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Customer was less than 10% of Gross Accounts Receivable at June 30, 2020.
Customer was less than 10% of total net sales for the three months ended June 30, 2020.
<p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0.3in 0pt 0; text-align: justify"><b>Recently Issued Accounting
Pronouncements</b></p>
<p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0.3in 0pt 0; text-align: justify"> </p>
<p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 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 condensed consolidated financial statements and related
disclosures. </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 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
condensed consolidated financial statements.</p>
<p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0.3in 0pt 0; text-align: justify"><b>Goodwill</b></p>
<p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0.3in 0pt 0; text-align: justify"> </p>
<p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 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 both June 30,
2020 and December 31, 2019 relates to the acquisition of NTW.</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">Goodwill is not amortized, but is tested
at least annually for impairment, or if circumstances occur that more likely than not reduce the fair value of the reporting unit
below its carrying amount.</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 COVID-19 pandemic was a triggering event for testing whether
goodwill has been impaired. The Company performed a qualitative assessment and determined it is more likely than not that the fair
value exceeds the carrying value of $163,000 as of June 30, 2020. The Company will continue to monitor the impacts of the COVID-19
pandemic in future quarters. Changes in the Company's forecasts or further decreases in the value of its common stock could
cause book values to exceed fair values which may result in goodwill impairment charges in future periods.</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 determined that there has
been no impairment of goodwill at June 30, 2020 and December 31, 2019.</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">Three and Six Months Ended</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">June 30,<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">June 30,<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">(Unaudited)</td><td> </td><td> </td>
<td colspan="2" style="text-align: center">(Unaudited)</td><td> </td></tr>
<tr style="vertical-align: bottom; background-color: rgb(204,238,255)">
<td style="text-align: left; width: 76%">Stock Options</td><td style="width: 1%"> </td>
<td style="text-align: left; width: 1%"> </td><td style="text-align: right; width: 9%">216,000</td><td style="text-align: left; width: 1%"> </td><td style="width: 1%"> </td>
<td style="text-align: left; width: 1%"> </td><td style="text-align: right; width: 9%">861,000</td><td style="text-align: left; width: 1%"> </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">1,423,000</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">2,183,000</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">1,639,000</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">3,044,000</td><td style="padding-bottom: 4pt; text-align: left"> </td></tr>
</table>
<p style="margin-top: 0; margin-bottom: 0"> </p>
<table cellspacing="0" cellpadding="0" style="font: 11pt Calibri, Helvetica, Sans-Serif; width: 100%; border-collapse: collapse">
<tr style="vertical-align: bottom">
<td> </td>
<td> </td>
<td colspan="6" style="border-bottom: black 1.5pt solid; text-align: center"><font style="font: 10pt Times New Roman, Times, Serif"><b>Three and Six Months Ended</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>June 30,<br />
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>June 30,<br />
2019</b></font></td>
<td> </td></tr>
<tr style="vertical-align: bottom">
<td> </td>
<td> </td>
<td colspan="2" style="text-align: center"><font style="font: 10pt Times New Roman, Times, Serif">(Unaudited)</font></td>
<td> </td>
<td> </td>
<td colspan="2" style="text-align: center"><font style="font: 10pt Times New Roman, Times, Serif">(Unaudited)</font></td>
<td> </td></tr>
<tr style="vertical-align: bottom; background-color: #CCEEFF">
<td><font style="font: 10pt Times New Roman, Times, Serif">Stock Options</font></td>
<td> </td>
<td> </td>
<td style="text-align: right"><font style="font: 10pt Times New Roman, Times, Serif">1,696,000</font></td>
<td> </td>
<td> </td>
<td> </td>
<td style="text-align: right"><font style="font: 10pt Times New Roman, Times, Serif">515,000</font></td>
<td> </td></tr>
<tr style="vertical-align: bottom; background-color: white">
<td><font style="font: 10pt Times New Roman, Times, Serif">Warrants</font></td>
<td> </td>
<td> </td>
<td style="text-align: right"><font style="font: 10pt Times New Roman, Times, Serif">760,000</font></td>
<td> </td>
<td> </td>
<td> </td>
<td style="text-align: right"><font style="font: 10pt Times New Roman, Times, Serif">-</font></td>
<td> </td></tr>
<tr style="vertical-align: bottom; background-color: #CCEEFF">
<td><font style="font: 10pt Times New Roman, Times, Serif">Convertible notes payable</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">5,045,000</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">5,934,000</font></td>
<td> </td></tr>
<tr style="vertical-align: bottom; background-color: white">
<td> </td>
<td> </td>
<td style="border-bottom: black 4.5pt double"> </td>
<td style="border-bottom: black 4.5pt double; text-align: right"><font style="font: 10pt Times New Roman, Times, Serif">7,501,000</font></td>
<td> </td>
<td> </td>
<td style="border-bottom: black 4.5pt double"> </td>
<td style="border-bottom: black 4.5pt double; text-align: right"><font style="font: 10pt Times New Roman, Times, Serif">6,449,000</font></td>
<td> </td></tr>
</table>
1000000
2000000
619316
12251000
11021000
177000
290000
530000
425000
1650000
300000
6495000
33139000
33643000
300000
1650000
12466000
6495000
11336000
148000
290000
530000
428000
25561000
26890000
13368000
27246000
21941000
19372000
24119000
3127000
2569000
27246000
21941000
8494000
7308000
11701000
1186000
1667000
8494000
13368000
2191000
4465000
2795000
2849000
4308000
157000
-54000
4465000
2795000
614000
681000
2095000
-67000
96000
614000
2191000
-735000
-1730000
-1940000
1160000
2794000
-281000
-343000
-4243000
-2757000
-1730000
-1940000
-1584000
-10000
1351000
-217000
-111000
-1357000
-1975000
-1584000
-735000
<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">For the twelve months ending</td><td style="padding-bottom: 1.5pt; font-weight: bold"> </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%; text-indent: -0.1in; padding-left: 0.1in">December 31, 2020 (remainder of the year)</td><td style="width: 1%"> </td>
<td style="width: 1%; text-align: left">$</td><td style="width: 9%; text-align: right">271,000</td><td style="width: 1%; text-align: left"> </td></tr>
<tr style="vertical-align: bottom; background-color: White">
<td style="text-indent: -0.1in; padding-left: 0.1in">December 31, 2021</td><td> </td>
<td style="text-align: left"> </td><td style="text-align: right">543,000</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; text-indent: -0.1in; padding-left: 0.1in">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">2,760,000</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; text-indent: -0.1in; padding-left: 0.1in">SNB Term Loan payable</td><td> </td>
<td style="text-align: left"> </td><td style="text-align: right">3,574,000</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; text-indent: -0.1in; padding-left: 0.1in">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">(58,000</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; text-indent: -0.1in; padding-left: 0.1in">Total SNB Term loan payable, net of debt issuance costs</td><td> </td>
<td style="text-align: left"> </td><td style="text-align: right">3,516,000</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; text-indent: -0.1in; padding-left: 0.1in">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">(543,000</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; text-indent: -0.1in; padding-left: 0.1in">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">$</td><td style="border-bottom: Black 4pt double; text-align: right">2,973,000</td><td style="padding-bottom: 4pt; text-align: left"> </td></tr></table>
<p style="font: 10pt Times New Roman, Times, Serif; margin: 0; text-align: justify"><font style="font: 10pt Times New Roman, Times, Serif"></font></p>
<table cellpadding="0" cellspacing="0" style="font: 10pt Times New Roman, Times, Serif; border-collapse: collapse; width: 100%">
<tr style="vertical-align: bottom; background-color: rgb(204,238,255)">
<td style="font: 10pt Times New Roman, Times, Serif; width: 88%; text-align: left">Liabilities related to sale of future proceeds from disposition of subsidiaries - as of December 31, 2019</td><td style="font: 10pt Times New Roman, Times, Serif; width: 1%"> </td>
<td style="font: 10pt Times New Roman, Times, Serif; width: 1%; text-align: left">$</td><td style="font: 10pt Times New Roman, Times, Serif; width: 9%; text-align: right">603,000</td><td style="font: 10pt Times New Roman, Times, Serif; width: 1%; text-align: left"> </td></tr>
<tr style="vertical-align: bottom; background-color: White">
<td style="font: 10pt Times New Roman, Times, Serif; text-align: left">Non-Cash other income recognized</td><td style="font: 10pt Times New Roman, Times, Serif"> </td>
<td style="font: 10pt Times New Roman, Times, Serif; text-align: left"> </td><td style="font: 10pt Times New Roman, Times, Serif; text-align: right">(211,000</td><td style="font: 10pt Times New Roman, Times, Serif; text-align: left">)</td></tr>
<tr style="vertical-align: bottom; background-color: rgb(204,238,255)">
<td style="font: 10pt Times New Roman, Times, Serif; text-align: left; padding-bottom: 1.5pt">Non-Cash interest expense recognized</td><td style="font: 10pt Times New Roman, Times, Serif; padding-bottom: 1.5pt"> </td>
<td style="border-bottom: Black 1.5pt solid; font: 10pt Times New Roman, Times, Serif; text-align: left"> </td><td style="border-bottom: Black 1.5pt solid; font: 10pt Times New Roman, Times, Serif; text-align: right">64,000</td><td style="font: 10pt Times New Roman, Times, Serif; padding-bottom: 1.5pt; text-align: left"> </td></tr>
<tr style="vertical-align: bottom; background-color: White">
<td style="font: 10pt Times New Roman, Times, Serif; text-align: left">Liabilities related to sale of future proceeds from disposition of subsidiary - as of June 30, 2020</td><td style="font: 10pt Times New Roman, Times, Serif"> </td>
<td style="font: 10pt Times New Roman, Times, Serif; text-align: left"> </td><td style="font: 10pt Times New Roman, Times, Serif; text-align: right">456,000</td><td style="font: 10pt Times New Roman, Times, Serif; text-align: left"> </td></tr>
<tr style="vertical-align: bottom; background-color: rgb(204,238,255)">
<td style="font: 10pt Times New Roman, Times, Serif; text-align: left; padding-bottom: 1.5pt">Less: unamortized transaction costs</td><td style="font: 10pt Times New Roman, Times, Serif; padding-bottom: 1.5pt"> </td>
<td style="border-bottom: Black 1.5pt solid; font: 10pt Times New Roman, Times, Serif; text-align: left"> </td><td style="border-bottom: Black 1.5pt solid; font: 10pt Times New Roman, Times, Serif; text-align: right">(3,000</td><td style="font: 10pt Times New Roman, Times, Serif; padding-bottom: 1.5pt; text-align: left">)</td></tr>
<tr style="vertical-align: bottom; background-color: White">
<td style="font: 10pt Times New Roman, Times, Serif; text-align: left; padding-bottom: 4pt">Liability related to sale of future proceeds from disposition of subsidiary, net</td><td style="font: 10pt Times New Roman, Times, Serif; padding-bottom: 4pt"> </td>
<td style="border-bottom: Black 4pt double; font: 10pt Times New Roman, Times, Serif; text-align: left">$</td><td style="border-bottom: Black 4pt double; font: 10pt Times New Roman, Times, Serif; text-align: right">453,000</td><td style="font: 10pt Times New Roman, Times, Serif; padding-bottom: 4pt; text-align: left"> </td></tr></table>
500000
1000000
603000
456000
453000
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.
0
6000
30620990
0.001
0.001
3000000
3000000
0
0
0.001
0.001
60000000
60000000
29478338
30579075
29478338
30579075
<p style="font: 10pt Times New Roman, Times, Serif; margin: 0; text-align: justify"><font style="font: 10pt Times New Roman, Times, Serif"><b>Inventory
Valuation</b></font></p>
<p style="font: 10pt Times New Roman, Times, Serif; margin: 0; text-align: justify"><font style="font: 10pt Times New Roman, Times, Serif"> </font></p>
<p style="font: 10pt/107% Calibri, Helvetica, Sans-Serif; margin: 0"><font style="font: 10pt Times New Roman, Times, Serif">For
annual periods, the Company values inventory at the lower of cost on a first-in-first-out basis or estimated net realizable value.
The Company does not take physical inventories at interim quarterly reporting periods. Historically, substantially all of the
inventory value has been estimated using a gross profit percentage based on gross profit percentages of previous periods as applied
to the net sales of the current period. During the three months ended June 30, 2020, the Company determined that its gross profits
by segment were below its 2019 gross profit percentages and has adjusted margins accordingly. 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.</font></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="font: 10pt Times New Roman, Times, Serif"> </td><td style="font: bold 10pt Times New Roman, Times, Serif; padding-bottom: 1.5pt"> </td>
<td colspan="6" style="border-bottom: Black 1.5pt solid; font: bold 10pt Times New Roman, Times, Serif; text-align: center">For the Three Months Ended<br />
June 30,</td><td style="font: bold 10pt Times New Roman, Times, Serif; padding-bottom: 1.5pt"> </td><td style="font: bold 10pt Times New Roman, Times, Serif; padding-bottom: 1.5pt"> </td>
<td colspan="6" style="border-bottom: Black 1.5pt solid; font: bold 10pt Times New Roman, Times, Serif; text-align: center">For the Six Months Ended<br />
June 30,</td><td style="font: bold 10pt Times New Roman, Times, Serif; padding-bottom: 1.5pt"> </td></tr>
<tr style="vertical-align: bottom">
<td style="font: 10pt Times New Roman, Times, Serif"> </td><td style="font: bold 10pt Times New Roman, Times, Serif; padding-bottom: 1.5pt"> </td>
<td colspan="2" style="border-bottom: Black 1.5pt solid; font: bold 10pt Times New Roman, Times, Serif; text-align: center">2020</td><td style="font: bold 10pt Times New Roman, Times, Serif; padding-bottom: 1.5pt"> </td><td style="font: bold 10pt Times New Roman, Times, Serif; padding-bottom: 1.5pt"> </td>
<td colspan="2" style="border-bottom: Black 1.5pt solid; font: bold 10pt Times New Roman, Times, Serif; text-align: center">2019</td><td style="font: bold 10pt Times New Roman, Times, Serif; padding-bottom: 1.5pt"> </td><td style="font: bold 10pt Times New Roman, Times, Serif; padding-bottom: 1.5pt"> </td>
<td colspan="2" style="border-bottom: Black 1.5pt solid; font: bold 10pt Times New Roman, Times, Serif; text-align: center">2020</td><td style="font: bold 10pt Times New Roman, Times, Serif; padding-bottom: 1.5pt"> </td><td style="font: bold 10pt Times New Roman, Times, Serif; padding-bottom: 1.5pt"> </td>
<td colspan="2" style="border-bottom: Black 1.5pt solid; font: bold 10pt Times New Roman, Times, Serif; text-align: center">2019</td><td style="font: bold 10pt Times New Roman, Times, Serif; padding-bottom: 1.5pt"> </td></tr>
<tr style="vertical-align: bottom">
<td style="font: 10pt Times New Roman, Times, Serif"> </td><td style="font: 10pt Times New Roman, Times, Serif"> </td>
<td colspan="2" style="font: 10pt Times New Roman, Times, Serif; text-align: center">(unaudited)</td><td style="font: 10pt Times New Roman, Times, Serif"> </td><td style="font: 10pt Times New Roman, Times, Serif"> </td>
<td colspan="2" style="font: 10pt Times New Roman, Times, Serif; text-align: center">(unaudited)</td><td style="font: 10pt Times New Roman, Times, Serif"> </td><td style="font: 10pt Times New Roman, Times, Serif"> </td>
<td colspan="2" style="font: 10pt Times New Roman, Times, Serif; text-align: center">(unaudited)</td><td style="font: 10pt Times New Roman, Times, Serif"> </td><td style="font: 10pt Times New Roman, Times, Serif"> </td>
<td colspan="2" style="font: 10pt Times New Roman, Times, Serif; text-align: center">(unaudited)</td><td style="font: 10pt Times New Roman, Times, Serif"> </td></tr>
<tr style="vertical-align: bottom">
<td style="font: 10pt Times New Roman, Times, Serif">COMPLEX MACHINING</td><td style="font: 10pt Times New Roman, Times, Serif"> </td>
<td colspan="2" style="font: 10pt Times New Roman, Times, Serif"> </td><td style="font: 10pt Times New Roman, Times, Serif"> </td><td style="font: 10pt Times New Roman, Times, Serif"> </td>
<td colspan="2" style="font: 10pt Times New Roman, Times, Serif"> </td><td style="font: 10pt Times New Roman, Times, Serif"> </td><td style="font: 10pt Times New Roman, Times, Serif"> </td>
<td colspan="2" style="font: 10pt Times New Roman, Times, Serif"> </td><td style="font: 10pt Times New Roman, Times, Serif"> </td><td style="font: 10pt Times New Roman, Times, Serif"> </td>
<td colspan="2" style="font: 10pt Times New Roman, Times, Serif"> </td><td style="font: 10pt Times New Roman, Times, Serif"> </td></tr>
<tr style="vertical-align: bottom; background-color: rgb(204,238,255)">
<td style="font: 10pt Times New Roman, Times, Serif; width: 52%; text-align: left">Net Sales</td><td style="font: 10pt Times New Roman, Times, Serif; width: 1%"> </td>
<td style="font: 10pt Times New Roman, Times, Serif; width: 1%; text-align: left">$</td><td style="font: 10pt Times New Roman, Times, Serif; width: 9%; text-align: right">7,308,000</td><td style="font: 10pt Times New Roman, Times, Serif; width: 1%; text-align: left"> </td><td style="font: 10pt Times New Roman, Times, Serif; width: 1%"> </td>
<td style="font: 10pt Times New Roman, Times, Serif; width: 1%; text-align: left">$</td><td style="font: 10pt Times New Roman, Times, Serif; width: 9%; text-align: right">11,701,000</td><td style="font: 10pt Times New Roman, Times, Serif; width: 1%; text-align: left"> </td><td style="font: 10pt Times New Roman, Times, Serif; width: 1%"> </td>
<td style="font: 10pt Times New Roman, Times, Serif; width: 1%; text-align: left">$</td><td style="font: 10pt Times New Roman, Times, Serif; width: 9%; text-align: right">19,372,000</td><td style="font: 10pt Times New Roman, Times, Serif; width: 1%; text-align: left"> </td><td style="font: 10pt Times New Roman, Times, Serif; width: 1%"> </td>
<td style="font: 10pt Times New Roman, Times, Serif; width: 1%; text-align: left">$</td><td style="font: 10pt Times New Roman, Times, Serif; width: 9%; text-align: right">24,119,000</td><td style="font: 10pt Times New Roman, Times, Serif; width: 1%; text-align: left"> </td></tr>
<tr style="vertical-align: bottom; background-color: White">
<td style="font: 10pt Times New Roman, Times, Serif; text-align: left">Gross Profit</td><td style="font: 10pt Times New Roman, Times, Serif"> </td>
<td style="font: 10pt Times New Roman, Times, Serif; text-align: left"> </td><td style="font: 10pt Times New Roman, Times, Serif; text-align: right">681,000</td><td style="font: 10pt Times New Roman, Times, Serif; text-align: left"> </td><td style="font: 10pt Times New Roman, Times, Serif"> </td>
<td style="font: 10pt Times New Roman, Times, Serif; text-align: left"> </td><td style="font: 10pt Times New Roman, Times, Serif; text-align: right">2,095,000</td><td style="font: 10pt Times New Roman, Times, Serif; text-align: left"> </td><td style="font: 10pt Times New Roman, Times, Serif"> </td>
<td style="font: 10pt Times New Roman, Times, Serif; text-align: left"> </td><td style="font: 10pt Times New Roman, Times, Serif; text-align: right">2,849,000</td><td style="font: 10pt Times New Roman, Times, Serif; text-align: left"> </td><td style="font: 10pt Times New Roman, Times, Serif"> </td>
<td style="font: 10pt Times New Roman, Times, Serif; text-align: left"> </td><td style="font: 10pt Times New Roman, Times, Serif; text-align: right">4,308,000</td><td style="font: 10pt Times New Roman, Times, Serif; text-align: left"> </td></tr>
<tr style="vertical-align: bottom; background-color: rgb(204,238,255)">
<td style="font: 10pt Times New Roman, Times, Serif; text-align: left">Pre Tax (Loss) Income from continuing operations</td><td style="font: 10pt Times New Roman, Times, Serif"> </td>
<td style="font: 10pt Times New Roman, Times, Serif; text-align: left"> </td><td style="font: 10pt Times New Roman, Times, Serif; text-align: right">(10,000</td><td style="font: 10pt Times New Roman, Times, Serif; text-align: left">)</td><td style="font: 10pt Times New Roman, Times, Serif"> </td>
<td style="font: 10pt Times New Roman, Times, Serif; text-align: left"> </td><td style="font: 10pt Times New Roman, Times, Serif; text-align: right">1,351,000</td><td style="font: 10pt Times New Roman, Times, Serif; text-align: left"> </td><td style="font: 10pt Times New Roman, Times, Serif"> </td>
<td style="font: 10pt Times New Roman, Times, Serif; text-align: left"> </td><td style="font: 10pt Times New Roman, Times, Serif; text-align: right">1,160,000</td><td style="font: 10pt Times New Roman, Times, Serif; text-align: left"> </td><td style="font: 10pt Times New Roman, Times, Serif"> </td>
<td style="font: 10pt Times New Roman, Times, Serif; text-align: left"> </td><td style="font: 10pt Times New Roman, Times, Serif; text-align: right">2,794,000</td><td style="font: 10pt Times New Roman, Times, Serif; text-align: left"> </td></tr>
<tr style="vertical-align: bottom; background-color: White">
<td style="font: 10pt Times New Roman, Times, Serif">Assets</td><td style="font: 10pt Times New Roman, Times, Serif"> </td>
<td style="font: 10pt Times New Roman, Times, Serif; text-align: left"> </td><td style="font: 10pt Times New Roman, Times, Serif; text-align: right">48,490,000</td><td style="font: 10pt Times New Roman, Times, Serif; text-align: left"> </td><td style="font: 10pt Times New Roman, Times, Serif"> </td>
<td style="font: 10pt Times New Roman, Times, Serif; text-align: left"> </td><td style="font: 10pt Times New Roman, Times, Serif; text-align: right">47,176,000</td><td style="font: 10pt Times New Roman, Times, Serif; text-align: left"> </td><td style="font: 10pt Times New Roman, Times, Serif"> </td>
<td style="font: 10pt Times New Roman, Times, Serif; text-align: left"> </td><td style="font: 10pt Times New Roman, Times, Serif; text-align: right">48,490,000</td><td style="font: 10pt Times New Roman, Times, Serif; text-align: left"> </td><td style="font: 10pt Times New Roman, Times, Serif"> </td>
<td style="font: 10pt Times New Roman, Times, Serif; text-align: left"> </td><td style="font: 10pt Times New Roman, Times, Serif; text-align: right">47,176,000</td><td style="font: 10pt Times New Roman, Times, Serif; text-align: left"> </td></tr>
<tr style="vertical-align: bottom; background-color: rgb(204,238,255)">
<td style="font: 10pt Times New Roman, Times, Serif"> </td><td style="font: 10pt Times New Roman, Times, Serif"> </td>
<td style="font: 10pt Times New Roman, Times, Serif; text-align: left"> </td><td style="font: 10pt Times New Roman, Times, Serif; text-align: right"> </td><td style="font: 10pt Times New Roman, Times, Serif; text-align: left"> </td><td style="font: 10pt Times New Roman, Times, Serif"> </td>
<td style="font: 10pt Times New Roman, Times, Serif; text-align: left"> </td><td style="font: 10pt Times New Roman, Times, Serif; text-align: right"> </td><td style="font: 10pt Times New Roman, Times, Serif; text-align: left"> </td><td style="font: 10pt Times New Roman, Times, Serif"> </td>
<td style="font: 10pt Times New Roman, Times, Serif; text-align: left"> </td><td style="font: 10pt Times New Roman, Times, Serif; text-align: right"> </td><td style="font: 10pt Times New Roman, Times, Serif; text-align: left"> </td><td style="font: 10pt Times New Roman, Times, Serif"> </td>
<td style="font: 10pt Times New Roman, Times, Serif; text-align: left"> </td><td style="font: 10pt Times New Roman, Times, Serif; text-align: right"> </td><td style="font: 10pt Times New Roman, Times, Serif; text-align: left"> </td></tr>
<tr style="vertical-align: bottom; background-color: White">
<td style="font: 10pt Times New Roman, Times, Serif; text-align: left">TURBINE ENGINE COMPONENTS</td><td style="font: 10pt Times New Roman, Times, Serif"> </td>
<td style="font: 10pt Times New Roman, Times, Serif; text-align: left"> </td><td style="font: 10pt Times New Roman, Times, Serif; text-align: right"> </td><td style="font: 10pt Times New Roman, Times, Serif; text-align: left"> </td><td style="font: 10pt Times New Roman, Times, Serif"> </td>
<td style="font: 10pt Times New Roman, Times, Serif; text-align: left"> </td><td style="font: 10pt Times New Roman, Times, Serif; text-align: right"> </td><td style="font: 10pt Times New Roman, Times, Serif; text-align: left"> </td><td style="font: 10pt Times New Roman, Times, Serif"> </td>
<td style="font: 10pt Times New Roman, Times, Serif; text-align: left"> </td><td style="font: 10pt Times New Roman, Times, Serif; text-align: right"> </td><td style="font: 10pt Times New Roman, Times, Serif; text-align: left"> </td><td style="font: 10pt Times New Roman, Times, Serif"> </td>
<td style="font: 10pt Times New Roman, Times, Serif; text-align: left"> </td><td style="font: 10pt Times New Roman, Times, Serif; text-align: right"> </td><td style="font: 10pt Times New Roman, Times, Serif; text-align: left"> </td></tr>
