AIRI's Mounting Losses, Debt Raise Going Concern Doubts Amid Sales Dip

TL;DR

**AIRI is bleeding cash and drowning in debt, making it a high-risk bet despite a decent backlog; steer clear until they sort out their financing.**

AI Summary

AIR INDUSTRIES GROUP (AIRI) reported a net loss of $1,454,000 for the nine months ended September 30, 2025, an increase from the $812,000 net loss in the prior year period. Net sales decreased to $35,111,000 for the nine months ended September 30, 2025, down from $40,188,000 in the same period of 2024, representing a 12.6% decline. Gross profit also saw a slight decrease to $6,357,000 from $6,491,000. Operating expenses rose to $6,779,000 from $5,931,000, leading to an operating loss of $422,000 compared to an operating income of $560,000 in the prior year. The company faces substantial doubt about its ability to continue as a going concern due to $26,827,000 in current debt obligations maturing by June 30, 2026, and defaults on certain credit facility covenants, including a Fixed Coverage Charge ratio of 0.76x against a required 1.05x as of June 30, 2025. Despite these challenges, AIRI has $269.0 million in total unfilled contract values, including a $131.8 million backlog, supporting a positive long-term outlook, though revenue acceleration is not expected until early 2026 due to extended lead times.

Why It Matters

AIRI's significant net losses and substantial current debt obligations, totaling $26,827,000, create considerable uncertainty for investors, raising red flags about the company's financial stability and future viability. The default on credit facility covenants, specifically the Fixed Coverage Charge ratio, could trigger adverse actions from lenders, impacting operations and potentially leading to a liquidity crisis. For employees, this situation signals potential instability and further cost-saving measures, including additional workforce reductions. Customers, particularly large aerospace and defense contractors like RTX and Lockheed, might face supply chain risks if AIRI's financial health deteriorates, potentially affecting critical military and commercial aviation programs. In a competitive market, these financial woes could weaken AIRI's position against more stable rivals, making it harder to secure new contracts despite its $269.0 million in unfilled orders.

Risk Assessment

Risk Level: high — The company explicitly states "substantial doubt about the Company's ability to continue as a going concern" due to $26,827,000 in current debt obligations maturing by June 30, 2026. Furthermore, AIRI is in default of a required minimum Fixed Coverage Charge ratio of 1.05x, having only attained 0.76x as of June 30, 2025, and exceeded its fixed asset acquisition limit of $2,500,000.

Analyst Insight

Investors should exercise extreme caution and consider divesting, or at least avoiding new positions, given the explicit going concern warning and covenant defaults. Monitor ongoing refinancing discussions closely, but do not invest based on potential future agreements; wait for concrete evidence of a stable capital structure and improved profitability before reconsidering.

Financial Highlights

debt To Equity

2.07

revenue

$35,111,000

operating Margin

-1.2%

total Assets

$57,951,000

total Debt

$23,774,000

net Income

-$1,454,000

eps

N/A

gross Margin

18.1%

cash Position

$126,000

revenue Growth

-12.6%

Key Numbers

• $1,454,000 — Net Loss (for the nine months ended September 30, 2025, increased from $812,000 in 2024)
• $35,111,000 — Net Sales (for the nine months ended September 30, 2025, down 12.6% from $40,188,000 in 2024)
• $26,827,000 — Current Debt Obligations (approximates debt under Current Credit Facility and Related Party Subordinated Notes, maturing by June 30, 2026)
• 0.76x — Fixed Coverage Charge Ratio (FCCR) (as of June 30, 2025, below the required 1.05x, indicating a covenant default)
• $269.0 million — Total Unfilled Contract Values (as of September 30, 2025, including $131.8 million in backlog)
• $4,869,000 — Gross Proceeds from ATM Offering (generated during the nine months ended September 30, 2025)
• $3,930,000 — Restricted Cash (for the benefit of the Current Credit Facility lender as of September 30, 2025)
• $5,616,000 — Increase in Inventory (for the nine months ended September 30, 2025, indicating potential working capital strain)
• $3,018,000 — Purchase of Property and Equipment (for the nine months ended September 30, 2025, exceeding the $2,500,000 covenant limit)
• 4,775,777 — Common Stock Shares Outstanding (as of November 12, 2025)

