility with PNC. Under such facility, substantially all of the Company's assets were pledged as collateral. The PNC Facility
provided for a $15,000,000 revolving line of credit ("PNC revolving line of credit") and a term loan ("PNC term
loan").</p>
<p style="font: 10pt Times New Roman, Times, Serif; margin: 0; text-align: justify; text-indent: 0.5in"> </p>
<p style="font: 10pt Times New Roman, Times, Serif; margin: 0; text-align: justify">Interest expense related to the PNC Facility
amounted to approximately $1,860,000 for the year ended December 31, 2019.</p>
<p style="font: 10pt Times New Roman, Times, Serif; margin: 0; text-align: justify"> </p>
<p style="font: 10pt Times New Roman, Times, Serif; margin: 0; text-align: justify">On December 31, 2019, both the PNC revolving
line of credit and PNC term loan were paid in full and all assets that were previously pledged as collateral were released.</p>
<p style="font: 10pt Times New Roman, Times, Serif; margin: 0; text-align: justify"> </p>
<p style="font: 10pt Times New Roman, Times, Serif; margin: 0; text-align: justify"><b>Loans Payable – Financed Assets</b></p>
<p style="font: 10pt Times New Roman, Times, Serif; margin: 0; text-align: justify; text-indent: 0.5in"> </p>
<p style="font: 10pt Times New Roman, Times, Serif; margin: 0; text-align: justify">The Company financed the 2019 acquisition of
manufacturing equipment with a third-party loan. The loan obligation totaled $0 and $385,000 as of December 31, 2020 and 2019,
respectively and bore interest at 3% per annum. This loan was repaid in full in conjunction with the First Amendment to the SNB
Term Loan.</p>
<p style="font: 10pt Times New Roman, Times, Serif; margin: 0; text-align: justify; text-indent: 0.5in"> </p>
<p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify">The Company has also borrowed to purchase
a delivery vehicle in July 2020. The loan obligation totaled $48,000 as of December 31, 2020. The loan bears no interest and a
final payment is due and payable for all unpaid principal on July 20, 2026.</p>
<p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify"><b> </b></p>
<p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0">Annual maturities of this loan are as follows:</p>
<p style="font: 10pt Times New Roman, Times, Serif; margin: 0; text-align: justify"> </p>
<table cellpadding="0" cellspacing="0" style="font: 10pt Times New Roman, Times, Serif; border-collapse: collapse; width: 100%">
<tr style="vertical-align: bottom">
<td style="border-bottom: Black 1.5pt solid; font-weight: bold"><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0"><b>For
the year ending</b></p></td><td style="font-weight: bold; padding-bottom: 1.5pt"> </td>
<td colspan="2" style="border-bottom: Black 1.5pt solid; font-weight: bold; text-align: center">Amount</td><td style="padding-bottom: 1.5pt; font-weight: bold"> </td></tr>
<tr style="vertical-align: bottom; background-color: rgb(204,238,255)">
<td style="width: 88%">December 31, 2021</td><td style="width: 1%"> </td>
<td style="width: 1%; text-align: left">$</td><td style="width: 9%; text-align: right">9,000</td><td style="width: 1%; text-align: left"> </td></tr>
<tr style="vertical-align: bottom; background-color: White">
<td>December 31, 2022</td><td> </td>
<td style="text-align: left"> </td><td style="text-align: right">9,000</td><td style="text-align: left"> </td></tr>
<tr style="vertical-align: bottom; background-color: rgb(204,238,255)">
<td>December 31, 2023</td><td> </td>
<td style="text-align: left"> </td><td style="text-align: right">9,000</td><td style="text-align: left"> </td></tr>
<tr style="vertical-align: bottom; background-color: White">
<td>December 31, 2024</td><td> </td>
<td style="text-align: left"> </td><td style="text-align: right">9,000</td><td style="text-align: left"> </td></tr>