<tr style="vertical-align: bottom; background-color: rgb(204,238,255)">
<td style="font: 10pt Times New Roman, Times, Serif; text-align: left">Net Sales</td><td style="font: 10pt Times New Roman, Times, Serif"> </td>
<td style="font: 10pt Times New Roman, Times, Serif; text-align: left"> </td><td style="font: 10pt Times New Roman, Times, Serif; text-align: right">1,186,000</td><td style="font: 10pt Times New Roman, Times, Serif; text-align: left"> </td><td style="font: 10pt Times New Roman, Times, Serif"> </td>
<td style="font: 10pt Times New Roman, Times, Serif; text-align: left"> </td><td style="font: 10pt Times New Roman, Times, Serif; text-align: right">1,667,000</td><td style="font: 10pt Times New Roman, Times, Serif; text-align: left"> </td><td style="font: 10pt Times New Roman, Times, Serif"> </td>
<td style="font: 10pt Times New Roman, Times, Serif; text-align: left"> </td><td style="font: 10pt Times New Roman, Times, Serif; text-align: right">2,569,000</td><td style="font: 10pt Times New Roman, Times, Serif; text-align: left"> </td><td style="font: 10pt Times New Roman, Times, Serif"> </td>
<td style="font: 10pt Times New Roman, Times, Serif; text-align: left"> </td><td style="font: 10pt Times New Roman, Times, Serif; text-align: right">3,127,000</td><td style="font: 10pt Times New Roman, Times, Serif; text-align: left"> </td></tr>
<tr style="vertical-align: bottom; background-color: White">
<td style="font: 10pt Times New Roman, Times, Serif; text-align: left">Gross (Loss) Profit</td><td style="font: 10pt Times New Roman, Times, Serif"> </td>
<td style="font: 10pt Times New Roman, Times, Serif; text-align: left"> </td><td style="font: 10pt Times New Roman, Times, Serif; text-align: right">(67,000</td><td style="font: 10pt Times New Roman, Times, Serif; text-align: left">)</td><td style="font: 10pt Times New Roman, Times, Serif"> </td>
<td style="font: 10pt Times New Roman, Times, Serif; text-align: left"> </td><td style="font: 10pt Times New Roman, Times, Serif; text-align: right">96,000</td><td style="font: 10pt Times New Roman, Times, Serif; text-align: left"> </td><td style="font: 10pt Times New Roman, Times, Serif"> </td>
<td style="font: 10pt Times New Roman, Times, Serif; text-align: left"> </td><td style="font: 10pt Times New Roman, Times, Serif; text-align: right">(54,000</td><td style="font: 10pt Times New Roman, Times, Serif; text-align: left">)</td><td style="font: 10pt Times New Roman, Times, Serif"> </td>
<td style="font: 10pt Times New Roman, Times, Serif; text-align: left"> </td><td style="font: 10pt Times New Roman, Times, Serif; text-align: right">157,000</td><td style="font: 10pt Times New Roman, Times, Serif; text-align: left"> </td></tr>
<tr style="vertical-align: bottom; background-color: rgb(204,238,255)">
<td style="font: 10pt Times New Roman, Times, Serif; text-align: left">Pre Tax Loss from continuing operations</td><td style="font: 10pt Times New Roman, Times, Serif"> </td>
<td style="font: 10pt Times New Roman, Times, Serif; text-align: left"> </td><td style="font: 10pt Times New Roman, Times, Serif; text-align: right">(217,000</td><td style="font: 10pt Times New Roman, Times, Serif; text-align: left">)</td><td style="font: 10pt Times New Roman, Times, Serif"> </td>
<td style="font: 10pt Times New Roman, Times, Serif; text-align: left"> </td><td style="font: 10pt Times New Roman, Times, Serif; text-align: right">(111,000</td><td style="font: 10pt Times New Roman, Times, Serif; text-align: left">)</td><td style="font: 10pt Times New Roman, Times, Serif"> </td>
<td style="font: 10pt Times New Roman, Times, Serif; text-align: left"> </td><td style="font: 10pt Times New Roman, Times, Serif; text-align: right">(343,000</td><td style="font: 10pt Times New Roman, Times, Serif; text-align: left">)</td><td style="font: 10pt Times New Roman, Times, Serif"> </td>
<td style="font: 10pt Times New Roman, Times, Serif; text-align: left"> </td><td style="font: 10pt Times New Roman, Times, Serif; text-align: right">(281,000</td><td style="font: 10pt Times New Roman, Times, Serif; text-align: left">)</td></tr>
<tr style="vertical-align: bottom; background-color: White">
<td style="font: 10pt Times New Roman, Times, Serif">Assets</td><td style="font: 10pt Times New Roman, Times, Serif"> </td>
<td style="font: 10pt Times New Roman, Times, Serif; text-align: left"> </td><td style="font: 10pt Times New Roman, Times, Serif; text-align: right">4,430,000</td><td style="font: 10pt Times New Roman, Times, Serif; text-align: left"> </td><td style="font: 10pt Times New Roman, Times, Serif"> </td>
<td style="font: 10pt Times New Roman, Times, Serif; text-align: left"> </td><td style="font: 10pt Times New Roman, Times, Serif; text-align: right">5,575,000</td><td style="font: 10pt Times New Roman, Times, Serif; text-align: left"> </td><td style="font: 10pt Times New Roman, Times, Serif"> </td>
<td style="font: 10pt Times New Roman, Times, Serif; text-align: left"> </td><td style="font: 10pt Times New Roman, Times, Serif; text-align: right">4,430,000</td><td style="font: 10pt Times New Roman, Times, Serif; text-align: left"> </td><td style="font: 10pt Times New Roman, Times, Serif"> </td>
<td style="font: 10pt Times New Roman, Times, Serif; text-align: left"> </td><td style="font: 10pt Times New Roman, Times, Serif; text-align: right">5,575,000</td><td style="font: 10pt Times New Roman, Times, Serif; text-align: left"> </td></tr>
<tr style="vertical-align: bottom; background-color: rgb(204,238,255)">
<td style="font: 10pt Times New Roman, Times, Serif"> </td><td style="font: 10pt Times New Roman, Times, Serif"> </td>
<td style="font: 10pt Times New Roman, Times, Serif; text-align: left"> </td><td style="font: 10pt Times New Roman, Times, Serif; text-align: right"> </td><td style="font: 10pt Times New Roman, Times, Serif; text-align: left"> </td><td style="font: 10pt Times New Roman, Times, Serif"> </td>
<td style="font: 10pt Times New Roman, Times, Serif; text-align: left"> </td><td style="font: 10pt Times New Roman, Times, Serif; text-align: right"> </td><td style="font: 10pt Times New Roman, Times, Serif; text-align: left"> </td><td style="font: 10pt Times New Roman, Times, Serif"> </td>
<td style="font: 10pt Times New Roman, Times, Serif; text-align: left"> </td><td style="font: 10pt Times New Roman, Times, Serif; text-align: right"> </td><td style="font: 10pt Times New Roman, Times, Serif; text-align: left"> </td><td style="font: 10pt Times New Roman, Times, Serif"> </td>
<td style="font: 10pt Times New Roman, Times, Serif; text-align: left"> </td><td style="font: 10pt Times New Roman, Times, Serif; text-align: right"> </td><td style="font: 10pt Times New Roman, Times, Serif; text-align: left"> </td></tr>
<tr style="vertical-align: bottom; background-color: White">
<td style="font: 10pt Times New Roman, Times, Serif">CORPORATE</td><td style="font: 10pt Times New Roman, Times, Serif"> </td>
<td style="font: 10pt Times New Roman, Times, Serif; text-align: left"> </td><td style="font: 10pt Times New Roman, Times, Serif; text-align: right"> </td><td style="font: 10pt Times New Roman, Times, Serif; text-align: left"> </td><td style="font: 10pt Times New Roman, Times, Serif"> </td>
<td style="font: 10pt Times New Roman, Times, Serif; text-align: left"> </td><td style="font: 10pt Times New Roman, Times, Serif; text-align: right"> </td><td style="font: 10pt Times New Roman, Times, Serif; text-align: left"> </td><td style="font: 10pt Times New Roman, Times, Serif"> </td>
<td style="font: 10pt Times New Roman, Times, Serif; text-align: left"> </td><td style="font: 10pt Times New Roman, Times, Serif; text-align: right"> </td><td style="font: 10pt Times New Roman, Times, Serif; text-align: left"> </td><td style="font: 10pt Times New Roman, Times, Serif"> </td>
<td style="font: 10pt Times New Roman, Times, Serif; text-align: left"> </td><td style="font: 10pt Times New Roman, Times, Serif; text-align: right"> </td><td style="font: 10pt Times New Roman, Times, Serif; text-align: left"> </td></tr>
<tr style="vertical-align: bottom; background-color: rgb(204,238,255)">
<td style="font: 10pt Times New Roman, Times, Serif; text-align: left">Net Sales</td><td style="font: 10pt Times New Roman, Times, Serif"> </td>
<td style="font: 10pt Times New Roman, Times, Serif; text-align: left"> </td><td style="font: 10pt Times New Roman, Times, Serif; text-align: right">-</td><td style="font: 10pt Times New Roman, Times, Serif; text-align: left"> </td><td style="font: 10pt Times New Roman, Times, Serif"> </td>
<td style="font: 10pt Times New Roman, Times, Serif; text-align: left"> </td><td style="font: 10pt Times New Roman, Times, Serif; text-align: right">-</td><td style="font: 10pt Times New Roman, Times, Serif; text-align: left"> </td><td style="font: 10pt Times New Roman, Times, Serif"> </td>
<td style="font: 10pt Times New Roman, Times, Serif; text-align: left"> </td><td style="font: 10pt Times New Roman, Times, Serif; text-align: right">-</td><td style="font: 10pt Times New Roman, Times, Serif; text-align: left"> </td><td style="font: 10pt Times New Roman, Times, Serif"> </td>
<td style="font: 10pt Times New Roman, Times, Serif; text-align: left"> </td><td style="font: 10pt Times New Roman, Times, Serif; text-align: right">-</td><td style="font: 10pt Times New Roman, Times, Serif; text-align: left"> </td></tr>
<tr style="vertical-align: bottom; background-color: White">
<td style="font: 10pt Times New Roman, Times, Serif; text-align: left">Gross Profit</td><td style="font: 10pt Times New Roman, Times, Serif"> </td>
<td style="font: 10pt Times New Roman, Times, Serif; text-align: left"> </td><td style="font: 10pt Times New Roman, Times, Serif; text-align: right">-</td><td style="font: 10pt Times New Roman, Times, Serif; text-align: left"> </td><td style="font: 10pt Times New Roman, Times, Serif"> </td>
<td style="font: 10pt Times New Roman, Times, Serif; text-align: left"> </td><td style="font: 10pt Times New Roman, Times, Serif; text-align: right">-</td><td style="font: 10pt Times New Roman, Times, Serif; text-align: left"> </td><td style="font: 10pt Times New Roman, Times, Serif"> </td>
<td style="font: 10pt Times New Roman, Times, Serif; text-align: left"> </td><td style="font: 10pt Times New Roman, Times, Serif; text-align: right">-</td><td style="font: 10pt Times New Roman, Times, Serif; text-align: left"> </td><td style="font: 10pt Times New Roman, Times, Serif"> </td>
<td style="font: 10pt Times New Roman, Times, Serif; text-align: left"> </td><td style="font: 10pt Times New Roman, Times, Serif; text-align: right">-</td><td style="font: 10pt Times New Roman, Times, Serif; text-align: left"> </td></tr>
<tr style="vertical-align: bottom; background-color: rgb(204,238,255)">
<td style="font: 10pt Times New Roman, Times, Serif; text-align: left">Pre Tax Loss from continuing operations</td><td style="font: 10pt Times New Roman, Times, Serif"> </td>
<td style="font: 10pt Times New Roman, Times, Serif; text-align: left"> </td><td style="font: 10pt Times New Roman, Times, Serif; text-align: right">(1,357,000</td><td style="font: 10pt Times New Roman, Times, Serif; text-align: left">)</td><td style="font: 10pt Times New Roman, Times, Serif"> </td>
<td style="font: 10pt Times New Roman, Times, Serif; text-align: left"> </td><td style="font: 10pt Times New Roman, Times, Serif; text-align: right">(1,975,000</td><td style="font: 10pt Times New Roman, Times, Serif; text-align: left">)</td><td style="font: 10pt Times New Roman, Times, Serif"> </td>
<td style="font: 10pt Times New Roman, Times, Serif; text-align: left"> </td><td style="font: 10pt Times New Roman, Times, Serif; text-align: right">(2,757,000</td><td style="font: 10pt Times New Roman, Times, Serif; text-align: left">)</td><td style="font: 10pt Times New Roman, Times, Serif"> </td>
<td style="font: 10pt Times New Roman, Times, Serif; text-align: left"> </td><td style="font: 10pt Times New Roman, Times, Serif; text-align: right">(4,243,000</td><td style="font: 10pt Times New Roman, Times, Serif; text-align: left">)</td></tr>
<tr style="vertical-align: bottom; background-color: White">
<td style="font: 10pt Times New Roman, Times, Serif">Assets</td><td style="font: 10pt Times New Roman, Times, Serif"> </td>
<td style="font: 10pt Times New Roman, Times, Serif; text-align: left"> </td><td style="font: 10pt Times New Roman, Times, Serif; text-align: right">1,808,000</td><td style="font: 10pt Times New Roman, Times, Serif; text-align: left"> </td><td style="font: 10pt Times New Roman, Times, Serif"> </td>
<td style="font: 10pt Times New Roman, Times, Serif; text-align: left"> </td><td style="font: 10pt Times New Roman, Times, Serif; text-align: right">568,000</td><td style="font: 10pt Times New Roman, Times, Serif; text-align: left"> </td><td style="font: 10pt Times New Roman, Times, Serif"> </td>
<td style="font: 10pt Times New Roman, Times, Serif; text-align: left"> </td><td style="font: 10pt Times New Roman, Times, Serif; text-align: right">1,808,000</td><td style="font: 10pt Times New Roman, Times, Serif; text-align: left"> </td><td style="font: 10pt Times New Roman, Times, Serif"> </td>
<td style="font: 10pt Times New Roman, Times, Serif; text-align: left"> </td><td style="font: 10pt Times New Roman, Times, Serif; text-align: right">568,000</td><td style="font: 10pt Times New Roman, Times, Serif; text-align: left"> </td></tr>
<tr style="vertical-align: bottom; background-color: rgb(204,238,255)">
<td style="font: 10pt Times New Roman, Times, Serif"> </td><td style="font: 10pt Times New Roman, Times, Serif"> </td>
<td style="font: 10pt Times New Roman, Times, Serif; text-align: left"> </td><td style="font: 10pt Times New Roman, Times, Serif; text-align: right"> </td><td style="font: 10pt Times New Roman, Times, Serif; text-align: left"> </td><td style="font: 10pt Times New Roman, Times, Serif"> </td>
<td style="font: 10pt Times New Roman, Times, Serif; text-align: left"> </td><td style="font: 10pt Times New Roman, Times, Serif; text-align: right"> </td><td style="font: 10pt Times New Roman, Times, Serif; text-align: left"> </td><td style="font: 10pt Times New Roman, Times, Serif"> </td>
<td style="font: 10pt Times New Roman, Times, Serif; text-align: left"> </td><td style="font: 10pt Times New Roman, Times, Serif; text-align: right"> </td><td style="font: 10pt Times New Roman, Times, Serif; text-align: left"> </td><td style="font: 10pt Times New Roman, Times, Serif"> </td>
<td style="font: 10pt Times New Roman, Times, Serif; text-align: left"> </td><td style="font: 10pt Times New Roman, Times, Serif; text-align: right"> </td><td style="font: 10pt Times New Roman, Times, Serif; text-align: left"> </td></tr>
<tr style="vertical-align: bottom; background-color: White">
<td style="font: 10pt Times New Roman, Times, Serif">CONSOLIDATED</td><td style="font: 10pt Times New Roman, Times, Serif"> </td>
<td style="font: 10pt Times New Roman, Times, Serif; text-align: left"> </td><td style="font: 10pt Times New Roman, Times, Serif; text-align: right"> </td><td style="font: 10pt Times New Roman, Times, Serif; text-align: left"> </td><td style="font: 10pt Times New Roman, Times, Serif"> </td>
<td style="font: 10pt Times New Roman, Times, Serif; text-align: left"> </td><td style="font: 10pt Times New Roman, Times, Serif; text-align: right"> </td><td style="font: 10pt Times New Roman, Times, Serif; text-align: left"> </td><td style="font: 10pt Times New Roman, Times, Serif"> </td>
<td style="font: 10pt Times New Roman, Times, Serif; text-align: left"> </td><td style="font: 10pt Times New Roman, Times, Serif; text-align: right"> </td><td style="font: 10pt Times New Roman, Times, Serif; text-align: left"> </td><td style="font: 10pt Times New Roman, Times, Serif"> </td>
<td style="font: 10pt Times New Roman, Times, Serif; text-align: left"> </td><td style="font: 10pt Times New Roman, Times, Serif; text-align: right"> </td><td style="font: 10pt Times New Roman, Times, Serif; text-align: left"> </td></tr>
<tr style="vertical-align: bottom; background-color: rgb(204,238,255)">
<td style="font: 10pt Times New Roman, Times, Serif; text-align: left">Net Sales</td><td style="font: 10pt Times New Roman, Times, Serif"> </td>
<td style="font: 10pt Times New Roman, Times, Serif; text-align: left"> </td><td style="font: 10pt Times New Roman, Times, Serif; text-align: right">8,494,000</td><td style="font: 10pt Times New Roman, Times, Serif; text-align: left"> </td><td style="font: 10pt Times New Roman, Times, Serif"> </td>
<td style="font: 10pt Times New Roman, Times, Serif; text-align: left"> </td><td style="font: 10pt Times New Roman, Times, Serif; text-align: right">13,368,000</td><td style="font: 10pt Times New Roman, Times, Serif; text-align: left"> </td><td style="font: 10pt Times New Roman, Times, Serif"> </td>
<td style="font: 10pt Times New Roman, Times, Serif; text-align: left"> </td><td style="font: 10pt Times New Roman, Times, Serif; text-align: right">21,941,000</td><td style="font: 10pt Times New Roman, Times, Serif; text-align: left"> </td><td style="font: 10pt Times New Roman, Times, Serif"> </td>
<td style="font: 10pt Times New Roman, Times, Serif; text-align: left"> </td><td style="font: 10pt Times New Roman, Times, Serif; text-align: right">27,246,000</td><td style="font: 10pt Times New Roman, Times, Serif; text-align: left"> </td></tr>
<tr style="vertical-align: bottom; background-color: White">
<td style="font: 10pt Times New Roman, Times, Serif; text-align: left">Gross Profit</td><td style="font: 10pt Times New Roman, Times, Serif"> </td>
<td style="font: 10pt Times New Roman, Times, Serif; text-align: left"> </td><td style="font: 10pt Times New Roman, Times, Serif; text-align: right">614,000</td><td style="font: 10pt Times New Roman, Times, Serif; text-align: left"> </td><td style="font: 10pt Times New Roman, Times, Serif"> </td>
<td style="font: 10pt Times New Roman, Times, Serif; text-align: left"> </td><td style="font: 10pt Times New Roman, Times, Serif; text-align: right">2,191,000</td><td style="font: 10pt Times New Roman, Times, Serif; text-align: left"> </td><td style="font: 10pt Times New Roman, Times, Serif"> </td>
<td style="font: 10pt Times New Roman, Times, Serif; text-align: left"> </td><td style="font: 10pt Times New Roman, Times, Serif; text-align: right">2,795,000</td><td style="font: 10pt Times New Roman, Times, Serif; text-align: left"> </td><td style="font: 10pt Times New Roman, Times, Serif"> </td>
<td style="font: 10pt Times New Roman, Times, Serif; text-align: left"> </td><td style="font: 10pt Times New Roman, Times, Serif; text-align: right">4,465,000</td><td style="font: 10pt Times New Roman, Times, Serif; text-align: left"> </td></tr>
<tr style="vertical-align: bottom; background-color: rgb(204,238,255)">
<td style="font: 10pt Times New Roman, Times, Serif; text-align: left">Pretax net loss from continuing operations</td><td style="font: 10pt Times New Roman, Times, Serif"> </td>
<td style="font: 10pt Times New Roman, Times, Serif; text-align: left"> </td><td style="font: 10pt Times New Roman, Times, Serif; text-align: right">(1,584,000</td><td style="font: 10pt Times New Roman, Times, Serif; text-align: left">)</td><td style="font: 10pt Times New Roman, Times, Serif"> </td>
<td style="font: 10pt Times New Roman, Times, Serif; text-align: left"> </td><td style="font: 10pt Times New Roman, Times, Serif; text-align: right">(735,000</td><td style="font: 10pt Times New Roman, Times, Serif; text-align: left">)</td><td style="font: 10pt Times New Roman, Times, Serif"> </td>
<td style="font: 10pt Times New Roman, Times, Serif; text-align: left"> </td><td style="font: 10pt Times New Roman, Times, Serif; text-align: right">(1,940,000</td><td style="font: 10pt Times New Roman, Times, Serif; text-align: left">)</td><td style="font: 10pt Times New Roman, Times, Serif"> </td>
<td style="font: 10pt Times New Roman, Times, Serif; text-align: left"> </td><td style="font: 10pt Times New Roman, Times, Serif; text-align: right">(1,730,000</td><td style="font: 10pt Times New Roman, Times, Serif; text-align: left">)</td></tr>
<tr style="vertical-align: bottom; background-color: White">
<td style="font: 10pt Times New Roman, Times, Serif; text-align: left">Benefit from Income Taxes</td><td style="font: 10pt Times New Roman, Times, Serif"> </td>
<td style="font: 10pt Times New Roman, Times, Serif; text-align: left"> </td><td style="font: 10pt Times New Roman, Times, Serif; text-align: right">-</td><td style="font: 10pt Times New Roman, Times, Serif; text-align: left"> </td><td style="font: 10pt Times New Roman, Times, Serif"> </td>
<td style="font: 10pt Times New Roman, Times, Serif; text-align: left"> </td><td style="font: 10pt Times New Roman, Times, Serif; text-align: right">-</td><td style="font: 10pt Times New Roman, Times, Serif; text-align: left"> </td><td style="font: 10pt Times New Roman, Times, Serif"> </td>
<td style="font: 10pt Times New Roman, Times, Serif; text-align: left"> </td><td style="font: 10pt Times New Roman, Times, Serif; text-align: right">(1,414,000</td><td style="font: 10pt Times New Roman, Times, Serif; text-align: left">)</td><td style="font: 10pt Times New Roman, Times, Serif"> </td>
<td style="font: 10pt Times New Roman, Times, Serif; text-align: left"> </td><td style="font: 10pt Times New Roman, Times, Serif; text-align: right">-</td><td style="font: 10pt Times New Roman, Times, Serif; text-align: left"> </td></tr>
<tr style="vertical-align: bottom; background-color: rgb(204,238,255)">
<td style="font: 10pt Times New Roman, Times, Serif; text-align: left">Income from Discontinued Operations, net of taxes</td><td style="font: 10pt Times New Roman, Times, Serif"> </td>
<td style="font: 10pt Times New Roman, Times, Serif; text-align: left"> </td><td style="font: 10pt Times New Roman, Times, Serif; text-align: right">-</td><td style="font: 10pt Times New Roman, Times, Serif; text-align: left"> </td><td style="font: 10pt Times New Roman, Times, Serif"> </td>
<td style="font: 10pt Times New Roman, Times, Serif; text-align: left"> </td><td style="font: 10pt Times New Roman, Times, Serif; text-align: right">-</td><td style="font: 10pt Times New Roman, Times, Serif; text-align: left"> </td><td style="font: 10pt Times New Roman, Times, Serif"> </td>
<td style="font: 10pt Times New Roman, Times, Serif; text-align: left"> </td><td style="font: 10pt Times New Roman, Times, Serif; text-align: right">-</td><td style="font: 10pt Times New Roman, Times, Serif; text-align: left"> </td><td style="font: 10pt Times New Roman, Times, Serif"> </td>
<td style="font: 10pt Times New Roman, Times, Serif; text-align: left"> </td><td style="font: 10pt Times New Roman, Times, Serif; text-align: right">72,000</td><td style="font: 10pt Times New Roman, Times, Serif; text-align: left"> </td></tr>
<tr style="vertical-align: bottom; background-color: White">
<td style="font: 10pt Times New Roman, Times, Serif; text-align: left">Net Loss</td><td style="font: 10pt Times New Roman, Times, Serif"> </td>
<td style="font: 10pt Times New Roman, Times, Serif; text-align: left"> </td><td style="font: 10pt Times New Roman, Times, Serif; text-align: right">(1,584,000</td><td style="font: 10pt Times New Roman, Times, Serif; text-align: left">)</td><td style="font: 10pt Times New Roman, Times, Serif"> </td>
<td style="font: 10pt Times New Roman, Times, Serif; text-align: left"> </td><td style="font: 10pt Times New Roman, Times, Serif; text-align: right">(735,000</td><td style="font: 10pt Times New Roman, Times, Serif; text-align: left">)</td><td style="font: 10pt Times New Roman, Times, Serif"> </td>
<td style="font: 10pt Times New Roman, Times, Serif; text-align: left"> </td><td style="font: 10pt Times New Roman, Times, Serif; text-align: right">(526,000</td><td style="font: 10pt Times New Roman, Times, Serif; text-align: left">)</td><td style="font: 10pt Times New Roman, Times, Serif"> </td>
<td style="font: 10pt Times New Roman, Times, Serif; text-align: left"> </td><td style="font: 10pt Times New Roman, Times, Serif; text-align: right">(1,658,000</td><td style="font: 10pt Times New Roman, Times, Serif; text-align: left">)</td></tr>
<tr style="vertical-align: bottom; background-color: rgb(204,238,255)">
<td style="font: 10pt Times New Roman, Times, Serif">Assets</td><td style="font: 10pt Times New Roman, Times, Serif"> </td>
<td style="font: 10pt Times New Roman, Times, Serif; text-align: left">$</td><td style="font: 10pt Times New Roman, Times, Serif; text-align: right">54,728,000</td><td style="font: 10pt Times New Roman, Times, Serif; text-align: left"> </td><td style="font: 10pt Times New Roman, Times, Serif"> </td>
<td style="font: 10pt Times New Roman, Times, Serif; text-align: left">$</td><td style="font: 10pt Times New Roman, Times, Serif; text-align: right">53,319,000</td><td style="font: 10pt Times New Roman, Times, Serif; text-align: left"> </td><td style="font: 10pt Times New Roman, Times, Serif"> </td>
<td style="font: 10pt Times New Roman, Times, Serif; text-align: left">$</td><td style="font: 10pt Times New Roman, Times, Serif; text-align: right">54,728,000</td><td style="font: 10pt Times New Roman, Times, Serif; text-align: left"> </td><td style="font: 10pt Times New Roman, Times, Serif"> </td>
<td style="font: 10pt Times New Roman, Times, Serif; text-align: left">$</td><td style="font: 10pt Times New Roman, Times, Serif; text-align: right">53,319,000</td><td style="font: 10pt Times New Roman, Times, Serif; text-align: left"> </td></tr></table>
3800000
3516000
3574000
-3000
93000
326000
214000
131000
101000
74000
46000
0
<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; text-align: left; font-weight: bold">Customer</td><td style="padding-bottom: 1.5pt; font-weight: bold"> </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">June 30,<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">June 30,<br />
