CPI Aerostructures, Inc.
Annual Report 2024

 
UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
 
Form 10-K
 
ANNUAL REPORT PURSUANT TO SECTION 13 OR 15(d) OF
THE SECURITIES EXCHANGE ACT OF 1934
 
For the fiscal year ended December 31, 2024
 
Commission file number 1-11398
 
 
CPI AEROSTRUCTURES, INC.
(Exact name of registrant as specified in its charter)
 
New York
11-2520310
(State or other jurisdiction of
(I.R.S. Employer
incorporation or organization)
Identification No.)
 
91 Heartland Blvd., Edgewood, New York 11717
(Address of principal executive offices)
 
(631) 586-5200
(Registrant’s telephone number, including area code)
 
Securities registered pursuant to Section 12(b) of the Act:
 
Title of Each Class
Trading Symbol(s)
Name of each exchange on which registered
Common Stock, $.001 par value
CVU
NYSE American
 
Securities registered pursuant to Section 12(g) of the Act: None
 
Indicate by check mark if the registrant is a well-known seasoned issuer, as defined in Rule 405 of the Securities Act.
Yes ☐ No ☒
Indicate by check mark if the registrant is not required to file reports pursuant to Section 13 or Section 15(d) of the Act.
Yes ☐ No ☒
Indicate by check mark whether the registrant (1) has filed all reports required to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during
the preceding 12 months (or for such shorter period that the registrant was required to file such reports), and (2) has been subject to such filing requirements for
the past 90 days.
Yes ☒ No ☐
Indicate by check mark whether the registrant has submitted electronically every Interactive Data File required to be submitted pursuant to Rule 405 of
Regulation S-T (§232.405 of this chapter) during the preceding 12 months (or for such shorter period that the registrant was required to submit such files). Yes
☒ No ☐
Indicate by check mark whether the registrant is a large accelerated filer, an accelerated filer, a non-accelerated filer, a smaller reporting company, or an
emerging growth company. See definitions of “large accelerated filer,” “accelerated filer,” “smaller reporting company,” and “emerging growth company” in
Rule 12b-2 of the Exchange Act.
Large accelerated filer
☐
 
Accelerated filer
☐ 
Non-accelerated filer
☒
 
Smaller reporting company
☒
 
Emerging growth company
☐ 
 
 
 
If an emerging growth company, indicate by check mark if the registrant has elected not to use the extended transition period for complying with any new or
revised financial accounting standards provided pursuant to Section 13(a) of the Exchange Act. ☐
Indicate by check mark whether the registrant has filed a report on and attestation to its management’s assessment of the effectiveness of its internal control
over financial reporting under Section 404(b) of the Sarbanes-Oxley Act (15 U.S.C. 7262(b)) by the registered public accounting firm that prepared or issued

its audit report. ☐
If securities are registered pursuant to Section 12(b) of the Act, indicate by check mark whether the financial statements of the registrant included in the filing
reflect the correction of an error to previously issued financial statements. ☒
Indicate by check mark whether any of those error corrections are restatements that required a recovery analysis of incentive-based compensation received by
any of the registrant’s executive officers during the relevant recovery period pursuant to §240.10D-1(b). ☐
Indicate by check mark whether the registrant is a shell company (as defined in Rule 12-b-2 of the Exchange Act).
Yes ☐ No ☒
As of June 28, 2024 (the last business day of the registrant’s most recently completed second fiscal quarter), the aggregate market value of the registrant’s
common stock (based on its reported last sale price on NYSE American on June 28, 2024 of $2.47) held by non-affiliates of the registrant was $29,059,837. 
As of March 28, 2025, the registrant had 13,031,223 shares of common stock, $.001 par value, outstanding.
Documents Incorporated by Reference:
 
Portions of the CPI Aerostructures, Inc. Proxy Statement to be filed with the Securities and Exchange Commission within 120 days after the year covered by
this Annual Report on Form 10-K with respect to the registrant’s 2024 Annual Meeting of Stockholders are incorporated by reference into Part III hereof.
 
 

CPI AEROSTRUCTURES, INC. AND SUBSIDIARIES
 
FORM 10-K
ANNUAL REPORT
 
FOR THE FISCAL YEAR ENDED DECEMBER 31, 2024
 
TABLE OF CONTENTS
 
FORWARD-LOOKING STATEMENTS
3
PART I
3
Item 1.
BUSINESS
3
Item 1A.
RISK FACTORS
12
Item 1B
UNRESOLVED STAFF COMMENTS
17
Item 1C
CYBERSECURITY
17
Item 2.
PROPERTIES
18
Item 3.
LEGAL PROCEEDINGS
18
Item 4.
MINE SAFETY DISCLOSURES
18
PART II
19
Item 5.
MARKET FOR REGISTRANT’S COMMON EQUITY, RELATED STOCKHOLDER MATTERS AND ISSUER
PURCHASES OF EQUITY SECURITIES
19
Item 6.
[RESERVED]
20
Item 7.
MANAGEMENT’S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS
20
Item 7A.
QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISK
25
Item 8.
FINANCIAL STATEMENTS AND SUPPLEMENTARY DATA
25
Item 9.
CHANGES IN AND DISAGREEMENTS WITH ACCOUNTANTS ON ACCOUNTING AND FINANCIAL DISCLOSURE
25
Item 9A
CONTROLS AND PROCEDURES
25
Item 9B.
OTHER INFORMATION
26
Item 9C
DISCLOSURE REGARDING FOREIGN JURISDICTIONS THAT PREVENT INSPECTIONS
26
PART III
26
Item 10.
DIRECTORS, EXECUTIVE OFFICERS AND CORPORATE GOVERNANCE
26
Item 11.
EXECUTIVE COMPENSATION
26
Item 12.
SECURITY OWNERSHIP OF CERTAIN BENEFICIAL OWNERS AND MANAGEMENT AND RELATED
STOCKHOLDER MATTERS
26
Item 13.
CERTAIN RELATIONSHIPS AND RELATED TRANSACTIONS, AND DIRECTOR INDEPENDENCE
26
Item 14.
PRINCIPAL ACCOUNTANT FEES AND SERVICES
27
PART IV
27
Item 15.
EXHIBITS AND FINANCIAL STATEMENT SCHEDULES
27
Item 16.
FORM 10-K SUMMARY
28
 
INDEX TO FINANCIAL STATEMENTS
F-1
 
2

FORWARD LOOKING STATEMENTS
 
This Annual Report on Form 10-K contains forward-looking statements within the meaning of the Private Securities Litigation Reform Act of 1995. When used
in this Annual Report on Form 10-K and in future filings by us with the Securities and Exchange Commission (“SEC”), the words or phrases “believe”,
“intend”, “plan”, “will”, “will likely result”, “we expect”, “could”, “will continue”, “anticipated”, “estimated” or similar expressions are intended to identify
forward-looking statements. In addition, any statements that refer to projections, forecasts or other characterizations of future events or circumstances,
including any underlying assumptions, are forward-looking statements. These statements are not guarantees of future performance and are subject to risks and
uncertainties. There can be no assurance that future developments will be those that have been anticipated. We may not actually achieve the plans, intentions or
expectations disclosed in our forward-looking statements. Further, such statements are subject to certain risks and uncertainties that could cause actual results
to differ materially from historical earnings and those presently anticipated or projected. Numerous factors, including the risk factors described in “Item 1A:
Risk Factors” in this Annual Report on Form 10-K, could cause our actual results to differ materially from those expressed in our forward-looking statements.
We assume no obligation to revise or update any forward looking statements for any reason except as required by law.
The forward-looking statements contained in this Form 10-K speak only as of the date of its filing. Except where required by applicable law, we expressly
disclaim a duty to provide updates to forward-looking statements after the date of this Form 10-K to reflect subsequent events, changed circumstances, changes
in expectations, or the estimates and assumptions associated with them. The forward-looking statements in this Form 10-K are intended to be subject to the safe
harbor protection provided by the federal securities laws.
You should read the financial information set forth below in conjunction with our consolidated financial statements and notes thereto.
PART I
Item 1.
BUSINESS
General
CPI Aerostructures, Inc., including its wholly owned subsidiary Welding Metallurgy, Inc. (“WMI”) and Compac Development Corporation, a wholly owned
subsidiary of WMI (collectively, “CPI Aero”, the “Company”, “us”, or “we”) is a manufacturer of structural assemblies, integrated systems, and kitted
components for the domestic and international aerospace and defense (“A&D”) markets. Our products are generally used by customers in the production and
refurbishment of fixed wing aircraft, helicopters, electronic warfare (“EW”) systems, intelligence, surveillance, and reconnaissance (“ISR”) systems, missiles,
autonomous systems, and other sophisticated A&D products. We are primarily a Tier 1 supplier to Original Equipment Manufacturers (“OEMs”). We are also a
Tier 2 supplier to larger Tier 1 manufacturers and a prime contractor to the United States (“U.S.”) Department of Defense (“DOD”), primarily the U.S. Air
Force (“USAF”). Our products are used by OEMs within both commercial aerospace and national security markets. In addition to our assembly operations, we
provide manufacturing engineering, program management, supply chain management, kitting, and maintenance repair and overhaul (“MRO”) services.
CPI Aero has over 45 years of experience as a contractor. Our team possesses extensive technical expertise, program and supply chain management, and
integration capabilities. Our competitive advantage lies in our ability to offer large contractor capabilities with the flexibility and responsiveness of a small
company, while staying competitive in cost and delivering superior quality products.
We maintain a website located at www.cpiaero.com. Our corporate filings, including our Annual Reports on Form 10-K, our Quarterly Reports on Form 10-Q,
our Current Reports on Form 8-K, our proxy statements and reports filed by our officers and directors under Section 16(a) of the Securities Exchange Act of
1934, as amended (the “Exchange Act”), and any amendments to those filings, are available, free of charge, on our website as soon as reasonably practicable
after we electronically file such material with the SEC. The contents of our website are not incorporated in or otherwise to be regarded as a part of this Annual
Report on
Form 10-K.
History
Conceived and started as a technical consulting firm on January 11, 1980, within a few years, Composite Products International Inc. (“CPI”) was
manufacturing aircraft structural components for U.S. military aircraft under contract to the U.S. Government. By the late 1980s, CPI was also providing
structural components for civil aircraft in the commercial market.
In the 1990s, CPI became a publicly traded company and changed its name to CPI Aerostructures, Inc. (“CPI Aero”). The Company continued to grow, both in
size and in its business. U.S. Government contracts served as the mainstay of CPI Aero’s business, and the Company continued to grow its presence in the
commercial market as well. Commitment to customer satisfaction and pride in a job well done propelled CPI Aero to the forefront as a reputable and
hardworking supplier to OEMs.
On September 5, 2000, CPI Aero shares were listed on the American Stock Exchange (now known as NYSE American). We also started to focus on
diversifying our business model to pursue more commercial contracts. In 2007, the Company won three major contracts and experienced great growth and
expansion.
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In 2018, CPI Aero acquired Welding Metallurgy Inc. This allowed for a small but strategically important amount of vertical integration in complex fusion
welding and large diameter tube bending capability. The acquisition included Miller Stuart and Compac Development Corporation, two other business lines
that added fabrication of electrical cables, harnesses and enclosures to the Company’s capabilities.
Today, CPI Aero continues to engage in traditional high quality structural assembly manufacturing while incorporating the latest in technology to improve
quality and streamline production. Our success is rooted in our core company values, the dedication and skill of our employees, and our commitment to
providing our customers the full-service solution they require.
Products and Services
We offer design, engineering, manufacture, build, MRO services, and supply chain and kitting services capabilities to the A&D industry as follows:
●
Aerostructures: New Production and Repair/Overhaul of Fielded Wing Structures and other Control Surfaces, Rudder Island, Engine Inlets/Nacelles,
Engine Exhaust Manifolds, Aircraft Doors and Windows, Aircraft Steps and Racks, and other Aircraft Secondary Structures
●
Aerosystems: Airborne Pod Structures and Integration of Internal Systems, Radar Housing Structures, Panel Assemblies, Mechanical Door Locking
Systems, and Canopy Lifting Systems
●
Large Diameter Tube Bending: Complex Ducts and Tubes in Steel, Aluminum, Titanium, and Nickel Alloys
●
Complex Specialty Welding: Fusion Welded Fluid Tanks and Resistance Welding (Spot and Seam) of complex metallic assemblies
●
Electrical Cables, Harness, and Enclosures: Wire Harnesses, Power Control Systems, Fuel Management Systems, Power Distribution Systems,
Fully Integrated Electrical Control Systems, and RF enclosures
Engineering Services and Capabilities
As a build-to-print structural assemblies manufacturer, CPI Aero’s engineering focus is on executing customer contracts through product realization, and to
support collaborative design development using design for manufacturing and assembly (“DFMA”), geometric dimensioning & tolerancing (“GD&T”), and
tooling concept support. CPI Aero has a deep well of experience on various types of detail part manufacturing that allows us to provide detailed design for
manufacturing input during the design refinement process.
We have significant experience working in a full model-based definition environment, both CATIA and NX, due to our long sustainment support on older
airframes. CPI Aero also possesses the capability to work with traditional blueprints, mylars and loft. The Company has executed several projects where older
engineering data sets were “rehabilitated” to fully model-based datasets per customers’ requests.
CPI Aero is capable and has experience in designing many types of assembly type tools up to and including large floor mounted, articulated tooling at high
levels of precision. We are also capable of designing various types of tooling that can be 3D printed for rapid response. Understanding our customers’ product
performance needs and combining product GD&T layout and final tooling definitions and requirements helps us maximize product realization success.
Overall, CPI Aero’s engineering team is dedicated to providing our customers an experience where our activities are an extension of their business and
complement their engineering goals.
Business Strategy
CPI Aero is committed to achieving revenue, gross profit margin, and earnings growth through the successful implementation of our business development
strategy. CPI Aero’s future strategic direction is tied to aerostructures, aerosystems, supply chain, and kitting services, and a deeper market penetration of
formerly acquired businesses in welding, tube bending, wire harnesses, and electronics. To accomplish this strategy, we are focused on executing on our current
customer programs while pursuing new aerospace build-to-print opportunities - in both new production and MRO statements of work.
We believe that there has been a shift in the market for more build-to-print contracts by OEMs versus the past trend of design and build contracts. This trend
fits in well with CPI Aero’s strengths. In addition, we expect to identify and close contracts for which we can provide more value added content to our
customer (like integrating sub-assemblies into higher level Aerostructures and Aerosystems statements of work) and we intend to pursue statements of work
that require proportionately higher CPI Aero value added content.
Another tenet of the CPI Aero business development strategy is portfolio reshaping of our existing business by identifying and closing long-term agreements or
multi-year contracts, which provides an opportunity to firm-up supplier agreements and secure supplier capacity.
The final element of CPI Aero’s business development strategy is to build upon the Company’s existing customer relationships and to develop relationships
with new customers. We intend to increase customer engagements by deploying our business development personnel to solidify existing customer relationships
which have been established by performance excellence, transparency and trust over many years and multiple programs. We have also added additional
resources to our business development function to cultivate new relationships with new customers.
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We will make sure each customer has the best possible buying experience, by ensuring we are a best value partner through the delivery of high quality products
delivered on time. The CPI Aero team will always work in a collaborative way to meet customers’ needs and solve their problems.
The Market
We have positioned the Company to take advantage of opportunities in the military aerospace market to a broad customer base, thereby reducing the impact of
direct government contracting limitations. Our success as a subcontractor to defense prime contractors has provided us with opportunities to also act as a
subcontractor to prime contractors in the production of commercial aircraft structures.
Over time, our Company has expanded in both capabilities and size, as evidenced by our growth in our operational, global supply chain management, program
management, and engineering capabilities, as well as the growth in our manufacturing shop floor size and equipment base. These expansions have provided us
the ability to supply larger and more complex Aerostructures and Aerosystems products in support of our government-based programs as well as to pursue
opportunities within the commercial and business jet markets. Our capabilities have also allowed us to obtain MRO, kitting, tube bending, welding, and
electronics related contracts.
Competition
We face competition in our role as both a prime contractor to the U.S. Government and as a Tier 1 or Tier 2 subcontractor to military and commercial aircraft
manufacturers. With respect to Aerostructures products, we often compete against much larger Tier 1 suppliers, such as Spirit Aerosystems, Kaman Aerospace,
GKN Aerospace, Ducommun, and LMI Aerospace. We believe that we can compete effectively with these larger companies by delivering products with the
same level of quality and performance at a better value for our customer. With respect to Aerosystems products, such as our portfolio of EW and ISR integrated
pod structures, we find more limited competition and are not aware of competition from any of the Aerostructures companies mentioned above. In these cases,
we typically compete with the internal manufacturing arm of our customers. We believe our unique skills related to integrated pod structures combined with a
very efficient and generally lower cost structure create a competitive advantage for bidding on Aerosystems contracts.
For certain unrestricted contracts for the U.S. Government, we may compete against well-established prime contractors, including Northrop Grumman,
Lockheed Martin, and Boeing. All of these competitors possess significantly larger infrastructures, greater resources and the capabilities to respond to much
larger contracts. We believe that our competitive advantage lies in our ability to offer large contractor capabilities with the flexibility and responsiveness of a
small company, while staying competitive in cost and delivering superior quality products. While larger prime contractors compete for significant modification
awards, they generally do not compete for awards in smaller modifications, spares and replacement parts, even for aircraft for which they are the original
manufacturer. In certain instances, the large prime contractors often subcontract much of the work they win to their Tier 1 suppliers so we also may act as a
subcontractor to them in these situations. Furthermore, in some cases these prime contractors are not permitted to bid, for example when the U.S. Government
designates a contract as a Small Business Set-Aside. In these restricted contracts for the U.S. Government, CPI Aero typically competes against numerous
small business competitors. We believe we compete effectively against the smaller competitors because of our 45 years of experience and expertise in
responding to requests for proposals for government contracts
Our Customers
Approximately $5.1 million and $6.0 million of our revenue for the years ended December 31, 2024 and 2023, respectively, were from customers outside the
U.S. All other revenue for the years ended December 31, 2024 and 2023 has been attributable to customers within the U.S. We have no assets outside the U.S.
We have positioned our Company to take advantage of opportunities in the military aerospace market to a broad customer base, which we believe will reduce
the potential impact of industry consolidation or potential defense budget reductions. Our success as a subcontractor to defense prime contractors has provided
us with opportunities to also act as a subcontractor to prime contractors in the production of commercial aircraft structures, which we believe will also reduce
our exposure to defense industry consolidation, government spending decisions, and other defense industry risks.
Our OEM customers in the defense sector include leading prime defense contractors such as:
●
Lockheed Martin Corporation - we provide products used in the production of Lockheed Martin Corporation’s (“Lockheed Martin”) F-35 Joint
Strike Fighter and an international variant of the F-16 Fighting Falcon. We also provide structural assemblies to Sikorsky, a Lockheed Martin
company (“Sikorsky”), for many of their military helicopter platforms including the UH-60 BLACK HAWK©, MH-60 Seahawk, CH-53E and CH-
53K King Stallion, and a special purpose helicopter.
●
RTX Corporation, formerly Raytheon Technologies – we provide products to multiple business divisions of RTX Corporation (“Raytheon”):
Raytheon (Next Generation Jammer – Mid-Band Pod, Advanced Tactical Pods, Intelligence, Surveillance and Airborne Reconnaissance Pods, Missile
Wings and Components, and Radar Racks) and Collins Aerospace (RF Enclosures).
5