<tr style="vertical-align: bottom; background-color: rgb(204,238,255)">
<td>December 31, 2025</td><td> </td>
<td style="text-align: left"> </td><td style="text-align: right">9,000</td><td style="text-align: left"> </td></tr>
<tr style="vertical-align: bottom; background-color: White">
<td style="padding-bottom: 1.5pt">Thereafter</td><td style="padding-bottom: 1.5pt"> </td>
<td style="border-bottom: Black 1.5pt solid; text-align: left"> </td><td style="border-bottom: Black 1.5pt solid; text-align: right">3,000</td><td style="padding-bottom: 1.5pt; text-align: left"> </td></tr>
<tr style="vertical-align: bottom; background-color: rgb(204,238,255)">
<td style="text-align: left">Loans Payable - financed assets</td><td> </td>
<td style="text-align: left"> </td><td style="text-align: right">48,000</td><td style="text-align: left"> </td></tr>
<tr style="vertical-align: bottom; background-color: White">
<td style="text-align: left; padding-bottom: 1.5pt">Less: Current portion</td><td style="padding-bottom: 1.5pt"> </td>
<td style="border-bottom: Black 1.5pt solid; text-align: left"> </td><td style="border-bottom: Black 1.5pt solid; text-align: right">9,000</td><td style="padding-bottom: 1.5pt; text-align: left"> </td></tr>
<tr style="vertical-align: bottom; background-color: rgb(204,238,255)">
<td style="padding-bottom: 4pt">Long-term portion</td><td style="padding-bottom: 4pt"> </td>
<td style="border-bottom: Black 4pt double; text-align: left">$</td><td style="border-bottom: Black 4pt double; text-align: right">39,000</td><td style="padding-bottom: 4pt; text-align: left"> </td></tr>
</table>
<p style="font: 10pt Times New Roman, Times, Serif; margin: 0; text-align: justify"> </p>
<p style="font: 10pt Times New Roman, Times, Serif; margin: 0; text-align: justify"><b>Related Party Notes Payable</b></p>
<p style="font: 10pt Times New Roman, Times, Serif; margin: 0; text-align: justify; text-indent: 0.5in"> </p>
<p style="font: 10pt Times New Roman, Times, Serif; margin: 0; text-align: justify">Taglich Brothers, Inc. is a corporation co-founded
by two directors of the Company, Michael and Robert Taglich. In addition, a third director of the Company is a vice president of
Taglich Brothers, Inc.</p>
<p style="font: 10pt Times New Roman, Times, Serif; margin: 0; text-align: justify"> </p>
<p style="font: 10pt Times New Roman, Times, Serif; margin: 0; text-align: justify">Taglich Brothers, Inc. has acted as placement
agent for various debt and equity financing transactions and has received cash and equity compensation for their services.</p>
<p style="font: 10pt Times New Roman, Times, Serif; margin: 0; text-align: justify"> </p>
<p style="font: 10pt Times New Roman, Times, Serif; margin: 0; text-align: justify">On January 15, 2019, the Company issued its
7% senior subordinated convertible promissory notes due December 31, 2020, each in the principal amount of $1,000,000 (together,
the "7% Notes"), to Michael Taglich and Robert Taglich, each for a purchase price of $1,000,000. The 7% Notes bear
interest at the rate of 7% per annum, are convertible into shares of the Company's common stock at a conversion price of
$0.93 per share, subject to the anti-dilution adjustments set forth in the 7% Notes and are subordinate to the Company's
indebtedness under the SNB Facility.</p>
<p style="font: 10pt Times New Roman, Times, Serif; margin: 0; text-align: justify; text-indent: 0.5in"> </p>
<p style="font: 10pt Times New Roman, Times, Serif; margin: 0; text-align: justify">In connection with the 7% Notes, the Company
paid Taglich Brothers, Inc. a fee of $80,000 (4% of the purchase price of the 7% Notes), paid in the form of a promissory note
having terms similar to the 7% Notes.</p>
<p style="font: 10pt Times New Roman, Times, Serif; margin: 0; text-align: justify; text-indent: 0.5in"> </p>