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">(Unaudited)</td><td> </td><td> </td>
<td colspan="2" style="text-align: center">(Unaudited)</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">38.6</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">30.0</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">33.3</td><td style="text-align: left"> </td><td> </td>
<td style="text-align: left"> </td><td style="text-align: right">35.1</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"><font style="font: 10pt Times New Roman, Times, Serif">*</font></td><td style="text-align: left"> </td><td> </td>
<td style="text-align: left"> </td><td style="text-align: right">10.5</td><td style="text-align: left"> </td></tr>
</table>
<p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0"> </p>
<table cellpadding="0" cellspacing="0" style="width: 100%; font: 10pt Times New Roman, Times, Serif; margin-top: 0pt; margin-bottom: 0pt"><tr style="vertical-align: top">
<td style="width: 0"></td><td style="width: 0.25in">*</td><td>Customer was less than 10% of total net sales for the three months ended June 30, 2020.</td></tr></table>
<p style="margin: 0pt"> </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; text-align: left; font-weight: bold">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">June 30,<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">June 30,<br />
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">(Unaudited)</td><td> </td><td> </td>
<td colspan="2" style="text-align: center">(Unaudited)</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">37.1</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">29.4</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">32.2</td><td style="text-align: left"> </td><td> </td>
<td style="text-align: left"> </td><td style="text-align: right">33.2</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"><font style="font: 10pt Times New Roman, Times, Serif">*</font></td><td style="text-align: left"> </td><td> </td>
<td style="text-align: left"> </td><td style="text-align: right">12.1</td><td style="text-align: left"> </td></tr>
</table>
<p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0"> </p>
<table cellpadding="0" cellspacing="0" style="width: 100%; font: 10pt Times New Roman, Times, Serif; margin-top: 0pt; margin-bottom: 0pt"><tr style="vertical-align: top">
<td style="width: 0"></td><td style="width: 0.25in">*</td><td>Customer was less than 10% of total net sales for the six months ended June 30, 2020.</td></tr></table>
<p style="margin: 0pt"> </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; text-align: left; font-weight: bold">Customer</td><td style="padding-bottom: 1.5pt; font-weight: bold"> </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; padding-bottom: 1.5pt"> </td>
<td colspan="2" style="border-bottom: Black 1.5pt solid; font-weight: bold; text-align: center">June 30,<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 style="text-align: left"> </td><td> </td>
<td colspan="2" style="text-align: center">(Unaudited)</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">49.7</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"><font style="font: 10pt Times New Roman, Times, Serif">*</font></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>
<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"><font style="font: 10pt Times New Roman, Times, Serif">*</font></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>
</table>
<p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0"> </p>
<table cellpadding="0" cellspacing="0" style="width: 100%; font: 10pt Times New Roman, Times, Serif; margin-top: 0pt; margin-bottom: 0pt"><tr style="vertical-align: top">
<td style="width: 0"></td><td style="width: 0.25in">*</td><td>Customer was less than 10% of Gross Accounts Receivable at June 30, 2020.</td></tr></table>
<p style="margin: 0pt"> </p>
4145870
4200000
AIR INDUSTRIES GROUP
0001009891
false
--12-31
10-Q
2020-06-30
Q2
2020
Non-accelerated Filer
true
false
Yes
false
001-35927
Yes
NV
72000
72000
-735000
-1658000
-526000
-1658000
-526000
-1584000
-1584000
-735000
147830
90897
47126
0
43771
147830
1416000
101000
72000
41000
0.0888
P6Y0M0D
2
6449000
515000
2456000
515000
1696000
760000
7501000
515000
1696000
760000
5045000
5934000
5045000
5934000
760000
1455000
1344000
688000
5396000
6304000
P31Y6M0D
P5Y0M0D
P5Y0M0D
P8Y0M0D
P5Y0M0D
P8Y0M0D
P1Y6M0D
P7Y0M0D
P5Y0M0D
P8Y0M0D
P4Y0M0D
P6Y0M0D
Term of Lease
3044000
3044000
1639000
861000
216000
2183000
1423000
1639000
861000
216000
2183000
1423000
<p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify"><b>Note 2. DISCONTINUED OPERATIONS</b></p>
<p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0"> </p>
<p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify">As discussed in Note 1, the Company disposed
of its EPC and ECC subsidiaries in March 2019. As required, the Company has retrospectively recast its condensed consolidated statements
of operations for the 2019 period presented. As such, these businesses are reported as discontinued operations for the three and
six months ended June 30, 2019. The Company has not segregated the cash flows of these businesses in the condensed 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 Condensed
Consolidated Financial Statements refers to the Company's continuing operations.</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 following table presents the results
of discontinued operations presented separately in the condensed consolidated statement of operations for the three and six months
ended June 30, 2019:</p>
<p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 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">Three Months Ended</td><td style="font-weight: bold"> </td><td style="font-weight: bold"> </td>
<td colspan="2" style="font-weight: bold; text-align: center">Six Months Ended</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">June 30,</td><td style="font-weight: bold"> </td><td style="font-weight: bold"> </td>
<td colspan="2" style="font-weight: bold; text-align: center">June 30,</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">2019</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">(unaudited)</td><td> </td><td> </td>
<td colspan="2" style="text-align: center">(unaudited)</td><td> </td></tr>
<tr style="vertical-align: bottom; background-color: rgb(204,238,255)">
<td style="width: 76%; text-align: left; text-indent: -0.1in; padding-left: 0.1in">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; text-indent: -0.1in; padding-left: 0.1in">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; text-indent: -0.1in; padding-left: 0.1in">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; text-indent: -0.1in; padding-left: 0.1in">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; text-indent: -0.1in; padding-left: 0.1in">Selling, general and administrative</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">96,000</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; text-indent: -0.1in; padding-left: 0.1in">Gain on impairment of assets</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">41,000</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; text-indent: -0.1in; padding-left: 0.1in">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">(28,000</td><td style="text-align: left">)</td></tr>
<tr style="vertical-align: bottom; background-color: White">
<td style="text-align: left; text-indent: -0.1in; padding-left: 0.1in">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">(1,000</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; text-indent: -0.1in; padding-left: 0.1in">Other income</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">101,000</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; text-indent: -0.1in; padding-left: 0.1in">Income from discontinued operations before income taxes</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">72,000</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; padding-bottom: 1.5pt; text-indent: -0.1in; padding-left: 0.1in">Provision for income taxes</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="text-align: left; padding-bottom: 4pt; text-indent: -0.1in; padding-left: 0.1in">Income from discontinued operations, net of income tax</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">72,000</td><td style="padding-bottom: 4pt; text-align: left"> </td></tr>
</table>
<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">Non-cash operating amounts for discontinued
operations for the three and six months ended June 30, 2019 include depreciation and amortization of $0 and $6,000, respectively.
There were no capital expenditures for discontinued operations for both the three and six months ended June 30, 2019. There were
no other significant non-cash operating amounts or investing items of the discontinued operations for the period.</p>
<p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify"><b>Note 4. PROPERTY AND EQUIPMENT</b></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 0.3in 0pt 0; text-align: justify">The components of property and
equipment at June 30, 2020 and December 31, 2019 consisted of the following:</p>
<p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0.3in 0pt 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="white-space: nowrap"> </td><td style="white-space: nowrap; font-weight: bold"> </td>
<td colspan="2" style="white-space: nowrap; font-weight: bold; text-align: center">June 30,</td><td style="white-space: nowrap; font-weight: bold"> </td><td style="white-space: nowrap; font-weight: bold"> </td>
<td colspan="2" style="white-space: nowrap; font-weight: bold; text-align: center">December 31,</td><td style="white-space: nowrap; font-weight: bold"> </td><td style="white-space: nowrap"> </td>
<td style="white-space: nowrap"> </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><td style="padding-bottom: 1.5pt"> </td>
<td style="white-space: nowrap"> </td></tr>
<tr style="vertical-align: bottom">
<td> </td><td> </td>
<td colspan="2" style="text-align: center">(unaudited)</td><td> </td><td> </td>
<td colspan="2" style="text-align: center"> </td><td> </td><td> </td>
<td style="white-space: nowrap"> </td></tr>
<tr style="vertical-align: bottom; background-color: rgb(204,238,255)">
<td style="width: 64%; text-indent: -0.1in; padding-left: 0.1in">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><td style="width: 1%"> </td>
<td style="white-space: nowrap; width: 11%"> </td></tr>
<tr style="vertical-align: bottom; background-color: White">
<td style="text-align: left; text-indent: -0.1in; padding-left: 0.1in">Buildings and Improvements</td><td> </td>
<td style="text-align: left"> </td><td style="text-align: right">1,650,000</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><td> </td>
<td style="white-space: nowrap; text-align: center">31.50 years</td></tr>
<tr style="vertical-align: bottom; background-color: rgb(204,238,255)">
<td style="text-align: left; text-indent: -0.1in; padding-left: 0.1in">Machinery and Equipment</td><td> </td>
<td style="text-align: left"> </td><td style="text-align: right">12,466,000</td><td style="text-align: left"> </td><td> </td>
<td style="text-align: left"> </td><td style="text-align: right">12,251,000</td><td style="text-align: left"> </td><td> </td>
<td style="white-space: nowrap; text-align: center">5 - 8 years</td></tr>
<tr style="vertical-align: bottom; background-color: White">
<td style="text-align: left; text-indent: -0.1in; padding-left: 0.1in">Finance Lease Machinery and Equipment</td><td> </td>
<td style="text-align: left"> </td><td style="text-align: right">6,495,000</td><td style="text-align: left"> </td><td> </td>
<td style="text-align: left"> </td><td style="text-align: right">6,495,000</td><td style="text-align: left"> </td><td> </td>
<td style="white-space: nowrap; text-align: center">5 - 8 years</td></tr>
<tr style="vertical-align: bottom; background-color: rgb(204,238,255)">
<td style="text-align: left; text-indent: -0.1in; padding-left: 0.1in">Tools and Instruments</td><td> </td>
<td style="text-align: left"> </td><td style="text-align: right">11,336,000</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><td> </td>
<td style="white-space: nowrap; text-align: center">1.50 - 7 years</td></tr>
<tr style="vertical-align: bottom; background-color: White">
<td style="text-align: left; text-indent: -0.1in; padding-left: 0.1in">Automotive Equipment</td><td> </td>
<td style="text-align: left"> </td><td style="text-align: right">148,000</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><td> </td>
<td style="white-space: nowrap; text-align: center">5 years</td></tr>
<tr style="vertical-align: bottom; background-color: rgb(204,238,255)">
<td style="text-align: left; text-indent: -0.1in; padding-left: 0.1in">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><td> </td>
<td style="white-space: nowrap; text-align: center">5 - 8 years</td></tr>
<tr style="vertical-align: bottom; background-color: White">
<td style="text-align: left; text-indent: -0.1in; padding-left: 0.1in">Leasehold Improvements</td><td> </td>
<td style="text-align: left"> </td><td style="text-align: right">530,000</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><td> </td>
<td style="white-space: nowrap; text-align: center">Term of Lease</td></tr>
<tr style="vertical-align: bottom; background-color: rgb(204,238,255)">
<td style="text-align: left; padding-bottom: 1.5pt; text-indent: -0.1in; padding-left: 0.1in">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">428,000</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><td style="padding-bottom: 1.5pt"> </td>
<td style="white-space: nowrap; text-align: center; padding-bottom: 1.5pt">4 - 6 years</td></tr>
<tr style="vertical-align: bottom; background-color: White">
<td style="text-align: left; text-indent: -0.1in; padding-left: 0.1in">Total Property and Equipment</td><td> </td>
<td style="text-align: left"> </td><td style="text-align: right">33,643,000</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><td> </td>
<td style="white-space: nowrap"> </td></tr>
<tr style="vertical-align: bottom; background-color: rgb(204,238,255)">
<td style="text-align: left; padding-bottom: 1.5pt; text-indent: -0.1in; padding-left: 0.1in">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">(26,890,000</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><td style="padding-bottom: 1.5pt"> </td>
<td style="white-space: nowrap; padding-bottom: 1.5pt"> </td></tr>
<tr style="vertical-align: bottom; background-color: White">
<td style="text-align: left; padding-bottom: 4pt; text-indent: -0.1in; padding-left: 0.1in">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">6,753,000</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><td style="padding-bottom: 4pt"> </td>
<td style="white-space: nowrap; padding-bottom: 4pt"> </td></tr>
</table>
<p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0.3in 0pt 0; text-align: justify"> </p>
<p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify">Depreciation expense for the three months
ended June 30, 2020 and 2019 was $688,000 and $760,000, respectively. Depreciation expense for the six months ended June 30, 2020
and 2019 was $1,344,000 and $1,455,000, respectively.</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">Assets held under financed 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
$6,304,000 and $5,396,000 as of June 30, 2020 and December 31, 2019, respectively.</p>
<table cellpadding="0" cellspacing="0" style="font: 10pt Times New Roman, Times, Serif; border-collapse: collapse; width: 100%"><tr style="vertical-align: bottom"><td></td><td style="font-weight: bold"> </td>
<td colspan="2" style="font-weight: bold; text-align: center">Three Months Ended</td><td style="font-weight: bold"> </td><td style="font-weight: bold"> </td>
<td colspan="2" style="font-weight: bold; text-align: center">Six Months Ended</td><td style="font-weight: bold"> </td></tr>
<tr style="vertical-align: bottom">
<td> </td><td style="font-weight: bold"> </td>
<td colspan="2" style="font-weight: bold; text-align: center">June 30,</td><td style="font-weight: bold"> </td><td style="font-weight: bold"> </td>
<td colspan="2" style="font-weight: bold; text-align: center">June 30,</td><td style="font-weight: bold"> </td></tr>
<tr style="vertical-align: bottom">
<td> </td><td style="font-weight: bold; padding-bottom: 1.5pt"> </td>
<td colspan="2" style="border-bottom: Black 1.5pt solid; font-weight: bold; text-align: center">2019</td><td style="padding-bottom: 1.5pt; font-weight: bold"> </td><td style="font-weight: bold; padding-bottom: 1.5pt"> </td>
<td colspan="2" style="border-bottom: Black 1.5pt solid; font-weight: bold; text-align: center">2019</td><td style="padding-bottom: 1.5pt; font-weight: bold"> </td></tr>
<tr style="vertical-align: bottom">
<td> </td><td> </td>
<td colspan="2" style="text-align: center">(unaudited)</td><td> </td><td> </td>
<td colspan="2" style="text-align: center">(unaudited)</td><td> </td></tr>
<tr style="vertical-align: bottom; background-color: rgb(204,238,255)">
<td style="width: 76%; text-align: left; text-indent: -0.1in; padding-left: 0.1in">Net revenue</td><td style="width: 1%"> </td>
<td style="width: 1%; text-align: left">$</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; text-indent: -0.1in; padding-left: 0.1in">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; text-indent: -0.1in; padding-left: 0.1in">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; text-indent: -0.1in; padding-left: 0.1in">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; text-indent: -0.1in; padding-left: 0.1in">Selling, general and administrative</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">96,000</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; text-indent: -0.1in; padding-left: 0.1in">Gain on impairment of assets</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">41,000</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; text-indent: -0.1in; padding-left: 0.1in">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">(28,000</td><td style="text-align: left">)</td></tr>
<tr style="vertical-align: bottom; background-color: White">
<td style="text-align: left; text-indent: -0.1in; padding-left: 0.1in">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">(1,000</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; text-indent: -0.1in; padding-left: 0.1in">Other income</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">101,000</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; text-indent: -0.1in; padding-left: 0.1in">Income from discontinued operations before income taxes</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">72,000</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; padding-bottom: 1.5pt; text-indent: -0.1in; padding-left: 0.1in">Provision for income taxes</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="text-align: left; padding-bottom: 4pt; text-indent: -0.1in; padding-left: 0.1in">Income from discontinued operations, net of income tax</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">$</td><td style="border-bottom: Black 4pt double; text-align: right">72,000</td><td style="padding-bottom: 4pt; text-align: left"> </td></tr></table>
<table cellpadding="0" cellspacing="0" style="font: 10pt Times New Roman, Times, Serif; border-collapse: collapse; width: 100%"><tr style="vertical-align: bottom"><td style="white-space: nowrap"> </td><td style="white-space: nowrap; font-weight: bold"> </td>
<td colspan="2" style="white-space: nowrap; font-weight: bold; text-align: center">June 30,</td><td style="white-space: nowrap; font-weight: bold"> </td><td style="white-space: nowrap; font-weight: bold"> </td>
<td colspan="2" style="white-space: nowrap; font-weight: bold; text-align: center">December 31,</td><td style="white-space: nowrap; font-weight: bold"> </td><td style="white-space: nowrap"> </td>
<td style="white-space: nowrap"> </td></tr>
<tr style="vertical-align: bottom">
<td> </td><td style="font-weight: bold; padding-bottom: 1.5pt"> </td>
<td colspan="2" style="border-bottom: Black 1.5pt solid; font-weight: bold; text-align: center">2020</td><td style="padding-bottom: 1.5pt; font-weight: bold"> </td><td style="font-weight: bold; padding-bottom: 1.5pt"> </td>
<td colspan="2" style="border-bottom: Black 1.5pt solid; font-weight: bold; text-align: center">2019</td><td style="padding-bottom: 1.5pt; font-weight: bold"> </td><td style="padding-bottom: 1.5pt"> </td>
<td style="white-space: nowrap"> </td></tr>
<tr style="vertical-align: bottom">
<td> </td><td> </td>
<td colspan="2" style="text-align: center">(unaudited)</td><td> </td><td> </td>
<td colspan="2" style="text-align: center"> </td><td> </td><td> </td>
<td style="white-space: nowrap"> </td></tr>
<tr style="vertical-align: bottom; background-color: rgb(204,238,255)">
<td style="width: 64%; text-indent: -0.1in; padding-left: 0.1in">Land</td><td style="width: 1%"> </td>
<td style="width: 1%; text-align: left">$</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><td style="width: 1%"> </td>
<td style="white-space: nowrap; width: 11%"> </td></tr>
<tr style="vertical-align: bottom; background-color: White">
<td style="text-align: left; text-indent: -0.1in; padding-left: 0.1in">Buildings and Improvements</td><td> </td>
<td style="text-align: left"> </td><td style="text-align: right">1,650,000</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><td> </td>
<td style="white-space: nowrap; text-align: center">31.50 years</td></tr>
<tr style="vertical-align: bottom; background-color: rgb(204,238,255)">
<td style="text-align: left; text-indent: -0.1in; padding-left: 0.1in">Machinery and Equipment</td><td> </td>
<td style="text-align: left"> </td><td style="text-align: right">12,466,000</td><td style="text-align: left"> </td><td> </td>
<td style="text-align: left"> </td><td style="text-align: right">12,251,000</td><td style="text-align: left"> </td><td> </td>
<td style="white-space: nowrap; text-align: center">5 - 8 years</td></tr>
<tr style="vertical-align: bottom; background-color: White">
<td style="text-align: left; text-indent: -0.1in; padding-left: 0.1in">Finance Lease Machinery and Equipment</td><td> </td>
<td style="text-align: left"> </td><td style="text-align: right">6,495,000</td><td style="text-align: left"> </td><td> </td>
<td style="text-align: left"> </td><td style="text-align: right">6,495,000</td><td style="text-align: left"> </td><td> </td>
<td style="white-space: nowrap; text-align: center">5 - 8 years</td></tr>
<tr style="vertical-align: bottom; background-color: rgb(204,238,255)">
<td style="text-align: left; text-indent: -0.1in; padding-left: 0.1in">Tools and Instruments</td><td> </td>
<td style="text-align: left"> </td><td style="text-align: right">11,336,000</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><td> </td>
<td style="white-space: nowrap; text-align: center">1.50 - 7 years</td></tr>
<tr style="vertical-align: bottom; background-color: White">
<td style="text-align: left; text-indent: -0.1in; padding-left: 0.1in">Automotive Equipment</td><td> </td>
<td style="text-align: left"> </td><td style="text-align: right">148,000</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><td> </td>
<td style="white-space: nowrap; text-align: center">5 years</td></tr>
<tr style="vertical-align: bottom; background-color: rgb(204,238,255)">
<td style="text-align: left; text-indent: -0.1in; padding-left: 0.1in">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><td> </td>
<td style="white-space: nowrap; text-align: center">5 - 8 years</td></tr>
<tr style="vertical-align: bottom; background-color: White">
<td style="text-align: left; text-indent: -0.1in; padding-left: 0.1in">Leasehold Improvements</td><td> </td>
<td style="text-align: left"> </td><td style="text-align: right">530,000</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><td> </td>
<td style="white-space: nowrap; text-align: center">Term of Lease</td></tr>
<tr style="vertical-align: bottom; background-color: rgb(204,238,255)">
<td style="text-align: left; padding-bottom: 1.5pt; text-indent: -0.1in; padding-left: 0.1in">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">428,000</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><td style="padding-bottom: 1.5pt"> </td>
<td style="white-space: nowrap; text-align: center; padding-bottom: 1.5pt">4 - 6 years</td></tr>
<tr style="vertical-align: bottom; background-color: White">
<td style="text-align: left; text-indent: -0.1in; padding-left: 0.1in">Total Property and Equipment</td><td> </td>
<td style="text-align: left"> </td><td style="text-align: right">33,643,000</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><td> </td>
<td style="white-space: nowrap"> </td></tr>
<tr style="vertical-align: bottom; background-color: rgb(204,238,255)">
<td style="text-align: left; padding-bottom: 1.5pt; text-indent: -0.1in; padding-left: 0.1in">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">(26,890,000</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><td style="padding-bottom: 1.5pt"> </td>
<td style="white-space: nowrap; padding-bottom: 1.5pt"> </td></tr>
<tr style="vertical-align: bottom; background-color: White">
<td style="text-align: left; padding-bottom: 4pt; text-indent: -0.1in; padding-left: 0.1in">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">6,753,000</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><td style="padding-bottom: 4pt"> </td>
<td style="white-space: nowrap; padding-bottom: 4pt"> </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">June 30,</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></tr>
<tr style="vertical-align: bottom; background-color: rgb(204,238,255)">