●
The Boeing Company - we provide critical wing structure for The Boeing Company’s (“Boeing”) A-10 re-wing program and welded structures for
the CH-47 Chinook helicopter.
●
Northrop Grumman Corporation – we provide structural components and kits for the Northrop Grumman Corporation (“NGC”) E-2D Advanced
Hawkeye, various integrated radar and laser pod structures, welded tubes, and welded fluid tanks for a classified program.
80% and 81% of our revenue in 2024 and 2023, respectively, was generated by subcontracts with defense prime contractors.
Our OEM customers in the civil aviation market include:
●
Embraer S.A. Executive Jets – we provide engine inlet assemblies for Embraer S.A.’s (“Embraer”) Phenom 300 business jet and recently were
awarded a contract to manufacture engine inlets for the Phenom 100 business jet.
6% and 5% of our revenue in 2024 and 2023, respectively, was generated by commercial contract sales.
CPI Aero also is a prime contractor to the DOD, primarily through contracts directly with the USAF and the Defense Logistics Agency (“DLA”), providing
supply chain management, assembly & integration, and kitting services for the F-16 and T-38 programs. 14% and 14 % of our revenue in 2024 and 2023,
respectively, were generated by direct government sales.
Significant Contracts
Our most significant contracts are described below:
Military Aircraft – Subcontracts with Prime Contractors
 
E-2D Advanced Hawkeye: The NGC E-2D Advanced Hawkeye is an all-weather, carrier-based tactical Airborne Early Warning aircraft. The twin turboprop
aircraft was designed and developed in the 1950s by the Grumman Aircraft Company for the U.S. Navy. The U.S. Navy aircraft has been progressively updated
with the latest variant, the E-2D, first flying in 2007. In 2008, we received an initial $7.9 million order from NGC to provide structural kits used in the
production of Outer Wing Panels (“OWP”) of the E-2D. We initially valued the long-term agreement at approximately $98 million over an eight-year period,
with the potential to be in excess of $195 million over the life of the aircraft program. In February of 2019, we announced a new multi-year award valued at up
to approximately $47.5 million. In June 2020, we announced that we had received firm orders valued in excess of $43 million and $5 million in long-lead
funding in anticipation of purchase orders for OWP structural components and kits. In 2021, we received additional orders valued at approximately $11
million. Since 2008, the cumulative orders we have received on this program through December 31, 2024 exceed $210 million. We anticipate shipping against
these orders into 2025.
In February 2020, the Company’s subsidiary WMI received approximately $4 million in purchase orders from NGC to produce numerous welded structures
and tubes for the E-2D Advanced Hawkeye. Under the terms of the purchase orders, WMI manufactured more than 140 different items in support of the
production of at least 25 E-2D aircraft. CPI received follow-on orders for additional quantities of welded products in 2024 totaling $2.8 million and anticipates
additional orders in 2025.
ALQ-249 Next Generation Jammer – Mid-Band Pod (“NGJ-MB”): The Raytheon NGJ-MB pod is an external jamming pod that will disrupt and degrade
enemy aircraft and ground radar and communication systems, and will replace the ALQ-99 system on the U.S. Navy’s EA-6B Growler carrier-based electronic
warfare aircraft. The U.S. Navy plans to install these pods on 139 EA-18G Growlers during the production phase. There are two pods per aircraft. There are
also 11 EA-18Gs operated by the Royal Australian Air Force. Raytheon received a $1 billion sole source contract from the U.S. Navy in April 2016, and CPI
Aero has a contract with Raytheon to assemble the pod structural housing and air management system (“AMS”) and integrate customer furnished equipment.
In 2019, Raytheon authorized CPI Aero to begin production of pod structures and AMS components for the System Demonstration and Test Article (“SDTA”)
phase of the NGJ-MB program. All SDTA pods and AMS components orders received were valued in excess of $60 million and completed delivery as of
December 31, 2022.
On November 16, 2021 the Company announced it was authorized by Raytheon to start the production phase of the program. The Company was awarded low
rate production (“LRIP”) I and II orders valued at approximately $18.5 million. LRIP III, for which the Company was awarded an order of approximately
$14.0 million in October 2022, and later definitized at $32.5 million. In November 2023, Raytheon issued a Memorandum for Record for Lot4 with an
anticipated Program Value of $32 million and an initial funding limit of $16 million. In December 2024, Lot 4 was fully funded at $33.4M. We believe that the
total value of the NGJ-MB program through production will be in excess of $254 million through 2030.
A-10 Thunderbolt II “Warthog”: The Boeing A-10 Thunderbolt II, also known as the Warthog, is a twin-engine aircraft that provides close-air support of
ground forces and employs a wide variety of conventional munitions including general-purpose bombs. This simple, effective and survivable single-seat
aircraft can be used against all ground targets, including tanks and other armored vehicles. On August 21, 2019, Boeing announced that it had received an
Indefinite Delivery/Indefinite Quantity (“IDIQ”) contract award from the USAF with a maximum contract value of $999 million to manage the production of
up to 112 new wing sets and spares kits for A-10 aircraft, and the USAF ordered 27 wing sets from Boeing immediately at contract award. In 2019, CPI Aero
announced the receipt of an IDIQ contract with a maximum ceiling value of $48 million from Boeing for structural assemblies for the A-10. Under the terms of
the IDIQ contract, CPI Aero will manufacture major structural subassemblies of the A-10 aircraft’s wing. The Company also announced that it had received
initial purchase orders under the IDIQ contract valued at approximately $6 million for the production of four shipsets of assemblies and associated program
start-up costs. In May 2020, CPI Aero announced the receipt of additional purchase orders totaling approximately $14 million from Boeing. In March of 2022,
CPI Aero announced the receipt of additional purchase orders totaling approximately $3.2 million. Including additional orders received in 2023, the total
purchase orders received as of December 31, 2024 aggregated $23.8 million. CPI will finish deliveries on this contract in 2025.
6


F-35 Lightning II: The Lockheed Martin F-35 Lightning II is a family of single-seat, single-engine, all-weather stealth multirole fighter aircraft that provides
unmatched multi-role capability, survivability, and connectivity with data sharing capabilities essential for joint all-domain operations. Current DOD plans call
for acquiring a total of 2,456 F-35s. U.S. allies are expected to purchase hundreds of additional F-35s, with eight nations participating as cost-sharing partners
in the program with the United States, and six other nations allied with the U.S. purchasing the F-35 via foreign military sales agreements with the DOD. In
2015, CPI Aero was awarded a multi-year contract to supply four different lock assemblies for the arresting gear door on the F-35C Carrier Take Off and
Landing variant. CPI Aero made its first delivery under that contract in May 2017. In November 2017, CPI Aero was awarded an additional $15.8 million
multi-year contract to manufacture canopy activation drive shaft assemblies for the F-35A, F-35B, and F-35C variants. In 2018, the Company received a new
long-term agreement valued at approximately $8 million for lock assemblies for which deliveries were completed in January 2025.
UH-60 “BLACK HAWK”: The Sikorsky UH-60 BLACK HAWK helicopter is the leader in multi-mission rotary wing aircraft. Among the mission
configurations it serves are troop transport, medical evacuation, electronic warfare, attack, assault support, and special operations. More than 4,000 BLACK
HAWK helicopters are in use today, operating in 29 countries. CPI Aero manufactures several different structural assemblies, including welded structure for the
BLACK HAWK. The majority of CPI Aero’s contracts for the BLACK HAWK are as a Tier 1 supplier to Sikorsky. The Company also is a Tier 2 supplier to
GKN Aerospace and Ducommun for products ultimately used on the BLACK HAWK. In 2017, CPI Aero received an approximately $21 million long-term
agreement through 2022 for the production of fuel panel assemblies, work it has performed for Sikorsky since 2010. Also in 2017, the Company received an $8
million long-term agreement through 2022 to manufacture machine gunner window assemblies for the BLACK HAWK, continuing work it has performed
since 2010. A third five-year long-term agreement was awarded in January 2022, also for gunner window assemblies, estimated at $13.6 million with a period
of performance from 2023-2027. Also, since October 2018, CPI Aero has received multiple purchase orders totaling $22 million for hover infrared suppression
system (“HIRSS”) module assemblies for use as spares on older variants of the BLACK HAWK. The HIRSS is a defensive countermeasures system that is
integral to the survival of the BLACK HAWK by reducing the opportunity for an infrared-seeking threat system to acquire, lock onto, track, and destroy the
aircraft. Finally, in May 2021, the Company announced receiving a multi-year contract valued at up to $17.2 million for the repair and overhaul of outboard
stabilator assemblies in support of the Sikorsky MH-60 SEAHAWK. In late 2024, Sikorsky kicked off proposal efforts for the next SEAHAWK PBL
commencing in 2027. Through December 31, 2024, CPI received orders totaling $6.5 million.
F-16V Fighting Falcon: The Lockheed Martin F-16 is the world’s most successful, combat-proven multirole fighter. Approximately 3,000 operational F-16s
are in service today in 25 countries. The F-16V is a new variant, sold exclusively to international air forces and is the most technologically advanced fourth
generation fighter in the world. In 2019, the Company announced it had been awarded a multi-year contract by Lockheed Martin to manufacture Rudder Island
and Drag Chute Canister (“RI/DCC”) assemblies for the F-16V. The RI/DCC is a large structural sub-assembly that is installed on the tail section of the
aircraft. CPI Aero deliveries began in 2021. In June 2020, the Company announced that it had been awarded an order from Lockheed Martin as part of the
previously announced multi-year contract to manufacture RI/DCC assemblies for new production F-16 Block 70/72 aircraft, in March 2021 the Company
announced that it had received an additional order for these assemblies for $9.2 million and in November 2022, the Company announced another follow-on
order for these assemblies for $4 million. On August 28, 2023 CPI announced the receipt of a 2nd Multiyear long-term agreement with not-to-exceed funding
of $34.4 million. The total value of the RI/DCC program, including both multi-year contracts is approximately $60 million. In 2024, Lockheed initiated
proposal efforts for the next pricing period, the anticipated LTA3.
CH-53K King Stallion: The CH-53K is a heavy-lift helicopter produced by Sikorsky for the U.S. Marine Corps. We manufacture composite electronics racks
as a Tier 2 supplier to Spirit AeroSystems, Inc., the manufacturer of the CH-53K cockpit and cabin. Through December 31, 2024, we had received orders
valued at more than $2.8 million from Spirit AeroSystems, Inc.
In addition, the Company also manufactures welded titanium and aluminum tubes for the CH-53K as a Tier 1 supplier to Sikorsky. In August 2023, CPI
received a Long-term Agreement with a ceiling price of $17.4 million and a funding limit of $7.3 million. These tubes will be required for the multi-year on
this program. This statement of work includes CPI Aero intellectual property.
Undisclosed Pod Structure: In 2019, the Company received an initial purchase order from Raytheon to manufacture pod structures for an undisclosed
application. The value of the order was approximately $2.3 million for manufacturing engineering services, development of assembly tooling, and the
production of the prototypes. The undisclosed pod structure is currently under development. In October 2021, the Company announced that Raytheon awarded
the Company an approximately $6.1 million contract modification that changes the scope of work the Company would perform and increases the quantity of
pods to be produced. The program value as of December 31, 2024 was $9.5 million for deliveries into 2025. CPI Aero has been awarded the follow-on to this
development statement of work.
7

Undisclosed Vehicle: In 2018, the Company started production of a welded tank for NGC for an undisclosed application on an undisclosed platform. The total
value of orders received as of December 31, 2024 is $3.2 million. Anticipated spares orders are expected to continue in 2025.
B-52 Radar Rack: In late 2021, the Company received an initial purchase order from Raytheon to manufacture radar rack structures for the B-52 Radar
Modernization Program. The value of the order was approximately $4.0 million for manufacturing engineering services, development of assembly tooling, and
the production of the initial units. The non-recurring and tooling phase of the program was completed and the initial 11 racks have been delivered in 2024. CPI
submitted proposals for follow-on lots of racks and an award is anticipated in 2025.
Next Generation Jammer – Low Band Pod: In August of 2024, the Company received a letter contract from a new customer, L3Harris Technologies to
manufacture pod structures for the Next Generation Low Band Program. The estimated value of this first development phase of the program is $12.1 million
with initial Purchase Order funding received in fourth quarter of 2024 of $5 million for long lead material, manufacturing engineering services, development of
assembly tooling, and the production of the initial units.
Military Aircraft – Prime Contracts with U.S. Government
 
T-38 Pacer Classic III, Phase 2: For more than 50 years, the NGC T-38 has been the principal supersonic jet trainer used by the USAF. The T-38C Pacer
Classic III Fuselage Structural Modification Kit Integration program (“PC III”) and the Talon Repair Inspection and Maintenance (“TRIM”) program are
expected to increase the structural service life of the T-38 beyond 2030. In 2015, CPI Aero was awarded Phase 2 of PC III and has received purchase orders
valued at approximately $2.0 million from the USAF to provide structural modification kits for the PC III aircraft structural modification program.
T-38 Pacer Classic III, Phase 3 and TRIM: In July 2019, the Company announced a new $65.7 million IDIQ contract from the USAF for the final phase of
PC III as well as TRIM. The TRIM program is a separate USAF structural modification effort that will extend the structural service life of T-38A and T-38
model types, as well as T-38C models that were not modified during PC III. Through December 31, 2020, the Company had received orders valued at
approximately $15.3 million for the PC III, Phase 3 and TRIM programs, and in 2021, the Company announced it had received three separate orders for
additional requirements valued at approximately $16.2 million. Through December 2024, CPI has received funded orders under this long term agreement
totaling $48.7 million.
Commercial Aircraft – Subcontracts with Prime Contractors
 
Embraer Phenom 300: The Phenom 300 is a twin-engine, executive jet produced by Brazilian aircraft company Embraer that can carry between six and ten
passengers and a crew of two. We have been producing engine inlet assemblies for Embraer under a long-term agreement we entered into in 2012. In January
2024, we celebrated the delivery of the 800th Shipset of Inlets. In 2024, we received funded orders totaling $5.0 million.
Embraer Phenom 100: The Phenom 100 is a light executive business jet twin-engine, produced by Brazilian aircraft company Embraer that can carry up to
six passengers and a crew of two. Embraer unveiled the Phenom 100EX, the Company’s latest evolution from the Phenom 100 series with over 400 aircraft in
operation. Embraer has informed us in December 2024 that we have been selected to produce the engine inlets for this aircraft. We anticipate our first deliveries
to take place in 2025.
Backlog
We produce custom assemblies pursuant to long-term contracts and customer purchase orders. Funded backlog consists of aggregate funded values under such
contracts and purchase orders, excluding the portion previously included in operating revenues pursuant to Accounting Standards Codification Topic 606
(“ASC 606”). Unfunded backlog is the estimated amount of future orders under the expected duration of the program. Substantially all of our unfunded
backlog is subject to termination at will and rescheduling, without significant penalty. Funds are often appropriated for programs or contracts on a yearly or
quarterly basis, even though the contract may call for performance that is expected to take a number of years. Therefore, our funded backlog does not include
the full value of our contracts.
The total backlog at December 31, 2024 is $510,271,000.
Our total backlog as of December 31, 2024 and 2023 was as follows:
Backlog
(Total)
December 31,
2024
December 31,
2023
Funded
$
85,039,000
$
118,218,000
Unfunded
425,232,000
395,133,000
Total
$
510,271,000
$
513,351,000
    
  
 
   
 
   
 
8

Approximately 95% and 97% of the total amount of our backlog at December 31, 2024 and 2023 was attributable to government contracts. Our backlog
attributable to government contracts at December 31, 2024 and 2023 was as follows:
Backlog
(Government)
December 31,
2024
December 31,
2023
Funded
$
82,262,000
$
115,681,000
Unfunded
404,256,000
383,574,000
Total
$
486,518,000
$
499,255,000
    
  
 
   
 
   
 
Our backlog attributable to commercial contracts at December 31, 2024 and 2023 was as follows:
Backlog
(Commercial)
December 31,
2024
December 31,
2023
Funded
$
2,777,000
$
2,537,000
Unfunded
20,976,000
11,559,000
Total
$
23,753,000
$
14,096,000
    
  
 
   
 
   
 
Material and Parts
We subcontract production of substantially all parts incorporated into our products to third-party manufacturers under firm fixed price orders. Our decision to
purchase certain components generally is based upon whether the components are available to meet required specifications at a cost and with a delivery
schedule consistent with customer requirements. From time to time, we are required to purchase custom made parts from sole suppliers and manufacturers in
order to meet specific customer requirements.
We obtain our raw materials from several commercial sources. Although certain items are only available from limited sources of supply, we believe that the
loss of any single supplier would not have a material adverse effect on our business.
Government Regulation
Environmental Regulation
We are subject to regulations administered by the U.S. Environmental Protection Agency, the U.S. Occupational Safety and Health Administration, various
state, county, and local agencies acting in cooperation with federal and state authorities. Among other things, these regulatory bodies impose restrictions to
control air, soil, and water pollution, to protect against occupational exposure to chemicals, including health and safety risks, and to require notification or
reporting of the storage, use, and release of certain hazardous chemicals and substances. The extensive regulatory framework imposes compliance burdens and
risks on us. Governmental authorities have the power to enforce compliance with these regulations and to obtain injunctions or impose civil and criminal fines
in the case of violations.
The Comprehensive Environmental Response, Compensation and Liability Act of 1980 (“CERCLA”) imposes strict, joint and several liability on the present
and former owners and operators of facilities that release hazardous substances into the environment. The Resource Conservation and Recovery Act of 1976
(“RCRA”) regulates the generation, transportation, treatment, storage, and disposal of hazardous waste. In New York State, the handling, storage, and disposal
of hazardous substances are governed by the Environmental Conservation Law, which contains the New York counterparts of CERCLA and RCRA. In
addition, the Occupational Safety and Health Act, which requires employers to provide a place of employment that is free from recognized and preventable
hazards that are likely to cause serious physical harm to employees, obligates employers to provide notice to employees regarding the presence of hazardous
chemicals and to train employees in the use of such substances.
Our operations require the use of a limited amount of chemicals and other materials for painting and cleaning, including solvents and thinners, which are
classified under applicable laws as hazardous chemicals and substances. We follow all federal, state and local rules and regulations regarding the disposal of
these chemicals and associated waste. We have obtained a permit from the Town of Islip, New York, Building Division in order to maintain a paint booth
containing flammable liquids.
Federal Aviation Administration Regulation
We are subject to regulation by the Federal Aviation Administration (“FAA”) under the provisions of the Federal Aviation Act of 1958, as amended. The FAA
prescribes standards and licensing requirements for aircraft and aircraft components. We are subject to inspections by the FAA and may be subjected to fines
and other penalties (including orders to cease production) for noncompliance with FAA regulations. Our failure to comply with applicable regulations could
result in the termination of or our disqualification from some of our contracts, which could have a material adverse effect on our operations.
9

