AIRI's Q2 Loss Widens, Going Concern Doubts Emerge Amid Revenue Dip

TL;DR

**AIRI is bleeding cash and in default, making it a high-risk bet despite a growing backlog.**

AI Summary

AIR INDUSTRIES GROUP (AIRI) reported a net loss of $1,410,000 for the six months ended June 30, 2025, a significant increase from the $408,000 net loss in the prior year period. Revenue decreased by 10.2% to $24,802,000 for the six months ended June 30, 2025, down from $27,633,000 in the same period of 2024. Gross profit also declined to $4,062,000 from $4,550,000 year-over-year. Operating expenses rose to $4,800,000 from $4,057,000, contributing to an operating loss of $738,000 compared to an operating income of $493,000 in 2024. The company is in default of its minimum Fixed Charge Coverage Ratio (FCCR) of 1.05x, achieving only 0.76x as of June 30, 2025, raising substantial doubt about its ability to continue as a going concern. Management plans to increase revenues and reduce costs, with a funded backlog of $128.5 million as of June 30, 2025, and anticipates sales increases in early 2026. The company also raised $1,243,000 from common stock sales during the six months ended June 30, 2025, and an additional $3,623,000 subsequently.

Why It Matters

AIRI's widening net loss and default on its Fixed Charge Coverage Ratio are critical red flags for investors, signaling significant financial distress and potential liquidity issues. The company's reliance on a few major aerospace and defense contractors like RTX and Lockheed Martin, which account for over 70% of net sales, exposes it to substantial concentration risk. If the lender of its Current Credit Facility were to exercise its rights due to the FCCR default, it could severely impact AIRI's operations and competitive standing in the specialized aerospace manufacturing sector. Employees face uncertainty regarding job security, while customers might be concerned about the company's long-term viability as a supplier.

Risk Assessment

Risk Level: high — The company explicitly states that its failure to meet the Fixed Charge Coverage Ratio of 1.05x (achieving only 0.76x) and the December 30, 2025 expiration of its Current Credit Facility raise "substantial doubt about the Company's ability to continue as a going concern." This is compounded by a net loss of $1,410,000 for the six months ended June 30, 2025, and a 10.2% decline in net sales.

Analyst Insight

Investors should exercise extreme caution and consider divesting, given the explicit 'going concern' warning and financial covenant breach. While the backlog is growing, the immediate liquidity and debt refinancing risks are paramount. Monitor negotiations with lenders and related party noteholders closely for any positive developments, but assume significant downside risk.

Financial Highlights

debt To Equity

2.30

revenue

$24,802,000

operating Margin

-2.97%

total Assets

$50,377,000

total Debt

$20,351,000

net Income

-$1,410,000

eps

N/A

gross Margin

16.38%

cash Position

$507,000

revenue Growth

-10.2%

Key Numbers

• $1,410,000 — Net Loss (for the six months ended June 30, 2025, increased from $408,000 in 2024)
• $24,802,000 — Net Sales (for the six months ended June 30, 2025, a 10.2% decrease from $27,633,000 in 2024)
• 0.76x — Fixed Charge Coverage Ratio (FCCR) (below the required 1.05x, indicating a covenant default)
• $128.5 million — Funded Backlog (as of June 30, 2025, indicating future revenue potential)
• $1,243,000 — Gross Proceeds from Common Stock Sales (during the six months ended June 30, 2025, through At The Market Offering)
• $3,623,000 — Additional Gross Proceeds from Common Stock Sales (subsequent to June 30, 2025, through At The Market Offering)
• $507,000 — Cash at End of Period (as of June 30, 2025, a decrease from $753,000 at December 31, 2024)
• $18,727,000 — Current Debt (as of June 30, 2025, increased from $18,362,000 at December 31, 2024)
• 4,771,954 — Common Stock Shares Outstanding (as of August 12, 2025)
• $70,517,000 — Accumulated Deficit (as of June 30, 2025, increased from $69,107,000 at December 31, 2024)

Key Players & Entities

• AIR INDUSTRIES GROUP (company) — registrant
• RTX (company) — major customer, 44.3% of Q2 2025 net sales
• Lockheed Martin (company) — major customer, 27.5% of Q2 2025 net sales
• Northrop (company) — major customer, 8.0% of Q2 2025 net sales
• SEC (regulator) — Securities and Exchange Commission
• Nevada (company) — state of incorporation
• Air Industries Machining Corp. (company) — wholly-owned subsidiary
• Nassau Tool Works, Inc. (company) — wholly-owned subsidiary
• Sterling Engineering Corporation (company) — wholly-owned subsidiary