<td style="width: 88%; text-align: left">Weighted Average Remaining Lease Term - in years</td><td style="width: 1%"> </td>
<td style="width: 1%; text-align: left"> </td><td style="width: 9%; text-align: right">6.00</td><td style="width: 1%; text-align: left"> </td></tr>
<tr style="vertical-align: bottom; background-color: White">
<td>Weighted Average discount rate - %</td><td> </td>
<td style="text-align: left"> </td><td style="text-align: right">8.88</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">June 30,<br />
2020</td><td style="font-weight: bold"> </td></tr>
<tr style="vertical-align: bottom">
<td style="border-bottom: Black 1.5pt solid"><b>For the twelve months ended December 31,</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">(unaudited)</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%; text-indent: -0.1in; padding-left: 0.1in">December 31, 2020 (remaining six months)</td><td style="width: 1%"> </td>
<td style="width: 1%; text-align: left">$</td><td style="width: 9%; text-align: right">536,000</td><td style="width: 1%; text-align: left"> </td></tr>
<tr style="vertical-align: bottom; background-color: White">
<td style="text-indent: -0.1in; padding-left: 0.1in">December 31, 2021</td><td> </td>
<td style="text-align: left"> </td><td style="text-align: right">1,080,000</td><td style="text-align: left"> </td></tr>
<tr style="vertical-align: bottom; background-color: rgb(204,238,255)">
<td style="text-indent: -0.1in; padding-left: 0.1in">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: White">
<td style="text-indent: -0.1in; padding-left: 0.1in">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: rgb(204,238,255)">
<td style="text-indent: -0.1in; padding-left: 0.1in">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: White">
<td style="padding-bottom: 1.5pt; text-indent: -0.1in; padding-left: 0.1in">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">4,731,000</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; text-indent: -0.1in; padding-left: 0.1in">Total future minimum lease payments</td><td> </td>
<td style="text-align: left"> </td><td style="text-align: right">9,462,000</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; text-indent: -0.1in; padding-left: 0.1in">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">(4,510,000</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; text-indent: -0.1in; padding-left: 0.1in">Total operating lease maturities</td><td> </td>
<td style="text-align: left"> </td><td style="text-align: right">4,952,000</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; text-indent: -0.1in; padding-left: 0.1in">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">(672,000</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; text-indent: -0.1in; padding-left: 0.1in">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">4,280,000</td><td style="padding-bottom: 4pt; text-align: left"> </td></tr></table>
<p style="font: 10pt Times New Roman, Times, Serif; margin: 0"><font style="font: 10pt Times New Roman, Times, Serif"><b>NOTE
7. LIABILITY RELATED TO THE SALE OF FUTURE PROCEEDS FROM DISPOSITION OF SUBSIDIARY</b></font></p>
<p style="font: 10pt Times New Roman, Times, Serif; margin: 0; text-align: justify"><font style="font: 10pt Times New Roman, Times, Serif"> </font></p>
<p style="font: 10pt Times New Roman, Times, Serif; margin: 0; text-align: justify"><font style="font: 10pt Times New Roman, Times, Serif">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").</font></p>
<p style="font: 10pt Times New Roman, Times, Serif; margin: 0; text-align: justify"><font style="font: 10pt Times New Roman, Times, Serif"> </font></p>
<p style="font: 10pt Times New Roman, Times, Serif; margin: 0; text-align: justify"><font style="font: 10pt Times New Roman, Times, Serif">As
of December 31, 2018, the Company received an aggregate of $363,000 under the Meyer Agreement.</font></p>
<p style="font: 10pt Times New Roman, Times, Serif; margin: 0; text-align: justify"><font style="font: 10pt Times New Roman, Times, Serif"> </font></p>
<p style="font: 10pt Times New Roman, Times, Serif; margin: 0; text-align: justify"><font style="font: 10pt Times New Roman, Times, Serif">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.</font></p>
<p style="font: 10pt Times New Roman, Times, Serif; margin: 0; text-align: justify"><font style="font: 10pt Times New Roman, Times, Serif"> </font></p>
<p style="font: 10pt Times New Roman, Times, Serif; margin: 0; text-align: justify"><font style="font: 10pt Times New Roman, Times, Serif">The
Purchasers have agreed to pay Taglich Brothers 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.</font></p>
<p style="font: 10pt Times New Roman, Times, Serif; margin: 0; text-align: justify"><font style="font: 10pt Times New Roman, Times, Serif"> </font></p>
<p style="font: 10pt Times New Roman, Times, Serif; margin: 0; text-align: justify"><font style="font: 10pt Times New Roman, Times, Serif">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 condensed 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.</font></p>
<p style="font: 10pt Times New Roman, Times, Serif; margin: 0; text-align: justify"><font style="font: 10pt Times New Roman, Times, Serif"> </font></p>
<p style="font: 10pt Times New Roman, Times, Serif; margin: 0; text-align: justify"><font style="font: 10pt Times New Roman, Times, Serif">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%.</font></p>
<p style="font: 10pt Times New Roman, Times, Serif; margin: 0; text-align: justify"><font style="font: 10pt Times New Roman, Times, Serif"> </font></p>
<p style="font: 10pt Times New Roman, Times, Serif; margin: 0; text-align: justify"><font style="font: 10pt Times New Roman, Times, Serif">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.</font></p>
<p style="font: 10pt Times New Roman, Times, Serif; margin: 0; text-align: justify"><font style="font: 10pt Times New Roman, Times, Serif"> </font></p>
<p style="font: 10pt Times New Roman, Times, Serif; margin: 0; text-align: justify"><font style="font: 10pt Times New Roman, Times, Serif">The
Company recognized $119,000 and $0 of non-cash income for the three months ended June 30, 2020 and 2019, respectively, and $211,000
and $109,000 of non-cash income for the six months ended June 30, 2020 and 2019, respectively, reflected in "other income,
net" on the condensed consolidated statement of operations. Additionally, the Company recorded $36,000 and $0 of related
non-cash interest expense related to the Purchase Agreement, for the three months ended June 30, 2020 and 2019, respectively,
and $64,000 and $33,000 for the six months ended June 30, 2020 and 2019, respectively. </font></p>
<p style="font: 10pt Times New Roman, Times, Serif; margin: 0; text-align: justify"><font style="font: 10pt Times New Roman, Times, Serif"></font> </p>
<p style="font: 10pt Times New Roman, Times, Serif; margin: 0; text-align: justify"><font style="font: 10pt Times New Roman, Times, Serif">The
table below shows the activity within the liability account for the six months ended June 30, 2020:</font></p>
<p style="font: 10pt Times New Roman, Times, Serif; margin: 0; text-align: justify"><font style="font: 10pt Times New Roman, Times, Serif"> </font></p>
<table cellpadding="0" cellspacing="0" style="font: 10pt Times New Roman, Times, Serif; border-collapse: collapse; width: 100%">
<tr style="vertical-align: bottom; background-color: rgb(204,238,255)">
<td style="font: 10pt Times New Roman, Times, Serif; width: 88%; text-align: left">Liabilities related to sale of future proceeds from disposition of subsidiaries - as of December 31, 2019</td><td style="font: 10pt Times New Roman, Times, Serif; width: 1%"> </td>
<td style="font: 10pt Times New Roman, Times, Serif; width: 1%; text-align: left">$</td><td style="font: 10pt Times New Roman, Times, Serif; width: 9%; text-align: right">603,000</td><td style="font: 10pt Times New Roman, Times, Serif; width: 1%; text-align: left"> </td></tr>
<tr style="vertical-align: bottom; background-color: White">
<td style="font: 10pt Times New Roman, Times, Serif; text-align: left">Non-Cash other income recognized</td><td style="font: 10pt Times New Roman, Times, Serif"> </td>
<td style="font: 10pt Times New Roman, Times, Serif; text-align: left"> </td><td style="font: 10pt Times New Roman, Times, Serif; text-align: right">(211,000</td><td style="font: 10pt Times New Roman, Times, Serif; text-align: left">)</td></tr>
<tr style="vertical-align: bottom; background-color: rgb(204,238,255)">
<td style="font: 10pt Times New Roman, Times, Serif; text-align: left; padding-bottom: 1.5pt">Non-Cash interest expense recognized</td><td style="font: 10pt Times New Roman, Times, Serif; padding-bottom: 1.5pt"> </td>
<td style="border-bottom: Black 1.5pt solid; font: 10pt Times New Roman, Times, Serif; text-align: left"> </td><td style="border-bottom: Black 1.5pt solid; font: 10pt Times New Roman, Times, Serif; text-align: right">64,000</td><td style="font: 10pt Times New Roman, Times, Serif; padding-bottom: 1.5pt; text-align: left"> </td></tr>
<tr style="vertical-align: bottom; background-color: White">
<td style="font: 10pt Times New Roman, Times, Serif; text-align: left">Liabilities related to sale of future proceeds from disposition of subsidiary - as of June 30, 2020</td><td style="font: 10pt Times New Roman, Times, Serif"> </td>
<td style="font: 10pt Times New Roman, Times, Serif; text-align: left"> </td><td style="font: 10pt Times New Roman, Times, Serif; text-align: right">456,000</td><td style="font: 10pt Times New Roman, Times, Serif; text-align: left"> </td></tr>
<tr style="vertical-align: bottom; background-color: rgb(204,238,255)">
<td style="font: 10pt Times New Roman, Times, Serif; text-align: left; padding-bottom: 1.5pt">Less: unamortized transaction costs</td><td style="font: 10pt Times New Roman, Times, Serif; padding-bottom: 1.5pt"> </td>
<td style="border-bottom: Black 1.5pt solid; font: 10pt Times New Roman, Times, Serif; text-align: left"> </td><td style="border-bottom: Black 1.5pt solid; font: 10pt Times New Roman, Times, Serif; text-align: right">(3,000</td><td style="font: 10pt Times New Roman, Times, Serif; padding-bottom: 1.5pt; text-align: left">)</td></tr>
<tr style="vertical-align: bottom; background-color: White">
<td style="font: 10pt Times New Roman, Times, Serif; text-align: left; padding-bottom: 4pt">Liability related to sale of future proceeds from disposition of subsidiary, net</td><td style="font: 10pt Times New Roman, Times, Serif; padding-bottom: 4pt"> </td>
<td style="border-bottom: Black 4pt double; font: 10pt Times New Roman, Times, Serif; text-align: left">$</td><td style="border-bottom: Black 4pt double; font: 10pt Times New Roman, Times, Serif; text-align: right">453,000</td><td style="font: 10pt Times New Roman, Times, Serif; padding-bottom: 4pt; text-align: left"> </td></tr></table>
<p style="font: 10pt Times New Roman, Times, Serif; margin: 0"><font style="font: 10pt Times New Roman, Times, Serif"><b>Note
11. SEGMENT REPORTING</b></font></p>
<p style="font: 10pt Times New Roman, Times, Serif; margin: 0"><font style="font: 10pt Times New Roman, Times, Serif"> </font></p>
<p style="font: 10pt Times New Roman, Times, Serif; margin: 0; text-align: justify"><font style="font: 10pt Times New Roman, Times, Serif">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.</font></p>
<p style="font: 10pt Times New Roman, Times, Serif; margin: 0; text-align: justify"><font style="font: 10pt Times New Roman, Times, Serif">  </font></p>
<p style="font: 10pt Times New Roman, Times, Serif; margin: 0; text-align: justify"><font style="font: 10pt Times New Roman, Times, Serif">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.</font></p>
<p style="font: 10pt Times New Roman, Times, Serif; margin: 0; text-align: justify"><font style="font: 10pt Times New Roman, Times, Serif"> </font></p>
<p style="font: 10pt Times New Roman, Times, Serif; margin: 0; text-align: justify"><font style="font: 10pt Times New Roman, Times, Serif">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 its corporate
division as an independent segment.</font></p>
<p style="font: 10pt Times New Roman, Times, Serif; margin: 0; text-align: justify"><font style="font: 10pt Times New Roman, Times, Serif"> </font></p>
<p style="font: 10pt Times New Roman, Times, Serif; margin: 0; text-align: justify"><font style="font: 10pt Times New Roman, Times, Serif">For
reporting purposes, EPC and ECC have been classified as discontinued operations for the three and six months ending June 30, 2019.</font></p>
<p style="font: 10pt Times New Roman, Times, Serif; margin: 0; text-align: justify"><font style="font: 10pt Times New Roman, Times, Serif"> </font></p>
<p style="font: 10pt Times New Roman, Times, Serif; margin: 0; text-align: justify"><font style="font: 10pt Times New Roman, Times, Serif">The
accounting policies of each of the segments are the same as those described in the Summary of Significant Accounting Policies.
Intersegment transfers are recorded at the transferor's cost, and there is no intercompany profit or loss on intersegment
transfers. We evaluate performance based on revenue, gross profit contribution and assets employed.</font></p>
<p style="font: 10pt Times New Roman, Times, Serif; margin: 0; text-align: justify"><font style="font: 10pt Times New Roman, Times, Serif"> </font></p>
<p style="font: 10pt Times New Roman, Times, Serif; margin: 0; text-align: justify"><font style="font: 10pt Times New Roman, Times, Serif">Financial
information about the Company's reporting segments for the three and six months ended June 30, 2020 and 2019 are as follows:</font></p>
<p style="font: 10pt Times New Roman, Times, Serif; margin: 0; text-align: justify"><font style="font: 10pt Times New Roman, Times, Serif"> </font></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="font: 10pt Times New Roman, Times, Serif"> </td><td style="font: bold 10pt Times New Roman, Times, Serif; padding-bottom: 1.5pt"> </td>
<td colspan="6" style="border-bottom: Black 1.5pt solid; font: bold 10pt Times New Roman, Times, Serif; text-align: center">For the Three Months Ended<br />
June 30,</td><td style="font: bold 10pt Times New Roman, Times, Serif; padding-bottom: 1.5pt"> </td><td style="font: bold 10pt Times New Roman, Times, Serif; padding-bottom: 1.5pt"> </td>
<td colspan="6" style="border-bottom: Black 1.5pt solid; font: bold 10pt Times New Roman, Times, Serif; text-align: center">For the Six Months Ended<br />
June 30,</td><td style="font: bold 10pt Times New Roman, Times, Serif; padding-bottom: 1.5pt"> </td></tr>
<tr style="vertical-align: bottom">
<td style="font: 10pt Times New Roman, Times, Serif"> </td><td style="font: bold 10pt Times New Roman, Times, Serif; padding-bottom: 1.5pt"> </td>
<td colspan="2" style="border-bottom: Black 1.5pt solid; font: bold 10pt Times New Roman, Times, Serif; text-align: center">2020</td><td style="font: bold 10pt Times New Roman, Times, Serif; padding-bottom: 1.5pt"> </td><td style="font: bold 10pt Times New Roman, Times, Serif; padding-bottom: 1.5pt"> </td>
<td colspan="2" style="border-bottom: Black 1.5pt solid; font: bold 10pt Times New Roman, Times, Serif; text-align: center">2019</td><td style="font: bold 10pt Times New Roman, Times, Serif; padding-bottom: 1.5pt"> </td><td style="font: bold 10pt Times New Roman, Times, Serif; padding-bottom: 1.5pt"> </td>
<td colspan="2" style="border-bottom: Black 1.5pt solid; font: bold 10pt Times New Roman, Times, Serif; text-align: center">2020</td><td style="font: bold 10pt Times New Roman, Times, Serif; padding-bottom: 1.5pt"> </td><td style="font: bold 10pt Times New Roman, Times, Serif; padding-bottom: 1.5pt"> </td>
<td colspan="2" style="border-bottom: Black 1.5pt solid; font: bold 10pt Times New Roman, Times, Serif; text-align: center">2019</td><td style="font: bold 10pt Times New Roman, Times, Serif; padding-bottom: 1.5pt"> </td></tr>
<tr style="vertical-align: bottom">
<td style="font: 10pt Times New Roman, Times, Serif"> </td><td style="font: 10pt Times New Roman, Times, Serif"> </td>
<td colspan="2" style="font: 10pt Times New Roman, Times, Serif; text-align: center">(unaudited)</td><td style="font: 10pt Times New Roman, Times, Serif"> </td><td style="font: 10pt Times New Roman, Times, Serif"> </td>
<td colspan="2" style="font: 10pt Times New Roman, Times, Serif; text-align: center">(unaudited)</td><td style="font: 10pt Times New Roman, Times, Serif"> </td><td style="font: 10pt Times New Roman, Times, Serif"> </td>
<td colspan="2" style="font: 10pt Times New Roman, Times, Serif; text-align: center">(unaudited)</td><td style="font: 10pt Times New Roman, Times, Serif"> </td><td style="font: 10pt Times New Roman, Times, Serif"> </td>
<td colspan="2" style="font: 10pt Times New Roman, Times, Serif; text-align: center">(unaudited)</td><td style="font: 10pt Times New Roman, Times, Serif"> </td></tr>
<tr style="vertical-align: bottom">
<td style="font: 10pt Times New Roman, Times, Serif">COMPLEX MACHINING</td><td style="font: 10pt Times New Roman, Times, Serif"> </td>
<td colspan="2" style="font: 10pt Times New Roman, Times, Serif"> </td><td style="font: 10pt Times New Roman, Times, Serif"> </td><td style="font: 10pt Times New Roman, Times, Serif"> </td>
<td colspan="2" style="font: 10pt Times New Roman, Times, Serif"> </td><td style="font: 10pt Times New Roman, Times, Serif"> </td><td style="font: 10pt Times New Roman, Times, Serif"> </td>
<td colspan="2" style="font: 10pt Times New Roman, Times, Serif"> </td><td style="font: 10pt Times New Roman, Times, Serif"> </td><td style="font: 10pt Times New Roman, Times, Serif"> </td>
<td colspan="2" style="font: 10pt Times New Roman, Times, Serif"> </td><td style="font: 10pt Times New Roman, Times, Serif"> </td></tr>
<tr style="vertical-align: bottom; background-color: rgb(204,238,255)">
<td style="font: 10pt Times New Roman, Times, Serif; width: 52%; text-align: left">Net Sales</td><td style="font: 10pt Times New Roman, Times, Serif; width: 1%"> </td>
<td style="font: 10pt Times New Roman, Times, Serif; width: 1%; text-align: left">$</td><td style="font: 10pt Times New Roman, Times, Serif; width: 9%; text-align: right">7,308,000</td><td style="font: 10pt Times New Roman, Times, Serif; width: 1%; text-align: left"> </td><td style="font: 10pt Times New Roman, Times, Serif; width: 1%"> </td>
<td style="font: 10pt Times New Roman, Times, Serif; width: 1%; text-align: left">$</td><td style="font: 10pt Times New Roman, Times, Serif; width: 9%; text-align: right">11,701,000</td><td style="font: 10pt Times New Roman, Times, Serif; width: 1%; text-align: left"> </td><td style="font: 10pt Times New Roman, Times, Serif; width: 1%"> </td>
<td style="font: 10pt Times New Roman, Times, Serif; width: 1%; text-align: left">$</td><td style="font: 10pt Times New Roman, Times, Serif; width: 9%; text-align: right">19,372,000</td><td style="font: 10pt Times New Roman, Times, Serif; width: 1%; text-align: left"> </td><td style="font: 10pt Times New Roman, Times, Serif; width: 1%"> </td>
<td style="font: 10pt Times New Roman, Times, Serif; width: 1%; text-align: left">$</td><td style="font: 10pt Times New Roman, Times, Serif; width: 9%; text-align: right">24,119,000</td><td style="font: 10pt Times New Roman, Times, Serif; width: 1%; text-align: left"> </td></tr>
<tr style="vertical-align: bottom; background-color: White">
<td style="font: 10pt Times New Roman, Times, Serif; text-align: left">Gross Profit</td><td style="font: 10pt Times New Roman, Times, Serif"> </td>
<td style="font: 10pt Times New Roman, Times, Serif; text-align: left"> </td><td style="font: 10pt Times New Roman, Times, Serif; text-align: right">681,000</td><td style="font: 10pt Times New Roman, Times, Serif; text-align: left"> </td><td style="font: 10pt Times New Roman, Times, Serif"> </td>
<td style="font: 10pt Times New Roman, Times, Serif; text-align: left"> </td><td style="font: 10pt Times New Roman, Times, Serif; text-align: right">2,095,000</td><td style="font: 10pt Times New Roman, Times, Serif; text-align: left"> </td><td style="font: 10pt Times New Roman, Times, Serif"> </td>
<td style="font: 10pt Times New Roman, Times, Serif; text-align: left"> </td><td style="font: 10pt Times New Roman, Times, Serif; text-align: right">2,849,000</td><td style="font: 10pt Times New Roman, Times, Serif; text-align: left"> </td><td style="font: 10pt Times New Roman, Times, Serif"> </td>
<td style="font: 10pt Times New Roman, Times, Serif; text-align: left"> </td><td style="font: 10pt Times New Roman, Times, Serif; text-align: right">4,308,000</td><td style="font: 10pt Times New Roman, Times, Serif; text-align: left"> </td></tr>
<tr style="vertical-align: bottom; background-color: rgb(204,238,255)">
<td style="font: 10pt Times New Roman, Times, Serif; text-align: left">Pre Tax (Loss) Income from continuing operations</td><td style="font: 10pt Times New Roman, Times, Serif"> </td>
<td style="font: 10pt Times New Roman, Times, Serif; text-align: left"> </td><td style="font: 10pt Times New Roman, Times, Serif; text-align: right">(10,000</td><td style="font: 10pt Times New Roman, Times, Serif; text-align: left">)</td><td style="font: 10pt Times New Roman, Times, Serif"> </td>
<td style="font: 10pt Times New Roman, Times, Serif; text-align: left"> </td><td style="font: 10pt Times New Roman, Times, Serif; text-align: right">1,351,000</td><td style="font: 10pt Times New Roman, Times, Serif; text-align: left"> </td><td style="font: 10pt Times New Roman, Times, Serif"> </td>
<td style="font: 10pt Times New Roman, Times, Serif; text-align: left"> </td><td style="font: 10pt Times New Roman, Times, Serif; text-align: right">1,160,000</td><td style="font: 10pt Times New Roman, Times, Serif; text-align: left"> </td><td style="font: 10pt Times New Roman, Times, Serif"> </td>
<td style="font: 10pt Times New Roman, Times, Serif; text-align: left"> </td><td style="font: 10pt Times New Roman, Times, Serif; text-align: right">2,794,000</td><td style="font: 10pt Times New Roman, Times, Serif; text-align: left"> </td></tr>
<tr style="vertical-align: bottom; background-color: White">
<td style="font: 10pt Times New Roman, Times, Serif">Assets</td><td style="font: 10pt Times New Roman, Times, Serif"> </td>
<td style="font: 10pt Times New Roman, Times, Serif; text-align: left"> </td><td style="font: 10pt Times New Roman, Times, Serif; text-align: right">48,490,000</td><td style="font: 10pt Times New Roman, Times, Serif; text-align: left"> </td><td style="font: 10pt Times New Roman, Times, Serif"> </td>
<td style="font: 10pt Times New Roman, Times, Serif; text-align: left"> </td><td style="font: 10pt Times New Roman, Times, Serif; text-align: right">47,176,000</td><td style="font: 10pt Times New Roman, Times, Serif; text-align: left"> </td><td style="font: 10pt Times New Roman, Times, Serif"> </td>
<td style="font: 10pt Times New Roman, Times, Serif; text-align: left"> </td><td style="font: 10pt Times New Roman, Times, Serif; text-align: right">48,490,000</td><td style="font: 10pt Times New Roman, Times, Serif; text-align: left"> </td><td style="font: 10pt Times New Roman, Times, Serif"> </td>
<td style="font: 10pt Times New Roman, Times, Serif; text-align: left"> </td><td style="font: 10pt Times New Roman, Times, Serif; text-align: right">47,176,000</td><td style="font: 10pt Times New Roman, Times, Serif; text-align: left"> </td></tr>
<tr style="vertical-align: bottom; background-color: rgb(204,238,255)">
<td style="font: 10pt Times New Roman, Times, Serif"> </td><td style="font: 10pt Times New Roman, Times, Serif"> </td>
<td style="font: 10pt Times New Roman, Times, Serif; text-align: left"> </td><td style="font: 10pt Times New Roman, Times, Serif; text-align: right"> </td><td style="font: 10pt Times New Roman, Times, Serif; text-align: left"> </td><td style="font: 10pt Times New Roman, Times, Serif"> </td>
<td style="font: 10pt Times New Roman, Times, Serif; text-align: left"> </td><td style="font: 10pt Times New Roman, Times, Serif; text-align: right"> </td><td style="font: 10pt Times New Roman, Times, Serif; text-align: left"> </td><td style="font: 10pt Times New Roman, Times, Serif"> </td>
<td style="font: 10pt Times New Roman, Times, Serif; text-align: left"> </td><td style="font: 10pt Times New Roman, Times, Serif; text-align: right"> </td><td style="font: 10pt Times New Roman, Times, Serif; text-align: left"> </td><td style="font: 10pt Times New Roman, Times, Serif"> </td>
<td style="font: 10pt Times New Roman, Times, Serif; text-align: left"> </td><td style="font: 10pt Times New Roman, Times, Serif; text-align: right"> </td><td style="font: 10pt Times New Roman, Times, Serif; text-align: left"> </td></tr>
<tr style="vertical-align: bottom; background-color: White">
<td style="font: 10pt Times New Roman, Times, Serif; text-align: left">TURBINE ENGINE COMPONENTS</td><td style="font: 10pt Times New Roman, Times, Serif"> </td>
<td style="font: 10pt Times New Roman, Times, Serif; text-align: left"> </td><td style="font: 10pt Times New Roman, Times, Serif; text-align: right"> </td><td style="font: 10pt Times New Roman, Times, Serif; text-align: left"> </td><td style="font: 10pt Times New Roman, Times, Serif"> </td>
<td style="font: 10pt Times New Roman, Times, Serif; text-align: left"> </td><td style="font: 10pt Times New Roman, Times, Serif; text-align: right"> </td><td style="font: 10pt Times New Roman, Times, Serif; text-align: left"> </td><td style="font: 10pt Times New Roman, Times, Serif"> </td>
<td style="font: 10pt Times New Roman, Times, Serif; text-align: left"> </td><td style="font: 10pt Times New Roman, Times, Serif; text-align: right"> </td><td style="font: 10pt Times New Roman, Times, Serif; text-align: left"> </td><td style="font: 10pt Times New Roman, Times, Serif"> </td>