<p style="font: 10pt Times New Roman, Times, Serif; margin: 0; text-align: justify">On June 26, 2019, the Company was advanced $250,000 from each
of Michael and Robert Taglich. These notes bear interest at a rate of 12% per annum. In connection with these notes, the Company
issued 37,500 shares of stock to each of Michael and Robert Taglich. The maturity date of these notes, was June 30, 2020, but was
extended to July 1, 2023.</p>
<p style="font: 10pt Times New Roman, Times, Serif; margin: 0; text-align: justify; text-indent: 0.5in"> </p>
<p style="font: 10pt Times New Roman, Times, Serif; margin: 0; text-align: justify">On October 21, 2019, the Company was advanced
$1,000,000 from Michael Taglich. This advance was repaid on January 2, 2020. The interest rate on this advance was 12% per annum.</p>
<p style="font: 10pt Times New Roman, Times, Serif; margin: 0; text-align: justify; text-indent: 0.5in"> </p>
<p style="font: 10pt Times New Roman, Times, Serif; margin: 0; text-align: justify"><font style="font-family: Times New Roman, Times, Serif"><u>Private
Placement of Subordinated Notes due May 31, 2019, together with Shares of Common Stock</u></font></p>
<p style="font: 10pt Times New Roman, Times, Serif; margin: 0; text-align: justify"> </p>
<p style="font: 10pt Times New Roman, Times, Serif; margin: 0; text-align: justify">On March 29, 2018 and April 4, 2018, Michael
Taglich and Robert Taglich advanced $1,000,000 and $100,000, respectively, to the Company for use as working capital. The Company
subsequently issued its Subordinated Notes originally due May 31, 2019 to Michael Taglich and Robert Taglich, together with shares
of common stock, in the financing described below, to evidence its obligation to repay the foregoing advances. </p>
<p style="font: 10pt Times New Roman, Times, Serif; margin: 0; text-align: justify; text-indent: 0.5in"> </p>
<p style="font: 10pt Times New Roman, Times, Serif; margin: 0; text-align: justify">In May 2018, the Company issued $1,200,000
of Subordinated Notes due May 31, 2019 (the "2019 Notes"), together with a total of 214,762 shares of common stock
to Michael Taglich, Robert Taglich and another accredited investor. As part of the financing, the Company issued to Michael Taglich
$1,000,000 principal amount of 2019 Notes and 178,571 shares of common stock for a purchase price of $1,000,000 and to Robert Taglich
$100,000 principal amount of 2019 Notes and 17,857 shares of common stock. The Company issued and sold a 2019 Note in the principal
amount of $100,000, plus 18,334 shares of common stock to the other accredited investor for a purchase price of $100,000. This
additional note was paid in full on January 2, 2020.</p>
<p style="font: 10pt Times New Roman, Times, Serif; margin: 0; text-indent: 0.5in"><b> </b></p>
<p style="font: 10pt Times New Roman, Times, Serif; margin: 0; text-align: justify">Interest on the 2019 Notes is payable on the
outstanding principal amount thereof at the rate of one percent (1%) per month, payable monthly commencing June 30, 2018. Upon
the occurrence and continuation of a failure to pay accrued interest, interest shall accrue and be payable on such amount at the
rate of 1.25% per month; provided that upon the occurrence and continuation of a failure to timely pay the principal amount of
the 2019 Note, interest shall accrue and be payable on such principal amount at the rate of 1.25% per month and shall no longer
be payable on interest accrued but unpaid. The 2019 Notes are subordinate to the Company's obligations to SNB.</p>
<p style="font: 10pt Times New Roman, Times, Serif; margin: 0; text-align: justify; text-indent: 0.5in"> </p>
<p style="font: 10pt Times New Roman, Times, Serif; margin: 0; text-align: justify">Taglich Brothers acted as placement agent for