Government Contract Compliance
Our government contracts and sub-contracts are subject to the procurement rules and regulations of the U.S. Government. Many of the contract terms are
dictated by these rules and regulations. Specifically, cost-based pricing is determined under the Federal Acquisition Regulation (“FAR”), which provide
guidance on the types of costs that are allowable in establishing prices for goods and services under U.S. Government contracts. For example, costs such as
those related to charitable contributions, advertising, interest expense, and public relations are unallowable, and therefore not recoverable through sales. During
and after the fulfillment of a government contract, we may be audited in respect of the direct and allocated indirect costs attributed thereto. These audits may
result in adjustments to our contract costs. Additionally, we may be subject to U.S. Government inquiries and investigations because of our participation in
government procurement. Any inquiry or investigation can result in fines or limitations on our ability to continue to bid for government contracts and fulfill
existing contracts. We believe that we are in compliance with all federal, state, and local laws and regulations governing our operations and have obtained all
material licenses and permits required for the operation of our business.
The U.S. Government generally has the ability to terminate our contracts, in whole or in part, without prior notice, for convenience or for default based on
performance. If a U.S. Government contract were to be terminated for convenience, we generally would be protected by provisions covering reimbursement for
costs incurred on the contract and profit on those costs, but not the anticipated profit that would have been earned had the contract been completed. In the
unusual circumstance where a U.S. Government contract does not have such termination protection, we attempt to mitigate the termination risk through other
means. Termination resulting from our default may expose us to liability and could have a material adverse effect on our ability to compete for other contracts.
The U.S. Government also has the ability to stop work under a contract for a limited period of time for its convenience. In the event of a stop work order, we
generally would be protected by provisions covering reimbursement for costs incurred on the contract to date and for costs associated with the temporary
stoppage of work on the contract. However, such temporary stoppages and delays could introduce inefficiencies for which we may not be able to negotiate full
recovery from the U.S. Government, and could ultimately result in termination for convenience or reduced future orders on certain contracts. Additionally, we
may be required to continue to perform for some period of time on certain of our U.S. Government contracts, even if the U.S. Government is unable to make
timely payments.
Insurance
We maintain a $2.0 million general liability insurance policy, a $100 million products liability insurance policy, and a $5.0 million umbrella liability insurance
policy. Additionally, we maintain $10.0 million of director and officers’ liability insurance. We believe this coverage is adequate for claims that have been and
may be brought against us, and for the types of products presently marketed because of the strict inspection standards imposed on us by our customers before
they take possession of our products. Additionally, the FAR generally provide that we will not be held liable for any loss of or damage to property of the U.S.
Government that occurs after the U.S. Government accepts delivery of our products and that results from any defects or deficiencies in our products unless the
liability results from willful misconduct or lack of good faith on the part of our managerial personnel.
Proprietary Information
None of our current assembly processes or products is protected by patents. We rely on proprietary know-how and information and employ various methods to
protect the processes, concepts, ideas, and documentation associated with our products. These methods, however, may not afford complete protection and there
can be no assurance that others will not independently develop such processes, concepts, ideas, and documentation.
CPI Aero® is a registered trademark of the Company.
Human Capital Management 
Our ability to attract, develop and retain top talent across all of our business functions, and particularly in highly technical areas, has a significant impact on
organizational success. Accordingly, our human capital management strategy places a significant focus on both attracting a diverse, highly skilled workforce
and engaging and developing talent from within by creating a work environment that promotes inclusion and equitability. By providing our valued employees
the opportunity to enhance their skillsets, develop their careers and pursue excellence through numerous training and development opportunities, we
consistently emphasize the importance of innovation and continuous improvement throughout our organization. We continue to pursue opportunities that
enable us to build our talent pipeline, particularly for skilled labor, including running an apprentice training program several times over the course of the year
and forging relationships with local high school and trade schools.
We attract and compensate our employees by offering a competitive total rewards package which includes benefits, resources, and programs that support
health, physical, mental, and financial wellness. The benefits package we offer, coupled with employee recognition opportunities and employee engagement
activities help create a comprehensive employee experience. We periodically benchmark our benefits programs and associated costs to remain competitive.
As of December 31, 2024, we had 212 full-time employees as compared to 203 full-time employees as of December 31, 2023. On an as-needed basis, we
employ temporary personnel with specialized disciplines to fill staffing gaps. We do not have any employees represented by a union, and we believe that our
relations with our employees are good. We provide our team members with ongoing opportunities to share thoughts and perspectives on company and
employment-related matters through surveys, all-hands meetings, and management open door policies. Our management, with oversight from the
Compensation and Human Resources Committee of our board of directors, monitors the hiring, retention, and management of our employees and regularly
conducts succession planning to ensure that we continue to cultivate the pipeline of talent needed to operate our business.
10

Diversity and Inclusion  
We value diversity and inclusion in our workforce as we understand that diversity of background, thought, and experience leads to greater innovation and
improved business results. We are committed to increasing and retaining diversity at all levels of our workforce, and focus on diversity and inclusion
throughout our recruitment, hiring, and onboarding processes. Diversity within our board of directors is 29%, and our executive management team is
comprised of 50% diverse employees.
Across our total employee population and based on employees who self-identify, as of December 31, 2024, approximately 20% of our workforce are female,
36% are multicultural and 4% are veterans.
Safety
Ensuring the safety and well-being of our employees is a top priority. The goal of our safety program is to increase safety knowledge and awareness throughout
the organization to ensure occupational health, reduce risk, and prevent incidents. We regularly benchmark our safety performance, self-audit our safety
compliance, and provide our employees with safety-related training. We conduct an investigation, including root cause analysis and corrective action, any time
a safety incident or a near miss occurs.
Our Safety Committee is comprised of employees from various disciplines throughout the organization who meet on a regular basis to execute continuous
improvement strategies, develop methods to increase ownership of safety throughout the organization, establish new safety initiatives, and assess safety
performance.
We monitor the effectiveness of our safety program by comparing recordable incidents and incident severity year over year. We measure the number of safety
incidents with the total recordable incident rate (“TRIR”) metric and the severity of incidents with the days away restricted and transferred (“DART”) metric.
The table below represents our result from the two most recent calendar years:
Safety Metric
2024
2023
TRIR
4.8
2.9
DART
2.7
1.0
TRIR = total number of recordable cases x 200,000 / total hours worked
DART = number of cases with days away from work x 200,000 / total hours worked by all employees
11

Community Involvement
Having a positive impact on the community around us is one of our most important values. We donate to local charitable organizations, such as United Way of
Long Island, through both monetary contributions, as well as “drives” to collect and deliver employee donated food and school supplies. We actively engage
and educate local high school students from surrounding districts about the manufacturing and engineering industry and career trajectory. This includes, hosting
educational experiences and shop tours with high school and trade school classes. Members of our leadership team participate on the boards of trade
associations that support and advance the interests of the local community.
Item 1A.
RISK FACTORS
In addition to other risks and uncertainties described in this Annual Report on Form 10-K, the following material risk factors should be carefully considered in
evaluating our business because such factors may have a significant impact on our business, operating results, liquidity, and financial condition. As a result of
the risk factors set forth below, actual results did and could continue to differ materially from those projected in any forward-looking statements.
Risks Related to Our Business 
We depend on government contracts for a significant portion of our revenues.
We are a supplier, either directly or as a subcontractor, to the U.S. Government and its agencies. We depend on government contracts for a significant portion of
our business. If we are suspended or barred from contracting with the U.S. Government, if our reputation or relationship with individual federal agencies were
impaired, or if the U.S. Government otherwise ceased doing business with us or significantly decreased the amount of business it does with us, our business,
prospects, financial condition, and operating results would be materially adversely affected.
We face risks relating to government contracts.
The funding of U.S. Government programs is subject to congressional budget authorization and appropriation processes. For many programs, the U.S.
Congress appropriates funds on a fiscal year basis even though a program may extend over several fiscal years. Consequently, programs are often only partially
funded initially and additional funds are committed only as Congress makes further appropriations. Appropriations are driven by numerous factors, including
geopolitical events, macroeconomic conditions, the ability of the U.S. Government to enact relevant legislation, such as appropriations bills and continuing
resolutions, the threat or existence of a government shutdown and potential downgrades of the United States’ credit rating, and risks relating to the recent U.S.
presidential election. We cannot predict the extent to which total funding and/or funding for individual programs will be included, increased or reduced in
budgets approved by Congress or be included in the scope of separate supplemental appropriations. In the event that appropriations for any of our programs
becomes unavailable, or is reduced or delayed, our contract or subcontract under such program may be terminated or adjusted by the U.S. Government, which
could have a material adverse effect on our future sales under such program, and on our financial position, results of operations and cash flows.
We also cannot predict the impact of potential changes in priorities due to military transformation and planning and/or the nature of war-related activity on
existing, follow-on, or replacement programs. A shift of government priorities to programs in which we do not participate and/or reductions in funding for or
the termination of programs in which we do participate, unless offset by other programs and opportunities, could have a material adverse effect on our financial
position, results of operations, and cash flows.
In addition, the U.S. Government generally has the ability to terminate contracts, completely or in part, without prior notice, for convenience or for default
based on performance. In the event of termination for the U.S. Government’s convenience, contractors are generally protected by provisions covering
reimbursement for costs incurred on the contracts and profit on those costs but not the anticipated profit that would have been earned had the contract been
completed. Termination by the U.S. Government of a contract for convenience could also result in the cancellation of future work on that program. Termination
by the U.S. Government of a contract due to our default could require us to pay for re-procurement costs in excess of the original contract price, net of the
value of work accepted from the original contract. Termination of a contract due to our default may expose us to liability and could have a material adverse
effect on our ability to compete for contracts. Additionally, we are a subcontractor on some U.S. Government contracts. In these arrangements, the U.S.
Government could terminate the prime contract for convenience or otherwise, without regard to our performance as a subcontractor. We can give no assurance
that we would be awarded new U.S. Government contracts to offset the revenues lost as a result of the termination of any of our U.S. Government contracts.
We have risks associated with competing in the bidding process for contracts.
We obtain many of our contracts through a competitive bidding process. In the bidding process, we face the following risks:
●
we must bid on programs in advance of their completion, which may result in unforeseen technological difficulties or cost overruns;
12

●
we must devote substantial time and effort to prepare bids and proposals for competitively awarded contracts that may not be awarded to us; and
●
awarded contracts may not generate sales sufficient to result in profitability.
Further consolidation in the aerospace industry could adversely affect our business and financial results.
The A&D industry has experienced significant consolidation, including among our customers, competitors, and suppliers. While we believe we have positioned
our Company to take advantage of opportunities to market to a broad customer base, which we believe will reduce the potential impact of industry
consolidation, there can be no assurance that industry consolidation will not impact our business. Consolidation among our customers may result in delays in
the awarding of new contracts and losses of existing business. Consolidation among our competitors may result in larger competitors with greater resources and
market share, which could adversely affect our ability to compete successfully. Consolidation among our suppliers may result in fewer sources of supply and
increased costs to us.
We depend upon a select base of large prime defense contractors for the majority of our revenue, which subjects us to unique risks which may adversely
affect us.
We currently generate a majority of our revenues by producing products for numerous programs under contracts with three prime defense contractors to the
U.S. Government. These significant customers – Raytheon, Lockheed Martin and United States Air Force – constituted approximately 36%, 24% and 14%,
respectively of our 2024 revenue. Our revenues from these customers are diversified over several different A&D products, programs, and subsidiaries within
these customers, however, any significant change in production rates by any of these customers would have a material effect on our results of operations and
cash flows. There is no assurance that our current significant customers will continue to buy products from us at current levels, that we will retain any or all our
existing significant customers, or that we will be able to form new relationships with other customers upon the loss of one or more of our existing significant
customers.
We are subject to strict governmental regulations relating to the environment, which could result in fines and remediation expenses in the event of non-
compliance.
We are required to comply with extensive and frequently changing environmental regulations at the federal, state, and local levels. Among other things, these
regulatory bodies impose restrictions to control air, soil, and water pollution, to protect against occupational exposure to chemicals, including health and safety
risks, and to require notification or reporting of the storage, use, and release of certain hazardous substances into the environment. This extensive regulatory
framework imposes significant compliance burdens and risks on us. In addition, these regulations may impose liability for the cost of removal or remediation
of certain hazardous substances released on or in our facilities without regard to whether we knew of, or caused, the release of such substances. Furthermore,
we are required to provide a place of employment that is free from recognized and preventable hazards that are likely to cause serious physical harm to
employees, provide notice to employees regarding the presence of hazardous chemicals and to train employees in the use of such substances. Our operations
require the use of a limited amount of chemicals and other materials for painting and cleaning that are classified under applicable laws as hazardous chemicals
and substances. If we are found not to comply with any of these rules, regulations, or permits, we may be subject to fines, remediation expenses, and the
obligation to change our business practice, any of which could result in substantial costs that would adversely affect our business operations and financial
condition.
We may be subject to fines and disqualification for non-compliance with Federal Aviation Administration (“FAA”) regulations.
We are subject to regulation by the FAA under the provisions of the Federal Aviation Act of 1958, as amended. The FAA prescribes standards and licensing
requirements for aircraft and aircraft components. We are subject to inspections by the FAA and may be subjected to fines and other penalties (including orders
to cease production) for noncompliance with FAA regulations. Our failure to comply with applicable regulations could result in the termination of or our
disqualification from some of our contracts, which could have a material adverse effect on our operations and financial condition.
If our subcontractors or suppliers fail to perform their contractual obligations, our contract performance, and our ability to obtain future business and our
profitability could be materially and adversely impacted.
Most of our contracts involve subcontracts with other companies upon which we rely to perform a portion of the services that we must provide to our
customers. There is a risk that we may have disputes with our subcontractors, including disputes regarding the quality and timeliness of work performed by the
subcontractor, customer concerns about the subcontract, our failure to extend existing task orders or issue new task orders under a subcontract, our hiring of
personnel of a subcontractor, or disputes concerning payment. A failure by one or more of our subcontractors to satisfactorily provide on a timely basis the
agreed-upon supplies or perform the agreed-upon services may materially and adversely affect our ability to fulfill our obligations as the prime contractor.
Subcontractor performance deficiencies could result in a customer eliminating our ability to progress bill or terminate our contract for default. A prohibition on
progress billing may have an adverse effect upon our cash flow and profitability and a default termination could expose us to liability and have a material
adverse effect on our ability to compete for future contracts and orders. In addition, a delay in our ability to obtain components and equipment parts from our
suppliers may affect our ability to meet our customers’ needs and may have a material adverse effect upon our profitability.
13

Due to fixed contract pricing, increasing contract costs exposes us to reduced profitability and the potential loss of future business.
Operating margin is adversely affected when contract costs that cannot be billed to customers are incurred. This cost growth can occur if estimates to complete
a contract increase due to technical challenges or if initial estimates used for calculating the contract price were incorrect. The cost estimation process requires
significant judgment and expertise. Reasons for cost growth may include unavailability and productivity of labor, the nature and complexity of the work to be
performed, the effect of change orders, the availability and cost of materials, the effect of any delays in performance, availability, and timing of funding from
the customer, natural disasters, pandemics, and the inability to recover any claims included in the estimates to complete. A significant increase in cost estimates
on one or more programs could have a material adverse effect on our financial position or results of operations.
We use estimates when accounting for contracts. Changes in estimates may affect our profitability and our overall financial position.
We primarily recognize revenue from our contracts over the contractual period pursuant to ASC 606. Pursuant to ASC 606, revenue and gross profit are
recognized as work is performed based on the relationship between actual costs incurred and total estimated costs at the completion of the contract. Recognized
revenues that will not be billed under the terms of the contract until a later date are recorded on our consolidated balance sheet as an asset captioned “Contract
assets.” Contracts where billings to date have exceeded recognized revenues are recorded on our consolidated balance sheet as a liability captioned “Contract
liabilities.” Changes to the original estimates may be required during the term of the contract. Estimates are reviewed quarterly and the effect of any change in
the estimated gross margin percentage for a contract is reflected in the consolidated financial statements for the period the change becomes known. ASC 606
requires the use of considerable estimates in determining revenues and profits and in assigning the amounts to accounting periods. As a result, there can be a
significant disparity between earnings (both for accounting and taxes) as reported and actual cash received by us during any reporting period.
We continually evaluate all the issues related to the assumptions, risks and uncertainties inherent with the application of ASC 606; however, there is no
assurance that our estimates will be accurate. If our estimates are not accurate or a contract is terminated, we will be forced to adjust revenue in later periods.
Furthermore, even if our estimates are accurate, we may have a shortfall in our cash flow and we may need to borrow money to pay for costs until the reported
earnings materialize to actual cash receipts.
We may be unable to attract and retain personnel who are key to our operations.
Our success, among other things, is dependent on our ability to attract and retain highly qualified senior officers and employees at all levels. Competition for
key personnel is intense. Our ability to attract and retain senior officers and experienced, top rate employees is dependent on several factors, including
prevailing market conditions and compensation and benefit packages offered by companies competing for the same talent and our reputation in the industry. If
our reputation is adversely affected, we may be unable to recruit, hire, and retain talented personnel. The inability to hire and retain these people may adversely
affect our production operations and other aspects of our business.
We are subject to intense competition for the skilled technicians necessary to manufacture our products.
We are subject to intense competition for the services of skilled technicians necessary to manufacture our products. The demand for these individuals may
increase as other manufacturers seek to bring to the U.S. manufacturing processes currently outsourced overseas. If the U.S. economy continues to undergo a
period of inflation, our labor costs may increase which could have a material adverse effect on our business, financial condition, and results of operations.
We are subject to the cyclical nature of the commercial aerospace industry, and any future downturn in the commercial aerospace industry or general
economic conditions, including inflation could adversely impact the demand for our products.
Our business may be affected by certain characteristics and trends of the commercial aerospace industry or general economic conditions that affect our
customers, such as the current inflationary and high interest rate environment in the U.S. and the resultant impacts on the supply chain, the labor market and the
general economy, as well as fluctuations in the aerospace industry’s business cycle, varying fuel and labor costs, intense price competition and regulatory
scrutiny, certain trends, including a possible decrease in aviation activity and a decrease in outsourcing by aircraft manufacturers, or the failure of projected
market growth to materialize or continue. If these characteristics and trends adversely affect customers in the commercial aerospace industry, they may reduce
the overall demand for our products.
Our working capital requirements may negatively affect our liquidity and capital resources.
Our working capital requirements can vary significantly, depending in part on the timing of new program awards and the payment terms with our customers
and suppliers. If our working capital needs exceed our cash flows from operations, we would look to our cash balances and any availability for borrowings
under our credit facility to satisfy those needs. See “Risks Related to Our Indebtedness and Liquidity” below.
14

We incur risks associated with new programs.
New programs with new technologies typically carry risks associated with design changes, development of new production tools, increased capital and funding
commitments, ability to meet customer specifications, delivery schedules and unique contractual requirements, supplier performance, ability of the customer to
meet its contractual obligations to us, and our ability to accurately estimate costs associated with such programs. In addition, any new program may not
generate sufficient demand or may experience technological problems or significant delays in the regulatory or other certification or manufacturing and
delivery schedule. If we were unable to perform our obligations under new programs to the customer’s satisfaction, if we were unable to manufacture products
at our estimated costs, or if a new program in which we had made a significant investment was terminated or experienced weak demand, delays, or
technological problems, then our business, financial condition and results of operations could be materially adversely affected. This risk includes the potential
for default, quality problems, or inability to meet specifications, as well as our inability to negotiate final pricing for program changes and could result in low
margin or forward loss contracts, and the risk of having to write-off contract assets if they were deemed to be unrecoverable. In addition, beginning new work
on existing programs also carries risk associated with the transfer of technology, knowledge, and tooling.
To perform on new programs, we may be required to expend up-front costs which may not have been negotiated in our selling price. Additionally, we may have
made margin assumptions related to those costs, that in the case of significant program delays and/or program cancellations, or if we are not successful in
negotiating favorable margin on scope changes, could cause us to experience margin degradation which may be material, for costs that are not recoverable.
Such charges and the loss of up-front costs could have a material adverse impact on our liquidity.
We are presently classified as a small business and the loss of our small business status may adversely affect our ability to compete for government
contracts.
We are presently classified as a small business under the North American Industry Classification Systems (“NAICS”) industry and product specific codes that
are regulated in the U.S. by the Small Business Administration (“SBA”). We are not considered a small business under all NAICS codes. While we do not
presently derive a substantial portion of our business from contracts that are set aside for small businesses, we are able to bid on small business set-aside
contracts as well as contracts that are open to non-small business entities. As the NAICS codes are periodically revised, it is possible that we may lose our
status as a small business. The loss of small business status would adversely affect our eligibility for special small business programs and limit our ability to
collaborate with other business entities which are seeking to team with small business entities as may be required under a specific contract.
Cyber security attacks, internal system or service failures and technological changes, including the use of machine learning and generative artificial
intelligence, may adversely impact our business and operations.
Any system or service disruptions, including those caused by projects to improve our information technology systems, if not anticipated and appropriately
mitigated, could disrupt our business, and impair our ability to effectively provide products and related services to our customers and could have a material
adverse effect on our business. We could also be subject to systems failures, including network, software, or hardware failures, whether caused by us, third-
party service providers, intruders or hackers, computer viruses, natural disasters, power shortages, or terrorist attacks. Cyber security threats are evolving and
include, but are not limited to, malicious software, phishing, and other unauthorized attempts to gain access to sensitive, confidential, or otherwise protected
information related to us or our products, customers, or suppliers, or other acts that could lead to disruptions in our business. Because the techniques used by
cyber-attackers to access or sabotage networks change frequently and may not be recognized until launched against a target, we may be unable to anticipate
these tactics. Any such failures to prevent or mitigate cyber-attacks could cause loss of data and interruptions or delays in our business, cause us to incur
remediation costs, or subject us to claims and damage our reputation. In addition, the failure or disruption of our communications or utilities could cause us to
interrupt or suspend our operations or otherwise adversely affect our business. Although we utilize various procedures and controls to monitor and mitigate the
risk of these threats, including contracting with an outside cyber security firm to provide constant monitoring of our systems, and training our employees to
recognize attacks, there can be no assurance that these procedures and controls will be sufficient. Our property and business interruption insurance may be
inadequate to compensate us for all losses that may occur because of any system or operational failure or disruption which could adversely affect our business,
results of operations, and financial condition. Moreover, expenditures incurred in implementing cyber security and other procedures and controls could
adversely affect our results of operations and financial condition.
Our ability to utilize our tax benefits could be substantially limited if we fail to generate sufficient income or if we experience an “ownership change”.
As of December 31, 2024, we had approximately $66.0 million of gross net operating losses (“NOLs”) for federal tax purposes and approximately $18.0
million of post-apportionment NOLs for state tax purposes. As a result of the Tax Cuts and Jobs Act of 2017 and the Coronavirus Aid, Relief, and Economic
Security Act of 2020, NOLs arising before January 1, 2018, and NOLs arising after January 1, 2018, are subject to different rules. Our pre-2018 NOLs totaled
approximately $51.6 million; these NOLs will expire in varying amounts from 2034 through 2037, if not utilized, and can offset 100% of future taxable income
for regular tax purposes. Our NOLs arising in 2018, and later years can be carried forward indefinitely and can offset up to 80% of future taxable income.
15