Key Players & Entities

• AIR INDUSTRIES GROUP (company) — registrant
• RTX (company) — customer accounting for 38.2% of net sales
• Lockheed (company) — customer accounting for 30.2% of net sales
• Northrop (company) — customer accounting for 3.2% of net sales
• U.S. Government (regulator) — ultimate end-user for a large percentage of revenues
• Nevada (regulator) — state of incorporation
• SEC (regulator) — Securities and Exchange Commission
• 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 Uncertainty [high — financial]: The company faces substantial doubt about its ability to continue as a going concern due to $26,827,000 in current debt obligations maturing by June 30, 2026. This is exacerbated by covenant defaults on its credit facility, specifically a Fixed Coverage Charge Ratio (FCCR) of 0.76x against a required 1.05x as of June 30, 2025.
• Covenant Violations [high — financial]: AIRI has defaulted on covenants within its credit facility, including the Fixed Coverage Charge Ratio (FCCR). The company also exceeded the $2,500,000 covenant limit for purchases of property and equipment, spending $3,018,000 in the nine months ended September 30, 2025.
• Increasing Debt Load [medium — financial]: Total current liabilities increased significantly to $37,561,000 as of September 30, 2025, up from $27,411,000 at December 31, 2024. This includes a new $4,871,000 in Subordinated Notes - Related Party, and an increase in Debt from $18,362,000 to $22,227,000.
• Inventory Build-up [medium — operational]: Inventory increased by $5,616,000 to $34,427,000 for the nine months ended September 30, 2025. This represents a significant portion of the total current assets and could indicate potential working capital strain or slower sales velocity.
• Declining Sales and Profitability [medium — financial]: Net sales decreased by 12.6% to $35,111,000 for the nine months ended September 30, 2025, compared to $40,188,000 in the prior year. This led to an operating loss of $422,000, a reversal from an operating income of $560,000 in the prior year period.
• Restricted Cash and ATM Offering [medium — financial]: The company reported $3,930,000 in restricted cash for the benefit of the Current Credit Facility lender as of September 30, 2025. During the nine months ended September 30, 2025, AIRI generated $4,869,000 in gross proceeds from an ATM offering.
• Extended Lead Times Impacting Revenue Acceleration [low — operational]: Despite a substantial $269.0 million in total unfilled contract values, including a $131.8 million backlog, revenue acceleration is not expected until early 2026 due to extended lead times. This suggests potential production or supply chain constraints.

Industry Context

The aerospace and defense industry is characterized by long production cycles, significant R&D investments, and stringent regulatory requirements. Companies often rely on large, multi-year contracts and government funding. Supply chain disruptions and extended lead times, as experienced by AIRI, are common challenges that can impact production schedules and revenue recognition.

Regulatory Implications

AIRI's financial distress and covenant defaults could trigger closer scrutiny from lenders and potentially regulatory bodies if it impacts its ability to fulfill government contracts. Compliance with financial covenants is critical to maintaining operational financing and avoiding further legal or financial repercussions.

What Investors Should Do

1. Monitor debt maturity and refinancing efforts
2. Assess the impact of covenant breaches
3. Evaluate the inventory build-up
4. Track revenue realization from backlog

Key Dates

• 2025-09-30: Nine months ended September 30, 2025 — Reported a net loss of $1,454,000 and net sales of $35,111,000, a 12.6% decrease from the prior year. Significant current debt obligations of $26,827,000 are due by June 30, 2026.
• 2025-06-30: Fixed Coverage Charge Ratio (FCCR) as of June 30, 2025 — The FCCR was 0.76x against a required 1.05x, indicating a covenant default and contributing to going concern doubts.
• 2026-06-30: Maturity of current debt obligations — Approximately $26,827,000 in debt obligations mature by this date, posing a significant liquidity challenge for the company.
• 2025-11-12: Common Stock Shares Outstanding — As of this date, there were 4,775,777 shares outstanding, reflecting recent equity issuances.

Glossary

Going Concern

An accounting assumption that a business will continue to operate for the foreseeable future. If substantial doubt exists, it must be disclosed. (AIRI faces substantial doubt about its ability to continue as a going concern due to significant debt obligations and covenant defaults.)

Fixed Coverage Charge Ratio (FCCR)

A financial covenant that measures a company's ability to cover its fixed charges (like interest and lease payments) with its earnings. (AIRI's FCCR of 0.76x is below the required 1.05x, indicating a default on its credit facility.)

ATM Offering

At-the-Market offering, where a company sells shares of its stock into the existing market at current market prices. (AIRI raised $4,869,000 in gross proceeds from an ATM offering during the nine months ended September 30, 2025, indicating efforts to bolster liquidity.)

Backlog

The total value of confirmed customer orders that have not yet been fulfilled. (AIRI has a backlog of $131.8 million, part of its $269.0 million in total unfilled contract values, providing some visibility into future revenue.)

Restricted Cash

Cash that a company cannot freely use because it has been pledged as collateral or is subject to other restrictions. (AIRI has $3,930,000 in restricted cash for the benefit of its credit facility lender, reducing available liquidity.)

Accumulated Deficit

The cumulative net losses of a company since its inception that have not been offset by profits. (AIRI has an accumulated deficit of $70,561,000 as of September 30, 2025, reflecting its history of net losses.)

Year-Over-Year Comparison

Compared to the prior year period, AIR INDUSTRIES GROUP (AIRI) experienced a significant downturn. Net sales for the nine months ended September 30, 2025, fell by 12.6% to $35,111,000 from $40,188,000 in 2024. This decline, coupled with rising operating expenses, resulted in a shift from operating income of $560,000 to an operating loss of $422,000. Consequently, the net loss widened to $1,454,000 from $812,000. New risks have emerged, notably the substantial debt obligations maturing by mid-2026 and the critical covenant breaches, which cast doubt on the company's ability to continue as a going concern.

