AIR INDUSTRIES GROUP
For the period ended Jun 30, 2026. Filed Aug 12, 2026.
View on SEC.govAbout this filing
A company's report for each of its first three quarters. The financial statements are not audited. It shows how the business has moved since the last annual report, and what management says changed.
Jun 30, 2026 · Filed Aug 12, 2026
AIRI$2.80+5.3%Stored close · as of Nov 6, 2026
What changed in Management’s Discussion and Analysis?
Read the current filingPrevious report: 10-Q
Period ended 2026-03-31; filed 2026-05-13.
0001213900-26-055772
Item 2. Management’s Discussion and Analysis of Financial Condition and Results of OperationsCurrent report: 10-Q
Period ended 2026-06-30; filed 2026-08-12.
0001213900-26-088334
Item 2. Management’s Discussion and Analysis of Financial Condition and Results of OperationsThe baseline is this issuer’s latest earlier reporting period of the same form that was filed before the current report. A previous 10-Q is a different quarter, not a year-over-year comparison. Amendments are excluded.
Compared 56 previous paragraphs and 71 current paragraphs.
25 unchanged; 29 reworded; 10 added; 2 removed; 0 previous and 7 current paragraphs rearranged.
Tables are not compared: 13 previous and 17 current tables excluded. Dates, whitespace, punctuation and numbering changes are ignored; changes to financial figures remain significant.
A changed paragraph is not evidence that risk increased or decreased. An unchanged paragraph does not establish that risk stayed the same.
Added paragraphs (10)
Current report
On February 16, 2026, we and Transitory Air Sub LLC, our wholly owned subsidiary (“Merger Sub”), entered into an Agreement and Plan of Merger (the “Original Merger Agreement”) with Tenax Aerospace Acquisition, LLC, a Delaware limited liability company (“Tenax”), pursuant to which we agreed to combine with Tenax and issue shares of our common stock to the holders of the membership interests of Tenax (the “Tenax Members”) at the closing of the merger based on a calculation of AIR Net Indebtedness (as defined in the Original Merger Agreement). On June 2, 2026, our subsidiary, Air Industries Machining Corp., received a payment of $1,971,070, (the “Advance”), from one of its customers for product to be delivered after receipt of the Advance. Subsequently, on June 8, 2026, we, Merger Sub and Tenax entered into an amendment (“Amendment No. 1”) to the Original Merger Agreement which amended the definition of AIR Net Indebtedness (as defined in the Original Merger Agreement) to mitigate the impact of the Advance on the calculation of AIR Net Indebtedness and thereby the number of shares of common stock to be issued pursuant to the Original Merger Agreement.
Current report
On July 2, 2026, we, Merger Sub and Tenax entered into an Amended and Restated Agreement and Plan of Merger (the “A&R Merger Agreement”), which amended and restated the Original Merger Agreement, as amended by Amendment No. 1, in its entirety. Pursuant to the A&R Merger Agreement, Merger Sub will merge with and into Tenax, with Tenax continuing as the surviving company in such merger (the “Merger”) and becoming our wholly owned subsidiary.
Current report
Pursuant to the A&R Merger Agreement, the number of shares of common stock we will issue has been fixed at 126,900,000 shares (25,380,000 shares after giving effect to a 1 for 5 Reverse Stock Split described herein) (the “Merger Consideration”) for the Tenax Members in connection with the Merger. A portion of the Merger Consideration allocated in respect of membership interests of Tenax underlying certain Tenax warrants that remain unexercised as of the closing, if any, will be reserved by us for future issuance upon the exercise of such warrants. The A&R Merger Agreement further provides that the Debt Adjusted AIR Share Price (as defined in the A&R Merger Agreement) shall be $3.05 ($15.25 after giving effect to a 1 for 5 Reverse Stock Split described herein). Each of the Merger Consideration and the Debt Adjusted AIR Share Price is subject to appropriate and equitable adjustment in the event of any subdivision, stock dividend or stock split, combination, recapitalization, exchange or reclassification of our common stock prior to the closing, including the 1 for 5 Reverse Stock Split described herein.