Our ability to fully recognize the benefits from our NOLs is dependent upon our ability to generate sufficient income prior to their expiration. In addition, our
NOL carryforwards may be limited if we experience an ownership change as defined by Section 382 of the Internal Revenue Code (“Section 382”). In general,
an ownership change under Section 382 occurs if 5% shareholders increase their collective ownership of the aggregate amount of our outstanding shares by
more than 50 percentage points over a relevant lookback period. The company completed a section 382 analysis for the year ended December 31, 2024 and
believes that no ownership change occurred during the relevant lookback period through December 31, 2024 that would limit our ability to use our NOLs.  
Product liability claims in excess of insurance could adversely affect our financial results and financial condition.
We face potential liability for property damage, personal injury, or death as a result of the failure of products designed or manufactured by us. Although we
currently maintain product liability insurance (including aircraft product liability insurance), any material product liability not covered by insurance could have
a material adverse effect on our financial condition, results of operations, and cash flows.
Increased scrutiny from investors, lenders, regulators and other market participants regarding our environmental, social, governance, sustainability or
climate responsibilities could expose us to additional costs and adversely impact our liquidity, results of operations, reputation, employee retention, and
stock price.
There is an increasing focus from certain investors, customers, and other key stakeholders concerning corporate responsibility, specifically related to
environmental, social, and governance (“ESG”) factors. Some investors may use ESG criteria to guide their investment strategies and, in some cases, may
choose not to invest in us if they believe our policies relating to corporate responsibilities are inadequate.
The ESG factors by which companies’ corporate responsibility practices are assessed may change. This could result in greater expectations of us and cause us
to undertake costly initiatives to satisfy such new criteria. If we are unable to satisfy the new corporate responsibility criteria, investors may view our policies
related to corporate responsibility as inadequate. We risk damage to our reputation in the event our corporate responsibility procedures or goals do not meet the
standards or goals set by various constituencies. In addition, if our competitors’ corporate responsibility performance is perceived to be greater than ours,
potential or current investors may elect to invest in our competitors instead. Further, in the event we communicate certain initiatives or goals related to ESG,
we could fail, or be perceived to have failed, in our achievement of such initiatives or goals. If we fail to satisfy the expectations of investors and other key
stakeholders, or our initiatives are not executed as planned, our reputation, employee retention, and willingness of our customers and suppliers to do business
with us, financial results, and stock price could be materially and adversely affected.
Risks Related to Our Indebtedness and Liquidity
In the past, CPI obtained amendments to and received waivers of and consents to non-compliance with certain covenants under our credit facility with
BankUnited and there can be no assurance that we will not fall out of compliance with our covenants in the future.
If we fall out of compliance with our banking covenants under our credit facility (the “BankUnited Facility” or the “Credit Agreement”) with BankUnited, N.A.
(“BankUnited”), they may declare a default under the BankUnited Facility and, among other remedies, could declare the full amount of the BankUnited
Facility immediately due and payable and could foreclose against our collateral. If this were to occur, we may be unable to secure outside financing, if needed,
to fund ongoing operations and for other capital needs. Any sources of financing that may be available to us could also be at higher costs and require us to
satisfy more restrictive covenants, which could limit or restrict our operations, cash flows, and earnings. We cannot ensure that additional financing would be
available to us or be sufficient or available on satisfactory terms.
Our capital requirements, liquidity and financial condition raise significant risks as to our ability to continue as a going concern.
Our working capital requirements can vary significantly, depending in part on the timing of the conclusion of mature programs and new program awards and
the payment terms with our customers and suppliers. There is currently no availability for borrowings under the BankUnited Facility and the Company finances
its operations from internally generated cash flow. Note 8 to our consolidated financial statements included in Part II - Item 8 of this Annual Report on Form
10-K includes a discussion regarding the BankUnited Facility and recent amendments thereto.
Our consolidated financial statements have been prepared assuming we will continue to operate as a going concern, which contemplates the realization of
assets and the satisfaction of liabilities in the normal course of business. If we become unable to continue as a going concern, we may have to liquidate our
assets and the values we receive for our assets in liquidation or dissolution could be significantly lower than the values reflected in our consolidated financial
statements. It is management’s estimation that there will likely not be any individual conditions or combination of events that will occur in the coming year
which would cause the Company to be unable to continue as a going concern.
16

Our cost of borrowing under the Credit Agreement is based on the Prime Rate of interest per annum published in the Money Rates section of The Wall
Street Journal (the “Prime Rate”) plus the margin charged by our lender, and increases in the Prime Rate negatively impact our profitability.
Interest rates under our Credit Agreement are based on the Prime Rate, and as a result, we have exposure to interest rate risk. Certain central banks, such as the
U.S. Federal Reserve, effected multiple interest rate decreases in 2024. Decreases in interest rates decrease our cost of borrowing and/or potentially make it
more viable to refinance our existing indebtedness. Conversely, increases in interest rates increase our cost of borrowing and/or potentially make it more
difficult to refinance our existing indebtedness.
We have identified material weaknesses in our internal control over financial reporting over a number of years which adversely affected our ability to
report our financial condition and results of operations in a timely and accurate manner. The material weaknesses led to multiple restatements of our
consolidated financial statements. The material weaknesses and restatements have resulted in our failure to meet SEC reporting obligations, affected and
may continue to affect investor confidence, our stock price and our ability to raise capital in the future, and have resulted and may continue to result in
stockholder litigation.
In June 2024, the Company entered into a settlement with the SEC to fully remediate its material weakness in internal control over financial reporting (“ICFR”)
and have effective ICFR and disclosure controls and procedures by December 31, 2024 to publicly disclose, concurrent with the filing of the Company’s 2024
annual report, on form 10-K. Per this agreement, if the Company fails to comply with these undertakings, a civil monetary penalty in the amount of $400,000
will be due to the SEC by June 30, 2025. Although the company believes that it has appropriately remediated its material weakness in internal controls, the risk
exists that the SEC’s determination could result in an adverse opinion.
If a future failure in internal control should occur, it may cause us to fail to meet SEC reporting obligations, negatively affect the accuracy of our financial
statements and disclosures, investor and customer confidence, our ability to raise capital in the future and result in events of default under our banking
agreement, any of which could have a negative effect on the price of our common stock, subject us to regulatory investigations and penalties and additional
stockholder litigation, and have a material adverse impact on our business and financial condition. 
Risks Related to Global Events
The conflict between Israel and Hamas, rising tensions between China and Taiwan, the ongoing war between Russia and Ukraine, and terrorist acts and
acts of war may seriously harm our business, results of operations and financial condition.
U.S. and global responses to actual or potential military conflicts such as Russia’s invasion of Ukraine, terrorism, perceived nuclear, biological, and chemical
threats and other global political crises increase uncertainties with respect to the U.S. and other business and financial markets. Several factors associated,
directly or indirectly, with actual or potential military conflicts, terrorism, perceived nuclear, biological, and chemical and cyber threats, and other global
political crises and responses thereto, may adversely affect the mix of products purchased by defense departments in the U.S. or other countries to platforms not
serviced by us. A shift in defense budgets to product lines we do not produce could have a material adverse effect on our business, financial condition and
results of operations.
We cannot predict the consequences of future geo-political events on our operations or our profitability.
New or increased economic and trade sanctions, including tariffs, may create economic and political uncertainties and could potentially impact the cost of our
raw materials and subassemblies having an adverse effect on our business, operations and profitability. Although our supply chain predominantly consists of
US based suppliers, any increases in their manufacturing costs may directly affect the Company’s profitability on previously negotiated Firm Fixed Price
contracts.
Item 1B.
UNRESOLVED STAFF COMMENTS
Not applicable.
Item 1C.
CYBERSECURITY
Cybersecurity risk management is an important part of our overall risk management efforts. We maintain a cybersecurity program that is comprised of policies,
procedures, controls and plans whose objective is to help us prevent and effectively respond to cybersecurity threats or incidents. Through our cybersecurity
risk management process, we continuously monitor cybersecurity vulnerabilities and potential attack vectors to company systems. We maintain various
measures to safeguard against cybersecurity threats such as monitoring systems, security controls, policy enforcement, data encryption, employee training,
tools and services from third-party providers and management oversight to assess, identify and mitigate risks from cybersecurity threats. We conduct regular
testing of these controls and systems including vulnerability scanning, penetration testing and simulating the execution of parts of our disaster recovery plan.
All employees are required to pass a mandatory cybersecurity training course on an annual basis and we regularly conduct phishing simulations to train our
employees on how to recognize phishing attempts.
17

We have implemented cybersecurity frameworks, policies and practices which incorporate industry-standards and contractual requirements. We also
contractually flow cybersecurity regulatory requirements to our subcontractors as required by the Defense Federal Acquisition Regulation Supplement and
other government agency specific requirements. These contractual flow downs include the requirement that our subcontractors implement certain information
security controls. Additionally, we gather information and review the SOC-2 reports of certain third-parties who integrate with our systems, such as our payroll
processor, managed solutions provider and software as a service providers on an annual basis to identify and manage risk. We continuously evaluate and seek
to improve and mature our cybersecurity processes. We apply lessons learned from our defense and monitoring efforts to help prevent future attacks and utilize
data analytics to detect anomalies and search for cyber threats. Additionally, our Internal Audit function regularly assesses our program effectiveness through
audits of systems and processes to help maintain compliance with policies.
Cybersecurity threats of all types, such as attacks from computer hackers, cyber criminals, nation-state actors, social engineering and other malicious internet-
based activities, continue to increase. We believe that our current preventative actions and response planning provide adequate measures of protection against
cybersecurity risks. While we have implemented measures to safeguard our information technology systems, the evolving nature of cybersecurity attacks and
vulnerabilities means that these protections may not always be effective. In 2024, we did not identify any cybersecurity threats that have materially affected or
are reasonably likely to materially affect our business strategy, results of operations, or financial condition. However, despite our efforts, we cannot eliminate
all risks from cybersecurity threats, or provide assurances that we have not experienced undetected cybersecurity incidents. For additional information about
these risks, see Part I, Item 1A, “Risk Factors” in this Annual Report on Form 10-K.
Governance
Our board of directors has oversight of our strategic and business risk management and oversees management’s execution of our cybersecurity risk
management program. The board receives regular updates from management on our cybersecurity risks. In addition, management updates the board as
necessary, regarding any material cybersecurity incidents, as well as incidents with lesser impact potential. Management is responsible for identifying,
assessing, and managing cybersecurity risks on an ongoing basis, establishing processes to ensure that such potential cybersecurity risk exposures are
monitored, putting in place appropriate mitigation measures, maintaining cybersecurity policies and procedures, and providing regular reports to our board of
directors. In the event of an incident, we intend to follow our incident response plan, which outlines the steps to be followed from incident detection to
mitigation, recovery and notification, including notifying functional areas (e.g. legal), as well as senior leadership and the board, as appropriate.
Our Director of Information Technology leads our cybersecurity program and is responsible for our overall information security strategy, policy, security
engineering, operations and cyber threat detection and response. The Director of Information Technology manages a team of information technology
professionals with broad experience, including in cybersecurity threat assessments and detection, mitigation technologies, incident response, insider threats and
regulatory compliance. Our Director of Information Technology brings extensive experience in cybersecurity, including conducting DIBCAC (Defense
Industrial Base Cybersecurity Assessment Center) audit and overseeing NIST (National Institute of Standards and Technology) internal audits. This expertise
ensures our organization aligns with strict industry standards and maintains robust compliance measures.
Our cybersecurity program is regularly assessed through management self-evaluation and ongoing monitoring procedures to evaluate our program
effectiveness, including assessments associated with internal controls over financial reporting as well as vulnerability management through active discovery
and testing to validate patching and configuration.
Item 2.
PROPERTIES
CPI Aero’s executive offices and production facility is situated in an approximately 171,000 square foot building located at 91 Heartland Blvd., Edgewood,
New York 11717. We use approximately 131,000 square feet of this building for manufacturing space and 40,000 square feet for offices and laboratories for
engineering and design work. CPI Aero occupies this facility under a lease that expires on April 30, 2026.
Item 3.
LEGAL PROCEEDINGS
This information is set forth in Note 16 to our Consolidated Financial Statements, which is hereby incorporated by reference.
Item 4.
MINE SAFETY DISCLOSURES
Not applicable.
18

PART II
Item 5.
MARKET FOR REGISTRANT’S COMMON EQUITY, RELATED STOCKHOLDER MATTERS AND ISSUER PURCHASES OF
EQUITY SECURITIES
Our shares of common stock are listed on the NYSE American exchange under the symbol “CVU”. On March 28, 2025, there were 157  holders of record of
our shares of common stock. We believe there are substantially more beneficial holders of our common stock.
Dividend Policy
To date, we have not paid any dividends on our common stock. Any payment of dividends in the future is within the discretion of our board of directors
(subject to the limitation on dividends contained in the BankUnited Facility, as described more fully in Part II, Item 7, Management’s Discussion and Analysis
of Financial Condition and Results of Operations) and will depend on our earnings, if any, our capital requirements and financial condition and other relevant
factors. Our board of directors does not intend to declare any cash or other dividends in the foreseeable future, but intends instead to retain earnings, if any, for
use in our business operations.
Sales of Unregistered Securities and Repurchase of Equity Securities
There were no sales of unregistered equity securities and no repurchases of our outstanding common stock during the year ended December 31, 2024.
19

Securities Authorized for Issuance under Equity Compensation Plans
The following table sets forth certain information at December 31, 2024 with respect to our equity compensation plans that provide for the issuance of options,
warrants or rights to purchase our securities:
Plan Category
 
Number of
Securities to
be Issued upon
Exercise of
Outstanding
Options,
Warrants and
Rights
   
Weighted-Average
Exercise Price of
Outstanding
Options,
Warrants and
Rights
   
Number of
Securities
Remaining
Available for
Future Issuance
under
Equity
Compensation
Plans (excluding
securities reflected
in the
first column)
 
Equity Compensation Plans Approved by Security Holders
   
—    $
—      
310,458 
Equity Compensation Plans Not Approved by Security Holders
   
—     
—      
—  
Total
   
—    $
—      
310,458 
Long-term equity incentives are an important component of compensation and are designed to align the interests of our executive officers and directors who
receive long-term equity awards with the Company’s long-term performance and to increase shareholder value. The Company has awarded long-term incentive
compensation pursuant to two plans:
2016 Long-Term Incentive Plan. The 2016 Long-Term Incentive Plan, as amended, authorizes the grant of 2,200,000 shares of our common stock, which may
be granted in the form of stock options, stock appreciation rights, restricted stock, deferred stock, stock reload options, and other stock-based awards, to
employees, officers, directors, and consultants of the Company. As of December 31, 2024, we have granted 1,891,906 shares under this plan and 308,094
shares remained available for grant under this plan.
Performance Equity Plan 2009. The Performance Equity Plan 2009 authorizes the grant of 500,000 stock options, stock appreciation rights, restricted stock,
deferred stock, stock reload options, and other stock-based awards. As of December 31, 2024, we have granted 497,636 shares under this plan and 2,364 shares
remained available for grant.
Item 6.
[RESERVED]
Not applicable.
Item 7.
MANAGEMENT’S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS
The following discussion and analysis of our financial condition and results of operations should be read together with our consolidated financial statements
and related notes appearing elsewhere in this Annual Report on Form 10-K. Some of the information contained in this discussion and analysis includes
forward-looking statements involving risks and uncertainties and should be read together with the “Risk Factors” section of this Annual Report on Form 10-K.
Such risks and uncertainties could cause actual results to differ materially from the results described in or implied by the forward-looking statements contained
in the following discussion and analysis.
Recent Developments
On November 13, 2024, the Company entered into a Fourteenth Amendment to the Credit Agreement (the “Fourteenth Amendment”). Under the Fourteenth
Amendment, the parties amended the Credit Agreement by: (i) extending the maturity date of the Company’s existing revolving line of credit (the “Revolving
Credit Loans”) to August 31, 2026; (ii) reducing the Base Rate Margin (as defined in the Credit Agreement) from 3.50% to 2.0%; (iii) resetting the aggregate
maximum principal amount of all Revolving Credit Loans to $16,890,000 from January 1, 2025 through March 31, 2025, $16,140,000 from April 1, 2025
through June 30, 2025, $15,390,000 from July 1, 2025 through September 30, 2025, $14,640,000 from October 1, 2025 through December 31,
2025, $13,890,000 from January 1, 2026 through March 31, 2026, $13,140,000 from April 1, 2026 through June 30, 2026, and $12,390,000 from July 1, 2026
onward and for payments to be made by the Company to comply therewith (if any such payments are necessary), on the first day of each such period; and (iv)
requiring the Company, if it does not deliver to BankUnited, N.A. by December 31, 2025, a commitment letter with banks and terms and conditions reasonably
acceptable to the Lenders for refinancing the obligations under the Credit Agreement, to make a payment by January 31, 2026, equal to 2% of the aggregate
outstanding principal amount of the Revolving Credit Loans as of December 31, 2025, with 50% of such payment applied to reduce the aggregate outstanding
principal and the remaining 50% retained by the Lenders as an amendment fee with respect to the Fourteenth Amendment.
20