Key Financial Figures

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

Filing Documents

• ea0264651-10q_airindus.htm (10-Q) — 696KB
• ea026465101ex31-1_airindus.htm (EX-31.1) — 10KB
• ea026465101ex31-2_airindus.htm (EX-31.2) — 10KB
• ea026465101ex32-1_airindus.htm (EX-32.1) — 4KB
• ea026465101ex32-2_airindus.htm (EX-32.2) — 4KB
• 0001213900-25-110811.txt ( ) — 5302KB
• airi-20250930.xsd (EX-101.SCH) — 42KB
• airi-20250930_cal.xml (EX-101.CAL) — 45KB
• airi-20250930_def.xml (EX-101.DEF) — 258KB
• airi-20250930_lab.xml (EX-101.LAB) — 469KB
• airi-20250930_pre.xml (EX-101.PRE) — 273KB
• ea0264651-10q_airindus_htm.xml (XML) — 598KB

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 23 Item 4.

Controls and Procedures

Controls and Procedures 31 PART II. OTHER INFORMATION 32 Item 1A.

Risk Factors

Risk Factors 32 Item 6. Exhibits 32

SIGNATURES

SIGNATURES 33 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 statements.

Forward-looking statements

Forward-looking statements are predictive in nature and can be identified by the fact that they do not relate strictly to historical or current facts 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 cause actual results to differ materially from those reflected in the forward-looking statements include, but are not limited to, those discussed under the heading "Risk Factors" in our Annual Report on Form 10-K for the year ended December 31, 2024, and elsewhere in this report and the risks discussed in our other filings with the Security and Exchange Commission ("SEC"). We do not intend to update or revise publicly and undertake no obligation to publicly update any forward-looking statement, whether as a result of new information, future events or otherwise, except as may be required under applicable securities laws. You are advised, however, to review any additional disclosures we make in our report

Financial statements

Item 1. Financial statements 2 Condensed Consolidated Financial Statements: Condensed Consolidated Balance Sheets as of September 30, 2025 (unaudited) and December 31, 2024 2 Condensed Consolidated Statements of Operations for the three and nine months ended September 30, 2025 and 2024 (unaudited) 3 Condensed Consolidated Statements of Changes in Stockholders' Equity for the three and nine months ended September 30, 2025 and 2024 (unaudited) 4 Condensed Consolidated Statements of Cash Flows for the nine months ended September 30, 2025 and 2024 (unaudited) 5 Notes to Condensed Consolidated Financial Statements (unaudited) 7 1

FINANCIAL STATEMENTS

ITEM 1. FINANCIAL STATEMENTS AIR INDUSTRIES GROUP Condensed Consolidated Balance Sheets September 30, 2025 December 31, 2024 (unaudited) ASSETS Current Assets Cash $ 126,000 $ 753,000 Restricted Cash 3,930,000 - Accounts Receivable, Net of Allowance for Credit Losses of $ 376,000 and $ 396,000 6,745,000 8,900,000 Inventory 34,427,000 28,811,000 Prepaid Expenses and Other Current Assets 509,000 371,000 Contract Costs Receivable - 296,000 Prepaid Taxes 76,000 56,000 Total Current Assets 45,813,000 39,187,000 Property and Equipment, Net 9,882,000 8,809,000 Finance Lease Right-Of-Use-Assets 966,000 1,113,000 Operating Lease Right-Of-Use-Assets 676,000 1,190,000 Deferred Financing Costs, Net, Deposits and Other Assets 614,000 712,000 TOTAL ASSETS $ 57,951,000 $ 51,011,000 LIABILITIES AND STOCKHOLDERS' EQUITY Current Liabilities Debt $ 22,227,000 $ 18,362,000 Subordinated Notes - Related Party 4,871,000 - Accounts Payable and Accrued Expenses 9,058,000 7,015,000 Operating Lease Liabilities 925,000 881,000 Deferred Gain on Sale 38,000 38,000 Customer Deposits 442,000 1,115,000 Total Current Liabilities 37,561,000 27,411,000 Long Term Liabilities Debt 1,547,000 1,759,000 Subordinated Notes - Related Party - 6,162,000 Operating Lease Liabilities - 702,000 Deferred Gain on Sale - 29,000 TOTAL LIABILITIES 39,108,000 36,063,000 Commitments and Contingencies (see Note 8) Stockholders' Equity Preferred Stock - par value $ .001 - Authorized 3,000,000 shares, 0 shares outstanding, at both September 30, 2025 and December 31, 2024. - - Common Stock - Par Value $ .001 - Authorized 20,000,000 shares, 4,771,954 and 3,474,970 shares issued and outstanding as of September 30, 2025 and December 31, 2024, respectively 5,000 3,000 Additional Paid-In Capital 89,399,000 84,052,000 Accumulated Deficit ( 70,561,000 ) ( 69,107,000 ) TOTAL STOCKHOLDERS' EQUIT

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