the offering and received a commission in the aggregate amount of 4% of the amount invested which was paid in kind.</p>
<p style="font: 10pt Times New Roman, Times, Serif; margin: 0; text-align: justify; text-indent: 0.5in"> </p>
<p style="font: 10pt Times New Roman, Times, Serif; margin: 0; text-align: justify">During the second quarter of 2019, the maturity
date of the 2019 Notes was extended to June 30, 2020. The interest rate of the notes remains at 12% per annum. In connection with
the extension, 180,000 shares of common stock were issued on a pro-rata basis to each of the note holders, including 150,000 shares
to Michael Taglich and 15,000 shares to Robert Taglich. The shares were valued at $1.01 per share or $182,000. The costs have been
recorded as a debt discount, and are being accreted over the revised term. In connection with the SNB Facility, Michael and Robert
Taglich agreed to extend the maturity date of the 2019 Notes to July 1, 2023.</p>
<p style="font: 10pt Times New Roman, Times, Serif; margin: 0; text-align: justify; text-indent: 0.5in"> </p>
<p style="font: 10pt Times New Roman, Times, Serif; margin: 0; text-align: justify"><u>Private Placements of 8% Subordinated Convertible
Notes</u></p>
<p style="font: 10pt Times New Roman, Times, Serif; margin: 0; text-align: justify; text-indent: 0.5in"> </p>
<p style="font: 10pt Times New Roman, Times, Serif; margin: 0; text-align: justify">From November 23, 2016 through March 21, 2017,
the Company received gross proceeds of $4,775,000, of which $1,950,000 were received from Robert and Michael Taglich, from the
sale of an equal principal amount of its 8% Subordinated Convertible Notes (the "8% Notes"), together with warrants
to purchase a total of 383,080 shares of its common stock, in private placement transactions with accredited investors (the "8%
Note Offerings"). In connection with the offering of the 8% Notes, the Company issued 8% Notes in the aggregate principal
amount of $382,000 to Taglich Brothers, Inc., placement agent for the 8% Note Offerings, in lieu of payment of cash compensation
for sales commissions, together with warrants to purchase a total of 180,977 shares of common stock. Payment of the principal and
accrued interest on the 8% Notes are junior and subordinate in right of payment to our indebtedness under the SNB Facility.</p>
<p style="font: 10pt Times New Roman, Times, Serif; margin: 0; text-align: justify"> </p>
<p style="font: 10pt Times New Roman, Times, Serif; margin: 0; text-align: justify">Interest on the 8% Notes is payable on the
outstanding principal amount thereof at the annual rate of 8%, payable quarterly commencing February 28, 2017, in cash, or at the
Company's option, in additional 8% Notes, provided that if accrued interest payable on $1,269,000 principal amount of the
8% Notes issued in December 2016 is paid in additional 8% Notes, interest for that quarterly interest payment shall be calculated
at the rate of 12% per annum. Upon the occurrence and continuation of an event of default, interest shall accrue at the rate of
12% per annum.</p>
<p style="font: 10pt Times New Roman, Times, Serif; margin: 0; text-align: justify; text-indent: 0.5in"> </p>
<p style="font: 10pt Times New Roman, Times, Serif; margin: 0; text-align: justify">Related party advances and notes payable, net
of debt discounts to Michael and Robert Taglich, and their affiliated entities, totaled $6,012,000 and $6,862,000, as of December
31, 2020 and 2019, respectively. Unamortized debt discounts related to these notes amounted to $0 and $226,000 as of December 31,
2020 and 2019, respectively. Interest incurred on these related party notes amounted to approximately $526,000 and $446,000 for
the years ended December 31, 2020 and 2019, respectively Amortization of debt discount incurred on these related party notes amounted
