Air Industries Group (AIRI) Risk Analysis

The Directors and Officers of the Company have agreed, among other things, to vote in favor of all proposals to be presented to our shareholders at the meeting which must be held to approve certain actions which must be taken to consummate the Merger (the "Shareholders Meeting"), including proposals to increase the number of shares of common stock we are authorized to issue from 20 million to 200 million, authorize stockholder action by written consent in lieu of a shareholders meeting at any time while Majority Ownership (as defined in the proposed Charter Amendment) exists and in order to comply with Section 713(b) of the NYSE American Company Guide, to approve the issuance of the shares of common stock pursuant to the Merger Agreement to the Tenax Members resulting in a change of control. Accordingly, such proposals, which are a condition to consummation of the Merger, could be approved even if the majority of the votes cast by the public shareholders are against it. Further, the directors and officers have agreed to vote against any Competing Proposal, as defined, and any other action, agreement or transaction involving the Company that is intended, or would reasonably be expected, to impede, interfere with, delay, postpone, adversely affect or prevent the consummation of the Merger.

In the period leading up to the Closing of the Merger, events may occur that, pursuant to the Merger Agreement, would require the Company to agree to amend the Merger Agreement, to consent to certain actions taken by Tenax, or to waive rights to which the Company is entitled to under the Merger Agreement. Such events could arise because of changes in the Company's business, a request by the Company to undertake actions that would otherwise be prohibited by the terms of the Merger Agreement, or the occurrence of other events that would have a material adverse effect on the Company's business and which would entitle Tenax to terminate the Merger Agreement. In any of such circumstances, it would be at the Company's discretion, acting through the Company's Board, to grant its consent or waive those rights. The existence of financial and personal interests of one or more of the directors in the consummation of the Merger may result in a conflict of interest on the part of such director(s) between what he or they may believe is best for the Company and the Company's shareholders and what he or they may believe is best for himself or themselves in determining whether or not to take the requested action.

Pursuant to the Merger Agreement, based upon our Indebtedness as of December 31, 2025, we will issue approximately 112.5 million shares of our common stock to the Members of Tenax and entities holding warrants to acquire membership interests in Tenax. As a result, the interests of current holders of our common stock will be substantially diluted and they will own in the aggregate, less than 5% of the number of shares of common stock outstanding immediately after consummation of the Merger.

The number of shares of our common stock to be issued to the members of Tenax is subject to adjustment based upon our operating performance between the date hereof and the end of the month preceding the month in which the Merger is consummated. Specifically, the number of shares to be issued will increase pursuant to the formula set forth in the Merger Agreement if our indebtedness, as defined in the Merger Agreement, increases ("Indebtedness"). Our Indebtedness increased during the year ended December 31, 2025, and likely will increase during the period commencing January 1, 2026, until the Merger is consummated or abandoned.

Although our common stock is listed on the NYSE American, there is only a limited number of our common shares available in the public float and the related market capitalization of our float is relatively small. Further, the proportion of our shares in the float will represent a very minor portion of our outstanding shares immediately following consummation of the Merger. The trading volume for our common stock has been limited and a more active public market for our common stock may not develop or be sustained over time. The lack of a robust market may impair a stockholder's ability to sell shares of our common stock. In the absence of a more active trading market, any attempt to sell our shares could result in a decrease in the price of our stock. Specifically, our shareholders may not be able to resell their shares of common stock at or above the price paid for such shares or at all.

Two of our directors, Michael N. Taglich and Robert F. Taglich, and their affiliates own a significant portion of our outstanding shares of common stock. They also held $4,871,000 of Related Party Notes as of December 31, 2025, some of which are convertible into our common stock. Although the Related Party Notes are subordinate to our debt pursuant to the Current Credit Facility, we may require additional concessions from the holders of the Related Party Notes and Tenax if we seek to refinance the Current Credit Facility or issue new debt. These related parties have significant influence over the outcome of corporate actions, including those actions requiring stockholder approval to permit the Merger to be consummated. The interests of these related parties may be different from the interests of other stockholders on these and other matters. Additionally, this concentration of ownership could also have the effect of delaying or preventing a change in our control or otherwise discouraging a potential acquirer from attempting to obtain control of us, which in turn could reduce the price of our common stock.

The sale of substantial amounts of shares of our common stock in the public market or the perception that such sales could occur, could negatively impact the market price of shares of our common stock. These sales, or the possibility that these sales may occur, also might make it more difficult for us or our shareholders to sell equity securities in the future at a time and at a price that we or they deem appropriate. In connection with the Merger, our directors and officers agreed that they will not, during the period beginning upon execution of the Merger Agreement and terminating on the date on which the Merger is consummated or the Merger Agreement is terminated, directly or indirectly, offer, sell, contract to sell, pledge, grant any option to purchase, make any short sale, or otherwise dispose of any shares of our common stock, or any options or warrants to purchase any shares of our common stock, or any securities convertible into, exchangeable for, or that represent the right to receive shares of our common stock, or any interest in any of the foregoing. Upon consummation of the Merger or termination of the Merger Agreement, shares held by our directors and officers will be eligible for resale, subject to, in the case of stockholders who are our affiliates, volume, manner of sale, and other limitations under Rule 144 promulgated under the Securities Act. In addition, shares of our common stock issuable upon exercise or vesting of incentive awards under our incentive plans are, once issued, eligible for sale in the public market, subject, in some cases, limitations on volume and manner of sale applicable to affiliates under Rule 144. Furthermore, shares of our common stock reserved for future issuance under our Equity Incentive Plans may become available for sale in future. The market price of our common stock could drop significantly if the holders of the shares described above sell them or are perceived by the market as intending to sell them. These factors could also make it more difficult for us to raise additional funds through future offerings of shares of our common stock or other securities.