Current report
The A&R Merger Agreement requires us to amend our articles of incorporation (the “AIR Charter Amendment”) to increase the number of authorized shares of our common stock from 20 million to 200 million. Subsequent to the effectiveness of the AIR Charter Amendment, we shall cause a certificate of change to be filed with the Secretary of State of the State of Nevada effecting a reverse stock split of the issued and outstanding shares of our common stock at a ratio of one post-split share of our common stock for every five pre-split shares of our common stock while simultaneously reducing the number of authorized shares of our common stock under our articles of incorporation (after giving effect to the AIR Charter Amendment) by a corresponding factor, with any fractional share of our common stock otherwise resulting from the split rounded up to the nearest whole share (the “1 for 5 Reverse Stock Split”). Unless the parties agree otherwise, the number of authorized shares of our common stock immediately after the closing will be 40,000,000.
Current report
The A&R Merger Agreement eliminates the post-closing tender offer contemplated by the Original Merger Agreement, under which we would have been required, within five business days following the closing, to commence a tender offer to purchase up to 1,000,000 shares of our common stock at a purchase price equal to the Debt Adjusted AIR Share Price (as defined in the Original Merger Agreement) if the volume weighted average price of our common stock during the 20 trading days preceding the closing was less than the Debt Adjusted AIR Share Price.
Current report
The A&R Merger Agreement further requires that, promptly following the date of the A&R Merger Agreement, we file with the SEC a Registration Statement on Form S-4, which will register the shares of our common stock to be issued to the Tenax Members pursuant to the A&R Merger Agreement, and will include a proxy statement/prospectus relating to the Merger, and the matters to be voted on by our stockholders. We and Tenax have agreed to use reasonable best efforts to cause the Registration Statement to become effective under the Securities Act as promptly as practicable and to keep the Registration Statement effective for so long as necessary to consummate the Merger.
Current report
On July 31, 2026, we, Merger Sub and Tenax entered into an amendment (the “Amendment”) to the A&R Merger Agreement, which extended the Outside Date (as defined in the A&R Merger Agreement) to close the transaction from September 30, 2026 to November 30, 2026.
Current report
Results of Operations for the three months ended June 30, 2026
Current report
Results of Operations for the six months ended June 30, 2026
Removed paragraphs (2)
Previous report
Pursuant to the Merger Agreement, we will issue shares of our common stock (the “Merger Consideration”) to the holders of the membership interests of Tenax (the “Tenax Members”) at the closing of the merger. A portion of the Merger Consideration allocated in respect of membership interests of Tenax underlying certain Tenax warrants that remain unexercised as of the closing, if any, will be reserved by us for future issuance upon the exercise of such warrants. The number of shares of our common stock to be issued to the Tenax Members will be adjusted based on a calculation of AIR Net Indebtedness (as defined in the Merger Agreement). Based on the amount of Air Net Indebtedness as of March 31, 2026, the calculation would result in the issuance of approximately 122.6 million shares of AIR common stock. Consequently, based upon the calculation of the Merger Consideration as of March 31, 2026, following the closing of the Merger, the Tenax Members will collectively own approximately 96% of the outstanding shares of our common stock.
Reworded paragraphs (29)
Previous wording
ITEM 2. MANAGEMENT’S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATION
Current wording
ITEM 2. MANAGEMENT’S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS
Previous wording
The following discussion of our financial condition and results of operations should be read in conjunction with the unaudited condensed consolidated financial statements and notes to those statements included elsewhere in this Form 10-Q and with the audited consolidated financial statements and the notes thereto included in our Annual Report on Form 10-K, for the year ended December 31, 2025 (the “2025 Form 10-K”). This discussion contains forward-looking statements that involve risks and uncertainties. You should specifically consider the various risk factors identified in this report and our 2025 Form 10-K that could cause actual results to differ materially from those anticipated in these forward-looking statements. Further, although we believe we will not face a material increase in the price of raw materials due to tariffs that may be imposed, ongoing geopolitical conflicts could adversely impact our ability to manufacture our products, the markets for some of our products, and our ability to access debt or equity financing.
Current wording
The following discussion of our financial condition and results of operations should be read in conjunction with the unaudited condensed consolidated financial statements and notes to those statements included elsewhere in this Form 10-Q and with the audited consolidated financial statements and the notes thereto included in our Annual Report on Form 10-K, for the year ended December 31, 2025 (the “2025 Form 10-K”). This discussion contains forward-looking statements that involve risks and uncertainties. You should specifically consider the various risk factors identified in this report and our 2025 Form 10-K and the Registration Statement on Form S-4 filed with the SEC on July 22, 2026, that could cause actual results to differ materially from those anticipated in these forward-looking statements.