to approximately $226,000 and $375,000 for the year ended December 31, 2020 and 2019 respectively. The amortization of the debt
discount is included in interest and financing costs in the Consolidated Statement of Operations.</p>
<p style="font: 10pt Times New Roman, Times, Serif; margin: 0; text-align: justify"> </p>
<p style="font: 10pt Times New Roman, Times, Serif; margin: 0; text-align: justify">Per the terms of the SNB Facility, the maturity
date of all related party notes has been extended to July 1, 2023 and are subordinated to the SNB Facility. There are no principal
payments due on these notes until such time.</p>
<p style="font: 10pt Times New Roman, Times, Serif; margin: 0; text-align: justify"> </p>
<p style="font: 10pt Times New Roman, Times, Serif; margin: 0; text-align: justify">On January 1, 2021, the related party subordinated
notes were amended to include all accrued interest through December 31, 2020 in the principal balance of the notes. The Note Holders
and the principal balance of the notes as amended on January 1, 2021 are shown below:</p>
<p style="font: 10pt Times New Roman, Times, Serif; margin: 0; text-align: justify"> </p>
<table cellpadding="0" cellspacing="0" style="font: 10pt Times New Roman, Times, Serif; border-collapse: collapse; width: 100%">
<tr style="vertical-align: bottom">
<td> </td>
<td> </td>
<td colspan="2" style="border-bottom: black 1.5pt solid; white-space: nowrap">
<p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: center"><b>Michael </b></p>
<p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: center"><b>Taglich, Chairman</b></p></td>
<td> </td>
<td> </td>
<td colspan="2" style="border-bottom: black 1.5pt solid; text-align: center"><font style="font: 10pt Times New Roman, Times, Serif"><b>Robert Taglich, Director</b></font></td>
<td> </td>
<td> </td>
<td colspan="2" style="border-bottom: black 1.5pt solid; text-align: center"><font style="font: 10pt Times New Roman, Times, Serif"><b>Taglich Brothers<br />
Inc.</b></font></td>
<td> </td>
<td> </td>
<td colspan="2" style="border-bottom: black 1.5pt solid; text-align: center"><font style="font: 10pt Times New Roman, Times, Serif"><b>Total</b></font></td>
<td> </td></tr>
<tr style="vertical-align: bottom; background-color: #CCEEFF">
<td style="width: 52%"><font style="font: 10pt Times New Roman, Times, Serif">Convertible Subordinated Notes</font></td>
<td style="width: 1%"> </td>
<td style="width: 1%"><font style="font: 10pt Times New Roman, Times, Serif">$</font></td>
<td style="width: 9%; text-align: right"><font style="font: 10pt Times New Roman, Times, Serif">2,666,000</font></td>
<td style="width: 1%"> </td>
<td style="width: 1%"> </td>
<td style="width: 1%"><font style="font: 10pt Times New Roman, Times, Serif">$</font></td>
<td style="width: 9%; text-align: right"><font style="font: 10pt Times New Roman, Times, Serif">1,905,000</font></td>
<td style="width: 1%"> </td>
<td style="width: 1%"> </td>
<td style="width: 1%"><font style="font: 10pt Times New Roman, Times, Serif">$</font></td>
<td style="width: 9%; text-align: right"><font style="font: 10pt Times New Roman, Times, Serif">241,000</font></td>
<td style="width: 1%"> </td>
<td style="width: 1%"> </td>
<td style="width: 1%"><font style="font: 10pt Times New Roman, Times, Serif">$</font></td>
<td style="width: 9%; text-align: right"><font style="font: 10pt Times New Roman, Times, Serif">4,812,000</font></td>
<td style="width: 1%"> </td></tr>
<tr style="vertical-align: bottom; background-color: white">
<td><font style="font: 10pt Times New Roman, Times, Serif">Subordinated notes</font></td>
<td> </td>
<td style="border-bottom: black 1.5pt solid"> </td>
<td style="border-bottom: black 1.5pt solid; text-align: right"><font style="font: 10pt Times New Roman, Times, Serif">1,250,000</font></td>
<td> </td>