Business Operations
We are engaged in the contract production of structural aircraft assemblies for fixed wing aircraft and helicopters in both the commercial and defense markets.
We also have a strong and growing presence in the aerosystems sector of the market, with our production of various reconnaissance pod structures and fuel
panel systems. Within the global aerostructure and aerosystem supply chain, we are either a Tier 1 supplier to aircraft OEMs or a Tier 2 subcontractor to major
Tier 1 manufacturers. We also are a prime contractor to the U.S. DOD, primarily the USAF. In conjunction with our assembly operations, we provide
engineering, program management, supply chain management and kitting, and MRO services.
Critical Accounting Estimates
The preparation of financial statements in conformity with US GAAP requires management to make estimates and assumptions that affect the reported amounts
of certain assets and liabilities, revenues and expenses, and disclosure of contingencies during the reporting period. Significant estimates and assumptions
include revenue recognition, and the valuation of deferred income taxes. Actual results could differ from those estimates.
We believe that the following discussion addresses our critical accounting policies which require management’s most difficult, subjective and complex
judgments, often as a result of the need to make estimates about the effect of matters that are inherently uncertain. For more discussion of these and other
significant accounting policies, refer to Part II, Item 8, Note 1 “Principal Business Activity and Summary of Significant Accounting Policies” in our notes to
our consolidated financial statements included elsewhere in this Annual Report on Form 10-K.
Revenue Recognition
In accordance with ASC 606, the Company recognizes revenue when it transfers control of a promised good or service to a customer in an amount that reflects
the consideration it expects to be entitled to in exchange for the good or service. The majority of the Company’s performance obligations are satisfied over time
as the Company (i) sells products with no alternative use to the Company and (ii) has an enforceable right to recover costs incurred plus a reasonable profit
margin for work completed to date. Under the over time revenue recognition model, revenue and gross profit are recognized over the contract period as work is
performed based on actual costs incurred and an estimate of costs to complete and resulting total estimated costs at completion. See Part II, Item 8, Note 1
“Principal Business Activity and Summary of Significant Accounting Policies” in the notes to the consolidated financial statements included in this Form 10-K
for additional information regarding the Company’s revenue recognition policy.
Deferred Income Taxes – Valuation Allowance
On a quarterly basis, we assess the likelihood that we will be able to recover our deferred tax assets against future sources of taxable income and reduce the
carrying amounts of deferred tax assets by recording a valuation allowance if, based on the available evidence, it is more likely than not (defined as a likelihood
of more than 50%) that all or a portion of such assets will not be realized.
Assessing the realizability of deferred tax assets requires the determination of whether it is more likely than not that some portion or all the deferred tax assets
will not be realized. In assessing the need for a valuation allowance, the Company considers all available positive and negative evidence, including future
reversals of existing taxable temporary differences, projected future taxable income, loss carryback and tax-planning strategies. Generally, more weight is given
to objectively verifiable evidence, such as a cumulative loss in recent years, as a significant piece of negative evidence to overcome. For the period ended
December 31, 2023, the Company achieved three years of cumulative book and taxable income, along with projections of profitability, for which management
determined that there was sufficient positive evidence to conclude that it is more likely than not that a portion of the deferred tax assets will be realized. As
such, $14,170,891 of the valuation allowance was released during the fourth quarter of 2023. During 2024 the Company continued to assess its ability to realize
its deferred tax asset. The Company continued to be profitable in 2024 and there was no significant change to the Company’s forecast of income or its ability to
realize the deferred tax asset at December 31, 2024. The increase of $404,224 is most significantly related to the state valuation allowance.
Results of Operations
The following discussion provides an analysis of our results of operations and should be read in conjunction with the accompanying consolidated financial
statements and notes thereto.
Revenue
Revenue for the year ended December 31, 2024 was $81,078,864 compared to $86,466,321 for the year ended December 31, 2023, representing a decrease of
$5,387,457, or 6.2%. The decrease was primarily related to various programs that neared completion in 2024 including NGC E-2D and Sikorsky HIRRS
programs coupled with the timing of work performed on the Lockheed Martin F-16 program. These decreases were partly offset by NGJ Mid Band production
and Sikorsky Welded Tubes.
21

Revenue generated from prime government contracts for the year ended December 31, 2024 was $11,677,152 compared to $11,842,145 for the year ended
December 31, 2023, a slight decrease of $164,993, or 1.4%. This decrease is the result of decreased revenue recognized on the T-38 Pacer Classic program.
Revenue generated from government subcontracts for the year ended December 31, 2024 was $64,704,370 compared to $69,672,602 for the year ended
December 31, 2023, a decrease of $4,968,232, or 7.1%. The decrease was primarily related to various programs that neared completion in 2024 including NGC
E-2D and Sikorsky HIRRS programs coupled with the timing of work performed on the Lockheed Martin F-16 program. These decreases were partly offset by
NGJ Mid Band production and Sikorsky Welded Tubes.
Revenue generated from commercial contracts for the year ended December 31, 2024 was $4,697,342 compared to $4,951,574 for the year ended December
31, 2023, a decrease of $254,232 or 5.1%. The decrease in revenue resulted from decreased revenue recognized on the timing of work performed on the
Embraer Phenom 300 Inlet program.
Cost of sales
Cost of sales for the year ended December 31, 2024 was $63,840,803 compared to $69,400,693 for the year ended December 31, 2023, a decrease of
$5,559,890 or 8.0%.
The components of cost of sales were as follows: 
 
Years ended
 
 
 
December 31,
2024
   
December 31,
2023
 
Procurement
  $
40,100,196    $
46,020,628 
Labor
   
7,303,563     
7,054,308 
Factory overhead
   
16,154,150     
16,028,140 
Other cost of sales
   
282,894     
297,617 
Cost of sales
  $
63,840,803    $
69,400,693 
Procurement for the year ended December 31, 2024 was $40,100,196 compared to $46,020,628 for the year ended December 31, 2023, a decrease of
$5,920,432 or 12.9%. This decrease is primarily the result of a decrease in procurement for the NGC E-2D MYP II OWP program, Sikorsky HIRRS program,
USAF T-38 Pacer Classic Structural Modification Kits program, offset by an increase in our Raytheon NGJ – Mid Band Pods program and Sikorsky Welded
Tubes.
Labor costs for the year ended December 31, 2024 were $7,303,563 compared to $7,054,308 for the year ended December 31, 2023, an increase of $249,255 or
3.5%. The increase is primarily the result of work performed on the Boeing A-10 program, offset by decreases on our Raytheon NGJ – Mid Band Pods program
due to efficiencies.
Factory overhead costs for the year ended December 31, 2024 were $16,154,150 compared to $16,028,140 for the year ended December 31, 2023, an increase
of $126,010 or 0.8%.
Other cost of sales relates to items that can increase or decrease cost of sales such as changes in inventory levels, changes in inventory valuation, changes to
inventory reserves, changes in loss contract provisions and direct charges to cost of sales. For the year ended December 31, 2024, there were costs in the
amount of $282,894 compared to $297,617 for the year ended December 31, 2023, a decrease of $14,723 or 4.9%.
Gross profit
Gross profit for the year ended December 31, 2024 was $17,238,061 compared to $17,065,628 for the year ended December 31, 2023, an increase of $172,433
or 1.0%. Gross profit percentage (“gross margin”) for the year ended December 31, 2024 was 21.3% compared to 19.7% for year ended December 31, 2023.
22

Favorable/(Unfavorable) Adjustments to Gross Profit
During the years ended December 31, 2024 and 2023, we made changes in estimates to various contracts. Such changes in estimates resulted in changes in total
gross profit as net unfavorable adjustments totaling $3,750,020 and 1,450,502 for the years ended December 31, 2024 and December 31, 2023.
Selling, general and administrative expenses
Selling, general and administrative expenses (“SG&A”) for the year ended December 31, 2024 were $10,506,439 compared to $10,758,624 for the year ended
December 31, 2023, a decrease of $252,185 or 2.3%. The decrease was primarily due to a reduction of consulting and legal fee expenses.
Interest expense
Interest expense for the year ended December 31, 2024 was $2,288,834, compared to $2,455,214 for the year ended December 31, 2023, a decrease of
$166,380 or 6.8%. The decrease is the result of a year-over-year decrease in the amount of our outstanding debt under the Credit Agreement coupled with a
lower year-over-year interest rates charged.
Income before provision for income taxes
Income before provision for income taxes for the year ended December 31, 2024 was $4,442,788 compared to $3,851,790 for the year ended December 31,
2023, an increase of $590,998 or 15.3%. The increase was driven by the aforementioned increase in gross profit and decreases in both SG&A and interest
expense described above.
Provision (benefit) for income taxes
The income tax (benefit) for the year ended December 31, 2024 was $1,143,454, which was an effective tax (benefit) rate of 25.7%, as compared to the income
tax (benefit) of ($13,349,414) for the year ended December 31, 2023, which was an effective tax (benefit) rate of (346.6%). The income tax recorded in 2024
and income tax benefit realized in 2023 was primarily due to federal and state statutory rates in 2024 and the reduction of the Company’s deferred tax asset
valuation allowance recorded by the Company in the fourth quarter of 2023, respectively.
Net income
Net income for the year ended December 31, 2024 was $3,299,334 compared to $17,201,204 for the year ended December 31, 2023, a decrease of $13,901,870
or 80.8%. The decrease in net income was driven by the 2023 income tax benefit.
Earnings per share
Basic earnings per share was $0.26 for the year ended December 31, 2024 calculating utilizing 12,593,213 weighted average shares outstanding as compared to
$1.40 for the year ended December 31, 2023 calculated utilizing 12,311,219 weighted average shares outstanding, an decrease of $1.14 per share, or 81.4%.
Diluted earnings per share was $0.26 for the year ended December 31, 2024 calculated utilizing 12,709,237 weighted average shares outstanding as compared
to $1.38 for the year ended December 31, 2023 calculated utilizing 12,471,961 weighted average shares outstanding, an decrease of $1.12 per share, or 81.2%.
Decrease in the basic and diluted earnings per share are due to the reduction of the Company’s deferred tax asset valuation allowance recorded by the Company
in the fourth quarter of 2023 which favorably impacted 2023 by $1.12 per share.
Business Outlook
The statements in the “Business Outlook” section and other forward-looking statements of this Annual Report on Form 10-K are subject to revision during the
course of the year in our quarterly earnings releases and SEC filings and at other times.
Liquidity and Capital Resources
General
At December 31, 2024, we had working capital of $17,122,111 compared to working capital of $15,402,381 at December 31, 2023, an increase of $1,719,730,
or 11.2%. The increase is primarily the result of an increase in net contract assets and a decrease to accrued expenses offset by decreases in accounts receivable
and inventory, and an increase in accounts payable.
Cash Flow
A large portion of our cash is used to pay for materials and processing costs associated with contracts that are in process and which do not provide for progress
payments. Costs for which we are not able to bill on a progress basis are components of contract assets on our consolidated balance sheet and represent the
aggregate costs and related earnings for uncompleted contracts for which the customer has not yet been billed. These costs and earnings are recovered upon
shipment of products and presentation of billings in accordance with contract terms.
Because ASC 606 requires us to use estimates in determining revenues, costs and profits and in assigning the amounts to accounting periods, there can be a
significant disparity between earnings (both for accounting and tax purposes) as reported and actual cash that we receive during any reporting period.
Accordingly, it is possible that we may have a shortfall in our cash flow and may need to borrow money or take steps to defer cash outflows until the reported
earnings materialize into actual cash receipts.

23

Several of our programs require us to expend up-front costs that may have to be amortized over a portion of production units. In the case of significant program
delays and/or program cancellations, we could experience margin degradation, which may be material for costs that are not recoverable. Such charges and the
loss of up-front costs could have a material impact on our liquidity and results of operations.
We continue to work to obtain better payment terms with our customers, including accelerated progress payment arrangements, as well as exploring alternative
funding sources.
At December 31, 2024, our cash balance was $5,490,963 compared to $5,094,794 at December 31, 2023, an increase of $396,169 or 7.8%. The increase was
driven by $3,558,935 in cash provided by operations, partly offset by our pay down of outstanding debt during 2024 of $2,694,498 and purchase of equipment
of $403,854.
BankUnited Facility
This information is set forth in Note 8 to our Consolidated Financial Statements, appearing following Item 15 of this Annual Report on Form 10-K which is
hereby incorporated by reference.
Leases
This information is set forth in Note 9 to our Consolidated Financial Statements, appearing following Item 15 of this Annual Report on Form 10-K which is
hereby incorporated by reference.
Liquidity
Our working capital requirements can vary significantly, depending in part on the timing of the conclusion of mature programs and new program awards and
the payment terms with our customers and suppliers. There is currently no availability for borrowings under the BankUnited Facility and the Company finances
its operations from internally generated cash flow. Note 8 to our consolidated financial statements included in Part II - Item 8 includes a discussion regarding
the BankUnited Facility and recent amendments thereto which provide, among other things, for increases in principal payments and the interest rate on the
loans provided for therein. Management has (i) negotiated and executed a further amendment to the Credit Agreement which extended the maturity date of the
Credit Agreement to August 31, 2026, (ii) obtained and regularly seeks additional progress payment and advance payment customer contract funding
provisions, (iii) maintained procedures to minimize investments in inventory and contract assets, (iv) remained focused on its military customer base and (v)
maintained its approximately $85.0 million backlog of funded orders, 97% of which are for military programs. Based upon the aforementioned factors, it is
management’s estimation that there will likely not be any individual conditions or combination of events that will occur in the coming year which would cause
the Company to be unable to meet its obligations or otherwise continue as a going concern. However, there can be no assurance that such plans will accomplish
their intended goals. 
Contractual Obligations
The table below summarizes information about our contractual obligations as of December 31, 2024 and the effects these obligations are expected to have on
our liquidity and cash flow in the future years.
 
Payments Due By Period
 
Contractual Obligations
 
Total
   
Less than 1
year
   
1-3 years
   
4-5 years
   
After 5
years
 
Line of credit
  $
17,390,000    $
2,750,000    $
14,640,000    $
—    $
— 
Finance Leases
   
26,483     
26,483     
—     
—     
— 
Operating Leases
   
3,100,572     
2,162,154     
938,418     
—     
— 
Insurance Financing Agreement
   
278,679     
278,679     
—     
—     
— 
Total Contractual Cash Obligations
  $
20,795,734    $
5,217,316    $
15,578,418    $
—    $
— 
Inflation
Inflation historically has not had a material effect on our operations, although the current inflationary environment in the U.S., and its impact on interest rates,
supply chain, labor markets and general economic conditions, are factors that the Company actively monitors in an attempt to mitigate and manage potential
negative impacts on and risks faced by the Company. The majority of the Company’s long term contracts with its customers and suppliers reflect fixed pricing.
When bidding for work, the Company takes inflation risk and supply side pricing risk into account in its proposals.
24

Item 7A.
QUANTITATIVE AND QUALITATIVE DISCLOSURE ABOUT MARKET RISK
Interest Rate Risk
We are exposed to interest rate risk on variable-rate credit facilities for which there was $17,390,000 outstanding at December 31, 2024. Additionally, if we
were to refinance our long-term debt, it may be refinanced at higher interest rates.
Item 8.
FINANCIAL STATEMENTS AND SUPPLEMENTARY DATA
This information appears following Item 15 of this Annual Report on Form 10-K and is incorporated herein by reference.
Item 9.
CHANGES IN AND DISAGREEMENTS WITH ACCOUNTANTS ON ACCOUNTING AND FINANCIAL DISCLOSURE
See the company’s current Report on Form 8-K filed June 17, 2024.
Item 9A.
CONTROLS AND PROCEDURES
Evaluation of Disclosure Controls and Procedures  
Our management, with the participation of our Chief Executive Officer and Chief Financial Officer, has evaluated the effectiveness of our disclosure controls
and procedures, as of the end of the period covered by this Annual Report on Form 10-K. Based on such evaluation, our Chief Executive Officer and Chief
Financial Officer have concluded that as of such date, our disclosure controls and procedures were effective to provide reasonable assurance that information
we are required to disclose in reports that we file or submit under the Exchange Act is (1) recorded, processed, summarized, and reported within the time
periods specified in the Securities and Exchange Commission's (SEC) rules and forms and (2) accumulated and communicated to our management, including
our CEO and CFO, as appropriate to allow timely decisions regarding required disclosures. 
Management’s Annual Report on Internal Control over Financial Reporting  
Management is responsible for establishing and maintaining adequate internal control over financial reporting. Internal control over financial reporting, as
defined in Exchange Act Rules 13a-15(f) and 15d-15(f), is a process designed by, or under the supervision of, our principal executive and principal financial
officers and effected by our board of directors, management and other personnel, to provide reasonable assurance regarding the reliability of financial reporting
and the preparation of financial statements for external purposes in accordance with U.S. GAAP and includes those policies and procedures that:
 ●
pertain to the maintenance of records that, in reasonable detail, accurately and fairly reflect the transactions and dispositions of our assets;
 ●
provide reasonable assurance that transactions are recorded as necessary to permit preparation of financial statements in accordance with U.S.
GAAP, and that our receipts and expenditures are being made only in accordance with authorizations of our management and directors; and
 ●
provide reasonable assurance regarding prevention or timely detection of unauthorized acquisition, use or disposition of our assets that could have a
material effect on our consolidated financial statements.
Because of its inherent limitations, internal control over financial reporting may not prevent or detect misstatements. Projections of any evaluation of
effectiveness to future periods are subject to the risk that controls may become inadequate because of changes in conditions, or that the degree of compliance
with the policies or procedures may deteriorate.
Management conducted an evaluation of the effectiveness of internal control over financial reporting based on criteria established in Internal Control-
Integrated Framework (2013) issued by the Committee of Sponsoring Organizations of the Treadway Commission (“COSO”). Based on this evaluation,
management concluded that the Company’s internal control over financial reporting was effective at the reasonable assurance level as of December 31, 2024. 
A material weakness is a deficiency, or a combination of deficiencies, in internal control over financial reporting, such that there is a reasonable possibility that
a material misstatement of the Company’s annual or interim consolidated financial statements will not be prevented or detected on a timely basis.
In connection with management’s evaluation of the Company’s internal control over financial reporting described above, management identified a material
weakness in its internal controls for the twelve months ended December 31, 2023 relating to the inadequate review, assessment of and reporting of the
Company’s temporary differences between book and taxable income. The Company remediated the aforementioned material weakness. The Company’s
remediation included (a) we replaced the Company's outside tax accounting and tax return preparer with a new firm (the “Tax Accounting Firm”); (b) we
retained the Tax Accounting Firm (i) to prepare the Company’s income tax accounting and disclosures for the year ended December 31, 2024 and (ii) to review
the income tax accounting and disclosures prepared by the predecessor firm for the quarter ended March 31, 2024 prior to the filing of the Form 10-Q for the
quarter ended March 31, 2024; (c) we updated our financial risk assessment to reflect tax accounting as a high risk area, and (d) we adopted a tax accounting
review checklist provided by our Sarbanes-Oxley consulting firm for use by CPI’s finance management in reviewing the quarterly and annual work of the Tax
Accounting Firm, beginning with the tax accounting for the quarter ended June 30, 2024 and continuing through the year ended December 31, 2024.
25