Previous wording
Our products include landing gear, flight controls, engine mounts and components for aircraft jet engines and ground turbines and other complex machines. The ultimate end-user for most of our products is the U.S. government, international governments, and commercial global airlines. Whether it is a small individual component for assembly by others or complete assemblies we manufacture ourselves, our high quality and extremely reliable products are used in mission critical operations that are essential for safety of military personnel and civilians.
Current wording
Our products include landing gear, flight controls, engine mounts and components for aircraft jet engines and ground turbines and other complex machines. The ultimate end-user for most of our products is the U.S. government, foreign governments, and commercial global airlines. Whether it is a small individual component for assembly by others or complete assemblies we manufacture ourselves, our high quality and extremely reliable products are used in mission critical operations that are essential for safety of military personnel and civilians.
Previous wording
Although our net sales are concentrated amongst a number of defense and aerospace prime contractors, we have cultivated long-standing relationships with a number of their subsidiaries and/or business units. Additionally, our net sales are generated across several high-profile platforms and programs including: the F-18 Hornet, the E-2 Hawkeye, the UH-60 Black Hawk Helicopters, Geared Turbo-Fan (“GTF”) Engines (used on smaller aircraft such as the Airbus A220 and Embraer E2), the CH-53 Helicopter, the F-35 Lighting II and the F-15 Eagle Tactical Fighter. In many cases, we are the sole or single supplier of certain parts and components and receive LTAs from our customers, both demonstrating their commitment to us.
Current wording
Although our net sales are concentrated amongst a number of defense and aerospace prime contractors, we have cultivated long-standing relationships with a number of their subsidiaries and/or business units. Additionally, our net sales are generated across several high-profile platforms and programs including: the F-18 Hornet, the E-2 Hawkeye, the UH-60 Black Hawk Helicopters, Geared Turbo-Fan (“GTF”) Engines (used on smaller aircraft such as the Airbus A220 and Embraer E2), the CH-53 Helicopter, the F-35 Lightning II and the F-15 Eagle Tactical Fighter. In many cases, we are the sole or single supplier of certain parts and components and receive LTAs from our customers, both demonstrating their commitment to us.
Previous wording
Winning a new contract award is highly competitive. Our ability to win new contract awards generally requires us to deliver superior quality products, more quickly and with lower pricing than our competitors. Accordingly, we must continually invest in process improvements and capital equipment. Recent investments in new equipment have improved the productive capacity of our employees, increased our efficiency and speed, and expanded the size of products we can manufacture. We strategically operate two state-of-the-art manufacturing centers in the U.S. This allows for rigorous oversight of production and the adherence to stringent quality standards. Although there is currently a shortage of skilled workers, we maintain a highly trained and close- knit team of over 160 professionals committed to driving excellence and precision in every aspect of our operations.
Current wording
Winning a new contract award is highly competitive. Our ability to win new contract awards generally requires us to deliver superior quality products, more quickly and with lower pricing than our competitors. Accordingly, we must continually invest in process improvements and capital equipment. Recent investments in new equipment have improved the productive capacity of our employees, increased our efficiency and speed, and expanded the size of products we can manufacture. We strategically operate two state-of-the-art manufacturing centers in the U.S. This allows for rigorous oversight of production and the adherence to stringent quality standards. Although there is currently a shortage of skilled workers, we maintain a highly trained and close-knit team of over 150 professionals committed to driving excellence and precision in every aspect of our operations.
Previous wording
As of March 31, 2026, we have total unfilled contract values amounting to $269.2 million (including our $134.7 million in backlog and all potential orders against LTA agreements previously awarded to us).
Current wording
As of June 30, 2026, we have total unfilled contract values amounting to $279.0 million (including our $139.7 million in backlog and all potential orders against LTA agreements previously awarded to us).
Previous wording
The closing of the merger is subject to risks and uncertainties and certain specified conditions, including, among other things: (a) the expiration or termination of the applicable waiting period under the Hart-Scott-Rodino Act, (b) the listing of the Merger Consideration on the NYSE American, and (c) other customary conditions for a transaction such as the Merger, such as the absence of any legal restraint prohibiting the consummation of the Merger and there not having occurred with respect to AIR or Tenax’s business a material adverse event, subject to certain customary exceptions.