<td style="font: 10pt Times New Roman, Times, Serif; text-align: left"> </td><td style="font: 10pt Times New Roman, Times, Serif; text-align: right"> </td><td style="font: 10pt Times New Roman, Times, Serif; text-align: left"> </td></tr>
<tr style="vertical-align: bottom; background-color: rgb(204,238,255)">
<td style="font: 10pt Times New Roman, Times, Serif; text-align: left">Net Sales</td><td style="font: 10pt Times New Roman, Times, Serif"> </td>
<td style="font: 10pt Times New Roman, Times, Serif; text-align: left"> </td><td style="font: 10pt Times New Roman, Times, Serif; text-align: right">1,186,000</td><td style="font: 10pt Times New Roman, Times, Serif; text-align: left"> </td><td style="font: 10pt Times New Roman, Times, Serif"> </td>
<td style="font: 10pt Times New Roman, Times, Serif; text-align: left"> </td><td style="font: 10pt Times New Roman, Times, Serif; text-align: right">1,667,000</td><td style="font: 10pt Times New Roman, Times, Serif; text-align: left"> </td><td style="font: 10pt Times New Roman, Times, Serif"> </td>
<td style="font: 10pt Times New Roman, Times, Serif; text-align: left"> </td><td style="font: 10pt Times New Roman, Times, Serif; text-align: right">2,569,000</td><td style="font: 10pt Times New Roman, Times, Serif; text-align: left"> </td><td style="font: 10pt Times New Roman, Times, Serif"> </td>
<td style="font: 10pt Times New Roman, Times, Serif; text-align: left"> </td><td style="font: 10pt Times New Roman, Times, Serif; text-align: right">3,127,000</td><td style="font: 10pt Times New Roman, Times, Serif; text-align: left"> </td></tr>
<tr style="vertical-align: bottom; background-color: White">
<td style="font: 10pt Times New Roman, Times, Serif; text-align: left">Gross (Loss) Profit</td><td style="font: 10pt Times New Roman, Times, Serif"> </td>
<td style="font: 10pt Times New Roman, Times, Serif; text-align: left"> </td><td style="font: 10pt Times New Roman, Times, Serif; text-align: right">(67,000</td><td style="font: 10pt Times New Roman, Times, Serif; text-align: left">)</td><td style="font: 10pt Times New Roman, Times, Serif"> </td>
<td style="font: 10pt Times New Roman, Times, Serif; text-align: left"> </td><td style="font: 10pt Times New Roman, Times, Serif; text-align: right">96,000</td><td style="font: 10pt Times New Roman, Times, Serif; text-align: left"> </td><td style="font: 10pt Times New Roman, Times, Serif"> </td>
<td style="font: 10pt Times New Roman, Times, Serif; text-align: left"> </td><td style="font: 10pt Times New Roman, Times, Serif; text-align: right">(54,000</td><td style="font: 10pt Times New Roman, Times, Serif; text-align: left">)</td><td style="font: 10pt Times New Roman, Times, Serif"> </td>
<td style="font: 10pt Times New Roman, Times, Serif; text-align: left"> </td><td style="font: 10pt Times New Roman, Times, Serif; text-align: right">157,000</td><td style="font: 10pt Times New Roman, Times, Serif; text-align: left"> </td></tr>
<tr style="vertical-align: bottom; background-color: rgb(204,238,255)">
<td style="font: 10pt Times New Roman, Times, Serif; text-align: left">Pre Tax Loss from continuing operations</td><td style="font: 10pt Times New Roman, Times, Serif"> </td>
<td style="font: 10pt Times New Roman, Times, Serif; text-align: left"> </td><td style="font: 10pt Times New Roman, Times, Serif; text-align: right">(217,000</td><td style="font: 10pt Times New Roman, Times, Serif; text-align: left">)</td><td style="font: 10pt Times New Roman, Times, Serif"> </td>
<td style="font: 10pt Times New Roman, Times, Serif; text-align: left"> </td><td style="font: 10pt Times New Roman, Times, Serif; text-align: right">(111,000</td><td style="font: 10pt Times New Roman, Times, Serif; text-align: left">)</td><td style="font: 10pt Times New Roman, Times, Serif"> </td>
<td style="font: 10pt Times New Roman, Times, Serif; text-align: left"> </td><td style="font: 10pt Times New Roman, Times, Serif; text-align: right">(343,000</td><td style="font: 10pt Times New Roman, Times, Serif; text-align: left">)</td><td style="font: 10pt Times New Roman, Times, Serif"> </td>
<td style="font: 10pt Times New Roman, Times, Serif; text-align: left"> </td><td style="font: 10pt Times New Roman, Times, Serif; text-align: right">(281,000</td><td style="font: 10pt Times New Roman, Times, Serif; text-align: left">)</td></tr>
<tr style="vertical-align: bottom; background-color: White">
<td style="font: 10pt Times New Roman, Times, Serif">Assets</td><td style="font: 10pt Times New Roman, Times, Serif"> </td>
<td style="font: 10pt Times New Roman, Times, Serif; text-align: left"> </td><td style="font: 10pt Times New Roman, Times, Serif; text-align: right">4,430,000</td><td style="font: 10pt Times New Roman, Times, Serif; text-align: left"> </td><td style="font: 10pt Times New Roman, Times, Serif"> </td>
<td style="font: 10pt Times New Roman, Times, Serif; text-align: left"> </td><td style="font: 10pt Times New Roman, Times, Serif; text-align: right">5,575,000</td><td style="font: 10pt Times New Roman, Times, Serif; text-align: left"> </td><td style="font: 10pt Times New Roman, Times, Serif"> </td>
<td style="font: 10pt Times New Roman, Times, Serif; text-align: left"> </td><td style="font: 10pt Times New Roman, Times, Serif; text-align: right">4,430,000</td><td style="font: 10pt Times New Roman, Times, Serif; text-align: left"> </td><td style="font: 10pt Times New Roman, Times, Serif"> </td>
<td style="font: 10pt Times New Roman, Times, Serif; text-align: left"> </td><td style="font: 10pt Times New Roman, Times, Serif; text-align: right">5,575,000</td><td style="font: 10pt Times New Roman, Times, Serif; text-align: left"> </td></tr>
<tr style="vertical-align: bottom; background-color: rgb(204,238,255)">
<td style="font: 10pt Times New Roman, Times, Serif"> </td><td style="font: 10pt Times New Roman, Times, Serif"> </td>
<td style="font: 10pt Times New Roman, Times, Serif; text-align: left"> </td><td style="font: 10pt Times New Roman, Times, Serif; text-align: right"> </td><td style="font: 10pt Times New Roman, Times, Serif; text-align: left"> </td><td style="font: 10pt Times New Roman, Times, Serif"> </td>
<td style="font: 10pt Times New Roman, Times, Serif; text-align: left"> </td><td style="font: 10pt Times New Roman, Times, Serif; text-align: right"> </td><td style="font: 10pt Times New Roman, Times, Serif; text-align: left"> </td><td style="font: 10pt Times New Roman, Times, Serif"> </td>
<td style="font: 10pt Times New Roman, Times, Serif; text-align: left"> </td><td style="font: 10pt Times New Roman, Times, Serif; text-align: right"> </td><td style="font: 10pt Times New Roman, Times, Serif; text-align: left"> </td><td style="font: 10pt Times New Roman, Times, Serif"> </td>
<td style="font: 10pt Times New Roman, Times, Serif; text-align: left"> </td><td style="font: 10pt Times New Roman, Times, Serif; text-align: right"> </td><td style="font: 10pt Times New Roman, Times, Serif; text-align: left"> </td></tr>
<tr style="vertical-align: bottom; background-color: White">
<td style="font: 10pt Times New Roman, Times, Serif">CORPORATE</td><td style="font: 10pt Times New Roman, Times, Serif"> </td>
<td style="font: 10pt Times New Roman, Times, Serif; text-align: left"> </td><td style="font: 10pt Times New Roman, Times, Serif; text-align: right"> </td><td style="font: 10pt Times New Roman, Times, Serif; text-align: left"> </td><td style="font: 10pt Times New Roman, Times, Serif"> </td>
<td style="font: 10pt Times New Roman, Times, Serif; text-align: left"> </td><td style="font: 10pt Times New Roman, Times, Serif; text-align: right"> </td><td style="font: 10pt Times New Roman, Times, Serif; text-align: left"> </td><td style="font: 10pt Times New Roman, Times, Serif"> </td>
<td style="font: 10pt Times New Roman, Times, Serif; text-align: left"> </td><td style="font: 10pt Times New Roman, Times, Serif; text-align: right"> </td><td style="font: 10pt Times New Roman, Times, Serif; text-align: left"> </td><td style="font: 10pt Times New Roman, Times, Serif"> </td>
<td style="font: 10pt Times New Roman, Times, Serif; text-align: left"> </td><td style="font: 10pt Times New Roman, Times, Serif; text-align: right"> </td><td style="font: 10pt Times New Roman, Times, Serif; text-align: left"> </td></tr>
<tr style="vertical-align: bottom; background-color: rgb(204,238,255)">
<td style="font: 10pt Times New Roman, Times, Serif; text-align: left">Net Sales</td><td style="font: 10pt Times New Roman, Times, Serif"> </td>
<td style="font: 10pt Times New Roman, Times, Serif; text-align: left"> </td><td style="font: 10pt Times New Roman, Times, Serif; text-align: right">-</td><td style="font: 10pt Times New Roman, Times, Serif; text-align: left"> </td><td style="font: 10pt Times New Roman, Times, Serif"> </td>
<td style="font: 10pt Times New Roman, Times, Serif; text-align: left"> </td><td style="font: 10pt Times New Roman, Times, Serif; text-align: right">-</td><td style="font: 10pt Times New Roman, Times, Serif; text-align: left"> </td><td style="font: 10pt Times New Roman, Times, Serif"> </td>
<td style="font: 10pt Times New Roman, Times, Serif; text-align: left"> </td><td style="font: 10pt Times New Roman, Times, Serif; text-align: right">-</td><td style="font: 10pt Times New Roman, Times, Serif; text-align: left"> </td><td style="font: 10pt Times New Roman, Times, Serif"> </td>
<td style="font: 10pt Times New Roman, Times, Serif; text-align: left"> </td><td style="font: 10pt Times New Roman, Times, Serif; text-align: right">-</td><td style="font: 10pt Times New Roman, Times, Serif; text-align: left"> </td></tr>
<tr style="vertical-align: bottom; background-color: White">
<td style="font: 10pt Times New Roman, Times, Serif; text-align: left">Gross Profit</td><td style="font: 10pt Times New Roman, Times, Serif"> </td>
<td style="font: 10pt Times New Roman, Times, Serif; text-align: left"> </td><td style="font: 10pt Times New Roman, Times, Serif; text-align: right">-</td><td style="font: 10pt Times New Roman, Times, Serif; text-align: left"> </td><td style="font: 10pt Times New Roman, Times, Serif"> </td>
<td style="font: 10pt Times New Roman, Times, Serif; text-align: left"> </td><td style="font: 10pt Times New Roman, Times, Serif; text-align: right">-</td><td style="font: 10pt Times New Roman, Times, Serif; text-align: left"> </td><td style="font: 10pt Times New Roman, Times, Serif"> </td>
<td style="font: 10pt Times New Roman, Times, Serif; text-align: left"> </td><td style="font: 10pt Times New Roman, Times, Serif; text-align: right">-</td><td style="font: 10pt Times New Roman, Times, Serif; text-align: left"> </td><td style="font: 10pt Times New Roman, Times, Serif"> </td>
<td style="font: 10pt Times New Roman, Times, Serif; text-align: left"> </td><td style="font: 10pt Times New Roman, Times, Serif; text-align: right">-</td><td style="font: 10pt Times New Roman, Times, Serif; text-align: left"> </td></tr>
<tr style="vertical-align: bottom; background-color: rgb(204,238,255)">
<td style="font: 10pt Times New Roman, Times, Serif; text-align: left">Pre Tax Loss from continuing operations</td><td style="font: 10pt Times New Roman, Times, Serif"> </td>
<td style="font: 10pt Times New Roman, Times, Serif; text-align: left"> </td><td style="font: 10pt Times New Roman, Times, Serif; text-align: right">(1,357,000</td><td style="font: 10pt Times New Roman, Times, Serif; text-align: left">)</td><td style="font: 10pt Times New Roman, Times, Serif"> </td>
<td style="font: 10pt Times New Roman, Times, Serif; text-align: left"> </td><td style="font: 10pt Times New Roman, Times, Serif; text-align: right">(1,975,000</td><td style="font: 10pt Times New Roman, Times, Serif; text-align: left">)</td><td style="font: 10pt Times New Roman, Times, Serif"> </td>
<td style="font: 10pt Times New Roman, Times, Serif; text-align: left"> </td><td style="font: 10pt Times New Roman, Times, Serif; text-align: right">(2,757,000</td><td style="font: 10pt Times New Roman, Times, Serif; text-align: left">)</td><td style="font: 10pt Times New Roman, Times, Serif"> </td>
<td style="font: 10pt Times New Roman, Times, Serif; text-align: left"> </td><td style="font: 10pt Times New Roman, Times, Serif; text-align: right">(4,243,000</td><td style="font: 10pt Times New Roman, Times, Serif; text-align: left">)</td></tr>
<tr style="vertical-align: bottom; background-color: White">
<td style="font: 10pt Times New Roman, Times, Serif">Assets</td><td style="font: 10pt Times New Roman, Times, Serif"> </td>
<td style="font: 10pt Times New Roman, Times, Serif; text-align: left"> </td><td style="font: 10pt Times New Roman, Times, Serif; text-align: right">1,808,000</td><td style="font: 10pt Times New Roman, Times, Serif; text-align: left"> </td><td style="font: 10pt Times New Roman, Times, Serif"> </td>
<td style="font: 10pt Times New Roman, Times, Serif; text-align: left"> </td><td style="font: 10pt Times New Roman, Times, Serif; text-align: right">568,000</td><td style="font: 10pt Times New Roman, Times, Serif; text-align: left"> </td><td style="font: 10pt Times New Roman, Times, Serif"> </td>
<td style="font: 10pt Times New Roman, Times, Serif; text-align: left"> </td><td style="font: 10pt Times New Roman, Times, Serif; text-align: right">1,808,000</td><td style="font: 10pt Times New Roman, Times, Serif; text-align: left"> </td><td style="font: 10pt Times New Roman, Times, Serif"> </td>
<td style="font: 10pt Times New Roman, Times, Serif; text-align: left"> </td><td style="font: 10pt Times New Roman, Times, Serif; text-align: right">568,000</td><td style="font: 10pt Times New Roman, Times, Serif; text-align: left"> </td></tr>
<tr style="vertical-align: bottom; background-color: rgb(204,238,255)">
<td style="font: 10pt Times New Roman, Times, Serif"> </td><td style="font: 10pt Times New Roman, Times, Serif"> </td>
<td style="font: 10pt Times New Roman, Times, Serif; text-align: left"> </td><td style="font: 10pt Times New Roman, Times, Serif; text-align: right"> </td><td style="font: 10pt Times New Roman, Times, Serif; text-align: left"> </td><td style="font: 10pt Times New Roman, Times, Serif"> </td>
<td style="font: 10pt Times New Roman, Times, Serif; text-align: left"> </td><td style="font: 10pt Times New Roman, Times, Serif; text-align: right"> </td><td style="font: 10pt Times New Roman, Times, Serif; text-align: left"> </td><td style="font: 10pt Times New Roman, Times, Serif"> </td>
<td style="font: 10pt Times New Roman, Times, Serif; text-align: left"> </td><td style="font: 10pt Times New Roman, Times, Serif; text-align: right"> </td><td style="font: 10pt Times New Roman, Times, Serif; text-align: left"> </td><td style="font: 10pt Times New Roman, Times, Serif"> </td>
<td style="font: 10pt Times New Roman, Times, Serif; text-align: left"> </td><td style="font: 10pt Times New Roman, Times, Serif; text-align: right"> </td><td style="font: 10pt Times New Roman, Times, Serif; text-align: left"> </td></tr>
<tr style="vertical-align: bottom; background-color: White">
<td style="font: 10pt Times New Roman, Times, Serif">CONSOLIDATED</td><td style="font: 10pt Times New Roman, Times, Serif"> </td>
<td style="font: 10pt Times New Roman, Times, Serif; text-align: left"> </td><td style="font: 10pt Times New Roman, Times, Serif; text-align: right"> </td><td style="font: 10pt Times New Roman, Times, Serif; text-align: left"> </td><td style="font: 10pt Times New Roman, Times, Serif"> </td>
<td style="font: 10pt Times New Roman, Times, Serif; text-align: left"> </td><td style="font: 10pt Times New Roman, Times, Serif; text-align: right"> </td><td style="font: 10pt Times New Roman, Times, Serif; text-align: left"> </td><td style="font: 10pt Times New Roman, Times, Serif"> </td>
<td style="font: 10pt Times New Roman, Times, Serif; text-align: left"> </td><td style="font: 10pt Times New Roman, Times, Serif; text-align: right"> </td><td style="font: 10pt Times New Roman, Times, Serif; text-align: left"> </td><td style="font: 10pt Times New Roman, Times, Serif"> </td>
<td style="font: 10pt Times New Roman, Times, Serif; text-align: left"> </td><td style="font: 10pt Times New Roman, Times, Serif; text-align: right"> </td><td style="font: 10pt Times New Roman, Times, Serif; text-align: left"> </td></tr>
<tr style="vertical-align: bottom; background-color: rgb(204,238,255)">
<td style="font: 10pt Times New Roman, Times, Serif; text-align: left">Net Sales</td><td style="font: 10pt Times New Roman, Times, Serif"> </td>
<td style="font: 10pt Times New Roman, Times, Serif; text-align: left"> </td><td style="font: 10pt Times New Roman, Times, Serif; text-align: right">8,494,000</td><td style="font: 10pt Times New Roman, Times, Serif; text-align: left"> </td><td style="font: 10pt Times New Roman, Times, Serif"> </td>
<td style="font: 10pt Times New Roman, Times, Serif; text-align: left"> </td><td style="font: 10pt Times New Roman, Times, Serif; text-align: right">13,368,000</td><td style="font: 10pt Times New Roman, Times, Serif; text-align: left"> </td><td style="font: 10pt Times New Roman, Times, Serif"> </td>
<td style="font: 10pt Times New Roman, Times, Serif; text-align: left"> </td><td style="font: 10pt Times New Roman, Times, Serif; text-align: right">21,941,000</td><td style="font: 10pt Times New Roman, Times, Serif; text-align: left"> </td><td style="font: 10pt Times New Roman, Times, Serif"> </td>
<td style="font: 10pt Times New Roman, Times, Serif; text-align: left"> </td><td style="font: 10pt Times New Roman, Times, Serif; text-align: right">27,246,000</td><td style="font: 10pt Times New Roman, Times, Serif; text-align: left"> </td></tr>
<tr style="vertical-align: bottom; background-color: White">
<td style="font: 10pt Times New Roman, Times, Serif; text-align: left">Gross Profit</td><td style="font: 10pt Times New Roman, Times, Serif"> </td>
<td style="font: 10pt Times New Roman, Times, Serif; text-align: left"> </td><td style="font: 10pt Times New Roman, Times, Serif; text-align: right">614,000</td><td style="font: 10pt Times New Roman, Times, Serif; text-align: left"> </td><td style="font: 10pt Times New Roman, Times, Serif"> </td>
<td style="font: 10pt Times New Roman, Times, Serif; text-align: left"> </td><td style="font: 10pt Times New Roman, Times, Serif; text-align: right">2,191,000</td><td style="font: 10pt Times New Roman, Times, Serif; text-align: left"> </td><td style="font: 10pt Times New Roman, Times, Serif"> </td>
<td style="font: 10pt Times New Roman, Times, Serif; text-align: left"> </td><td style="font: 10pt Times New Roman, Times, Serif; text-align: right">2,795,000</td><td style="font: 10pt Times New Roman, Times, Serif; text-align: left"> </td><td style="font: 10pt Times New Roman, Times, Serif"> </td>
<td style="font: 10pt Times New Roman, Times, Serif; text-align: left"> </td><td style="font: 10pt Times New Roman, Times, Serif; text-align: right">4,465,000</td><td style="font: 10pt Times New Roman, Times, Serif; text-align: left"> </td></tr>
<tr style="vertical-align: bottom; background-color: rgb(204,238,255)">
<td style="font: 10pt Times New Roman, Times, Serif; text-align: left">Pretax net loss from continuing operations</td><td style="font: 10pt Times New Roman, Times, Serif"> </td>
<td style="font: 10pt Times New Roman, Times, Serif; text-align: left"> </td><td style="font: 10pt Times New Roman, Times, Serif; text-align: right">(1,584,000</td><td style="font: 10pt Times New Roman, Times, Serif; text-align: left">)</td><td style="font: 10pt Times New Roman, Times, Serif"> </td>
<td style="font: 10pt Times New Roman, Times, Serif; text-align: left"> </td><td style="font: 10pt Times New Roman, Times, Serif; text-align: right">(735,000</td><td style="font: 10pt Times New Roman, Times, Serif; text-align: left">)</td><td style="font: 10pt Times New Roman, Times, Serif"> </td>
<td style="font: 10pt Times New Roman, Times, Serif; text-align: left"> </td><td style="font: 10pt Times New Roman, Times, Serif; text-align: right">(1,940,000</td><td style="font: 10pt Times New Roman, Times, Serif; text-align: left">)</td><td style="font: 10pt Times New Roman, Times, Serif"> </td>
<td style="font: 10pt Times New Roman, Times, Serif; text-align: left"> </td><td style="font: 10pt Times New Roman, Times, Serif; text-align: right">(1,730,000</td><td style="font: 10pt Times New Roman, Times, Serif; text-align: left">)</td></tr>
<tr style="vertical-align: bottom; background-color: White">
<td style="font: 10pt Times New Roman, Times, Serif; text-align: left">Benefit from Income Taxes</td><td style="font: 10pt Times New Roman, Times, Serif"> </td>
<td style="font: 10pt Times New Roman, Times, Serif; text-align: left"> </td><td style="font: 10pt Times New Roman, Times, Serif; text-align: right">-</td><td style="font: 10pt Times New Roman, Times, Serif; text-align: left"> </td><td style="font: 10pt Times New Roman, Times, Serif"> </td>
<td style="font: 10pt Times New Roman, Times, Serif; text-align: left"> </td><td style="font: 10pt Times New Roman, Times, Serif; text-align: right">-</td><td style="font: 10pt Times New Roman, Times, Serif; text-align: left"> </td><td style="font: 10pt Times New Roman, Times, Serif"> </td>
<td style="font: 10pt Times New Roman, Times, Serif; text-align: left"> </td><td style="font: 10pt Times New Roman, Times, Serif; text-align: right">(1,414,000</td><td style="font: 10pt Times New Roman, Times, Serif; text-align: left">)</td><td style="font: 10pt Times New Roman, Times, Serif"> </td>
<td style="font: 10pt Times New Roman, Times, Serif; text-align: left"> </td><td style="font: 10pt Times New Roman, Times, Serif; text-align: right">-</td><td style="font: 10pt Times New Roman, Times, Serif; text-align: left"> </td></tr>
<tr style="vertical-align: bottom; background-color: rgb(204,238,255)">
<td style="font: 10pt Times New Roman, Times, Serif; text-align: left">Income from Discontinued Operations, net of taxes</td><td style="font: 10pt Times New Roman, Times, Serif"> </td>
<td style="font: 10pt Times New Roman, Times, Serif; text-align: left"> </td><td style="font: 10pt Times New Roman, Times, Serif; text-align: right">-</td><td style="font: 10pt Times New Roman, Times, Serif; text-align: left"> </td><td style="font: 10pt Times New Roman, Times, Serif"> </td>
<td style="font: 10pt Times New Roman, Times, Serif; text-align: left"> </td><td style="font: 10pt Times New Roman, Times, Serif; text-align: right">-</td><td style="font: 10pt Times New Roman, Times, Serif; text-align: left"> </td><td style="font: 10pt Times New Roman, Times, Serif"> </td>
<td style="font: 10pt Times New Roman, Times, Serif; text-align: left"> </td><td style="font: 10pt Times New Roman, Times, Serif; text-align: right">-</td><td style="font: 10pt Times New Roman, Times, Serif; text-align: left"> </td><td style="font: 10pt Times New Roman, Times, Serif"> </td>
<td style="font: 10pt Times New Roman, Times, Serif; text-align: left"> </td><td style="font: 10pt Times New Roman, Times, Serif; text-align: right">72,000</td><td style="font: 10pt Times New Roman, Times, Serif; text-align: left"> </td></tr>
<tr style="vertical-align: bottom; background-color: White">
<td style="font: 10pt Times New Roman, Times, Serif; text-align: left">Net Loss</td><td style="font: 10pt Times New Roman, Times, Serif"> </td>
<td style="font: 10pt Times New Roman, Times, Serif; text-align: left"> </td><td style="font: 10pt Times New Roman, Times, Serif; text-align: right">(1,584,000</td><td style="font: 10pt Times New Roman, Times, Serif; text-align: left">)</td><td style="font: 10pt Times New Roman, Times, Serif"> </td>
<td style="font: 10pt Times New Roman, Times, Serif; text-align: left"> </td><td style="font: 10pt Times New Roman, Times, Serif; text-align: right">(735,000</td><td style="font: 10pt Times New Roman, Times, Serif; text-align: left">)</td><td style="font: 10pt Times New Roman, Times, Serif"> </td>
<td style="font: 10pt Times New Roman, Times, Serif; text-align: left"> </td><td style="font: 10pt Times New Roman, Times, Serif; text-align: right">(526,000</td><td style="font: 10pt Times New Roman, Times, Serif; text-align: left">)</td><td style="font: 10pt Times New Roman, Times, Serif"> </td>
<td style="font: 10pt Times New Roman, Times, Serif; text-align: left"> </td><td style="font: 10pt Times New Roman, Times, Serif; text-align: right">(1,658,000</td><td style="font: 10pt Times New Roman, Times, Serif; text-align: left">)</td></tr>
<tr style="vertical-align: bottom; background-color: rgb(204,238,255)">
<td style="font: 10pt Times New Roman, Times, Serif">Assets</td><td style="font: 10pt Times New Roman, Times, Serif"> </td>
<td style="font: 10pt Times New Roman, Times, Serif; text-align: left">$</td><td style="font: 10pt Times New Roman, Times, Serif; text-align: right">54,728,000</td><td style="font: 10pt Times New Roman, Times, Serif; text-align: left"> </td><td style="font: 10pt Times New Roman, Times, Serif"> </td>
<td style="font: 10pt Times New Roman, Times, Serif; text-align: left">$</td><td style="font: 10pt Times New Roman, Times, Serif; text-align: right">53,319,000</td><td style="font: 10pt Times New Roman, Times, Serif; text-align: left"> </td><td style="font: 10pt Times New Roman, Times, Serif"> </td>
<td style="font: 10pt Times New Roman, Times, Serif; text-align: left">$</td><td style="font: 10pt Times New Roman, Times, Serif; text-align: right">54,728,000</td><td style="font: 10pt Times New Roman, Times, Serif; text-align: left"> </td><td style="font: 10pt Times New Roman, Times, Serif"> </td>
<td style="font: 10pt Times New Roman, Times, Serif; text-align: left">$</td><td style="font: 10pt Times New Roman, Times, Serif; text-align: right">53,319,000</td><td style="font: 10pt Times New Roman, Times, Serif; text-align: left"> </td></tr></table>
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").