Conclusion  
As described above, under the supervision and with the participation of our management, including our Chief Executive Officer and Chief Financial Officer,
we conducted an evaluation of our disclosure controls and procedures (as defined in Exchange Act Rules 13a-15(e) and 15d-15(e)) as of December 31, 2024
management believes that the consolidated financial statements and related financial information included in this Annual Report on Form 10-K fairly present in
all material respects our financial position, results of operations and cash flows as of and for the dates presented, and for the periods ended on such dates, in
conformity with U.S. GAAP.
CPI is a non-accelerated filer for 2024. As such, CPI is not subject to the requirement to have an auditor attestation report on internal control over financial
reporting in the 10-K filed in 2025 for 2024.
Changes in Internal Control Over Financial Reporting  
Other than as disclosed above, there were no changes in our internal control over financial reporting during the quarter ended December 31, 2024 that
materially affected, or are reasonably likely to materially affect, our internal control over financial reporting.
Disclosure Pursuant to SEC Order Dated June 20, 2024
As mandated by the SEC in its Order Instituting Cease-and-Desist Proceedings Pursuant to Section 21C of the Securities Exchange Act of 1934, dated June 20,
2024 (Release No. 34-100389) (the “SEC Order”), and as previously disclosed in the Company’s Current Report on Form 8-K filed with the SEC on June 21,
2024, the Company undertook, among other things, to fully remediate its material weaknesses in ICFR and have effective ICFR and disclosure controls and
procedures (“DCP”) by December 31, 2024 and to publicly disclose, concurrent with the filing of this Annual Report on Form 10-K, whether, in management’s
opinion, the Company has fully remediated its material weaknesses in ICFR and has effective ICFR and DCP.
In compliance with the SEC Order, management confirms that, as of December 31, 2024, in its opinion, the Company has fully remediated its material
weaknesses in ICFR and that the Company’s ICFR and DCP were effective as of that date.
Item 9B.
OTHER INFORMATION
None.
Item 9C.
DISCLOSURE REGARDING FOREIGN JURISDICTIONS THAT PREVENT INSPECTIONS
None.
PART III
Item 10.
DIRECTORS, EXECUTIVE OFFICERS AND CORPORATE GOVERNANCE
Incorporated herein by reference from the Company’s definitive proxy statement, which will be filed no later than 120 days after December 31, 2024.
Insider Trading Policy and Procedures
The Company has adopted an insider trading policy and related procedures that govern the purchase, sale, and other dispositions of Company securities by
directors, officers, and employees. This policy is designed to promote compliance with insider trading laws, rules, and regulations, as well as NYSE American
listing standards. The Company recognizes its obligation to comply with all applicable laws and regulations regarding its own transactions in Company
securities.
The Company’s insider trading policy is filed as Exhibit 19 to this Annual Report on Form 10-K.
Item 11.
EXECUTIVE COMPENSATION
Incorporated herein by reference from the Company’s definitive proxy statement, which will be filed no later than 120 days after December 31, 2024.
Item 12.
SECURITY OWNERSHIP OF CERTAIN BENEFICIAL OWNERS AND MANAGEMENT AND RELATED STOCKHOLDER
MATTERS
Incorporated herein by reference from the Company’s definitive proxy statement, which will be filed no later than 120 days after December 31, 2024.
Item 13.
CERTAIN RELATIONSHIPS AND RELATED TRANSACTIONS, AND DIRECTOR INDEPENDENCE
Incorporated herein by reference from the Company’s definitive proxy statement, which will be filed no later than 120 days after December 31, 2024.
26

Item 14.
PRINCIPAL ACCOUNTANT FEES AND SERVICES
Incorporated herein by reference from the Company’s definitive proxy statement, which will be filed no later than 120 days after December 31, 2024.
PART IV
Item 15.
EXHIBITS AND FINANCIAL STATEMENT SCHEDULES
(a)
The following documents are filed as part of this report:
 
(1) Financial Statements:
 
Report of Independent Registered Public Accounting Firm
 
Consolidated Balance Sheets as of December 31, 2024 and 2023
 
Consolidated Statements of Operations for the Years Ended December 31, 2024 and 2023
 
Consolidated Statements of Shareholders’ Equity for the Years Ended December 31, 2024 and 2023
 
Consolidated Statements of Cash Flows for the Years Ended December 31, 2024 and 2023
 
Notes to Financial Statements
 
 
(2) Financial Statement Schedules:
 
None.
 
(3) The following Exhibits are filed as part of this report:
 
Exhibit No.
 
Description
3.1
 
Certificate of Incorporation of the Company, as amended, (incorporated by reference to Exhibit 3.1 to the Company’s Annual Report on Form
10-K, filed on August 25, 2020).
3.1.1
 
Certificate of Amendment of the Certificate of Incorporation of Composite of Precision Industries, Inc., dated May 9, 1989 (incorporated by
reference to Exhibit 3.1.1 to the Company’s Annual Report on Form 10-K, filed on August 25, 2020).
3.1.2
 
Certificate of Amendment of the Certificate of Incorporation of Consortium Products International, Inc., dated June 30, 1992 (incorporated by
reference to Exhibit 3.1.2 to the Company’s Annual Report on Form 10-K, filed on August 25, 2020).
3.1.3
 
Certificate of Amendment of the Certificate of Incorporation of CPI Aerostructures, Inc., dated August 7, 1992 (incorporated by reference to
Exhibit 3.1.3 to the Company’s Annual Report on Form 10-K, filed on August 25, 2020).
3.1.4
 
Certificate of Amendment of the Certificate of Incorporation of CPI Aerostructures, Inc., dated June 3, 1997 (incorporated by reference to
Exhibit 3.1.4 to the Company’s Annual Report on Form 10-K, filed on August 25, 2020).
3.1.5
 
Certificate of Amendment of the Certificate of Incorporation of CPI Aerostructures, Inc., dated June 16, 1998 (incorporated by reference to
Exhibit 3.1.5 to the Company’s Annual Report on Form 10-K, filed on August 25, 2020).
3.2
 
Amended and Restated By-laws of the Company (incorporated by reference to Exhibit 3.2 to the Company’s Annual Report on Form 10-K/A
filed on November 24, 2021).
3.2.1
 
Amended Article V, Section 6 of Amended and Restated By-laws of the Company (incorporated by reference to Exhibit 3.1 to the Company’s
Current Report on Form 8-K filed on November 22, 2021).
4.1*
  Securities of the Registrant.
10.1**
 
Performance Equity Plan 2009 (incorporated by reference to Appendix A to the Company’s Proxy Statement on Schedule 14A filed on April
30, 2009).
10.2**
 
2016 Long-Term Incentive Plan, as amended (incorporated by reference from Exhibit 99.1 to the Company’s Registration Statement on Form
S-8 filed on June 28, 2023).
10.3.1
 
Agreement of Lease, dated June 30, 2011, between Heartland Boys II L.P. and CPI Aerostructures, Inc. (incorporated by reference to Exhibit
10.1 to the Company’s Quarterly Report on Form 10-Q filed on August 15, 2011).
10.3.2
 
Lease Amendment, dated November 11, 2020, between Heartland Boys II L.P. and CPI Aerostructures, Inc. (incorporated by reference to
Exhibit 10.3.2 to the Company’s Annual Report on Form 10-K/A filed on November 24, 2021).
10.3.3
 
Second Lease Amendment, dated November 10, 2021, between Heartland Boys II L.P. and CPI Aerostructures, Inc. (incorporated by reference
from Exhibit 10.1 to the Company’s Current Report on Form 8-K filed on November 12, 2021).
10.4.1
 
Amended and Restated Credit Agreement, dated as of March 24, 2016, among CPI Aerostructures, Inc., the several lenders from time to time
party thereto, and BankUnited, N.A. (incorporated by reference from Exhibit 10.1 to the Company’s Current Report on Form 8-K filed on
March 28, 2016).
10.4.2
 
First Amendment to the Amended and Restated Credit Agreement (incorporated by reference from Exhibit 10.1 to the Company’s Current
Report on Form 8-K filed on May 10, 2016).
27 

10.4.3
 
Second Amendment to the Amended and Restated Credit Agreement (incorporated by reference from Exhibit 10.4.3 to the Company’s Annual
Report on Form 10-K filed on August 25, 2020).
10.4.4
 
Third Amendment to the Amended and Restated Credit Agreement (incorporated by reference from Exhibit 10.1 to the Company’s Current
Report on Form 8-K filed on August 16, 2018).
10.4.5
 
Fourth Amendment to the Amended and Restated Credit Agreement (incorporated by reference from Exhibit 10.2 to the Company’s Current
Report on Form 8-K filed on December 27, 2018).
10.4.6
 
Fifth Amendment to the Amended and Restated Credit Agreement (incorporated by reference from Exhibit 10.1 to the Company’s Current
Report on Form 8-K filed on June 26, 2019).
10.4.7
 
Waiver and Sixth Amendment to the Amended and Restated Credit Agreement (incorporated by reference from Exhibit 10.1 to the Company’s
Current Report on Form 8-K filed on August 24, 2020).
10.4.8
 
Waiver and Seventh Amendment to the Amended and Restated Credit Agreement (incorporated by reference from Exhibit 10.1 to the
Company’s Current Report on Form 8-K filed on May 17, 2021).
10.4.9
 
Waiver and Eighth Amendment to the Amended and Restated Credit Agreement (incorporated by reference from Exhibit 10.1 to the Company’s
Current Report on Form 8-K filed on October 28, 2021).
10.4.10
 
Consent, Waiver and Ninth Amendment to the Amended and Restated Credit Agreement (incorporated by reference from Exhibit 10.1 to the
Company’s Current Report on Form 8-K filed on April 12, 2022).
10.4.11
 
Consent, Waiver and Tenth Amendment to the Amended and Restated Credit Agreement (incorporated by reference from Exhibit 10.1 to the
Company’s Current Report on Form 8-K filed on August 19, 2022).
10.4.12
 
Eleventh Amendment to the Amended and Restated Credit Agreement (incorporated by reference from Exhibit 10.1 to the Company’s Current
Report on Form 8-K filed on November 11, 2022).
10.4.13
 
Twelfth Amendment to the Amended and Restated Credit Agreement (incorporated by reference from Exhibit 10.1 to the Company’s Current
Report on Form 8-K filed on March 23, 2023).
10.4.14
 
Thirteenth Amendment to the Amended and Restated Credit Agreement (incorporated by reference from Exhibit 10.1 to the Company’s Current
Report on Form 8-K filed on February 21, 2024.
10.4.15
 
Fourteenth Amendment to the Amended and Restated Credit Agreement (incorporated by reference from Exhibit 10.1 to the Company’s
Current Report on Form 8-K filed on November 13, 2024.
10.5
19* 
 
Amended and Restated Continuing General Security Agreement among CPI Aerostructures, Inc. and BankUnited N.A. (incorporated by
reference to Exhibit 10.2 to the Company’s Current Report on Form 8-K filed on March 28, 2016).
Insider Trading Policy 
21*
  Subsidiaries of the Registrant.
23.1*
  Consent of Marcum LLP. 
23.2*
  Consent of RSM US LLP.
31.1*
  Certification of Chief Executive Officer pursuant to Section 302 of the Sarbanes-Oxley Act of 2002.
31.2*
  Certification of Chief Financial Officer pursuant to Section 302 of the Sarbanes-Oxley Act of 2002.
32.1***
  Certification Pursuant to 18 U.S.C. Section 1350, as Adopted Pursuant to Section 905 of the Sarbanes-Oxley Act of 2002.
97*
 
The Company’s Clawback Policy Relating to the Recovery of excessive Incentive-Based Compensation from Executive Officers in the Event
of an Accounting Restatement.
   
101.INS*
  XBRL Instanse Document.
101.SCH*
  XBRL Taxonomy Extension Scheme Document.
101.CAL*
  XBRL Taxonomy Extension Calculation Linkbase Document.
101.DEF*
  XBRL Taxonomy Extension Definition Linkbase Document.
101.LAB*
  XBRL Taxonomy Extension Label Linkbase Document.
101.PRE*
  XBRL Taxonomy Extension Presentation Linkbase Document.
104*
  Cover page formatted as Inline XBRL and contained in Exhibit 101.
*
Filed herewith.
**
Management contract compensatory plan or arrangement.
***
Furnished herewith.
Item 16.
FORM 10-K SUMMARY
None
28 

CPI AEROSTRUCTURES, INC. AND SUBSIDIARIES
INDEX TO FINANCIAL STATEMENTS
Report of Independent Registered Public Accounting Firm (PCAOB ID: 688)
  F-2
 
Report of Independent Registered Public Accounting Firm (PCAOB ID: 49)
  F-4 
   
   
Consolidated Financial Statements:
   
   
Consolidated Balance Sheets as of December 31, 2024 and 2023
  F-5
   
Consolidated Statements of Operations for the Years Ended December 31, 2024 and 2023
  F-6
   
Consolidated Statements of Shareholders’ Equity for the Years Ended December 31, 2024 and 2023
  F-7
   
Consolidated Statements of Cash Flows for the Years Ended December 31, 2024 and 2023
  F-8
   
Notes to Consolidated Financial Statements
  F-9 - F-24
F-1 

 
Report of Independent Registered Public Accounting Firm
 
To the Shareholders and Board of Directors of
CPI Aerostructures, Inc. and Subsidiaries
Opinion on the Financial Statements
We have audited the accompanying consolidated balance sheet of CPI Aerostructures, Inc. and Subsidiaries (the "Company") as of December 31, 2024, the
related consolidated statements of operations, shareholders' equity and cash flow for the year ended December 31 , 2024, and the related notes ( collectively
referred to as the “financial statements”). In our opinion, based on our audit, the financial statements present fairly, in all material respects, the financial
position of the Company as of December 31, 2024, and the results of its operations and its cash flow for the year ended December 31, 2024 in conformity with
accounting principles generally accepted in the United States of America.
Basis for Opinion
These financial statements are the responsibility of the Company's management. Our responsibility is to express an opinion on the Company's financial
statements based on our audit. We are a public accounting firm registered with the Public Company Accounting Oversight Board (United States) ("PCAOB")
and are required to be independent with respect to the Company in accordance with the U.S. federal securities laws and the applicable rules and regulations of
the Securities and Exchange Commission and the PCAOB.
We conducted our audit in accordance with the standards of the PCAOB. Those standards require that we plan and perform the audit to obtain reasonable
assurance about whether the financial statements are free of material misstatement, whether due to error or fraud. The Company is not required to have, nor
were we engaged to perform, an audit of its internal control over financial reporting. As part of our audit we are required to obtain an understanding of internal
control over financial reporting but not for the purpose of expressing an opinion on the effectiveness of the Company's internal control over financial reporting.
Accordingly, we express no such opinion.
Our audit included performing procedures to assess the risks of material misstatement of the financial statements, whether due to error or fraud, and performing
procedures that respond to those risks. Such procedures included examining, on a test basis, evidence regarding the amounts and disclosures in the financial
statements. Our audit also included evaluating the accounting principles used and significant estimates made by management, as well as evaluating the overall
presentation of the financial statements. We believe that our audit provides a reasonable basis for our opinion.
Critical Audit Matters
The critical audit matter communicated below is a matter arising from the current period audit of the financial statements that were communicated or required
to be communicated to the audit committee and that: (1) relate to accounts or disclosures that are material to the financial statements and (2) involved our
especially challenging, subjective, or complex judgments. The communication of this critical audit matters did not alter in any way our opinion on the financial
statements, taken as a whole, and we are not, by communicating this critical audit matter below, providing a separate opinion on this critical audit matter or on
the accounts or disclosures to which they relate.
F-2 

Revenue Recognition
Description of the Matter
As discussed in Notes 1 and 2 to the consolidated financial statements, the Company recognizes revenue from long-term contracts with performance
obligations satisfied over time by using an input method based on costs incurred as it best depicts the Company’s progress toward satisfaction of the
performance obligation. Under this method, revenue arising from such contracts is recognized as work is performed based on the ratio of costs incurred to date
to the total estimated costs at completion of the performance obligations. The estimation of these costs requires judgment by the Company given the unique
product specifications and requirements for contracts related to the design, development, and manufacture of the product. During the year ended December 31,
2024, the Company recognized approximately $80.1 million of revenue over time.
Subjective judgment is required by management in determining the assumptions in estimating the estimated costs to complete on contracts for which revenue is
recognized over time using a cost-to-cost model. Complex auditor judgment was required in evaluating initial cost estimates and expected costs to complete
which was our principal consideration in determining the manner in which the Company recognizes revenue was a critical audit matter.
The primary procedures we performed to address this critical audit matter included the following:
•
Obtaining an understanding of management’s process in developing the cost estimates;
•
Performed substantive test of details on a sample of contracts with customers to ensure contract terms and any modifications were agreed to by the
customer and ensuring overtime revenue recognition was appropriate and in alignment with relevant accounting guidance based on the contracts
terms and conditions;
•
Evaluating management's ability to reasonably estimate costs by performing a comparison of the actual costs to prior period estimates, including
evaluating the timely identification of circumstances that may warrant a modification to the estimated costs;
•
Tested the estimated costs to complete on in process jobs that were not completed during the year ended December 31, 2024 by comparing the
estimated costs to complete at December 31, 2024 to actual costs incurred subsequent to December 31, 2024;
•
Performed inquiries with the Company's program management regarding their basis of estimates, challenges or opportunities related to the
program, actual performance to date compared to plan, and any recent correspondence between the Company and the customer on changes in
scope or terms;
•
Tested the existence, accuracy, and completeness of costs incurred to date on a sample of contracts; and
•
Tested the mathematical accuracy of managements calculations of revenue recognized on a sample basis.
/s/ Marcum LLP
Marcum LLP
We have served as the Company's auditor since 2024
Melville, New York
March 31, 2025
 
F-3 

 
Report of Independent Registered Public Accounting Firm
 
To the Shareholders and the Board of Directors of CPI Aerostructures, Inc.
Opinion on the Financial Statements
We have audited the accompanying consolidated balance sheet of CPI Aerostructures, Inc. and subsidiaries (the Company) as of December 31, 2023, the
related consolidated statements of operations, shareholders' equity and cash flows for the year then ended, and the related notes (collectively, the financial
statements). In our opinion, the financial statements present fairly, in all material respects, the financial position of the Company as of December 31, 2023, and
the results of its operations and its cash flows for the year then ended in conformity with accounting principles generally accepted in the United States of
America.
Basis for Opinion
These financial statements are the responsibility of the Company's management. Our responsibility is to express an opinion on the Company's financial
statements based on our audit. We are a public accounting firm registered with the Public Company Accounting Oversight Board (United States) (PCAOB) and
are required to be independent with respect to the Company in accordance with U.S. federal securities laws and the applicable rules and regulations of the
Securities and Exchange Commission and the PCAOB.
We conducted our audit in accordance with the standards of the PCAOB. Those standards require that we plan and perform the audit to obtain reasonable
assurance about whether the financial statements are free of material misstatement, whether due to error or fraud.
Our audit included performing procedures to assess the risks of material misstatement of the financial statements, whether due to error or fraud, and performing
procedures that respond to those risks. Such procedures included examining, on a test basis, evidence regarding the amounts and disclosures in the financial
statements. Our audit also included evaluating the accounting principles used and significant estimates made by management, as well as evaluating the overall
presentation of the financial statements. We believe that our audit provides a reasonable basis for our opinion.
/s/ RSM US LLP
We served as the Company's auditor from 2021 to 2024.
New York, New York
April 5, 2024
 
 
F-4 

 
CPI AEROSTRUCTURES, INC. AND SUBSIDIARIES
 
CONSOLIDATED BALANCE SHEETS
 
 
December 31,
2024
   
December 31,
2023
 
ASSETS
   
      
  
Current Assets:
   
      
  
Cash
  $
5,490,963    $
5,094,794 
Accounts receivable, net
   
3,716,378     
4,352,196 
Contract assets, net
   
32,832,290     
35,312,068 
Inventory
   
918,288     
1,436,647 
Prepaid expenses and other current assets
   
634,534     
718,026 
Total Current Assets
   
43,592,453     
46,913,731 
   
      
  
Operating lease right-of-use assets
   
2,856,200     
4,740,193 
Property and equipment, net
   
767,904     
794,056 
Deferred tax asset, net
   
18,837,576     
19,938,124 
Goodwill
   
1,784,254     
1,784,254 
Other assets
   
143,615     
189,774 
Total Assets
  $
67,982,002    $
74,360,132 
   
      
  
LIABILITIES AND SHAREHOLDERS’ EQUITY
   
      
  
Current Liabilities:
   
      
  
Accounts payable
  $
11,097,685    $
10,487,012 
Accrued expenses
   
7,922,316     
10,275,695 
Contract liabilities
   
2,430,663     
5,937,629 
Loss reserve
   
22,832     
337,351 
Current portion of line of credit
   
2,750,000     
2,400,000 
Current portion of long-term debt
   
26,483     
44,498 
Operating lease liabilities
   
2,162,154     
1,999,058 
Income taxes payable
   
58,209      
30,107 
Total Current Liabilities
   
26,470,342     
31,511,350 
   
      
  
