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Formation and Basis of Presentation
12 Months Ended
Dec. 31, 2020
Formation and Basis of Presentation [Abstract]  
FORMATION AND BASIS OF PRESENTATION

Note 1. FORMATION AND BASIS OF PRESENTATION

 

Organization

 

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.

 

Closing EPC and ECC

 

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.

 

Impact of Covid-19

 

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.

 

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.

 

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.

 

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.

 

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.

 

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.

 

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.

 

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.

 

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.

 

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.

 

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.

 

Subsequent Events

 

Management has evaluated subsequent events through the date of this filing.