385000
242000
242000
<p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0.3in 0pt 0; text-align: justify"><b>Credit and Concentration Risks</b></p>
<p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0.3in 0pt 0; text-align: justify"> </p>
<p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify">There were two customers that represented
71.9% and three customers that represented 75.6% of total net sales for the three months ended June 30, 2020 and 2019, respectively.
This is set forth in the table below.</p>
<p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0 0pt 0.5in; 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; text-align: left; font-weight: bold">Customer</td><td style="padding-bottom: 1.5pt; font-weight: bold"> </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">June 30,<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">June 30,<br />
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">(Unaudited)</td><td> </td><td> </td>
<td colspan="2" style="text-align: center">(Unaudited)</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">38.6</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">30.0</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">33.3</td><td style="text-align: left"> </td><td> </td>
<td style="text-align: left"> </td><td style="text-align: right">35.1</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"><font style="font: 10pt Times New Roman, Times, Serif">*</font></td><td style="text-align: left"> </td><td> </td>
<td style="text-align: left"> </td><td style="text-align: right">10.5</td><td style="text-align: left"> </td></tr>
</table>
<p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0"> </p>
<table cellpadding="0" cellspacing="0" style="width: 100%; font: 10pt Times New Roman, Times, Serif; margin-top: 0pt; margin-bottom: 0pt"><tr style="vertical-align: top">
<td style="width: 0"></td><td style="width: 0.25in">*</td><td>Customer was less than 10% of total net sales for the three months ended June 30, 2020.</td></tr></table>
<p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-indent: 1in"> </p>
<p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify">There were two customers that represented
69.3% and three customers that represented 74.7% of total net sales for the six months ended June 30, 2020 and 2019, respectively.
This is set forth in the table below.</p>
<p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 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; text-align: left; font-weight: bold">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">June 30,<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">June 30,<br />
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">(Unaudited)</td><td> </td><td> </td>
<td colspan="2" style="text-align: center">(Unaudited)</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">37.1</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">29.4</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">32.2</td><td style="text-align: left"> </td><td> </td>
<td style="text-align: left"> </td><td style="text-align: right">33.2</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"><font style="font: 10pt Times New Roman, Times, Serif">*</font></td><td style="text-align: left"> </td><td> </td>
<td style="text-align: left"> </td><td style="text-align: right">12.1</td><td style="text-align: left"> </td></tr>
</table>
<p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0"> </p>
<table cellpadding="0" cellspacing="0" style="width: 100%; font: 10pt Times New Roman, Times, Serif; margin-top: 0pt; margin-bottom: 0pt"><tr style="vertical-align: top">
<td style="width: 0"></td><td style="width: 0.25in">*</td><td>Customer was less than 10% of total net sales for the six months ended June 30, 2020.</td></tr></table>
<p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-indent: 1in"> </p>
<p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0">There was one customer that represented 49.7% of gross accounts
receivable at June 30, 2020 and three customers that represented 67.8% of gross accounts receivable at December 31, 2019, respectively.
This is set forth in the table below.</p>
<p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 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; text-align: left; font-weight: bold">Customer</td><td style="padding-bottom: 1.5pt; font-weight: bold"> </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; padding-bottom: 1.5pt"> </td>
<td colspan="2" style="border-bottom: Black 1.5pt solid; font-weight: bold; text-align: center">June 30,<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 style="text-align: left"> </td><td> </td>
<td colspan="2" style="text-align: center">(Unaudited)</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">49.7</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"><font style="font: 10pt Times New Roman, Times, Serif">*</font></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>
<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"><font style="font: 10pt Times New Roman, Times, Serif">*</font></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>
</table>
<p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0"> </p>
<table cellpadding="0" cellspacing="0" style="width: 100%; font: 10pt Times New Roman, Times, Serif; margin-top: 0pt; margin-bottom: 0pt"><tr style="vertical-align: top">
<td style="width: 0"></td><td style="width: 0.25in">*</td><td>Customer was less than 10% of Gross Accounts Receivable at June 30, 2020.</td></tr></table>
<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"><u>Cash and Cash Equivalents</u></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">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: 0pt 0; text-align: justify"> </p>
<p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify"><u>Major Suppliers</u></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 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: 0pt 0"><b>Leases</b></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; text-align: justify">The Company accounts for leases under ASC
842, "Leases." All leases are required to be recorded on the balance sheet and are classified as either operating leases
or finance leases. The lease classification affects the expense recognition in the income statement. Operating lease charges are
recorded entirely in operating expenses. Finance lease charges are split, where amortization of the right-of- use asset is recorded
in operating expenses and an implied interest component is recorded in interest expense.</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">For the twelve months ending</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, 2020 (remainder of the year)</td><td style="width: 1%"> </td>
<td style="width: 1%; text-align: left">$</td><td style="width: 9%; text-align: right">145,000</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, 2021</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">97,000</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 Loan Payable - equipment</td><td> </td>
<td style="text-align: left"> </td><td style="text-align: right">242,000</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 loan payable equipment</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">242,000</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">Long-term portion of loan payable equipment</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; text-align: justify"><font style="font: 10pt Times New Roman, Times, Serif"><b>Note
9. CONTINGENCIES</b></font></p>
<p style="font: 10pt Times New Roman, Times, Serif; margin: 0; text-align: justify"><font style="font: 10pt Times New Roman, Times, Serif"> </font></p>
<p style="font: 10pt Times New Roman, Times, Serif; margin: 0; text-align: justify"><font style="font: 10pt Times New Roman, Times, Serif"><b>Loss
Contingencies</b></font></p>
<p style="font: 10pt Times New Roman, Times, Serif; margin: 0; text-align: justify"><font style="font: 10pt Times New Roman, Times, Serif"> </font></p>
<p style="font: 10pt Times New Roman, Times, Serif; margin: 0; text-align: justify"><font style="font: 10pt Times New Roman, Times, Serif">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.</font></p>
<p style="font: 10pt Times New Roman, Times, Serif; margin: 0; text-align: justify"><font style="font: 10pt Times New Roman, Times, Serif"> </font></p>
<p style="font: 10pt Times New Roman, Times, Serif; margin: 0; text-align: justify"><font style="font: 10pt Times New Roman, Times, Serif">On
December 20, 2018, pursuant to a Stock Purchase Agreement dated as of March 21, 2018 ("SPA"), the Company completed
the sale of all of the outstanding shares of its subsidiary, Welding Metallurgy, Inc. to CPI Aerostructures. On March 19, 2019,
in accordance with the procedures set forth in the SPA with CPI Aerostructures, the Company received a notice from CPI claiming
that the working capital deficit used to compute the purchase price was understated. The issue of the amount of the working capital
deficit was submitted to BDO USA, LLP ("BDO"), acting as an expert, and it issued a report dated September 3, 2019,
where it determined that the amount of the working capital deficit was approximately $4,145,870. On September 9, 2019 the Company
received a demand from CPI for payment of such amount. The Company advised CPI that the determination of BDO is void because,
among other things, it believes BDO exceeded the scope of its authority as set forth in the SPA. On September 27, 2019, CPI filed
a notice of motion in the Supreme Court of the State of New York, County of New York, against the Company seeking, among other
things, an order of specific performance requiring delivery of the funds deposited in escrow, together with the balance of the
working capital deficit which it claimed, and a judgment against the Company in the amount of approximately $4,200,000 of which
$2,000,000 would be satisfied by delivery of the funds in escrow. On October 7, 2019, the Company agreed to the release of $619,316
of the funds held in escrow in respect of claims related to the working capital deficit not related to the value of WMI's
inventory. As of December 31, 2018, the Company has placed a reserve against substantially all of the escrowed amount and cannot
estimate the amount of loss. For, among others, the reasons stated above the Company intends to contest vigorously any claim CPI
may make for payment based on the BDO Report. Outside counsel for the company has advised that at this stage in the proceedings,
it cannot offer an opinion as to the probable outcome. As of June 30, 2020, there has been no new developments.</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"></p>
<p style="font: 10pt Times New Roman, Times, Serif; margin: 0; text-align: justify"><font style="font: 10pt Times New Roman, Times, Serif">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 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 and have recently submitted a motion in opposition to its motion for summary judgement. As of June 30, 2020, it is not
possible to estimate if a loss will be incurred, as such there has been no accrual.</font></p>
<p style="font: 10pt Times New Roman, Times, Serif; margin: 0; text-align: justify"><font style="font: 10pt Times New Roman, Times, Serif"> </font></p>
<p style="font: 10pt Times New Roman, Times, Serif; margin: 0; text-align: justify"><font style="font: 10pt Times New Roman, Times, Serif">From
time to time we also may be engaged in various lawsuits and legal proceedings in the ordinary course of our business. We are currently
not aware of any legal proceedings the ultimate outcome of which, in our judgment based on information currently available, would
have a material adverse effect on our business, financial condition or operating results. There are no proceedings in which any
of our directors, officers or affiliates, or any registered or beneficial stockholder of our common stock, is an adverse party
or has a material interest averse to our interest.</font></p>
<p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0.3in 0pt 0; text-align: justify"><b>Stock-Based Compensation</b></p>
<p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0.3in 0pt 0; text-align: justify"> </p>
<p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 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. Stock based compensation
expense for employees amounted to $74,000 and $93,000 for the three months ended June 30, 2020 and 2019, respectively, and $214,000
and $326,000 for the six months ended June 30, 2020 and 2019, respectively. Stock compensation expense for directors amounted to
$46,000 and $0 for the three months ended June 30, 2020 and 2019, respectively and $101,000 and $131,000 for the six months ended
June 30, 2020 and 2019, respectively. Stock compensation expense for employees and directors was included in operating expenses
on the accompanying Condensed Consolidated Statements of Operations.</p>
800000
199000
These deferred amounts must be repaid 50% on December 31, 2021 with the remaining 50% on December 31, 2022.
49410
163000
-672000
4952000
-4510000
9462000
4731000
1070000
1038000
1007000
1080000
536000
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.
3406000
4456000
22544000
22133000
25950000
26589000
2414000
2414000
2338000
1440000
22000
13000
12543000
12972000
2973000
3516000
58000
2760000
543000
271000
97000
145000
543000
51090000
54728000
-67257000
-67783000
77434000
79472000
29000
30000
40884000
43009000
199000
402000
256000
219000
200000
3406000
4456000
32622000
33618000
27000
2000
200000
200000
1011000
1014000
38000
38000
697000
672000
8105000
9559000
6862000
5992000
15682000
16141000
1481000
1618000
3623000
3738000
7578000
6753000
38245000
42456000
447000
373000
28646000
33859000
7858000
6156000
28770983
28735597
30476289
30552147
28770983
28686187
30476289
30552147
28770983
28686187
30476289
30552147
0
-0.03
-0.06
-0.02
-0.05
0
-0.03
-0.06
-0.02
-0.05
-735000
-1730000
-526000
-1584000
38000
69000
241000
136000
362000
475000
253000
125000
630000
1480000
555000
303000
219000
156000
-1373000
-1292000
1972000
4034000
4168000
1906000
11177000
22781000
19146000
7880000
28392853
29478338
28685582
28890083
30579075
30531949
11606000
28000
29000
28000
29000
76101000
77434000
-64523000
-67257000
76222000
-65446000
10804000
76446000
-66181000
10294000
10206000
11719000
30000
79472000
-67783000
30000
79352000
-66199000
13183000
55000
131000
55000
131000
145000
58000
145000
58000
93000
93000
74000
140000
233000
74000
140000
233000
144899
-185000
-185000
-735000
-735000
-1584000
1058000
-923000
-1584000
1058000
-923000
590243
47126
46000
885000
46000
885000
-55000
-55000
0
33000
64000
36000
0
-109000
-211000
-119000
0.02
2012000
1357000
1294000
2068000
917000
2126000
-49000
-143000
100000
4000
1020000
984000
593000
9000
3000
800000
739000
-284000
1118000
429000
-79000
-309000
79000
309000
-1493000
-1043000
199000
17000
3000
-20000
-25000
290000
349000
805000
1301000
-41000
128000
-74000
1112000
5213000
1347000
-1380000
48000
64000
322000
113000
158000
-42000
-16000
19000
19000
236000
261000
-275000
39000
101000
326000
214000
131000
885000
1165000
5397000
642000
4368000
642000
760000
238000
-145000
113000
2414000
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 our 8% Subordinated Convertible Notes (the “8% Notes”), together with warrants to purchase a total of 383,080 shares of our 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 our 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 repayment terms of the SNB term loan provide 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.
Under the terms of the SNB Facility, both the SNB revolving line of credit and the SNB term loan will bear an interest rate equal to 30-day LIBOR, (with a 1% floor), plus 2.5%. The average interest rate charged during the period ended June 30, 2020 was 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 our 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
16343000
16488000
15000000
805000
2414000
12543000
12972000
3800000
3516000
0.08
18334
15000
1.01
100000
182000
0.04
1000000
100000
250000
6862000
5992000
1200000
1000000
100000
2019-05-31
2020-06-30
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
0.12
0.0125
0.04
274000
80000
256000
253000
475000
38000
168000
125000
362000
154000
563000
333000
0.12
0.03
0.08
0.01
80000
590243
1.50
6862000
2338000
1440000
5992000
7000
128000
151000
231000
3000
5000
77000
101000
7000
226000
0
76000
2414000
-655000
774000
275000
-256000
-185000
-211000
800000
3000
145000
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 Borrower may apply to SNB for forgiveness of a portion of the SBA Loan in accordance with the applicable provisions of the federal statute authorizing the Loan Program.
<p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0.3in 0pt 0; text-align: justify"><b>Note 1. FORMATION AND BASIS
OF PRESENTATION</b></p>
<p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0.3in 0pt 0; text-align: justify"> </p>
<p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify"><b>Organization</b></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">Air Industries Group is a Nevada
corporation ("AIRI"). As of and for the three and six months ended June 30, 2020 and 2019, the accompanying
condensed 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 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: 0pt 0"><b> </b></p>
<p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify"><b>Principal Business Activities</b></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 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: 0pt 0"><b> </b></p>
<p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0"><b>Basis of Presentation</b></p>
<p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0"> </p>
<p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify">The accompanying unaudited condensed consolidated
financial statements of the Company have been prepared in accordance with U.S. generally accepted accounting principles for interim
financial information and with Rule 8-03 of Regulation S-X. Accordingly, they do not include all of the information and footnotes
required by generally accepted accounting principles for complete financial statements. In the opinion of management, all adjustments
(consisting of normal recurring accruals) considered necessary for a fair presentation have been included. Operating results for
the three and six months ended June 30, 2020 are not necessarily indicative of the results that may be expected for the year ending
December 31, 2020. These unaudited condensed consolidated financial statements should be read in conjunction with the audited consolidated
financial statements and notes thereto included in the Company's Annual Report on Form 10-K for the year ended December 31,
2019, as filed with the Securities and Exchange Commission, from which the accompanying condensed consolidated balance sheet dated
December 31, 2019 was derived.</p>
<p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0"> </p>
<p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0"><b>Reclassifications</b></p>
<p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0"> </p>
<p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0">Certain account balances in 2019 have been reclassified to conform
to the current period presentation.</p>
<p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0"> </p>
<p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0"><b>Impact of Covid-19 </b></p>
<p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0"><b> </b></p>
<p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 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: 0pt 0; text-align: justify"> </p>
<p style="font: 10pt Times New Roman, Times, Serif; margin: 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, have 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 is uncertain. The likely overall economic impact
of the COVID-19 pandemic will be 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"><b> </b></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.
Although the Company's facilities are open, it has been unable to operate at full capacity or achieve high levels of productivity
due to the implementation of enhanced safety procedures, increased employee absenteeism and intermittent closings of other businesses
that supply goods or services to the Company.</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">Financial impacts related to COVID-19,
including actions and costs in response to the pandemic, were not material to the Company's first quarter 2020 financial
position, results of operations or cash flows. Beginning in April 2020, the COVID–19 crisis resulted in a reduction to 2020
revenue and operating margins in portions of its business. This negative effect continued in May 2020 and to a lesser extent in
June 2020. The decrease in revenue resulted from employee absenteeism, supplier disruption, changes in employee productivity,
and related program delays or challenges. The Company and its employees, suppliers, customers and its global community are facing
tremendous challenges and the Company cannot predict how this dynamic situation will evolve or the impact it will have on the
Company's results of operations.</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: 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. In addition, a number of the Company's suppliers and
customers have intermittently suspended or otherwise reduced their operations, and the Company is experiencing some supply chain
challenges. Suppliers are also experiencing liquidity pressures and disruptions to their operations as a result of COVID-19. During
the three months ended June 30, 2020, we had large numbers of employees working remotely. Beginning in June, and continuing into
July, that number has declined.</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">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: 0pt 0; text-align: justify"> </p>
<p style="font: 10pt Times New Roman, Times, Serif; margin: 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 Borrower may apply to SNB for forgiveness of a portion of the SBA Loan in accordance with the
applicable provisions of the federal statute authorizing the Loan Program. See Note 6.</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 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 June 30, 2020, the Company has deferred
$199,000, which is classified as Other Liability on the accompanying Condensed Consolidated Balance Sheet.</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 addition, 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. See Note 10.</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 believes that based on
its confirmed orders, funds generated from operations, amounts received under government subsidized loan programs and amounts
available under its credit facility, it will have sufficient cash on hand to support its activities through
September 1, 2021.</p>
<p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0"><b> </b></p>
<p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify"><b>Subsequent Events</b></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">Management has evaluated subsequent events
through the date of this filing.</p>
<p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0.3in 0pt 0; text-align: justify"><b>Note 3. SUMMARY OF SIGNIFICANT
ACCOUNTING POLICIES</b></p>
<p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0.3in 0pt 0; text-align: justify"> </p>
<p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify"><b>Inventory Valuation</b></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">For annual periods, the Company values
inventory at the lower of cost on a first-in-first-out basis or estimated net realizable value. The Company does not take physical
inventories at interim quarterly reporting periods. Historically, substantially all of the inventory value has been estimated using
a gross profit percentage based on gross profit percentages of previous periods as applied to the net sales of the current period.
During the three months ended June 30, 2020, the Company determined that its gross profits by segment were below its 2019 gross
profit percentages and has adjusted margins accordingly. 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: 0pt 0; text-align: justify"> </p>
<p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0.3in 0pt 0; text-align: justify"><b>Credit and Concentration Risks</b></p>
<p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0.3in 0pt 0; text-align: justify"> </p>
<p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify">There were two customers that represented
71.9% and three customers that represented 75.6% of total net sales for the three months ended June 30, 2020 and 2019, respectively.