<td> </td>
<td style="border-bottom: black 1.5pt solid"> </td>
<td style="border-bottom: black 1.5pt solid; text-align: right"><font style="font: 10pt Times New Roman, Times, Serif">350,000</font></td>
<td> </td>
<td> </td>
<td style="border-bottom: black 1.5pt solid"> </td>
<td style="border-bottom: black 1.5pt solid; text-align: right"><font style="font: 10pt Times New Roman, Times, Serif">-</font></td>
<td> </td>
<td> </td>
<td style="border-bottom: black 1.5pt solid"> </td>
<td style="border-bottom: black 1.5pt solid; text-align: right"><font style="font: 10pt Times New Roman, Times, Serif">1,600,000</font></td>
<td> </td></tr>
<tr style="vertical-align: bottom; background-color: #CCEEFF">
<td style="padding-left: 9pt"><font style="font: 10pt Times New Roman, Times, Serif">Total</font></td>
<td> </td>
<td style="border-bottom: black 4.5pt double"><font style="font: 10pt Times New Roman, Times, Serif">$</font></td>
<td style="border-bottom: black 4.5pt double; text-align: right"><font style="font: 10pt Times New Roman, Times, Serif">3,916,000</font></td>
<td> </td>
<td> </td>
<td style="border-bottom: black 4.5pt double"><font style="font: 10pt Times New Roman, Times, Serif">$</font></td>
<td style="border-bottom: black 4.5pt double; text-align: right"><font style="font: 10pt Times New Roman, Times, Serif">2,255,000</font></td>
<td> </td>
<td> </td>
<td style="border-bottom: black 4.5pt double"><font style="font: 10pt Times New Roman, Times, Serif">$</font></td>
<td style="border-bottom: black 4.5pt double; text-align: right"><font style="font: 10pt Times New Roman, Times, Serif">241,000</font></td>
<td> </td>
<td> </td>
<td style="border-bottom: black 4.5pt double"><font style="font: 10pt Times New Roman, Times, Serif">$</font></td>
<td style="border-bottom: black 4.5pt double; text-align: right"><font style="font: 10pt Times New Roman, Times, Serif">6,412,000</font></td>
<td> </td></tr>
</table>
<p style="font: 10pt Times New Roman, Times, Serif; margin: 0; text-align: justify"> </p>
<p style="font: 10pt Times New Roman, Times, Serif; margin: 0; text-align: justify"><b>Convertible Notes Payable – Third
Parties</b></p>
<p style="font: 10pt Times New Roman, Times, Serif; margin: 0; text-align: justify; text-indent: 0.5in"> </p>
<p style="font: 10pt Times New Roman, Times, Serif; margin: 0; text-align: justify">As discussed above in connection with the Private
Placement of Subordinated Notes due May 31, 2019, together with Shares of Common Stock, a $100,000 note issued to a third party
in May 2018 was repaid in January 2020.</p>
<p style="font: 10pt Times New Roman, Times, Serif; margin: 0; text-align: justify"> </p>
<p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify">In the years ended December 31, 2020 and
2019, the third party holders of $580,000 and $2,245,000 principal, respectively, with accrued interest thereon of $58,000 and
$344,000, respectively, converted their notes into approximately 426,000 and 1,831,000 shares, respectively, of common stock. These
notes were converted at a per share price between $1.35 and $1.50.</p>
<p style="font: 10pt Times New Roman, Times, Serif; margin: 0; text-align: justify"> </p>
<p style="font: 10pt Times New Roman, Times, Serif; margin: 0; text-align: justify">8% Notes payable to third parties totaled $0
and $2,338,000, net of unamortized debt discount at December 31, 2020 and 2019, respectively. Interest incurred on the 8% Notes
amounted to approximately $141,000 and $380,000 for the years ended December 31, 2020 and 2019, respectively, unamortized debt
discounts related to these notes amounted to $0 and $7,000 as of December 31, 2020 and 2019, respectively. Amortization of debt
discount on the 8% Notes amounted to approximately $7,000 and $135,000 for the years ended December 31, 2020 and 2019, respectively.