Line of credit, net of current portion
   
14,640,000     
17,640,000 
Long-term operating lease liabilities
   
938,418     
3,100,571 
Long-term debt, net of current portion
   
—     
26,483 
Total Liabilities
   
42,048,760     
52,278,404 
   
      
  
Commitments and Contingencies (see note 15)
   
      
  
Shareholders’ Equity:
   
      
  
Common stock - $.001 par value; authorized 50,000,000 shares, 12,978,741 and 12,771,434 shares,
respectively, issued and outstanding
   
12,979     
12,771 
Additional paid-in capital
   
74,424,651     
73,872,679 
Accumulated deficit
   
(48,504,388)     
(51,803,722) 
Total Shareholders’ Equity
   
25,933,242     
22,081,728 
Total Liabilities and Shareholders’ Equity
  $
67,982,002    $
74,360,132 
 
SEE NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
 
F-5 

 
CPI AEROSTRUCTURES, INC. AND SUBSIDIARIES
 
CONSOLIDATED STATEMENTS OF OPERATIONS
 
Years ended December 31, 2024 and 2023
 
 
 
      
  
 
2024
   
2023
 
Revenue
 
$
81,078,864    $
86,466,321 
 
 
      
  
Cost of sales
 
 
63,840,803     
69,400,693 
 
 
      
  
Gross profit
 
 
17,238,061     
17,065,628 
 
 
      
  
Selling, general and administrative expenses
 
 
10,506,439     
10,758,624 
Income from operations
 
 
6,731,622     
6,307,004 
 
 
      
  
Interest expense
 
 
(2,288,834)    
(2,455,214)
Income before benefit for income taxes
 
 
4,442,788     
3,851,790 
 
 
      
  
Provision (Benefit) for income taxes
 
 
1,143,454    
(13,349,414)
Net income
 
$
3,299,334    $
17,201,204 
 
 
      
  
Income per common share-basic
 
$
0.26    $
1.40 
Income per common share-diluted
 
$
0.26    $
1.38 
 
 
      
  
Shares used in computing income per common share:
 
 
      
  
Basic
 
 
12,593,213     
12,311,219 
Diluted
 
 
12,709,237     
12,471,961 
 
SEE NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
 
F-6 

 
CPI AEROSTRUCTURES, INC. AND SUBSIDIARIES
 
CONSOLIDATED STATEMENTS OF SHAREHOLDERS’ EQUITY
 
Years ended December 31, 2024 and 2023
 
 
Common
Stock Shares    
Common
Stock
Amount
   
Additional
Paid-in
Capital
   
Accumulated
Deficit
   
Total
Shareholders’
Equity (Deficit)
 
Balance at January 1, 2023
   
12,506,795    $
12,507    $
73,189,449    $
(69,004,926)    $
4,197,030 
   
      
      
      
      
  
Net income
   
—     
—     
—     
17,201,204     
17,201,204 
Issuance of common stock upon settlement of
restricted stock, net
   
264,639     
264     
—     
—     
264 
Stock-based compensation expense
   
—     
—     
770,362     
—     
770,362 
Shares withheld for tax withholdings
   
—     
—     
(87,132)     
—     
(87,132) 
Balance at December 31, 2023
   
12,771,434     
12,771     
73,872,679     
(51,803,722)    
22,081,728 
   
      
      
      
      
  
Net income
   
—     
—     
—     
3,299,334     
3,299,334 
Issuance of common stock upon settlement of
restricted stock, net
   
207,307     
208     
—     
—     
208 
Stock-based compensation expense
   
—     
—     
604,474     
—     
604,474 
Shares withheld for tax withholdings
   
—     
—     
(52,502)     
—     
(52,502) 
Balance at December 31, 2024
   
12,978,741    $
12,979    $
74,424,651    $
(48,504,388)    $
25,933,242 
 
SEE NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
 
F-7 

 
CPI AEROSTRUCTURES, INC. AND SUBSIDIARIES
 
CONSOLIDATED STATEMENTS OF CASH FLOWS
 
Years ended December 31, 2024 and 2023
 
   
     
 
 
2024
   
2023
 
Cash flows from operating activities:
   
      
  
Net income
  $
3,299,334    $
17,201,204 
Adjustments to reconcile net income to net cash provided by operating activities:
   
      
  
Depreciation and amortization
   
430,006     
470,950 
Amortization of debt issuance costs
   
46,159     
103,304 
Stock-based compensation expense
   
604,682     
770,626 
Deferred income taxes
   
1,100,548     
(13,363,661)
Provision for credit losses
   
144,565     
— 
Changes in operating assets and liabilities:
   
      
  
Decrease in accounts receivable
   
491,253     
505,576 
Decrease in insurance recovery receivable
   
—     
3,600,000 
Decrease (increase) in contract assets
   
2,479,778     
(7,927,528)
Decrease in inventory
   
518,359     
1,056,422 
Decrease in prepaid expenses and other current assets
   
83,492     
297,804 
Decrease in operating right-of-use assets
   
1,883,993     
1,786,434 
(Decrease) increase in accounts payable and accrued expenses
   
(1,730,794)     
5,107,211 
Decrease in litigation settlement obligation
   
—     
(3,600,000) 
Decrease in contract liabilities
   
(3,506,966)     
(64,097) 
Decrease in lease liabilities
   
(1,999,057)     
(1,795,417)
Decrease in loss reserve
   
(314,519)     
(239,198)
Increase in income taxes payable
   
28,102     
18,711 
Net cash provided by operating activities
   
3,558,935     
3,928,341 
Cash flows from investing activities:
   
      
  
Purchase of property and equipment
   
(403,854)     
(140,450)
Net cash used in investing activities
   
(403,854)     
(140,450)
Cash flows from financing activities:
   
      
  
Principal payments on line of credit
   
(2,650,000)     
(960,000)
Principal payments on long-term debt
   
(44,498)     
(1,719,766)
Proceeds from insurance financing obligation
   
326,125     
330,482 
Repayments of insurance financing obligation
   
(338,037)     
(49,572) 
Taxes paid related to net share settlement of equity awards
   
(52,502)     
(87,132) 
Debt issuance costs
   
—     
(54,334) 
Net cash used in financing activities
   
(2,758,912)     
(2,540,322)
Net increase in cash
   
396,169     
1,247,569 
Cash at beginning of year
   
5,094,794     
3,847,225 
Cash at end of year
  $
5,490,963    $
5,094,794 
Supplemental disclosure of cash flow information:
   
      
  
Cash paid during the year for interest
  $
2,356,447    $
2,454,065 
Cash paid for income taxes
  $
5,484    $
4,364 
 
SEE NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
 
F-8 

 
CPI AEROSTRUCTURES, INC. AND SUBSIDIARIES
 
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
 
1.
PRINCIPAL BUSINESS ACTIVITY AND SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES
The Company consists of CPI Aerostructures, Inc. (“CPI”), Welding Metallurgy, Inc. (“WMI”) and Compac Development Corporation, a wholly owned
subsidiary of WMI (collectively the “Company”).
CPI is a U.S. supplier of aircraft parts for fixed wing aircraft and helicopters in both the commercial and defense markets. CPI manufactures complex
aerostructure assemblies, as well as aerosystems. Additionally, CPI supplies parts for maintenance, repair and overhaul (“MRO”) and kitting contracts.
An operating segment, in part, is a component of an enterprise whose operating results are regularly reviewed by the chief operating decision maker (the
“CODM”) to make decisions about resources to be allocated to the segment and assess its performance. Operating segments may be aggregated only to a
limited extent. The Company’s CODM, the Chief Executive Officer, reviews financial information presented on a consolidated basis for purposes of making
operating decisions and assessing financial performance. The Company has determined that it has a single operating and reportable segment.
Basis of Presentation and Principles of Consolidation
The accompanying consolidated financial statements have been prepared in accordance with accounting principles generally accepted in the United States of
America (“U.S. GAAP”) and applicable rules and regulations of the United States Securities and Exchange Commission (“SEC”). The consolidated financial
statements include the accounts of the Company and its wholly-owned subsidiaries. All intercompany accounts and transactions have been eliminated in
consolidation.
Use of Estimates
The preparation of financial statements in conformity with U.S. GAAP requires the use of estimates by management. Actual results could differ from these
estimates.
Revenue Recognition
The Company follows Accounting Standards Codification Topic 606, “Revenue from Contracts with Customers” (“ASC 606”). In accordance with ASC 606,
the Company recognizes revenue when it transfers control of a promised good or service to a customer in an amount that reflects the consideration it expects to
be entitled to in exchange for the good or service. The majority of the Company’s performance obligations are satisfied over time as the Company (i) sells
products with no alternative use to the Company and (ii) has an enforceable right to recover costs incurred plus a reasonable profit margin for work completed
to date. This is known as the over time revenue recognition model. Under the over time revenue recognition model, revenue and gross profit are recognized
over the contract period as work is performed based on actual costs incurred and an estimate of costs to complete and resulting total estimated costs at
completion.
The Company also has contracts that are considered point in time. Under the point in time revenue recognition model, revenue is recognized when control of
the components has transferred to the customer; in most cases this will be based on shipping terms.
The majority of the Company’s revenues are from long-term contracts with the U.S. government and commercial contractors. The Company accounts for a
contract when it has approval and commitment from both parties, the rights of the parties are identified, payment terms are identified, the contract has
commercial substance and collectability of consideration is probable. For the Company, the contract under ASC 606 is typically established upon execution of a
purchase order either in accordance with a long-term customer contract or on a standalone basis.
To determine the proper revenue recognition for our contracts, we must evaluate whether two or more contracts should be combined and accounted for as a
single contract, and whether the combined or single contract should be accounted for as one performance obligation or more than one performance obligation.
This evaluation requires significant judgment and the decision to combine a group of contracts or to separate a contract into multiple performance obligations
could change the amount of revenue and profit recorded in a period. A performance obligation is a promise within a contract to transfer a distinct good or
service to the customer in exchange for payment and is the unit of account for recognizing revenue. The Company’s performance obligations in its contracts
with customers are typically the sale of each individual product contemplated in the contract or a single performance obligation representing a series of
products when the contract contains multiple products that are substantially the same. The Company has elected to account for shipping performed after control
over a product has transferred to a customer as fulfillment activities. When revenue is recognized in advance of incurring shipping costs, the costs related to the
shipping are accrued. Shipping costs are included in costs of sales. The Company provides warranties on many of its products; however, since customers
cannot purchase such warranties separately and they do not provide services beyond standard assurances, warranties are not separate performance obligations.
F-9 

CPI AEROSTRUCTURES, INC. AND SUBSIDIARIES
 
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
 
A contract’s transaction price is allocated to each distinct performance obligation and recognized as revenue when or as the performance obligation is satisfied.
For contracts with more than one performance obligation, the Company allocates the transaction price to each performance obligation based on its estimated
standalone selling price. When standalone selling prices are not available, the transaction price is allocated using an expected cost plus margin approach as
pricing for such contracts is typically negotiated on the basis of cost.
The contracts directly with the U.S. government or subcontracted through its prime contractors, typically are subject to the Federal Acquisition Regulation
(“FAR”), which provides guidance on the types of costs that are allowable in establishing prices for goods and services provided under U.S. government
contracts. The pricing for commercial contractors are based on the specific negotiations with each customer and any taxes imposed by governmental authorities
are excluded from revenue. The transaction price is primarily comprised of fixed consideration as the customer typically pays a fixed fee for each product sold.
The Company does not adjust the amount of revenue to be recognized under a customer contract for the effects of the time value of money when the timing
difference between receipt of payment and transferring the good or service is less than one year.
The majority of the Company’s performance obligations are satisfied over time as the Company (i) sells products with no alternative use to the Company and
(ii) has an enforceable right to recover costs incurred plus a reasonable profit margin for work completed to date. The Company uses the cost-to-cost input
method to measure progress for its performance obligations because it best depicts the transfer of control to the customer which occurs as the Company incurs
costs on its contracts.
The Company generally utilizes the portfolio approach to estimate the amount of revenue to recognize for its contracts and groups contracts together that have
similar characteristics. Contract gross profit margins are calculated using the estimated costs for either the individual contract or the portfolio as applicable.
Significant judgment is used to determine which contracts are grouped together to form a portfolio. The portfolio approach is utilized only when the result of
the accounting is not expected to be materially different than if applied to individual contracts.
The Company’s contracts are often modified to account for changes in contract specifications and requirements. The Company considers contract modifications
to exist when the modification either creates new or changes the existing enforceable rights and obligations. The effect of a contract modification on the
transaction price, and the measure of progress for the performance obligation to which it relates, are recognized prospectively when the remaining goods or
services are distinct and on a cumulative catch-up basis when the remaining goods or services are not distinct.
The Company also has contracts that are considered point in time. Under the point in time revenue recognition model, revenue is recognized when control of
the components has transferred to the customer.
Certain contracts contain forms of variable consideration, such as price discounts and performance penalties. The Company generally estimates variable
consideration using the most likely amount based on an assessment of all available information (i.e., historical experience, current and forecasted performance)
and only to the extent it is probable that a significant reversal of revenue recognized will not occur when the uncertainty is resolved.
In applying the cost-to-cost input method, the Company compares the actual costs incurred relative to the total estimated costs expected at completion to
determine its progress towards satisfying its performance obligation and to calculate the corresponding amount of revenue to recognize. For any costs incurred
that do not depict the Company’s performance in transferring control of goods or services to the customer, the Company excludes such costs from its input
method measure of progress as the amounts are not reflected in the price of the contract. Costs that are inputs to the satisfaction of a performance obligation
include labor, materials and subcontractors’ costs, other direct costs and an allocation of indirect costs.
Changes to the original estimates may be required during the life of the contract. Estimates are reviewed quarterly and the effect of any change in the total
estimated costs expected at completion for a contract is reflected in revenue in the period the change becomes known. ASC 606 involves considerable use of
estimates and judgment in determining revenues, costs and profits and in assigning the amounts to accounting periods. For instance, management must make
assumptions and estimates regarding labor productivity and availability, the complexity of the work to be performed, the availability of materials, the length of
time to complete the performance obligation, execution by our subcontractors, the availability and timing of funding from the customer, and overhead cost
rates, among other variables. The Company continually evaluates all of the factors related to the assumptions, risks and uncertainties inherent with the
application of the cost-to-cost input method; however, it cannot be assured that estimates will be accurate. If estimates are not accurate, or a contract is
terminated which will affect estimates at completion, the Company is required to adjust revenue in the period the change is determined.
F-10 

CPI AEROSTRUCTURES, INC. AND SUBSIDIARIES
 
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
 
When changes are required for the estimated total revenue on a contract, these changes are recognized on a cumulative catch-up basis in the current period. A
significant change in one or more estimates could affect the profitability of one or more of our performance obligations. If estimates of total costs to be incurred
exceed estimates of total consideration the Company expects to receive, a provision for the remaining loss on the contract is recorded in the period in which the
loss becomes evident.
Contract acquisition costs are those incremental costs that the Company incurs to obtain a contract with a customer that it would not have incurred if the
contract had not been obtained. The Company does not typically incur contract acquisition costs or contract fulfillment costs that are subject to capitalization in
accordance with the guidance in Accounting Standards Codification Subtopic 340-40, “Other Assets and Deferred Costs—Contracts with Customers.”
Government Contracts
The Company’s government contracts and subcontracts are subject to the procurement rules and regulations of the U.S. government. Many of the contract
terms are dictated by these rules and regulations. Specifically, cost-based pricing is determined under the FAR, which provides guidance on the types of costs
that are allowable in establishing prices for goods and services under U.S. government contracts. For example, costs such as those related to charitable
contributions, advertising, interest expense, and public relations are unallowable, and therefore not recoverable through sales. During and after the fulfillment
of a government contract, the Company may be audited in respect to the direct and allocated indirect costs attributable thereto. These audits may result in
adjustments to the Company’s contract cost, and/or revenue.
When contractual terms allow, the Company invoices its customers on a progress basis.
Cash
The Company maintains its cash in multiple financial institutions. The balances are insured by the Federal Deposit Insurance Corporation up to the limit of
$250,000. From time to time, the Company’s balances may exceed these limits. As of December 31, 2024 and 2023, the Company had $5,270,629 and
$4,943,628, respectively, of uninsured balances. The Company limits its credit risk by selecting financial institutions considered to be highly credit worthy.
Allowance for Credit Losses
The Company maintains an allowance for credit losses on accounts receivable and contract assets. The adequacy of the allowance is assessed quarterly through
consideration of factors such as age of the receivable and identification of any anticipated collectability issues by account, if applicable. The Company writes
off accounts when they are deemed to be uncollectible.
Inventory
Inventories, which consist of raw materials, work in progress and finished goods, are reported at lower of cost or net realizable value using the weighted
average cost method. The Company capitalizes labor, material, subcontractor and overhead costs as work-in-process for contracts where control has not yet
passed to the customer. The Company regularly reviews inventory quantities on hand, future purchase commitments with its suppliers, and the estimated
usability for its inventory. If the Company’s review indicates a reduction in usability below carrying value, it reduces its net inventory to its net realizable
value.
Property and Equipment
Property and equipment are carried at cost, net of accumulated depreciation. Depreciation is computed utilizing the straight-line method over the estimated
useful life of the asset. Leasehold improvements depreciation is computed over the shorter of the lease term or estimated useful life of the asset. Additions and
improvements that extend the useful lives are capitalized, while repairs and maintenance are expensed as incurred.
Leases
The Company leases a building and various equipment. Under ASC 842, Leases (“ASC 842”), at contract inception we determine whether the contract is or
contains a lease and whether the lease should be classified as an operating or a finance lease. Operating leases are included in right-of-use (“ROU”) assets and
operating lease liabilities in our consolidated balance sheets.
F-11 