This is set forth in the table below.</p>
<p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0 0pt 0.5in; 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; text-align: left; font-weight: bold">Customer</td><td style="padding-bottom: 1.5pt; font-weight: bold"> </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">June 30,<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">June 30,<br />
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">(Unaudited)</td><td> </td><td> </td>
<td colspan="2" style="text-align: center">(Unaudited)</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">38.6</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">30.0</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">33.3</td><td style="text-align: left"> </td><td> </td>
<td style="text-align: left"> </td><td style="text-align: right">35.1</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"><font style="font: 10pt Times New Roman, Times, Serif">*</font></td><td style="text-align: left"> </td><td> </td>
<td style="text-align: left"> </td><td style="text-align: right">10.5</td><td style="text-align: left"> </td></tr>
</table>
<p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0"> </p>
<table cellpadding="0" cellspacing="0" style="width: 100%; font: 10pt Times New Roman, Times, Serif; margin-top: 0pt; margin-bottom: 0pt"><tr style="vertical-align: top">
<td style="width: 0"></td><td style="width: 0.25in">*</td><td>Customer was less than 10% of total net sales for the three months ended June 30, 2020.</td></tr></table>
<p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-indent: 1in"> </p>
<p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify">There were two customers that represented
69.3% and three customers that represented 74.7% of total net sales for the six months ended June 30, 2020 and 2019, respectively.
This is set forth in the table below.</p>
<p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 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; text-align: left; font-weight: bold">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">June 30,<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">June 30,<br />
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">(Unaudited)</td><td> </td><td> </td>
<td colspan="2" style="text-align: center">(Unaudited)</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">37.1</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">29.4</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">32.2</td><td style="text-align: left"> </td><td> </td>
<td style="text-align: left"> </td><td style="text-align: right">33.2</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"><font style="font: 10pt Times New Roman, Times, Serif">*</font></td><td style="text-align: left"> </td><td> </td>
<td style="text-align: left"> </td><td style="text-align: right">12.1</td><td style="text-align: left"> </td></tr>
</table>
<p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0"> </p>
<table cellpadding="0" cellspacing="0" style="width: 100%; font: 10pt Times New Roman, Times, Serif; margin-top: 0pt; margin-bottom: 0pt"><tr style="vertical-align: top">
<td style="width: 0"></td><td style="width: 0.25in">*</td><td>Customer was less than 10% of total net sales for the six months ended June 30, 2020.</td></tr></table>
<p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-indent: 1in"> </p>
<p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0">There was one customer that represented 49.7% of gross accounts
receivable at June 30, 2020 and three customers that represented 67.8% of gross accounts receivable at December 31, 2019, respectively.
This is set forth in the table below.</p>
<p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 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; text-align: left; font-weight: bold">Customer</td><td style="padding-bottom: 1.5pt; font-weight: bold"> </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; padding-bottom: 1.5pt"> </td>
<td colspan="2" style="border-bottom: Black 1.5pt solid; font-weight: bold; text-align: center">June 30,<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 style="text-align: left"> </td><td> </td>
<td colspan="2" style="text-align: center">(Unaudited)</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">49.7</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"><font style="font: 10pt Times New Roman, Times, Serif">*</font></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>
<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"><font style="font: 10pt Times New Roman, Times, Serif">*</font></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>
</table>
<p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0"> </p>
<table cellpadding="0" cellspacing="0" style="width: 100%; font: 10pt Times New Roman, Times, Serif; margin-top: 0pt; margin-bottom: 0pt"><tr style="vertical-align: top">
<td style="width: 0"></td><td style="width: 0.25in">*</td><td>Customer was less than 10% of Gross Accounts Receivable at June 30, 2020.</td></tr></table>
<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"><u>Cash and Cash Equivalents</u></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">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: 0pt 0; text-align: justify"> </p>
<p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify"><u>Major Suppliers</u></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 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: 0pt 0; text-align: justify"> </p>
<p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0"><b>Leases</b></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; text-align: justify">The Company accounts for leases under ASC
842, "Leases." All leases are required to be recorded on the balance sheet and are classified as either operating leases
or finance leases. The lease classification affects the expense recognition in the income statement. Operating lease charges are
recorded entirely in operating expenses. Finance lease charges are split, where amortization of the right-of- use asset is recorded
in operating expenses and an implied interest component is recorded in interest expense.</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"><b>Earnings (Loss) per share</b></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">Basic earnings (loss) per share ("EPS")
is computed by dividing the net income (loss) 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: 0pt 0; text-align: justify"> </p>
<p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 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: 0pt 0; text-align: justify"> </p>
<p style="font: 10pt Times New Roman, Times, Serif; text-align: justify; margin: 0pt 0">The following is a reconciliation of the denominators of basic
and diluted earnings per share for discontinued operations computations:</p>
<p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 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">Three Months Ended</td><td style="padding-bottom: 1.5pt; font-weight: bold"> </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">Six Months Ended</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">June 30,<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">June 30,<br />
2019</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">June 30,<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">June 30,<br />
2019</td><td style="padding-bottom: 1.5pt; font-weight: bold"> </td></tr>
<tr style="vertical-align: bottom">
<td style="font-weight: bold">Discontinued Operations</td><td> </td>
<td colspan="2" style="text-align: center">(Unaudited)</td><td> </td><td> </td>
<td colspan="2" style="text-align: center">(Unaudited)</td><td> </td><td> </td>
<td colspan="2" style="text-align: center">(Unaudited)</td><td> </td><td> </td>
<td colspan="2" style="text-align: center">(Unaudited)</td><td> </td></tr>
<tr style="vertical-align: bottom; background-color: rgb(204,238,255)">
<td style="width: 52%; text-indent: -0.1in; padding-left: 0.1in">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">30,552,147</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">28,770,983</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">30,476,289</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">28,686,187</td><td style="width: 1%; text-align: left"> </td></tr>
<tr style="vertical-align: bottom; background-color: White">
<td style="text-align: left; text-indent: -0.1in; padding-left: 0.1in">Effect of dilutive stock options and 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">-</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">49,410</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; text-indent: -0.1in; padding-left: 0.1in">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">30,552,147</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">28,770,983</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">30,476,289</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">28,735,597</td><td style="padding-bottom: 4pt; text-align: left"> </td></tr>
</table>
<p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0"> </p>
<p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 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: 0pt 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="6" style="border-bottom: Black 1.5pt solid; font-weight: bold; text-align: center">Three and Six Months Ended</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">June 30,<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">June 30,<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">(Unaudited)</td><td> </td><td> </td>
<td colspan="2" style="text-align: center">(Unaudited)</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">216,000</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">861,000</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">1,423,000</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">2,183,000</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">1,639,000</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">3,044,000</td><td style="padding-bottom: 4pt; text-align: left"> </td></tr>
</table>
<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 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 that period:</p>
<p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 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="6" style="border-bottom: Black 1.5pt solid; font-weight: bold; text-align: center">Three and Six Months Ended</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">June 30,<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">June 30,<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">(Unaudited)</td><td> </td><td> </td>
<td colspan="2" style="text-align: center">(Unaudited)</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">1,696,000</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">515,000</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">760,000</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">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">5,045,000</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">5,934,000</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">7,501,000</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">6,449,000</td><td style="padding-bottom: 4pt; text-align: left"> </td></tr>
</table>
<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"><b>Stock-Based Compensation</b></p>
<p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0.3in 0pt 0; text-align: justify"> </p>
<p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 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. Stock based compensation
expense for employees amounted to $74,000 and $93,000 for the three months ended June 30, 2020 and 2019, respectively, and $214,000
and $326,000 for the six months ended June 30, 2020 and 2019, respectively. Stock compensation expense for directors amounted to
$46,000 and $0 for the three months ended June 30, 2020 and 2019, respectively and $101,000 and $131,000 for the six months ended
June 30, 2020 and 2019, respectively. Stock compensation expense for employees and directors was included in operating expenses
on the accompanying Condensed Consolidated Statements of Operations.</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 0.3in 0pt 0; text-align: justify"><b>Goodwill</b></p>
<p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0.3in 0pt 0; text-align: justify"> </p>
<p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 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 both June 30,
2020 and December 31, 2019 relates to the acquisition of NTW.</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">Goodwill is not amortized, but is tested
at least annually for impairment, or if circumstances occur that more likely than not reduce the fair value of the reporting unit
below its carrying amount.</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 COVID-19 pandemic was a triggering event for testing whether
goodwill has been impaired. The Company performed a qualitative assessment and determined it is more likely than not that the fair
value exceeds the carrying value of $163,000 as of June 30, 2020. The Company will continue to monitor the impacts of the COVID-19
pandemic in future quarters. Changes in the Company's forecasts or further decreases in the value of its common stock could
cause book values to exceed fair values which may result in goodwill impairment charges in future periods.</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 determined that there has
been no impairment of goodwill at June 30, 2020 and December 31, 2019.</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 0.3in 0pt 0; text-align: justify"><b>Recently Issued Accounting
Pronouncements</b></p>
<p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0.3in 0pt 0; text-align: justify"> </p>
<p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 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 condensed consolidated financial statements and related
disclosures. </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 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
condensed consolidated financial statements.</p>
<table cellspacing="0" cellpadding="0" style="font: 11pt Calibri, Helvetica, Sans-Serif; width: 100%; border-collapse: collapse">
<tr style="vertical-align: bottom">
<td> </td>
<td> </td>
<td colspan="6" style="border-bottom: black 1.5pt solid; text-align: center"><font style="font: 10pt Times New Roman, Times, Serif"><b>Three Months Ended</b></font></td>
<td> </td>
<td> </td>
<td colspan="6" style="border-bottom: black 1.5pt solid; text-align: center"><font style="font: 10pt Times New Roman, Times, Serif"><b>Six Months Ended</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>June 30,<br />
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>June 30,<br />
2019</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>June 30,<br />
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>June 30,<br />
2019</b></font></td>
<td> </td></tr>
<tr style="vertical-align: bottom">
<td><font style="font: 10pt Times New Roman, Times, Serif"><b>Discontinued Operations</b></font></td>
<td> </td>
<td colspan="2" style="text-align: center"><font style="font: 10pt Times New Roman, Times, Serif">(Unaudited)</font></td>
<td> </td>
<td> </td>
<td colspan="2" style="text-align: center"><font style="font: 10pt Times New Roman, Times, Serif">(Unaudited)</font></td>
<td> </td>
<td> </td>
<td colspan="2" style="text-align: center"><font style="font: 10pt Times New Roman, Times, Serif">(Unaudited)</font></td>
<td> </td>
<td> </td>
<td colspan="2" style="text-align: center"><font style="font: 10pt Times New Roman, Times, Serif">(Unaudited)</font></td>
<td> </td></tr>
<tr style="vertical-align: bottom; background-color: #CCEEFF">
<td style="width: 52%; padding-left: 0.1in; text-indent: -0.1in"><font style="font: 10pt Times New Roman, Times, Serif">Weighted average shares outstanding used to compute basic earnings per share</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">30,552,147</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">28,770,983</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">30,476,289</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">28,686,187</font></td>
<td style="width: 1%"> </td></tr>
<tr style="vertical-align: bottom; background-color: white">
<td style="padding-left: 0.1in; text-indent: -0.1in"><font style="font: 10pt Times New Roman, Times, Serif">Effect of dilutive stock options and warrants</font></td>
<td> </td>
<td> </td>
<td style="text-align: right"><font style="font: 10pt Times New Roman, Times, Serif">-</font></td>
<td> </td>
<td> </td>
<td> </td>
<td style="text-align: right"><font style="font: 10pt Times New Roman, Times, Serif">-</font></td>
<td> </td>
<td> </td>
<td> </td>
<td style="text-align: right"><font style="font: 10pt Times New Roman, Times, Serif">-</font></td>
<td> </td>
<td> </td>
<td> </td>
<td style="text-align: right"><font style="font: 10pt Times New Roman, Times, Serif">49,410</font></td>
<td> </td></tr>
<tr style="vertical-align: bottom; background-color: #CCEEFF">
<td style="padding-left: 0.1in; text-indent: -0.1in"><font style="font: 10pt Times New Roman, Times, Serif">Weighted average shares outstanding and dilutive securities used to compute dilutive earnings per share</font></td>
<td> </td>
<td style="border-bottom: black 4.5pt double"> </td>
<td style="border-bottom: black 4.5pt double; text-align: right"><font style="font: 10pt Times New Roman, Times, Serif">30,552,147</font></td>
<td> </td>
<td> </td>
<td style="border-bottom: black 4.5pt double"> </td>
<td style="border-bottom: black 4.5pt double; text-align: right"><font style="font: 10pt Times New Roman, Times, Serif">28,770,983</font></td>
<td> </td>
<td> </td>
<td style="border-bottom: black 4.5pt double"> </td>
<td style="border-bottom: black 4.5pt double; text-align: right"><font style="font: 10pt Times New Roman, Times, Serif">30,476,289</font></td>
<td> </td>
<td> </td>
<td style="border-bottom: black 4.5pt double"> </td>
<td style="border-bottom: black 4.5pt double; text-align: right"><font style="font: 10pt Times New Roman, Times, Serif">28,735,597</font></td>
<td> </td></tr>
</table>
<p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify"><b>Earnings (Loss) per share</b></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">Basic earnings (loss) per share ("EPS")
is computed by dividing the net income (loss) 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: 0pt 0; text-align: justify"> </p>
<p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 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: 0pt 0; text-align: justify"> </p>
<p style="font: 10pt Times New Roman, Times, Serif; text-align: justify; margin: 0pt 0">The following is a reconciliation of the denominators of basic
and diluted earnings per share for discontinued operations computations:</p>
<p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 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">Three Months Ended</td><td style="padding-bottom: 1.5pt; font-weight: bold"> </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">Six Months Ended</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">June 30,<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">June 30,<br />
2019</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">June 30,<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">June 30,<br />
2019</td><td style="padding-bottom: 1.5pt; font-weight: bold"> </td></tr>
<tr style="vertical-align: bottom">
<td style="font-weight: bold">Discontinued Operations</td><td> </td>
<td colspan="2" style="text-align: center">(Unaudited)</td><td> </td><td> </td>
<td colspan="2" style="text-align: center">(Unaudited)</td><td> </td><td> </td>
<td colspan="2" style="text-align: center">(Unaudited)</td><td> </td><td> </td>
<td colspan="2" style="text-align: center">(Unaudited)</td><td> </td></tr>
<tr style="vertical-align: bottom; background-color: rgb(204,238,255)">
<td style="width: 52%; text-indent: -0.1in; padding-left: 0.1in">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">30,552,147</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">28,770,983</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">30,476,289</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">28,686,187</td><td style="width: 1%; text-align: left"> </td></tr>
<tr style="vertical-align: bottom; background-color: White">
<td style="text-align: left; text-indent: -0.1in; padding-left: 0.1in">Effect of dilutive stock options and 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">-</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">49,410</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; text-indent: -0.1in; padding-left: 0.1in">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">30,552,147</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">28,770,983</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">30,476,289</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">28,735,597</td><td style="padding-bottom: 4pt; text-align: left"> </td></tr>
</table>
<p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0"> </p>
<p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 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: 0pt 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="6" style="border-bottom: Black 1.5pt solid; font-weight: bold; text-align: center">Three and Six Months Ended</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">June 30,<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">June 30,<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">(Unaudited)</td><td> </td><td> </td>
<td colspan="2" style="text-align: center">(Unaudited)</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">216,000</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">861,000</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">1,423,000</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">2,183,000</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">1,639,000</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">3,044,000</td><td style="padding-bottom: 4pt; text-align: left"> </td></tr>
</table>
<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 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 that period:</p>
<p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 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="6" style="border-bottom: Black 1.5pt solid; font-weight: bold; text-align: center">Three and Six Months Ended</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">June 30,<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">June 30,<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">(Unaudited)</td><td> </td><td> </td>
<td colspan="2" style="text-align: center">(Unaudited)</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">1,696,000</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">515,000</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">760,000</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">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">5,045,000</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">5,934,000</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">7,501,000</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">6,449,000</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"><b>Note 6. NOTES PAYABLE, RELATED PARTY NOTES
PAYABLE AND FINANCE LEASE OBLIGATIONS</b></p>
<p style="font: 10pt Times New Roman, Times, Serif; margin: 0 0.3in 0 0; text-align: justify"> </p>
<p style="font: 10pt Times New Roman, Times, Serif; margin: 0 0.3in 0 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 0.3in 0 0; text-align: justify"> </p>
<table cellspacing="0" cellpadding="0" style="font: 11pt Calibri, Helvetica, Sans-Serif; width: 100%; border-collapse: collapse">
<tr style="vertical-align: bottom">
<td style="white-space: nowrap"> </td>
<td style="white-space: nowrap"> </td>
<td colspan="2" style="white-space: nowrap; text-align: center"><font style="font: 10pt Times New Roman, Times, Serif"><b>June 30,</b></font></td>
<td style="white-space: nowrap"> </td>
<td style="white-space: nowrap"> </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 style="white-space: nowrap"> </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">
<td> </td>
<td> </td>
<td colspan="2" style="text-align: center"><font style="font: 10pt Times New Roman, Times, Serif">(unaudited)</font></td>
<td> </td>
<td> </td>
<td colspan="2" style="text-align: center"> </td>
<td> </td></tr>
<tr style="vertical-align: bottom; background-color: #CCEEFF">
<td style="width: 78%; padding-left: 0.1in; text-indent: -0.1in"><font style="font: 10pt Times New Roman, Times, Serif">Revolving credit note payable to Sterling National Bank ("SNB")</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: 8%; text-align: right"><font style="font: 10pt Times New Roman, Times, Serif">12,972,000</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: 8%; text-align: right"><font style="font: 10pt Times New Roman, Times, Serif">12,543,000</font></td>
<td style="width: 1%"> </td></tr>
<tr style="vertical-align: bottom; background-color: white">
<td style="padding-left: 0.1in; text-indent: -0.1in"><font style="font: 10pt Times New Roman, Times, Serif">Term loan, SNB</font></td>
<td> </td>
<td> </td>
<td style="text-align: right"><font style="font: 10pt Times New Roman, Times, Serif">3,516,000</font></td>
<td> </td>
<td> </td>
<td> </td>
<td style="text-align: right"><font style="font: 10pt Times New Roman, Times, Serif">3,800,000</font></td>
<td> </td></tr>
<tr style="vertical-align: bottom; background-color: #CCEEFF">
<td style="padding-left: 0.1in; text-indent: -0.1in"><font style="font: 10pt Times New Roman, Times, Serif">Finance lease obligations</font></td>
<td> </td>
<td> </td>
<td style="text-align: right"><font style="font: 10pt Times New Roman, Times, Serif">13,000</font></td>
<td> </td>
<td> </td>
<td> </td>
<td style="text-align: right"><font style="font: 10pt Times New Roman, Times, Serif">22,000</font></td>
<td> </td></tr>
<tr style="vertical-align: bottom; background-color: white">
<td style="padding-left: 0.1in; text-indent: -0.1in"><font style="font: 10pt Times New Roman, Times, Serif">Loan Payable - equipment</font></td>
<td> </td>
<td> </td>
<td style="text-align: right"><font style="font: 10pt Times New Roman, Times, Serif">242,000</font></td>
<td> </td>
<td> </td>
<td> </td>
<td style="text-align: right"><font style="font: 10pt Times New Roman, Times, Serif">385,000</font></td>
<td> </td></tr>
<tr style="vertical-align: bottom; background-color: #CCEEFF">
<td style="padding-left: 0.1in; text-indent: -0.1in"><font style="font: 10pt Times New Roman, Times, Serif">Related party notes payable, net of debt discount</font></td>
<td> </td>
<td> </td>
<td style="text-align: right"><font style="font: 10pt Times New Roman, Times, Serif">5,992,000</font></td>
<td> </td>
<td> </td>
<td> </td>
<td style="text-align: right"><font style="font: 10pt Times New Roman, Times, Serif">6,862,000</font></td>
<td> </td></tr>
<tr style="vertical-align: bottom; background-color: white">
<td style="padding-left: 0.1in; text-indent: -0.1in"><font style="font: 10pt Times New Roman, Times, Serif">Convertible notes payable-third parties, net of debt discount</font></td>
<td> </td>
<td> </td>
<td style="text-align: right"><font style="font: 10pt Times New Roman, Times, Serif">1,440,000</font></td>
<td> </td>
<td> </td>
<td> </td>
<td style="text-align: right"><font style="font: 10pt Times New Roman, Times, Serif">2,338,000</font></td>
<td> </td></tr>
<tr style="vertical-align: bottom; background-color: #CCEEFF">
<td style="padding-left: 0.1in; text-indent: -0.1in"><font style="font: 10pt Times New Roman, Times, Serif">SBA loans</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">2,414,000</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></tr>
<tr style="vertical-align: bottom; background-color: white">
<td style="padding-left: 0.1in; text-indent: -0.1in"><font style="font: 10pt Times New Roman, Times, Serif">Subtotal</font></td>
<td> </td>
<td> </td>
<td style="text-align: right"><font style="font: 10pt Times New Roman, Times, Serif">26,589,000</font></td>
<td> </td>
<td> </td>
<td> </td>
<td style="text-align: right"><font style="font: 10pt Times New Roman, Times, Serif">25,950,000</font></td>
<td> </td></tr>
<tr style="vertical-align: bottom; background-color: #CCEEFF">
<td style="padding-left: 0.1in; text-indent: -0.1in"><font style="font: 10pt Times New Roman, Times, Serif">Less: Current portion of notes payable, related party notes payable and finance lease obligations</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">(22,133,000</font></td>
<td><font style="font: 10pt Times New Roman, Times, Serif">)</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">(22,544,000</font></td>
<td><font style="font: 10pt Times New Roman, Times, Serif">)</font></td></tr>
<tr style="vertical-align: bottom; background-color: white">
<td style="padding-left: 0.1in; text-indent: -0.1in"><font style="font: 10pt Times New Roman, Times, Serif">Notes payable, related party notes payable and finance lease obligations, net of current portion</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">4,456,000</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">3,406,000</font></td>
<td> </td></tr>
</table>
<p style="font: 10pt Times New Roman, Times, Serif; margin: 0 0.3in 0 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"> </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; text-align: justify">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; text-align: justify"> </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 repayment terms of the SNB term loan provide
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; 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 June 30, 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-align: justify"> </p>
<p style="font: 10pt Times New Roman, Times, Serif; margin: 0; text-align: justify">As of June 30, 2020 the future minimum principal
payments for the SNB term loan are as follows:</p>
<p style="font: 10pt Times New Roman, Times, Serif; margin: 0; text-align: justify"> </p>
<table cellspacing="0" cellpadding="0" style="font: 11pt Calibri, Helvetica, Sans-Serif; width: 100%; border-collapse: collapse">
<tr style="vertical-align: bottom">
<td style="border-bottom: black 1.5pt solid"><font style="font: 10pt Times New Roman, Times, Serif"><b>For the twelve months ending</b></font></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>Amount</b></font></td>
<td> </td></tr>
<tr style="vertical-align: bottom; background-color: #CCEEFF">
<td style="width: 89%; padding-left: 0.1in; text-indent: -0.1in"><font style="font: 10pt Times New Roman, Times, Serif">December 31, 2020 (remainder of the year)</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: 8%; text-align: right"><font style="font: 10pt Times New Roman, Times, Serif">271,000</font></td>
<td style="width: 1%"> </td></tr>
<tr style="vertical-align: bottom; background-color: white">
<td style="padding-left: 0.1in; text-indent: -0.1in"><font style="font: 10pt Times New Roman, Times, Serif">December 31, 2021</font></td>
<td> </td>
<td> </td>
<td style="text-align: right"><font style="font: 10pt Times New Roman, Times, Serif">543,000</font></td>
<td> </td></tr>
<tr style="vertical-align: bottom; background-color: #CCEEFF">
<td style="padding-left: 0.1in; text-indent: -0.1in"><font style="font: 10pt Times New Roman, Times, Serif">December 31, 2022</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">2,760,000</font></td>
<td> </td></tr>
<tr style="vertical-align: bottom; background-color: white">
<td style="padding-left: 0.1in; text-indent: -0.1in"><font style="font: 10pt Times New Roman, Times, Serif">SNB Term Loan payable</font></td>
<td> </td>
<td> </td>
<td style="text-align: right"><font style="font: 10pt Times New Roman, Times, Serif">3,574,000</font></td>
<td> </td></tr>
<tr style="vertical-align: bottom; background-color: #CCEEFF">
<td style="padding-left: 0.1in; text-indent: -0.1in"><font style="font: 10pt Times New Roman, Times, Serif">Less: debt issuance costs</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">(58,000</font></td>
<td><font style="font: 10pt Times New Roman, Times, Serif">)</font></td></tr>
<tr style="vertical-align: bottom; background-color: white">
<td style="padding-left: 0.1in; text-indent: -0.1in"><font style="font: 10pt Times New Roman, Times, Serif">Total SNB Term loan payable, net of debt issuance costs</font></td>
<td> </td>
<td> </td>
<td style="text-align: right"><font style="font: 10pt Times New Roman, Times, Serif">3,516,000</font></td>
<td> </td></tr>
<tr style="vertical-align: bottom; background-color: #CCEEFF">
<td style="padding-left: 0.1in; text-indent: -0.1in"><font style="font: 10pt Times New Roman, Times, Serif">Less: Current portion of SNB term loan payable</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">(543,000</font></td>
<td><font style="font: 10pt Times New Roman, Times, Serif">)</font></td></tr>
<tr style="vertical-align: bottom; background-color: white">
<td style="padding-left: 0.1in; text-indent: -0.1in"><font style="font: 10pt Times New Roman, Times, Serif">Total long-term portion of SNB term loan payable</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">2,973,000</font></td>
<td> </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">Under the terms of the SNB Facility, both the
SNB revolving line of credit and the SNB term loan will bear an interest rate equal to 30-day LIBOR, (with a 1% floor), plus 2.5%.