FAQ

Risk Factors

• Going Concern and Covenant Default [high — financial]: AIRI is in default of its minimum Fixed Charge Coverage Ratio (FCCR) covenant, achieving only 0.76x as of June 30, 2025, against a required 1.05x. This default, coupled with a net loss of $1,410,000 for the six months ended June 30, 2025, and a declining revenue of $24,802,000, raises substantial doubt about the company's ability to continue as a going concern.
• Declining Revenue and Profitability [high — financial]: Net sales decreased by 10.2% to $24,802,000 for the six months ended June 30, 2025, compared to $27,633,000 in the prior year. Gross profit also fell to $4,062,000 from $4,550,000, and operating expenses increased to $4,800,000, resulting in an operating loss of $738,000.
• Increased Operating Expenses [medium — financial]: Operating expenses rose to $4,800,000 for the six months ended June 30, 2025, from $4,057,000 in the same period of 2024. This increase, despite lower revenues, significantly contributed to the shift from operating income to an operating loss.
• Deteriorating Cash Position [medium — financial]: The company's cash balance decreased to $507,000 as of June 30, 2025, from $753,000 at December 31, 2024. This reduction in liquidity, alongside increased current liabilities, may strain the company's ability to meet short-term obligations.
• Growing Accumulated Deficit [medium — financial]: The accumulated deficit increased to $70,517,000 as of June 30, 2025, from $69,107,000 at December 31, 2024. This trend indicates ongoing unprofitability and erodes stockholders' equity.
• Increased Current Debt [medium — financial]: Current debt increased to $18,727,000 as of June 30, 2025, from $18,362,000 at December 31, 2024. This rise in short-term obligations, combined with the FCCR default, heightens financial risk.

Industry Context

The aerospace and defense industry is characterized by long production cycles, significant R&D investments, and stringent regulatory requirements. Companies like AIRI often rely on large, long-term contracts. Current industry trends include increased demand for defense spending and a focus on supply chain resilience, but also face challenges from economic uncertainty and geopolitical risks.

Regulatory Implications

AIRI's default on its FCCR covenant could trigger cross-default clauses in other debt agreements, leading to potential acceleration of payments. The company's going concern status may also attract increased scrutiny from regulatory bodies and investors.

What Investors Should Do

1. Monitor management's execution of cost reduction and revenue enhancement strategies to address the FCCR default and improve profitability.
2. Evaluate the conversion rate and profitability of the $128.5 million funded backlog, as this is critical for future revenue generation.
3. Assess the impact of ongoing ATM offerings on share dilution and the company's long-term capital structure.
4. Scrutinize the company's ability to secure additional financing or renegotiate debt covenants to mitigate going concern risks.

Key Dates

• 2025-06-30: End of Six-Month Period — Reporting period for the 10-Q, revealing a net loss of $1,410,000, revenue decline, and FCCR covenant default.
• 2025-08-12: Common Stock Shares Outstanding Date — Indicates 4,771,954 shares outstanding, relevant for per-share calculations and market capitalization.

Glossary

Fixed Charge Coverage Ratio (FCCR)

A financial ratio that measures a company's ability to meet its fixed financial obligations, such as interest, lease payments, and preferred dividends, from its operating income. (AIRI's FCCR of 0.76x is below the required 1.05x, indicating a breach of loan covenants and raising concerns about financial stability.)

Accumulated Deficit

The cumulative net losses of a company that have not been offset by net income or other gains. (AIRI's increasing accumulated deficit to $70,517,000 highlights persistent unprofitability and a reduction in retained earnings.)

Funded Backlog

The value of orders that have been confirmed and are expected to generate revenue in the future. (AIRI's funded backlog of $128.5 million provides some visibility into future revenue, but its conversion to actual sales and profitability remains to be seen.)

At The Market Offering (ATM)

A type of equity offering where a company sells shares of its stock on the open market over a period of time at prevailing market prices. (AIRI raised $1,243,000 and an additional $3,623,000 through ATM offerings, indicating a need for capital and potential dilution for existing shareholders.)

Year-Over-Year Comparison

Compared to the prior year period, AIR INDUSTRIES GROUP (AIRI) has experienced a significant downturn. Net sales for the six months ended June 30, 2025, decreased by 10.2% to $24,802,000. Gross profit declined, while operating expenses rose, leading to an operating loss and a net loss of $1,410,000, a substantial increase from the $408,000 net loss in the prior year. Most critically, the company is now in default of its Fixed Charge Coverage Ratio covenant, a new and severe risk not present in the prior period.