Current wording
The closing of the Merger pursuant to the A&R Merger Agreement is subject to risks and uncertainties and certain specified conditions, including, among other things: (a) the expiration or termination of the applicable waiting period under the Hart-Scott-Rodino Act, (b) the listing of the Merger Consideration on the NYSE American, and (c) other customary conditions for a transaction such as the Merger, such as the absence of any legal restraint prohibiting the consummation of the Merger and there not having occurred with respect to the Company or Tenax’s business a material adverse event, subject to certain customary exceptions.
Previous wording
For a more complete description of the Merger Agreement, transactions to be consummated, actions to be taken and agreements entered into or to be entered in connection therewith, reference is made to the Current Report on Form 8-K filed February 17, 2026 and the full text of the Merger Agreement and the documents that are exhibits.
Current wording
For a more complete description of the A & R Merger Agreement as amended by the Amendment, transactions to be consummated, actions to be taken and agreements entered into or to be entered into in connection therewith, reference is made to the Current Reports on Form 8-K filed July 9, 2026, and August 3, 2026 and the full text of the A & R Merger Agreement, the Amendment and the documents that are exhibits thereto.
Previous wording
On February 16, 2026, we and Transitory Air Sub LLC, our wholly owned subsidiary (“Merger Sub”), entered into an Agreement and Plan of Merger (the “Merger Agreement”) with Tenax Aerospace Acquisition, LLC, a Delaware limited liability company (“Tenax”). Upon consummation of the merger contemplated by the Merger Agreement (the “Merger”), Tenax will become a wholly owned subsidiary of AIR. Tenax is a leading provider of special mission aviation solutions that combine aircraft sourcing, financing and modification with aviation services including pilots, maintenance and other types of program support. Additionally, they have long standing relationships with key government customers.
Current wording
Tenax is a leading provider of special mission aviation solutions that combine aircraft sourcing, financing and modification with aviation services including pilots, maintenance and other types of program support. Additionally, Tenax has a long-standing relationship with key government customers.
Previous wording
***Net Sales:***Net sales for the three months ended March 31, 2026 were $11,606,000, a decrease of $529,000, or 4.4%, compared with $12,135,000 that we achieved in the three months ended March 31, 2025. The period-over-period decrease in net sales was primarily due to overall changes in the mix of products requested by customers, which are discussed further below.
Current wording
*Net Sales:*Net sales for the three months ended June 30, 2026 were $11,995,000, a decrease of $664,000, or 5.2%, compared with $12,659,000 that we achieved in the three months ended June 30, 2025. The period-over-period decrease in net sales was primarily due to overall changes in the mix of products delivered in response to customer orders.
Previous wording
***Gross Profit:***Gross profit for the three months ended March 31, 2026, was $2,602,000 as compared to $2,034,000 for the three months ended March 31, 2025. Our gross profit percentage for the three months ended March 31, 2026 increased to 22.4% from the 16.8% for the three months ended March 31, 2025. The increase in margin can be attributable to changes in the sales across our major platforms, shifts in product mix, and overall operating efficiencies. During the second half of 2025, we implemented several cost reductions that benefited our gross profit during the three months ended March 31, 2026 that were not in place during the three months ended March 31, 2025.
Current wording
*Gross Profit:*Gross profit for the three months ended June 30, 2026, was $2,483,000 as compared to $2,028,000 for the three months ended June 30, 2025. Our gross profit percentage for the three months ended June 30, 2026 increased to 20.7% from 16.0% for the three months ended June 30, 2025. The increase in margin was attributed to changes in the sales across our major platforms, shifts in product mix, and overall operating efficiencies. During the second half of 2025, we implemented several cost reductions that benefited our gross profit during the three months ended June 30, 2026 that were not in place during the three months ended June 30, 2025.
Previous wording
Operating Expenses: Operating expenses were $3,167,000, for the three months ended March 31, 2026, an increase of $387,000, from $2,780,000 for the three months ended March 31, 2025. As a percentage of consolidated net sales, operating expenses increased to 27.3%, compared to the 22.9% achieved during the three months ended March 31, 2025. The dollar increase was primarily driven by increases in stock-based compensation costs and professional fees as well as costs associated with the continued improvement of our information technology system and hardening our cyber-security defenses. We continue to look for ways to reduce our costs and improve our operating performance and financial results.
