Air Industries Group plans to sell about $7 million in common stock as the Hauppauge defense contractor grapples with “liquidity problems,” according to a government filing Thursday.
Acting president and CEO Peter Rettaliata said in an interview that losses in 2016, coupled with a surge in new orders that needs funding, created the liquidity crunch. “We have a tiger by the tail,” he said.
The publicly traded company plans to use the proceeds from the stock offering to pay suppliers, redeem some convertible securities and provide funds for working capital and other corporate purposes.
Rettaliata and chief financial officer Michael Recca also said in the Securities and Exchange Commission filing that they concluded that the company’s internal financial reporting controls for the quarter ended March 31 and the year ended Dec. 31 “were not effective” in accounting for the costs of work in progress, inventory on hand and tracking employee hours.
Alon Kapen, a securities lawyer at Farrell Fritz in Uniondale, said that Air Industries’ disclosures about internal financial controls brings into question the accuracy of the company’s financial statements and “as a practical matter,” could affect the willingness of investors to buy the stock.
Rettaliata said in the interview that the company has already “made changes in accounting personnel and is making additional changes in the very short term” to address those problems.
He said the company also is cutting costs. It has trimmed head count from 366 to about 318, due primarily to the sale in January of its AMK Technical Services subsidiary in South Windsor, Connecticut. That unit employed about 40 people, he said.
Shares of Air Industries gained 10 cents to close at $1.97 on heavy volume Thursday afternoon on the New York Stock Exchange. The stock has declined more than 58 percent in the last 12 months.
In 2016, Air Industries had a net loss $15.6 million in what Rettaliata said was a “very difficult year” that “hurt our liquidity and cash flow.”
As of May 31, the company had debt of $23.4 million under its loan facility secured by “substantially all of our assets,” according to the filing.
The company is offering to sell 4.4 million shares of stock, which would yield net proceeds of $7.1 million. Underwriters can exercise an option to sell up to 5.1 million, which would yield up to $8.3 million. The company had 7.7 million shares outstanding before the offering.
The company makes products for the Sikorsky UH-60 Black Hawk, Lockheed Martin F-35 Joint Strike Fighter, Northrop Grumman E2 Hawkeye and the Boeing 777.