Key Financial Figures

• $0 — une 30, 2025 and December 31, 2024 were $0 and $ 296,000 , respectively. Earning

Filing Documents

• ea0252543-10q_airindus.htm (10-Q) — 763KB
• ea025254301ex31-1_airindus.htm (EX-31.1) — 16KB
• ea025254301ex31-2_airindus.htm (EX-31.2) — 17KB
• ea025254301ex32-1_airindus.htm (EX-32.1) — 6KB
• ea025254301ex32-2_airindus.htm (EX-32.2) — 6KB
• 0001213900-25-076418.txt ( ) — 5519KB
• airi-20250630.xsd (EX-101.SCH) — 43KB
• airi-20250630_cal.xml (EX-101.CAL) — 46KB
• airi-20250630_def.xml (EX-101.DEF) — 258KB
• airi-20250630_lab.xml (EX-101.LAB) — 470KB
• airi-20250630_pre.xml (EX-101.PRE) — 273KB
• ea0252543-10q_airindus_htm.xml (XML) — 703KB

Financial Statements

Financial Statements 2 Item 2.

Management's Discussion and Analysis of Financial Condition and Results of Operations

Management's Discussion and Analysis of Financial Condition and Results of Operations 21 Item 4.

Controls and Procedures

Controls and Procedures 29 PART II. OTHER INFORMATION 30 Item 1A.

Risk Factors

Risk Factors 30 Item 6. Exhibits 30

SIGNATURES

SIGNATURES 31 i SPECIAL NOTE REGARDING FORWARD-LOOKING STATEMENTS This Quarterly Report on Form 10-Q filed by Air Industries Group (herein referred to as "Air Industries", the "company", "we", "us", or "our") contains "forward-looking statements" within the meaning of Section 27A of the Securities Act of 1933, as amended, or Securities Act, and Section 21E of the Securities Exchange Act of 1934, or Exchange Act. Certain of the matters discussed herein concerning, among other items, our operations, cash flows, financial position and economic performance including, in particular, future sales, product demand, competition and the effect of economic conditions, include forward-looking Forward-looking and generally include words such as "expects," "anticipates," "intends," "plans," "believes," "estimates" and similar expressions. Although we believe that these statements are based upon reasonable assumptions, including projections of orders, sales, operating margins, earnings, cash flow, research and development costs, working capital, capital expenditures, distribution channels, profitability, new products, adequacy of funds from operations, and general economic conditions, these statements and other projections contained herein expressing opinions about future outcomes and non-historical information, are subject to uncertainties and, therefore, there is no assurance that the outcomes expressed in these statements will be achieved. Investors are cautioned that forward-looking statements are not guarantees of future performance and actual results or developments may differ materially from the expectations expressed in forward-looking statements contained herein. Given these uncertainties, you should not place any reliance on these forward-looking statements which speak only as of the date hereof. Factors that could c

Financial statements

Item 1. Financial statements 2 Condensed Consolidated Financial Statements: Condensed Consolidated Balance Sheets as of June 30, 2025 (unaudited) and December 31, 2024 2 Condensed Consolidated Statements of Operations for the three and six months ended June 30, 2025 and 2024 (unaudited) 3 Condensed Consolidated Statements of Changes in Stockholders' Equity for the three and six months ended June 30, 2025 and 2024 (unaudited) 4 Condensed Consolidated Statements of Cash Flows for the six months ended June 30, 2025 and 2024 (unaudited) 5 Notes to Condensed Consolidated Financial Statements 7 1 Part I. Financial Information Item 1. Financial Statements AIR INDUSTRIES GROUP Condensed Consolidated Balance Sheets June 30, December 31, 2025 2024 (unaudited) ASSETS Current Assets Cash $ 507,000 $ 753,000 Accounts Receivable, Net of Allowance for Credit Losses of $ 368,000 and $ 396,000 6,975,000 8,900,000 Inventory 30,187,000 28,811,000 Prepaid Expenses and Other Current Assets 388,000 371,000 Contract Costs Receivable - 296,000 Prepaid Taxes 76,000 56,000 Total Current Assets 38,133,000 39,187,000 Property and Equipment, Net 9,735,000 8,809,000 Finance Lease Right-Of-Use-Assets 1,015,000 1,113,000 Operating Lease Right-Of-Use-Assets 833,000 1,190,000 Deferred Financing Costs, Net, Deposits and Other Assets 661,000 712,000 TOTAL ASSETS $ 50,377,000 $ 51,011,000 LIABILITIES AND STOCKHOLDERS' EQUITY Current Liabilities Debt $ 18,727,000 $ 18,362,000 Accounts Payable and Accrued Expenses 8,264,000 7,015,000 Operating Lease Liabilities 896,000 881,000 Deferred Gain on Sale 38,000 38,000 Customer Deposits 442,000 1,115,000 Total Current Liabilities 28,367,000 27,411,000 Long Term Liabilities Debt 1,624,000 1,759,000 Subordinated Notes - Related Party 4,871,000 6,162,000 Operating Lease Liabilities 239,000 702,000 Deferred Gain on Sale 10,000

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View this 10-Q filing on SEC EDGAR