Current wording
Operating Expenses: Operating expenses were $2,849,000, for the three months ended June 30, 2026, an increase of $829,000, from $2,020,000 for the three months ended June 30, 2025. As a percentage of consolidated net sales, operating expenses increased to 23.8%, compared to the 16.0% achieved during the three months ended June 30, 2025. The dollar increase was primarily driven by professional expenses associated with our pending merger, as well as costs associated with the continued improvement of our information technology system and hardening our cyber-security defenses, offset by decreases in stock-based compensation costs. The professional expenses related to the merger were approximately $1,195,000. We continue to look for ways to reduce our costs and improve our operating performance and financial results.
Previous wording
***Interest Expense:***Interest expense (which includes amortization of deferred financing costs) was $494,000 during the three months ended March 31, 2026, an increase of $50,000 or 11.2% from $444,000 during the three months ended March 31, 2025. The increase is primarily attributable to the higher loan balances under our Current Credit Facility. The average interest rate on outstanding debt pursuant to our Current Credit Facility which decreased to 6.10% in 2026 as compared to 6.85% in 2025.
Current wording
*Interest Expense:*Interest expense was $500,000 during the three months ended June 30, 2026, an increase of $54,000 or 12.1% from $446,000 during the three months ended June 30, 2025. The increase is primarily attributable to higher borrowing levels during a portion of the period partially offset by a decrease in the average interest rate on outstanding debt pursuant to our Current Credit Facility which decreased to 6.10% in 2026 as compared to 6.85% in 2025.
Previous wording
Net Loss: Net loss for the three months ended March 31, 2026 was $1,020,000, compared to a net loss of $988,000 for the three months ended March 31, 2025, for the reasons discussed above.
Current wording
Net Loss: Net loss for the three months ended June 30, 2026 was $846,000, compared to a net loss of $422,000 for the three months ended June 30, 2025, for the reasons discussed above.
Previous wording
Under the terms of the Current Credit Facility, as amended, we are required to meet a prescribed Fixed Charge Coverage Ratio (“FCCR”) (as defined) that is determined at the end of each fiscal quarter. This ratio is a financial metric that we use to measure our ability to cover fixed charges such as interest and lease expenses divided by EBITDA (as defined in the Current Credit Facility) which represents net income (loss) before interest, taxes, depreciation and amortization. As of March 31, 2026, the Company is required to meet a FCCR of 1.10x. As of March 31, 2026, we were not in compliance with this ratio having only attained a ratio of 0.93x. We are in compliance with all other required business and financial covenants.
Current wording
Under the terms of the Current Credit Facility, as amended, we are required to meet a prescribed Fixed Charge Coverage Ratio (as defined) that is determined at the end of each fiscal quarter on a rolling twelve-month basis. This ratio is a financial metric that we use to measure our ability to cover fixed charges such as interest and lease expenses divided by EBITDA (as defined in the Current Credit Facility) which represents net income (loss) before interest, taxes, depreciation and amortization. As of June 30, 2026, the Company is required to meet a Fixed Charge Coverage Ratio on a rolling twelve-month basis of 1.10x. As of June 30, 2026, we were in compliance with this ratio having attained a ratio of 1.36x. Additionally, we are in compliance with all other required business and financial covenants in the Current Credit Facility.
Previous wording
The Current Credit Facility and Related Party Subordinated are classified as current liabilities on the condensed consolidated balance sheet as of March 31, 2026. As a result of the due dates of this debt, there is substantial doubt about our ability to continue as a going concern for the twelve months following the date of filing of these consolidated financial statements. In addition, we are in default under our Current Credit Facility due to our failure to meet the FCCR required for the period ended March 31, 2026. Webster Bank has advised us that it will not renew our Current Credit Facility. In addition to discussions with our lenders, as discussed in our Current Report on Form 8-K filed February 17, 2026, we entered into a Merger Agreement with Tenax.
Current wording
The Current Credit Facility and Related Party Notes are due on September 30 and October 1, 2026, respectively and are classified as current liabilities on the condensed consolidated balance sheet as of June 30, 2026. As a result of the due dates of this debt, there is substantial doubt about our ability to continue as a going concern for the twelve months following the date of filing of these consolidated financial statements. Moreover, Webster Bank has advised us that it does not want to renew our Current Credit Facility. In addition to discussions with our lenders, as discussed in our Current Report on Form 8-K filed on February 17, 2026, and Registration Statement on Form S-4 filed on July 22, 2026, we are seeking to merge with Tenax pursuant to the terms of the A&R Merger Agreement, as amended by the Amendment. It is likely that we will not complete the Merger with Tenax prior to September 30, 2026. However, we are currently engaged in discussions with Webster Bank as well as the holders of the Related Party Notes as to the terms and conditions on which they will extend the maturity dates of their debt to the Outside Date of November 30, 2026, as defined in the Amendment to the A&R Merger Agreement.