These costs are included in interest and financing costs in the Consolidated Statement of Operations.</p>
<p style="font: 10pt Times New Roman, Times, Serif; margin: 0; text-align: justify; text-indent: 0.5in"> </p>
<p style="font: 10pt Times New Roman, Times, Serif; margin: 0; text-align: justify; text-indent: 0"><b>SBA Loans</b></p>
<p style="font: 10pt Times New Roman, Times, Serif; margin: 0; text-align: justify; text-indent: 0.5in"><b> </b></p>
<p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify">In May 2020, AIM, NTW and Sterling entered
into SBA Loans with SNB as the lender in an aggregate principal amount of $2,414,000, which was forgiven by the SBA in December
of 2020, Each SBA Loan was evidenced by a Note. Subject to the terms of the Note, the SBA Loans bore interest at a fixed rate
of one percent (1%) per annum, with the first six months of interest deferred, had an initial term of two years, and was unsecured
and guaranteed by the SBA. At least 60% of the proceeds of each Loan must be used for payroll and payroll-related costs, in accordance
with the applicable provisions of the federal statute authorizing the loan program administered by the SBA and the rules promulgated
thereunder (the "Loan Program"). In December 2020, the Company was notified that the loans and all interest accrued
thereon had been forgiven.</p>
<p style="font: 10pt Times New Roman, Times, Serif; margin: 0; text-align: justify; text-indent: 0.5in"> </p>
<p style="font: 10pt Times New Roman, Times, Serif; margin: 0; text-align: justify">The Company elected to treat the SBA Loans
as debt under FASB ASC 470. As such, the Company derecognized the liability when the loans were forgiven and the Company was legally
released from the loans.</p>
<p style="font: 10pt Times New Roman, Times, Serif; margin: 0; text-align: justify"><b>Note 12. STOCKHOLDERS' EQUITY</b></p>
<p style="font: 10pt Times New Roman, Times, Serif; margin: 0; text-align: justify; text-indent: 0.5in"> </p>
<p style="font: 10pt Times New Roman, Times, Serif; margin: 0; text-align: justify"><b>Common Stock – Sale of Securities</b></p>
<p style="font: 10pt Times New Roman, Times, Serif; margin: 0; text-align: justify"> </p>
<p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify">In January 2020, the Company issued and
sold 419,597 shares of its common stock for gross proceeds of $984,000 pursuant to a Form S-3 filed on October 10, 2019 as updated
on January 15, 2020. Costs of the sale amounted to $145,000.</p>
<p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify"> </p>
<p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify">During the year ended December 31, 2020,
the Company issued 1,830,631 shares of common stock to convert third party subordinated debt totaling $2,589,000 to equity.</p>
<p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify"> </p>
<p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify">During the year ended December 31, 2020,
the Company issued 178,405 shares of common stock in payment of directors' fees totaling $211,000.</p>
<p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify"> </p>
<p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify">During the year ended December 31, 2019,
the Company issued 50,000 shares of common stock in lieu of cash payment for various services provided to the Company, 257,602
shares of common stock in payment of directors' fees, 424,805 shares of common stock issued from the conversion of notes
payable, 180,000 shares issued in connection with the issuance of subordinated notes payable and 2,778 shares issued upon the exercise
of stock options.</p>
<p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify"> </p>
<p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify">During the first quarter of 2021, the Company
issued 41,960 shares of common stock in payment of directors' fees totaling $52,000 and 51,224 shares of common stock upon
the exercise of stock options.</p>
Customer was less than 10% of sales at December 31, 2020.
Customer was less than 10% of sales at December 31, 2019.