The market price of our common stock has historically been volatile and is likely to continue to be volatile. The market price of our common stock could fluctuate widely due to factors relating to our operations, the terms of our Merger Agreement with Tenax, as well as those beyond our control, including public perception of the business prospects of Tenax and the likelihood of consummation of the Merger with Tenax. Because our common stock is thinly traded, the trading price may be volatile due to factors concerning our operations, such as variations in our operating results, failure to meet the covenants under the Current Credit Facility, news regarding the loss of a major customer or termination or a reduction in funding for a program we are on, the loss of management personnel, the outcome or perception of the potential outcome of any litigation, public perception of the business prospects of Tenax and the likelihood of consummation of the Merger with Tenax, general industry conditions and significant industry developments. In addition, the market price of our common stock may be affected by factors unrelated to our operations, such as general economic factors, government budgeting decisions affecting our industry and developments in the financial markets and availability of credit.

We are a "smaller reporting company." As a smaller reporting company, we may follow reduced disclosure requirements and do not have to make all of the disclosures that are made by public companies that are not smaller reporting companies. For so long as we remain a smaller reporting company, we are permitted and intend to rely on exemptions from certain disclosure requirements that are applicable to other public companies. We cannot predict whether investors will find our common stock less attractive if we rely on these exemptions. If some investors find our common stock less attractive as a result, there may be a less active trading market for our common stock and our share price may be more volatile.

If we fail to satisfy the continued listing requirements of the NYSE American, it may take steps to delist our common stock. There are measures that can be taken to remain in compliance with certain of the listing requirements of NYSE American which often require the undertaking of a reverse stock split, selling common stock at prices below what the Board of Directors may believe is its true value or completing a merger to acquire a new business. There are other exchanges and trading platforms on which we could choose to list our common stock. Our Board periodically examines the costs and benefits of listing our common stock on the NYSE American with the costs and benefits that would result from an alternative trading platform.  If our Board were to choose to seek another platform for the trading of our common stock, this could entail suspending our obligation to file periodic reports with the SEC and using other means to make information publicly available to shareholders and potential buyers of our common stock.  There can be no assurance that any cost savings and other benefits we might achieve from trading on another platform would outweigh any negative impact to the trading market and price of our common stock that would result from delisting from the NYSE American. If the NYSE delists the Company's securities from trading on its exchange and the Company is not able to list its securities on another national securities exchange, the Company's securities could be quoted on an over-the-counter market. If this were to occur, the Company could face significant material adverse consequences, including: - a limited availability of market quotations for its securities;- reduced liquidity for its securities;- a determination that the Company's common stock is a "penny stock" which will require brokers trading in the common stock to adhere to more stringent rules and possibly result in a reduced level of trading activity in the secondary trading market for the Company's securities;- a decreased ability to issue additional securities or obtain additional financing in the future.

If we consummate the Merger with Tenax the NYSE American may require us to meet the requirements for an initial listing. The NYSE American has announced it intends to amend its initial listing rules to require, among other criteria, a per share price of at least $4.00 per share and a market capitalization of at least $15,000,000. If we are unable to satisfy such requirements, it may take steps to delist our common stock. There are measures that can be taken to comply with certain of the listing requirements of NYSE American, such as effecting a reverse stock split or selling shares of our common stock.  We cannot assure you that the Company will be able to meet those initial listing requirements after the Merger.

Our quarterly and annual operating results fluctuate significantly due to a variety of factors, some of which are outside our control. Accordingly, we believe period-to-period comparisons should not be relied upon as indications of future performance. Some of the factors that could cause quarterly or annual operating results to fluctuate include conditions inherent in government contracting and our business such as the timing of cost and expense recognition for contracts, the U.S. Government contracting and budget cycles, introduction of new government regulations and standards, contract closeouts, variations in manufacturing efficiencies, our ability to obtain components and subassemblies from contract manufacturers and suppliers, general economic conditions and economic conditions specific to the defense market and disruptions caused by global events. Because we base our operating expenses on anticipated revenue trends and a high percentage of our expenses are fixed in the short term, any delay in generating or recognizing forecasted revenues could significantly harm our business. Fluctuations in quarterly results may cause earnings to fall below the expectations of securities analysts and investors. In this event, the trading price of our common stock could significantly decline. These fluctuations, as well as general economic and market conditions, may adversely affect the future market price of our common stock, as well as our overall operating results. Consequently, our share price may experience significant volatility and may not necessarily reflect the value of our expected performance.