Previous wording
The Current Credit Facility expires on September 30, 2026. In addition, we are required to maintain a collection account with our lender into which substantially all cash receipts are remitted. As we are in to default under the Current Credit Facility, our lender could choose to increase the rate of interest or refuse to make loans under the revolving portion of the Current Credit Facility and keep the funds remitted to the collection account. If the lender were to raise the rate of interest, it would adversely impact our operating results. If the lender were to cease making new loans under the revolving facility, we would lack the funds to continue operations. The Current Credit Facility expiration date and the rights granted to the lender, combined with the reasonable possibility that we might fail to meet covenants in the future, raise substantial doubt about our ability to continue as a going concern for the one year commencing as of the date of filing this report. To date, the lender has chosen not to exercise any of its remedies, though we have agreed to place $3,930,000 of ATM proceeds in an interest bearing account to serve as additional security for the Company’s obligations under the Current Credit Facility.
Current wording
Pursuant to the Current Credit Facility we are required to maintain a collection account with our lender into which substantially all cash receipts are remitted. Should our lender choose to increase the rate of interest or refuse to make loans under the revolving portion of the Current Credit Facility and keep the funds remitted to the collection account, it would adversely impact our operating results. If the lender were to cease making new loans under the revolving facility, we would lack the funds to continue operations. The Current Credit Facility expiration date and the rights granted to the lender, combined with the reasonable possibility that we might fail to meet covenants in the future, raise substantial doubt about our ability to continue as a going concern for the one year commencing as of the date of filing this report. To date, the lender has chosen not to exercise any of its remedies, though we have agreed to place $3,930,000 of ATM proceeds in an interest bearing account with the lender to serve as additional security for our obligations under the Current Credit Facility and agreed to pay $150,000 for its agreement to extend the maturity date to September 30, 2026. It is likely that the lender under our Current Credit Facility and the holders of our Related Party Notes will require additional fees for their respective agreement to extend the maturity date of the Current Credit Facility and the Related Party Notes beyond September 30, 2026.
Previous wording
To support current operations and strategic initiatives, beginning in December 2024 we raised capital through public market sales of our common stock and believe we can continue to access equity markets in future periods, though there is no assurance as to our ability to do so or as to the price and terms under which we could issue equity securities. During the year ended December 31, 2025, the Company sold 1,213,593 shares of common stock in the public market and generated gross proceeds of $4,869,000, of which approximately $3,930,000 is restricted for the benefit of the Current Credit Facility lender. Since initiating the sales in December 2024, we have sold a total of 1,330,444 shares for gross proceeds of $5,375,000. In light of ongoing negotiations with our lenders and in accordance with the Merger Agreement with Tenax, we have temporarily paused all equity raising activity.
Current wording
To support current operations and strategic initiatives, beginning in December 2024 we raised capital through public market sales of our common stock and believe we can continue to access equity markets in future periods, though there is no assurance as to our ability to do so or as to the price and terms under which we could issue equity securities. During the year ended December 31, 2025, we sold 1,213,593 shares of common stock in the public market and generated gross proceeds of $4,869,000, of which approximately $3,930,000 is restricted for the benefit of the Current Credit Facility lender. Since initiating the sales in December 2024, we have sold a total of 1,330,444 shares for gross proceeds of $5,375,000. In light of ongoing negotiations with our lenders and in accordance with the A & R Merger Agreement with Tenax, we have temporarily paused all equity raising activity.
Previous wording
The following is a brief discussion of the recent amendments to the Current Credit Facility (all of which have been filed with the SEC):
Current wording
The following is a brief discussion of the recent amendments to the Current Credit Facility (all of which have been included as exhibits to reports filed with the SEC):
Previous wording
If we are unable to close the merger with Tenax contemplated by the Merger Agreement or obtain a new lender to replace the Current Credit Facility we may not be able meet our financial obligations. As of March 31, 2026, we have borrowing capacity of approximately $787,000 under the Revolving Loan.
Current wording
If we are unable to close the merger with Tenax contemplated by the A & R Merger Agreement or obtain a new lender to replace the Current Credit Facility we may not be able to meet our financial obligations. As of June 30, 2026, we have borrowing capacity of approximately $1,317,000 under the Revolving Loan.