The average interest rate charged during the period ended June 30, 2020 was 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: 0; text-align: justify">As of June 30, 2020, our debt to SNB in the
amount of $16,488,000 consisted of the SNB revolving line of credit note in the amount of $12,972,000 and the SNB term loan in
the amount of $3,516,000. As of December 31, 2019, our 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.</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 expense related to the SNB Facility
amounted to approximately $154,000 for the three months ended June 30, 2020, and $274,000 for the six months ended June 30, 2020.</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"><b>PNC Bank N.A. ("PNC")</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 previously maintained the PNC Facility.
Under the PNC 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"> </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 $333,000 for the three months ended June 30, 2019 and $563,000 for the six months ended June 30, 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>Loan Payable – Equipment</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">The Company is committed to a loan for manufacturing
equipment purchased during 2019. The loan payable obligation totaled $242,000 and $385,000 as of June 30, 2020 and December 31,
2019, respectively. The loan bears interest at 3% per annum.</p>
<p style="font: 10pt Times New Roman, Times, Serif; margin: 0; text-align: justify"> </p>
<p style="font: 10pt Times New Roman, Times, Serif; margin: 0; text-align: justify">The future minimum loan payments are as follows:</p>
<p style="font: 10pt Times New Roman, Times, Serif; margin: 0; text-align: justify"> </p>
<table cellspacing="0" cellpadding="0" style="font: 11pt Calibri, Helvetica, Sans-Serif; width: 100%; border-collapse: collapse">
<tr style="vertical-align: bottom">
<td style="border-bottom: black 1.5pt solid"><font style="font: 10pt Times New Roman, Times, Serif"><b>For the twelve months ending</b></font></td>
<td> </td>
<td colspan="2" style="border-bottom: black 1.5pt solid; text-align: center"><font style="font: 10pt Times New Roman, Times, Serif"><b>Amount</b></font></td>
<td> </td></tr>
<tr style="vertical-align: bottom; background-color: #CCEEFF">
<td style="width: 89%"><font style="font: 10pt Times New Roman, Times, Serif">December 31, 2020 (remainder of the year)</font></td>
<td style="width: 1%"> </td>
<td style="width: 1%"><font style="font: 10pt Times New Roman, Times, Serif">$</font></td>
<td style="width: 8%; text-align: right"><font style="font: 10pt Times New Roman, Times, Serif">145,000</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">December 31, 2021</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">97,000</font></td>
<td> </td></tr>
<tr style="vertical-align: bottom; background-color: #CCEEFF">
<td><font style="font: 10pt Times New Roman, Times, Serif">Total Loan Payable - equipment</font></td>
<td> </td>
<td> </td>
<td style="text-align: right"><font style="font: 10pt Times New Roman, Times, Serif">242,000</font></td>
<td> </td></tr>
<tr style="vertical-align: bottom; background-color: white">
<td><font style="font: 10pt Times New Roman, Times, Serif">Less: Current portion of loan payable - equipment</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">242,000</font></td>
<td> </td></tr>
<tr style="vertical-align: bottom; background-color: #CCEEFF">
<td><font style="font: 10pt Times New Roman, Times, Serif">Long-term portion of loan payable - equipment</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">-</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>Related Party Notes Payable</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">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"> </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"> </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 December 31, 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: 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"> </p>
<p style="font: 10pt Times New Roman, Times, Serif; margin: 0"><u>Private Placement of Subordinated Notes due May 31, 2019, together
with Shares of Common Stock</u> </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"> </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-align: justify"> </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"> </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"> </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 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 Loan facility, Michael and Robert Taglich agreed to extend
the maturity date of the 2019 Notes to December 31, 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: 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"> </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 our 8% Subordinated Convertible Notes (the "8% Notes"), together with warrants to
purchase a total of 383,080 shares of our 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 our 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 our
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"> </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 $5,992,000 and $6,862,000, as of June 30,
2020 and December 31, 2019, respectively. Unamortized debt discounts related to these notes amounted to $76,000 and $226,000 as
of June 30, 2020 and December 31, 2019, respectively. Interest incurred on these related party notes amounted to approximately
$125,000 and $362,000 for the three months ended June 30, 2020 and 2019, respectively, and $253,000 and $475,000 for the six months
ended June 30, 2020 and 2019 respectively. Amortization of debt discount incurred on these related party notes amounted to approximately
$77,000 and $101,000 for the three months ended June 30, 2020 and 2019, respectively and $151,000 and $231,000 for the six months
ended June 30, 2020 and 2019, respectively. The amortization of the debt discount is included in interest and financing costs in
the Condensed Consolidated Statement of Operations.</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">All related party notes are due on December
31, 2020 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">Per the terms of the SNB Facility, prior to September 30, 2020,
with respect to any and all related party notes payable and Subordinated Notes, (i) the maturity date shall be extended to a date
that is more than six months after December, 30, 2022 or (ii) shall be converted to common stock of 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"><b>Convertible Notes Payable – Third
Parties</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">In January 2020, the third party holders of
$805,000 principal of the 8% Notes with accrued interest thereon of $80,000 converted their notes into approximately 590,243 shares
of common stock at a per share price of $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 $1,440,000
and $2,338,000, as of June 30, 2020 and December 31, 2019, respectively. Interest incurred on the 8% Notes amounted to approximately
$38,000 and $168,000 for the three months ended June 30, 2020 and 2019, respectively, and $80,000 and $256,000 for the six months
ended June 30, 2020 and 2019, respectively. Unamortized debt discounts related to these notes amounted to $0 and $7,000 as of June
30, 2020 and December 31, 2019, respectively. Amortization of debt discount on the 8% Notes amounted to approximately $3,000 and
$5,000 for the three months ended June 30, 2020 and 2019, respectively, and $7,000 and $128,000 for the six months ended June 30,
2020 and 2019, respectively. These costs are included in interest and financing costs in the Condensed 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">All convertible notes with third parties are
due on December 31, 2020 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">Per the terms of the SNB Facility, prior to
September 30, 2020, with respect to any and all of the convertible notes payable, (i) the maturity date shall be extended to a
date that is more than six months after December, 30, 2022 or (ii) shall be converted to common stock of 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"><b>SBA Loans</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">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. Each SBA Loan is evidenced by a Note. Subject
to the terms of the Note, the SBA Loan bears interest at a fixed rate of one percent (1%) per annum, with the first six months
of interest deferred, has an initial term of two years, and is 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"). The Company
may apply to SNB for forgiveness of a portion of the SBA Loan in accordance the applicable provisions of the federal statute authorizing
the Loan Program. Each Note provides for customary events of default including, among other things, cross-defaults on any other
loan with SNB. Each SBA Loan may be accelerated upon the occurrence of an event of default. As of June 30, 2020, SBA Loans totaled
$2,414,000.</p>
<p style="font: 10pt Times New Roman, Times, Serif; margin: 0; text-align: justify"> </p>
<p style="font: 10pt Times New Roman, Times, Serif; margin: 0; text-align: justify">The future minimum loan payments are as follows:</p>
<p style="font: 10pt Times New Roman, Times, Serif; margin: 0; text-align: justify"> </p>
<table cellspacing="0" cellpadding="0" style="font: 11pt Calibri, Helvetica, Sans-Serif; width: 100%; border-collapse: collapse">
<tr style="vertical-align: bottom">
<td style="border-bottom: black 1.5pt solid"><font style="font: 10pt Times New Roman, Times, Serif"><b>For the twelve months ending</b></font></td>
<td> </td>
<td colspan="2" style="border-bottom: black 1.5pt solid; text-align: center"><font style="font: 10pt Times New Roman, Times, Serif"><b>Amount</b></font></td>
<td> </td></tr>
<tr style="vertical-align: bottom; background-color: #CCEEFF">
<td style="width: 89%; padding-left: 0.1in; text-indent: -0.1in"><font style="font: 10pt Times New Roman, Times, Serif">December 31, 2020 (remainder of the year)</font></td>
<td style="width: 1%"> </td>
<td style="width: 1%"><font style="font: 10pt Times New Roman, Times, Serif">$</font></td>
<td style="width: 8%; text-align: right"><font style="font: 10pt Times New Roman, Times, Serif">133,000</font></td>
<td style="width: 1%"> </td></tr>
<tr style="vertical-align: bottom; background-color: white">
<td style="padding-left: 0.1in; text-indent: -0.1in"><font style="font: 10pt Times New Roman, Times, Serif">December 31, 2021</font></td>
<td> </td>
<td> </td>
<td style="text-align: right"><font style="font: 10pt Times New Roman, Times, Serif">1,607,000</font></td>
<td> </td></tr>
<tr style="vertical-align: bottom; background-color: #CCEEFF">
<td style="padding-left: 0.1in; text-indent: -0.1in"><font style="font: 10pt Times New Roman, Times, Serif">December 31, 2022</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">674,000</font></td>
<td> </td></tr>
<tr style="vertical-align: bottom; background-color: white">
<td style="padding-left: 0.1in; text-indent: -0.1in"><font style="font: 10pt Times New Roman, Times, Serif">Total SBA Loans</font></td>
<td> </td>
<td> </td>
<td style="text-align: right"><font style="font: 10pt Times New Roman, Times, Serif">2,414,000</font></td>
<td> </td></tr>
<tr style="vertical-align: bottom; background-color: #CCEEFF">
<td style="padding-left: 0.1in; text-indent: -0.1in"><font style="font: 10pt Times New Roman, Times, Serif">Less: Current portion of SBA Loans</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">934,000</font></td>
<td> </td></tr>
<tr style="vertical-align: bottom; background-color: white">
<td style="padding-left: 0.1in; text-indent: -0.1in"><font style="font: 10pt Times New Roman, Times, Serif">Long-term portion of SBA Loans</font></td>
<td> </td>
<td style="border-bottom: black 4.5pt double"><font style="font: 10pt Times New Roman, Times, Serif">$</font></td>
<td style="border-bottom: black 4.5pt double; text-align: right"><font style="font: 10pt Times New Roman, Times, Serif">1,480,000</font></td>
<td> </td></tr>
</table>
<table cellpadding="0" cellspacing="0" style="font: 10pt Times New Roman, Times, Serif; border-collapse: collapse; width: 100%">
<tr style="vertical-align: bottom">
<td style="white-space: nowrap"> </td><td style="white-space: nowrap; font-weight: bold"> </td>
<td colspan="2" style="white-space: nowrap; font-weight: bold; text-align: center">June 30,</td><td style="white-space: nowrap; font-weight: bold"> </td><td style="white-space: nowrap; font-weight: bold"> </td>
<td colspan="2" style="white-space: nowrap; font-weight: bold; text-align: center">December 31,</td><td style="white-space: nowrap; font-weight: bold"> </td></tr>
<tr style="vertical-align: bottom">
<td> </td><td style="font-weight: bold; padding-bottom: 1.5pt"> </td>
<td colspan="2" style="border-bottom: Black 1.5pt solid; font-weight: bold; text-align: center">2020</td><td style="padding-bottom: 1.5pt; font-weight: bold"> </td><td style="font-weight: bold; padding-bottom: 1.5pt"> </td>
<td colspan="2" style="border-bottom: Black 1.5pt solid; font-weight: bold; text-align: center">2019</td><td style="padding-bottom: 1.5pt; font-weight: bold"> </td></tr>
<tr style="vertical-align: bottom">
<td> </td><td> </td>
<td colspan="2" style="text-align: center">(unaudited)</td><td> </td><td> </td>
<td colspan="2" style="text-align: center"> </td><td> </td></tr>
<tr style="vertical-align: bottom; background-color: rgb(204,238,255)">
<td style="text-align: left; text-indent: -0.1in; padding-left: 0.1in; width: 76%">Revolving credit note payable to Sterling National Bank ("SNB")</td><td style="width: 1%"> </td>
<td style="text-align: left; width: 1%">$</td><td style="text-align: right; width: 9%">12,972,000</td><td style="text-align: left; width: 1%"> </td><td style="width: 1%"> </td>
<td style="text-align: left; width: 1%">$</td><td style="text-align: right; width: 9%">12,543,000</td><td style="text-align: left; width: 1%"> </td></tr>
<tr style="vertical-align: bottom; background-color: White">
<td style="text-align: left; text-indent: -0.1in; padding-left: 0.1in">Term loan, SNB</td><td> </td>
<td style="text-align: left"> </td><td style="text-align: right">3,516,000</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; text-indent: -0.1in; padding-left: 0.1in">Finance lease obligations</td><td> </td>
<td style="text-align: left"> </td><td style="text-align: right">13,000</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; text-indent: -0.1in; padding-left: 0.1in">Loan Payable - equipment</td><td> </td>
<td style="text-align: left"> </td><td style="text-align: right">242,000</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; text-indent: -0.1in; padding-left: 0.1in">Related party notes payable, net of debt discount</td><td> </td>
<td style="text-align: left"> </td><td style="text-align: right">5,992,000</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; text-indent: -0.1in; padding-left: 0.1in">Convertible notes payable-third parties, net of debt discount</td><td> </td>
<td style="text-align: left"> </td><td style="text-align: right">1,440,000</td><td style="text-align: left"> </td><td> </td>
<td style="text-align: left"> </td><td style="text-align: right">2,338,000</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; text-indent: -0.1in; padding-left: 0.1in">SBA loans</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">2,414,000</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 style="text-indent: -0.1in; padding-left: 0.1in">Subtotal</td><td> </td>
<td style="text-align: left"> </td><td style="text-align: right">26,589,000</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: rgb(204,238,255)">
<td style="text-align: left; padding-bottom: 1.5pt; text-indent: -0.1in; padding-left: 0.1in">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">(22,133,000</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: White">
<td style="text-align: left; padding-bottom: 4pt; text-indent: -0.1in; padding-left: 0.1in">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">4,456,000</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">$</td><td style="border-bottom: Black 4pt double; text-align: right">3,406,000</td><td style="padding-bottom: 4pt; text-align: left"> </td></tr>
</table>
<table cellspacing="0" cellpadding="0" style="font: 11pt Calibri, Helvetica, Sans-Serif; width: 100%; border-collapse: collapse">
<tr style="vertical-align: bottom">
<td style="border-bottom: black 1.5pt solid"><font style="font: 10pt Times New Roman, Times, Serif"><b>For the twelve months ending</b></font></td>
<td> </td>
<td colspan="2" style="border-bottom: black 1.5pt solid; text-align: center"><font style="font: 10pt Times New Roman, Times, Serif"><b>Amount</b></font></td>
<td> </td></tr>
<tr style="vertical-align: bottom; background-color: #CCEEFF">
<td style="width: 89%; padding-left: 0.1in; text-indent: -0.1in"><font style="font: 10pt Times New Roman, Times, Serif">December 31, 2020 (remainder of the year)</font></td>
<td style="width: 1%"> </td>
<td style="width: 1%"><font style="font: 10pt Times New Roman, Times, Serif">$</font></td>
<td style="width: 8%; text-align: right"><font style="font: 10pt Times New Roman, Times, Serif">133,000</font></td>
<td style="width: 1%"> </td></tr>
<tr style="vertical-align: bottom; background-color: white">
<td style="padding-left: 0.1in; text-indent: -0.1in"><font style="font: 10pt Times New Roman, Times, Serif">December 31, 2021</font></td>
<td> </td>
<td> </td>
<td style="text-align: right"><font style="font: 10pt Times New Roman, Times, Serif">1,607,000</font></td>
<td> </td></tr>
<tr style="vertical-align: bottom; background-color: #CCEEFF">
<td style="padding-left: 0.1in; text-indent: -0.1in"><font style="font: 10pt Times New Roman, Times, Serif">December 31, 2022</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">674,000</font></td>
<td> </td></tr>
<tr style="vertical-align: bottom; background-color: white">
<td style="padding-left: 0.1in; text-indent: -0.1in"><font style="font: 10pt Times New Roman, Times, Serif">Total SBA Loans</font></td>
<td> </td>
<td> </td>
<td style="text-align: right"><font style="font: 10pt Times New Roman, Times, Serif">2,414,000</font></td>
<td> </td></tr>
<tr style="vertical-align: bottom; background-color: #CCEEFF">
<td style="padding-left: 0.1in; text-indent: -0.1in"><font style="font: 10pt Times New Roman, Times, Serif">Less: Current portion of SBA Loans</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">934,000</font></td>
<td> </td></tr>
<tr style="vertical-align: bottom; background-color: white">
<td style="padding-left: 0.1in; text-indent: -0.1in"><font style="font: 10pt Times New Roman, Times, Serif">Long-term portion of SBA Loans</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">1,480,000</font></td>
<td> </td></tr>
</table>
242000
674000
934000
1480000
<p style="font: 10pt Times New Roman, Times, Serif; margin: 0; text-align: justify"><font style="font: 10pt Times New Roman, Times, Serif"><b>Note
8. STOCKHOLDERS' EQUITY</b></font></p>
<p style="font: 10pt Times New Roman, Times, Serif; margin: 0; text-align: justify"><font style="font: 10pt Times New Roman, Times, Serif"> </font></p>
<p style="font: 10pt Times New Roman, Times, Serif; margin: 0; text-align: justify"><font style="font: 10pt Times New Roman, Times, Serif"><b>Common
Stock – Sale of Securities</b></font></p>
<p style="font: 10pt Times New Roman, Times, Serif; margin: 0; text-align: justify"><font style="font: 10pt Times New Roman, Times, Serif"><b> </b></font></p>
<p style="font: 10pt Times New Roman, Times, Serif; margin: 0; text-align: justify"><font style="font: 10pt Times New Roman, Times, Serif"></font></p>
<p style="font: 10pt Times New Roman, Times, Serif; margin: 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 our 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: 0; text-align: justify"> </p>
<p style="font: 10pt Times New Roman, Times, Serif; margin: 0; text-align: justify"><font style="font: 10pt Times New Roman, Times, Serif">The
Company issued 47,126 and 0 shares of common stock in lieu of cash payments for director fees for the three months ended June
30, 2020 and 2019, respectively, and 90,897 and 147,830 for the six months ended June 30, 2020 and 2019, respectively.</font></p>
<p style="font: 10pt Times New Roman, Times, Serif; margin: 0; text-align: justify"><font style="font: 10pt Times New Roman, Times, Serif"><b>Note
10. INCOME TAXES</b></font></p>
<p style="font: 10pt Times New Roman, Times, Serif; margin: 0; text-align: justify"><font style="font: 10pt Times New Roman, Times, Serif"> </font></p>
<p style="font: 10pt Times New Roman, Times, Serif; margin: 0; text-align: justify"><font style="font: 10pt Times New Roman, Times, Serif">The
Company recorded no income tax expense for the three and six months ended June 30, 2020 and 2019 because the estimated annual
effective tax rate was zero. In determining the estimated annual effective income tax rate, the Company analyzes various factors,
including projections of the Company's annual earnings and taxing jurisdictions in which the earnings will be generated,
the impact of state and local income taxes, the ability to use tax credits and net operating loss carry forwards, and available
tax planning alternatives.</font></p>
<p style="font: 10pt Times New Roman, Times, Serif; margin: 0; text-align: justify"><font style="font: 10pt Times New Roman, Times, Serif"> </font></p>
<p style="font: 10pt Times New Roman, Times, Serif; margin: 0; text-align: justify"><font style="font: 10pt Times New Roman, Times, Serif">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.</font></p>
<p style="font: 10pt Times New Roman, Times, Serif; margin: 0; text-align: justify"><font style="font: 10pt Times New Roman, Times, Serif"> </font></p>
<p style="font: 10pt Times New Roman, Times, Serif; margin: 0; text-align: justify"><font style="font: 10pt Times New Roman, Times, Serif">The
Company recorded no other federal income tax benefit for both of the three and six months ended June 30, 2020 and 2019.</font></p>
<p style="font: 10pt Times New Roman, Times, Serif; margin: 0; text-align: justify"><font style="font: 10pt Times New Roman, Times, Serif"> </font></p>
<p style="font: 10pt Times New Roman, Times, Serif; margin: 0; text-align: justify"><font style="font: 10pt Times New Roman, Times, Serif">As
of June 30, 2020, and December 31, 2019, the Company provided a full valuation allowance against its net deferred tax assets since
the Company believes it is more likely than not that its deferred tax assets will not be realized.</font></p>
<p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify"><b>Note 5. LEASES</b></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: 0; text-align: justify">The Company has operating and finance leases
for leased office and manufacturing facilities and equipment leases. The Company leases certain machinery and equipment under finance
leases and leases its offices and manufacturing facilities under operating leases. The leases have remaining lease terms of one
to six years, some of which include options to extend or terminate the leases.</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 three months ended June 30, 2020,
NTW's warehouse lease was terminated 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: 0pt 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">June 30,</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></tr>
<tr style="vertical-align: bottom; background-color: rgb(204,238,255)">
<td style="width: 88%; text-align: left">Weighted Average Remaining Lease Term - in years</td><td style="width: 1%"> </td>
<td style="width: 1%; text-align: left"> </td><td style="width: 9%; text-align: right">6.00</td><td style="width: 1%; text-align: left"> </td></tr>
<tr style="vertical-align: bottom; background-color: White">
<td>Weighted Average discount rate - %</td><td> </td>
<td style="text-align: left"> </td><td style="text-align: right">8.88</td><td style="text-align: left">%</td></tr>
</table>
<p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0"> </p>
<p style="font: 10pt Times New Roman, Times, Serif; margin: 0">The aggregate undiscounted cash flows of operating lease
payments for leases with remaining terms greater than one year are as follows:</p>
<p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 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">June 30,<br />
2020</td><td style="font-weight: bold"> </td></tr>
<tr style="vertical-align: bottom">
<td style="border-bottom: Black 1.5pt solid"><b>For the twelve months ended December 31,</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">(unaudited)</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%; text-indent: -0.1in; padding-left: 0.1in">December 31, 2020 (remaining six months)</td><td style="width: 1%"> </td>
<td style="width: 1%; text-align: left">$</td><td style="width: 9%; text-align: right">536,000</td><td style="width: 1%; text-align: left"> </td></tr>
<tr style="vertical-align: bottom; background-color: White">
<td style="text-indent: -0.1in; padding-left: 0.1in">December 31, 2021</td><td> </td>
<td style="text-align: left"> </td><td style="text-align: right">1,080,000</td><td style="text-align: left"> </td></tr>
<tr style="vertical-align: bottom; background-color: rgb(204,238,255)">
<td style="text-indent: -0.1in; padding-left: 0.1in">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: White">
<td style="text-indent: -0.1in; padding-left: 0.1in">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: rgb(204,238,255)">
<td style="text-indent: -0.1in; padding-left: 0.1in">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: White">
<td style="padding-bottom: 1.5pt; text-indent: -0.1in; padding-left: 0.1in">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">4,731,000</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; text-indent: -0.1in; padding-left: 0.1in">Total future minimum lease payments</td><td> </td>
<td style="text-align: left"> </td><td style="text-align: right">9,462,000</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; text-indent: -0.1in; padding-left: 0.1in">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">(4,510,000</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; text-indent: -0.1in; padding-left: 0.1in">Total operating lease maturities</td><td> </td>
<td style="text-align: left"> </td><td style="text-align: right">4,952,000</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; text-indent: -0.1in; padding-left: 0.1in">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">(672,000</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; text-indent: -0.1in; padding-left: 0.1in">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">4,280,000</td><td style="padding-bottom: 4pt; text-align: left"> </td></tr></table>
Customer was less than 10% of total net sales for the three months ended June 30, 2020.
Customer was less than 10% of total net sales for the six months ended June 30, 2020.
Customer was less than 10% of Gross Accounts Receivable at June 30, 2020.