Previous wording
Our material cash requirements are for debt service, funding working capital and capital expenditures. We have historically met these requirements with funds provided by a combination of cash generated from operating activities and cash generated from equity and debt financing transactions. Based on our current revenue visibility, strength of our backlog, and availability under our Current Credit Facility, we believe that we have sufficient liquidity to meet our day-to-day cash requirements for our operations. However, we must pay or refinance large portions of our indebtedness prior to September 30, 2026. Further, as a condition to refinancing our Current Credit Facility prior to September 30, 2026, a new lender may require that the holders of our Related Party Notes extend or otherwise modify the subordination agreements they have given in favor of the lender.
Current wording
Our material cash requirements are for debt service, funding working capital and capital expenditures. We have historically met these requirements with funds provided by a combination of cash generated from operating activities and cash generated from equity and debt financing transactions. Based on our current revenue visibility, strength of our backlog, and availability under our Current Credit Facility, we believe that we have sufficient liquidity to meet our day-to-day cash requirements for our operations. However, we must pay or refinance large portions of our indebtedness prior to September 30, 2026 and, even if the lender under our Current Credit Facility were to agree to additional extensions, the extensions are likely to be short term and require the payment of significant fees. Further, as a condition to any extension which might be agreed to by our current lender or a refinancing of our Current Credit Facility, our current lender or a new lender may require that the holders of our Related Party Notes extend or otherwise modify the subordination agreements they have given in favor of our current lender and the holders of the Related Party Notes may seek consideration for agreeing to do so.
Previous wording
If we do not close the contemplated Merger, it is unlikely we will be able to pay existing debt and will need to refinance our Current Credit Facility and Related Party Notes. We have engaged in discussions with Webster Bank and the holders of our Related Party Notes to explore potential extensions or refinancings of our obligations. Webster Bank has advised us that it will not extend our Current Credit Facility. Refinancing our indebtedness may require us to pay higher interest rates than we currently pay, agree to more restrictive business or financial covenants or involve the issuance of debt, equity and/or new securities convertible into or exercisable or exchangeable for our common stock. Any failure to refinance our existing debt or obtain additional working capital when required would have a material adverse effect on our business and financial condition.
Current wording
If we do not close the contemplated Merger, it is unlikely we will be able to pay existing debt and will need to refinance our Current Credit Facility and Related Party Notes. We have engaged in discussions with Webster Bank and the holders of our Related Party Notes to explore potential extensions or refinancings of our obligations. Webster Bank has advised us that it will not extend our Current Credit Facility indefinitely and required us to make significant payments in consideration of its agreement to extend the Current Credit Facility to September 30, 2026. Refinancing our indebtedness may require us to pay higher interest rates than we currently pay, agree to more restrictive business or financial covenants or involve the issuance of debt, equity and/or new securities convertible into or exercisable or exchangeable for our common stock to our lenders or to third parties to reduce the amount of our debt. Any failure to refinance our existing debt or obtain additional working capital when required would have a material adverse effect on our business and financial condition. Any issuances of our common stock, preferred stock, or securities such as warrants or notes that are convertible into, exercisable or exchangeable for, our capital stock, would have a dilutive effect on the voting and economic interest of our existing stockholders.
Previous wording
The following table summarizes our net cash flows from operating, investing and financing activities for the periods indicated (in thousands):
Current wording
The following table summarizes our net cash flow from operating, investing and financing activities for the periods indicated below (in thousands):
Previous wording
Cash (Used in) Provided by Operating Activities
Current wording
Cash Provided by Operating Activities
Previous wording
For the three months ended March 31, 2026, we used $1,298,000 in operations as compared to a cash flow provided of $1,525,000 for the three months ended March 31, 2025. The decrease was due primarily to increases in inventory and accounts receivable and a decrease in accounts payable partially offset by an increase in customer deposits.
Current wording
For the six months ended June 30, 2026, we generated $225,000 of cash flows from operations as compared to $1,870,000 for the six months ended June 30, 2025. The decrease was due primarily to the increase in our net loss, increases in inventory and decreases in accounts payable partially offset by an increase in customer deposits.
Previous wording
For the three months ended March 31, 2025, we generated $1,525,000 from operations which was mainly attributable to a decrease in accounts receivable and the collection of contract costs receivable.
Current wording
For the six months ended June 30, 2025, we generated $1,870,000 from operations which was mainly attributable to a decrease in accounts receivable and an increase in non-cash expenses partially offset by the net loss and an increase in inventory.
Previous wording
During our most recent quarter, we continued to make investments to enhance our competitiveness and market position. Cash used in investing activities of $425,000 and $1,217,000, during the three months ended March 31, 2026 and 2025, respectively, was for new property and equipment.
Current wording
During the first half of 2026, we continued to make investments to enhance our competitiveness and market position. Cash used in investing activities of $485,000 and $2,113,000, during the six months ended June 30, 2026 and 2025, respectively, was for new machinery and equipment.
Previous wording
For the three months ended March 31, 2026, cash provided by financing activities was $1,329,000. During this period, we increased borrowings under our Current Credit Facility by $1,403,000 (consisting of a net increase in Revolving Loan borrowings of $1,665,000 and a net decrease of $262,000 against the Term Loan). Additionally, we made payments of $59,000 pursuant to financing lease obligations, $13,000 on our Solar Credit Facility and $2,000 on a loan payable.
Current wording
For the six months ended June 30, 2026, cash provided by financing activities was $274,000. During this period, we increased borrowings under our Current Credit Facility by $541,000 (consisting of a net increase in Revolving Loan borrowings of $1,065,000 and a net decrease of $524,000 against the Term Loan). Additionally, we made payments of $118,000 pursuant to financing lease obligations, $14,000 on our Solar Credit Facility, $4,000 on a loan payable and $131,000 for taxes related to the net share settlement of equity awards.
Previous wording
A critical accounting estimate is one that is both important to the portrayal of a company’s financial condition and results of operations and requires management’s most difficult, subjective or complex judgements, often as a result of the need to make estimates about the effect of matters that are inherently uncertain.
Current wording
A critical accounting estimate is one that is both important to the portrayal of a company’s financial condition and results of operations and requires management’s most difficult, subjective or complex judgments, often as a result of the need to make estimates about the effect of matters that are inherently uncertain.
Rearranged current paragraphs (7)
Current report — wording carried from elsewhere
*Net Sales:*Net sales for the six months ended June 30, 2026 were $23,601,000, a decrease of $1,201,000, or 4.8%, compared with $24,802,000 that we achieved in the six months ended June 30, 2025. The period-over-period decrease in net sales was primarily due to overall changes in the mix of products delivered in response to customer orders.
Current report — wording carried from elsewhere
The composition of customers that exceeded 10% of our net sales for the six months ended June 30, 2026 and 2025 are shown below:
Current report — wording carried from elsewhere
The composition of our net sales by platform or program profiles for the six months ended June 30, 2026 and 2025 are shown below:
Current report — wording carried from elsewhere
*Gross Profit:*Gross profit for the six months ended June 30, 2026, was $5,085,000 as compared to $4,062,000 for the six months ended June 30, 2025. Our gross profit percentage for the six months ended June 30, 2026 increased to 21.5% from 16.4% for the six months ended June 30, 2025. The increase in margin was attributed to changes in the sales across our major platforms, shifts in product mix and overall operating efficiencies.
Current report — wording carried from elsewhere
Operating Expenses: Operating expenses were $6,016,000, for the six months ended June 30, 2026, an increase of $1,216,000, from $4,800,000 for the six months ended June 30, 2025. As a percentage of consolidated net sales, operating expenses increased to 25.5%, compared to 19.4% incurred during the six months ended June 30, 2025. The dollar increase was primarily driven by professional expenses associated with our pending merger and increases in stock compensation expense, and costs associated with the continued improvement of our information technology system and hardening our cyber-security defenses. The professional expenses related to the merger were approximately $1,195,000. We continue to look for ways to reduce our costs and improve our operating performance and financial results.
Current report — wording carried from elsewhere
*Interest Expense:*Interest expense was $994,000 during the six months ended June 30, 2026, an increase of $104,000 or 11.7% from $890,000 during the six months ended June 30, 2025. The increase is primarily attributable to higher borrowing levels during a portion of the period partially offset by a reduction in the average interest rate on outstanding debt pursuant to our Current Credit Facility which decreased to 6.10% in 2026 as compared to 6.85% in 2025.
Current report — wording carried from elsewhere
Net Loss: Net Loss for the six months ended June 30, 2026 was $1,866,000, compared to a net loss of $1,410,000 for the six months ended June 30, 2025, for the reasons discussed above.