CPI AEROSTRUCTURES, INC. AND SUBSIDIARIES
 
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
 
ROU assets represent the Company’s right to use an underlying asset during the lease term, and lease liabilities represent the Company’s obligation to make
lease payments arising from the lease. The determination of the length of lease terms is affected by options to extend or terminate the lease when it is
reasonably certain that the Company will exercise that option. The existence of significant economic incentive is the primary consideration when assessing
whether the Company is reasonably certain of exercising an option in a lease. ROU assets and liabilities are recognized at commencement date and measured
as the present value of lease payments to be made over the lease term. As the interest rate implicit in the lease is not readily available for most of the
Company’s leases, the Company uses its estimated incremental borrowing rate in determining the present value of lease payments. The estimated incremental
borrowing rate is derived from information available at the lease commencement date. The lease ROU asset recognized at commencement is adjusted for any
lease payments related to initial direct costs, prepayments, and lease incentives. Operating lease expense is recognized on a straight-line basis over the expected
lease term and recognized in cost of sales and selling, general and administrative expenses.
At December 31, 2024, the Company has right of use assets and lease liabilities of $2,856,200 and $3,100,572, respectively. At December 31, 2023, the
Company had right of use assets and lease liabilities of $4,740,193 and $5,099,629, respectively.
Finance leases are treated as the purchase of an asset on a financing basis. Assets under finance leases, which primarily represent machinery and equipment,
computer equipment, and leasehold improvements, are included in property and equipment, net, with the related liabilities included in current portion of long-
term debt and long-term debt on the consolidated balance sheets.
Goodwill
Goodwill represents the excess of purchase price of an acquisition over the fair value of net assets acquired. Goodwill is not amortized but instead is assessed
for impairment annually as of December 31st and when events and circumstances warrant an evaluation. The Company has determined that it has a single
operating and reporting unit, and assesses during its evaluation whether it believes it is more likely than not that the fair value of this reporting unit is greater
than or less than its carrying amount by comparing the fair value of this reporting unit with its carrying value. If the carrying amount of a reporting unit exceeds
the reporting unit’s fair value, the amount by which the carrying value exceeds the fair value is recognized as an impairment loss. The Company performed its
annual impairment assessment of goodwill as of December 31, 2024 and concluded that goodwill was not impaired. The Company assessed goodwill using
qualitative factors to determine whether it was more likely than not that the fair value is less than its carrying value (step 0) and determined that no further
testing was required.
Long-Lived Assets
The Company reviews its long-lived assets and certain related intangibles for impairment whenever changes in circumstances indicate that the carrying amount
of an asset may not be fully recoverable by comparing the estimated undiscounted cash flow expected to result from the use of the asset and the estimated
amounts expected to be realized upon the asset’s eventual disposition with the carrying value of the asset. If the carrying amount of the asset exceeds the
aforementioned estimated expected undiscounted cash flows and estimated expected disposition proceeds, the Company measures the amount of the
impairment to record by comparing the carrying amount of the asset with its estimated fair value. As of December 31, 2024 and 2023, the Company determined
that long-lived assets were not impaired.
Fair Value
The fair value hierarchy has three levels based on the reliability of the inputs used to determine fair value. Level 1 refers to fair values determined based on
quoted prices in active markets for identical assets. Level 2 refers to fair values estimated using significant other observable inputs and Level 3 includes fair
values estimated using significant unobservable inputs.
At December 31, 2024 and 2023, the fair values of the Company’s current assets and current liabilities approximated their carrying values because of the short-
term nature of these instruments.
The carrying value of the line of credit and long-term debt approximates fair value (level 2) as the interest rate is based on market quotes.
Earnings per Share
The Company complies with the accounting and disclosure requirements of FASB ASC Topic 260, “Earnings Per Share” and uses the treasury stock method in
the calculation of earnings per share. Net income per common share is computed by dividing net income by the weighted average number of common shares
outstanding during the period.
Basic and diluted income per common share is computed using the weighted average number of common shares outstanding. Diluted income per common
share is adjusted for the incremental shares attributed to unvested RSUs. There were 116,024 and 160,742 incremental shares used in the calculation of diluted
income per common share for the years ended December 31, 2024 and 2023, respectively.
F-12 

CPI AEROSTRUCTURES, INC. AND SUBSIDIARIES
 
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
 
Income Taxes
Income taxes are accounted for under the asset and liability method whereby deferred tax assets and liabilities are recognized for future tax consequences
attributable to the temporary differences between the consolidated financial statements carrying amounts of assets and liabilities and their respective tax bases
and operating loss and tax credit carryforwards. Deferred tax assets and liabilities are measured using enacted tax rates expected to apply in the years in which
those temporary differences are expected to be recovered or settled. The effect on deferred tax assets and liabilities of a change in tax rates is recognized in the
period that includes the enactment date. Deferred tax assets are reduced by a valuation allowance when, in the opinion of management, it is more likely than
not that some portion or all of the deferred tax assets will not be realized. The Company recognizes the effect of an income tax position only if, based on its
merits, the position is more likely than not to be sustained on audit by the taxing authorities.
The Company’s policy is to record estimated interest and penalties related to uncertain tax positions in income tax expense.
Stock-Based Compensation
The Company accounts for stock-based compensation in accordance with ASC 718, Compensation - Stock Compensation (“ASC 718”). ASC 718 establishes
accounting for stock-based awards exchanged for employee and nonemployees. Under the provisions of ASC 718, stock-based compensation cost is measured
at the grant date, based on the fair value of the award on the grant date, and is recognized as expense over the employee’s requisite service period (generally the
vesting period of the equity grant).
Restricted stock awards are granted at the discretion of the Company’s board of directors. These awards are restricted as to the transfer of ownership and
generally vest over the requisite service period. The Company recognizes forfeitures at the time the forfeiture occurs.
Research and Development
Customer-funded research and development (“R&D”) costs are incurred pursuant to contractual arrangements requiring us to provide a product meeting certain
defined performance or other specifications, such as designs, and such contractual arrangements are accounted for principally by the over time revenue
recognition method. Customer-funded R&D is included in the “Revenue” and “Cost of sales” line items in our Consolidated Statements of Operations.
Prior Period Reclassification
Certain amounts in prior periods have been reclassified to conform with current period presentation.
Recently Issued Accounting Standards – Adopted
In 2024, the Company adopted ASU No. 2023-07, Segment Reporting (Topic 280): Improvements to Reportable Segment Disclosures, requiring public entities
to disclose information about their reportable segments’ significant expenses and other segment items on an interim and annual basis. Public entities with a
single reportable segment are required to apply the disclosure requirements in ASU 2023-07, as well as all existing segment disclosures and reconciliation
requirements in ASC 280 on an interim and annual basis. The Company adopted ASU 202-07 during the year ended December 31, 2024. See Note 17. Segment
Reporting in the accompanying notes to the consolidated financial statements for further detail.
Recently Issued Accounting Standards – Not Adopted
In November 2024, the FASB issued ASU 2024-03, Income Statement-Reporting Comprehensive Income-Expense Disaggregation Disclosures (Subtopic 220-
40): Disaggregation of Income Statement Expenses, which requires disclosure in the notes to the financial statements of specified information about certain
costs and expenses. In January 2025, the FASB issued ASU 2025-01, Income Statement-Reporting Comprehensive Income-Expense Disaggregation
Disclosures (Subtopic 220-40): Clarifying the Effective Date, which amends the effective date of ASU 2024-03 to clarify that all public business entities are
required to adopt the guidance in annual reporting periods beginning after December 15, 2026, and interim periods within annual reporting periods beginning
after December 15, 2027. Early adoption of ASU 2024-03 is permitted. ASU 2024-03 should be applied either prospectively to financial statements issued for
reporting periods after the effective date or retrospectively to any or all prior periods presented in the financial statements. The Company is currently evaluating
the new guidance to determine the impact it may have on its consolidated financial statements and related disclosures, but expects additional disclosures upon
adoption.
In December 2023, the FASB issued ASU No. 2023-09, Income Taxes (Topic 740): Improvements to Income Tax Disclosures, which focuses on the rate
reconciliation and income taxes paid. ASU No. 2023-09 requires a public business entity (“PBE”) to disclose, on an annual basis, a tabular rate reconciliation
using both percentages and currency amounts, broken out into specified categories with certain reconciling items further broken out by nature and jurisdiction
to the extent those items exceed a specified threshold. In addition, all entities are required to disclose income taxes paid, net of refunds received disaggregated
by federal, state/local, and foreign and by jurisdiction if the amount is at least 5% of total income tax payments, net of refunds received. For PBEs, the new
standard is effective for annual periods beginning after December 15, 2024, with early adoption permitted. An entity may apply the amendments in this ASU
prospectively by providing the revised disclosures for the period ending December 31, 2025 and continuing to provide the pre-ASU disclosures for the prior
periods, or may apply the amendments retrospectively by providing the revised disclosures for all period presented. We expect this ASU to only impact our
disclosures with no impacts to our results of operations, cash flows, and financial condition.
F-13 

CPI AEROSTRUCTURES, INC. AND SUBSIDIARIES
 
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
 
2.
REVENUE
Disaggregation of Revenue
The following table presents the Company’s revenue disaggregated by contract type and revenue recognition method:
 
 
Year Ended
 
 
 
December 31,
2024
  
December 31,
2023
 
Government subcontracts
  $
64,704,370  $
69,672,602 
Prime government contracts
   
11,677,152   
11,842,145 
Commercial contracts
   
4,697,342   
4,951,574 
Total
  $
81,078,864  $
86,466,321 
 
 
Year Ended
 
 
 
December 31,
2024
  
December 31,
2023
 
Revenue recognized using over time revenue
recognition model
  $
80,123,031  $
82,713,436 
Revenue recognized using point in time revenue
recognition model
   
955,833   
3,752,885 
Total
  $
81,078,864  $
86,466,321 
Favorable/(Unfavorable) Adjustments to Gross Profit
We review our Estimates at Completion (“EAC”) at least quarterly. Due to the nature of the work required to be performed on many of the Company’s
performance obligations, the estimation of total revenue and cost at completion is complex, subject to many inputs, and requires significant judgment by
management on a contract-by-contract basis. As part of this process, management reviews information including, but not limited to, any outstanding key
contract matters, progress towards completion and the related program schedule, identified risks and opportunities, and the related changes in estimates of
revenues and costs. The risks and opportunities relate to management’s judgment about the ability and cost to achieve the schedule, consideration of customer-
directed delays or reductions in scheduled deliveries, technical requirements, customer activity levels, and related variable consideration. Management must
make assumptions and estimates regarding contract revenue and costs, including estimates of labor productivity and availability, the complexity and scope of
the work to be performed, the availability and cost of materials including any impact from changing costs or inflation, the length of time to complete the
performance obligation, the availability and timing of funding from our customer, and overhead cost rates, among others.
Changes in estimates of net sales, cost of sales, and the related impact to operating profit on contracts recognized over time are recognized on a cumulative
catch-up basis, which recognizes the cumulative effect of the profit changes on current and prior periods based on a performance obligation’s percentage-of-
completion in the current period. A significant change in one or more of these estimates could affect the profitability of one or more of our performance
obligations. Our EAC adjustments also include the establishment of, and changes to, loss provisions for our contracts accounted for on a percentage-of-
completion basis.
Net EAC adjustments had the following impact on our gross profit during the years ended December 31, 2024 and 2023:
 
 
Years Ended
 
 
 
December 31,
2024
  
December 31,
2023
 
Net adjustments
  $
(3,750,020) $
(1,450,502)
Net unfavorable adjustments during the year ended December 31, 2024 compared to the year ended December 31, 2023 were a result of increased material
costs on various programs.
F-14 

CPI AEROSTRUCTURES, INC. AND SUBSIDIARIES
 
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
 
Transaction Price Allocated to Remaining Performance Obligations
As of December 31, 2024, the aggregate amount of transaction price allocated to the remaining performance obligations was approximately $85.0 million. This
represents the amount of revenue the Company expects to recognize in the future on contracts with unsatisfied or partially satisfied performance obligations as
of December 31, 2024.
3.
CONTRACT ASSETS AND LIABILITIES
Contract assets represent revenue recognized on contracts in excess of amounts invoiced to the customer and the Company’s right to consideration is
conditional on something other than the passage of time. Amounts may not exceed their net realizable value. Under the typical payment terms of our
government contracts, the customer retains a portion of the contract price until completion of the contract, as a measure of protection for the customer. Our
government contracts therefore typically result in revenue recognized in excess of billings, which we present as contract assets. Contract assets are classified as
current assets. The Company’s contract liabilities represent customer payments received or due from the customer in excess of revenue recognized. Contract
liabilities are classified as current liabilities.
 
December 31,
2024 
  
December 31,
2023
 
December 31,
2022
 
Contract assets
 $
32,832,290  $
35,312,068 
27,384,540 
  
    
   
 
Contract liabilities
  
2,430,663   
5,937,629 
6,001,726 
Contract assets at December 31, 2024 decreased $2,479,778 from December 31, 2023 due to the timing of billings as compared to the recognition of revenue
during 2024 upon the satisfaction or partial satisfaction of performance obligations.
Contract liabilities decreased $3,506,966 during 2024, primarily due to revenue recognized on these performance obligations in excess of payments received.
Revenue recognized for the year ended December 31, 2024, that was included in the contract liabilities balances as of January 1, 2024 was $5,635,629.
Revenue recognized for the year ended December 31, 2023, that was included in the contract liabilities balances as of January 1, 2023 was $3,816,336.
4.
ACCOUNTS RECEIVABLE
Accounts receivable consists of trade receivables as follows:
 
December 31,
2024
  
December 31,
2023
  
December 31,
2022
 
  
   
   
 
Billed receivables
 $
3,931,527  $
4,444,504  $
5,139,757 
Less: allowance for expected credit losses   
(215,149)  
(92,308)  
(281,985)
Total accounts receivable, net
 $
3,716,378  $
4,352,196  $
4,857,772 
F-15 

CPI AEROSTRUCTURES, INC. AND SUBSIDIARIES
 
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
 
5.
INVENTORY
The components of inventory consist of the following:
   
 
   
 
 
 
December 31,
 
 
2024
   
2023
 
Raw materials
  $
414,806    $
648,264 
Work in progress
   
60,719     
75,795 
Finished goods
   
442,763     
712,588 
Inventory
  $
918,288    $
1,436,647 
6.
PROPERTY AND EQUIPMENT
The components of property and equipment consist of the following:
 
December 31,
   
Estimated
 
 
2024
   
2023
   
Useful Life (years)
 
Machinery and equipment
  $
4,247,671    $
4,004,779   
5 to 7
 
Computer equipment
   
4,393,060     
4,242,437   
5 to 10
 
Furniture and fixtures
   
709,350     
709,350   
7
 
Automobiles and trucks
   
13,162     
13,162   
5
 
Leasehold improvements
   
2,702,891     
2,692,552   
 Lesser of lease term or
10 years
 
Total gross property and equipment
   
12,066,134     
11,662,280   
 
 
Less accumulated depreciation and amortization
   
(11,298,230)    
(10,868,224)  
 
 
Total property and equipment, net
  $
767,904    $
794,056   
 
 
Depreciation expense for the years ended December 31, 2024 and 2023 was $430,006 and $470,950, respectively.
7.
GOODWILL
The Company acquired WMI on December 20, 2018. The acquisition was accounted for as a business combination in accordance with ASC Topic 805.
Accordingly, the Company recorded the fair value of the assets and liabilities assumed at the date of acquisition. As a result of the acquisition of WMI on
December 30, 2018, the Company recorded Goodwill of $1,784,254.
8.
LINE OF CREDIT AND LONG-TERM DEBT
On March 24, 2016, the Company entered into an Amended and Restated Credit Agreement with the lenders named therein and BankUnited, N.A.
(“BankUnited”) as Sole Arranger, Agent and a Lender, dated as of March 24, 2016 (as amended, the “Credit Agreement” or the “BankUnited Facility”). The
BankUnited Facility originally provided for a revolving credit loan commitment of $30 million (the “Revolving Loan”) and a $10 million term loan (“Term
Loan”). The Revolving Loan bears interest at a rate based upon a pricing grid, as defined in the Credit Agreement.
F-16 

CPI AEROSTRUCTURES, INC. AND SUBSIDIARIES
 
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
 
On March 23, 2023, the Company entered into a Twelfth Amendment to the Credit Agreement (the “Twelfth Amendment”). Under the Twelfth Amendment, the
parties amended the Credit Agreement by : (a) extending the maturity date of the Company’s existing revolving line of credit and its existing term loan to
November 30, 2024 (under the terms of the Credit Agreement, the outstanding principal balance of the term loan will be repaid by June 30, 2023); (b)
providing for reduction of the aggregate maximum principal amount of all revolving line of credit loans to $20,520,000 from October 1, 2023 through
December 31, 2023, $19,800,000 from January 1, 2024 through March 31, 2024, $19,080,000 from April 1, 2024 through June 30, 2024, $18,360,000 from
July 1, 2024 through September 30, 2024, and $17,640,000 from October 1, 2024 and thereafter, and for payments to be made by the Company to comply
therewith (if any such payments are necessary), on the first day of each such period; and (c) payment of a $250,000 capitalized fee incurred in connection with
the Eighth Amendment to the Credit Agreement in two installments, the first installment to be paid on June 1, 2023 in the amount of $116,667 and the second
installment to be paid July 1, 2023 in the amount of $133,333, together with all unpaid interest accrued at the term loan interest rate on the capitalized fee
through each such date.
The Credit Agreement, as amended, requires us to maintain the following financial covenants (subject to the exclusions provided for in the previous
paragraph): (a) minimum debt service coverage ratio of no less than 1.5 to 1.0 for the trailing four quarter period ended March 31, 2022, 0.95 to 1.0 for the
trailing four quarter period ended June 30, 2022, and 1.5 to 1.0 for the trailing four quarter period ended September 30, 2022 and for the trailing four quarter
periods ended thereafter; (b) maximum leverage ratio of no less than 7.30 to 1.0 for the trailing four quarter period ended March 31, 2022, 6.30 to 1.0 for the
trailing four quarter period ended June 30, 2022, 5.0 to 1.0 for the trailing four quarter period ended September 30, 2022 and 4.0 to 1.0 for the trailing four
quarter periods thereafter; (c) minimum net income after taxes as of the end of each fiscal quarter being no less than $1.00 commencing June 30, 2022; and (d)
a minimum adjusted EBITDA at the end of each quarter of no less than $1.0 million (waived for the quarter ended March 31, 2022). The additional principal
payments, increase in interest and an amendment fee provided for in the Eighth and Ninth Amendments are excluded for purposes of calculating compliance
with each of the financial covenants.
On February 20, 2024, the Company entered into a Thirteenth Amendment to the Credit Agreement (the “Thirteenth Amendment”). Under the Thirteenth
Amendment, the parties amended the Credit Agreement by (a) extending the maturity date of the Company’s existing revolving line of credit to August 31,
2025; and (b) setting the aggregate maximum principal amount of all revolving line of credit loans to $19,800,000 from January 1, 2024 through March 31,
2024, $19,080,000 from April 1, 2024 through June 30, 2024, $18,360,000 from July 1, 2024 through September 30, 2024, $17,640,000 from October 1, 2024
through December 31, 2024, $16,920,000 from January 1, 2025 through March 31, 2025, $16,200,000 from April 1, 2025 through June 30, 2025 and
$15,480,000 thereafter, and for payments to be made by the Company to comply therewith (if any such payments are necessary), on the first day of each such
period.
On November 13, 2024, the Company entered into a Fourteenth Amendment to the Credit Agreement (the “Fourteenth Amendment”). Under the Fourteenth
Amendment, the parties amended the Credit Agreement by: (i) extending the maturity date of the Company’s existing revolving line of credit (the “Revolving
Credit Loans”) to August 31, 2026; (ii) reducing the Base Rate Margin (as defined in the Credit Agreement) from 3.50% to 2.0%; (iii) resetting the aggregate
maximum principal amount of all Revolving Credit Loans to $16,890,000 from January 1, 2025 through March 31, 2025, $16,140,000 from April 1, 2025
through June 30, 2025, $15,390,000 from July 1, 2025 through September 30, 2025, $14,640,000 from October 1, 2025 through December 31, 2025,
$13,890,000 from January 1, 2026 through March 31, 2026, $13,140,000 from April 1, 2026 through June 30, 2026, and $12,390,000 from July 1, 2026
onward and for payments to be made by the Company to comply therewith (if any such payments are necessary), on the first day of each such period; and (iv)
requiring the Company, if it does not deliver to BankUnited, N.A. by December 31, 2025, a commitment letter with banks and terms and conditions reasonably
acceptable to the Lenders for refinancing the obligations under the Credit Agreement, to make a payment by January 31, 2026, equal to 2% of the aggregate
outstanding principal amount of the Revolving Credit Loans as of December 31, 2025, with 50% of such payment applied to reduce the aggregate outstanding
principal and the remaining 50% retained by the Lenders as an amendment fee with respect to the Fourteenth Amendment.
As of December 31, 2024 and 2023, the Company had $17,390,000 and $20,040,000, respectively, outstanding under the BankUnited Revolving Loan Facility.
$2,750,000 of the revolving line of credit matures and is payable by December 31, 2025 and the remaining balance of $14,640,000 of the revolving line of
credit matures and is payable by August 31, 2026.
The BankUnited Facility is secured by all of the Company’s assets and both the Revolving Loan and Term Loan bear interest at the Prime Rate + 2.0% per the
14th Amendment effective on November 13, 2024. Prior to the amendment, interest was equal to the prime rate + 3.5%. The Prime Rate was 7.50% as of
December 31, 2024 and as such, the Company’s interest rate on the Revolving Loan and Term Loan was 9.50% as of December 31, 2024.
The BankUnited Facility is secured by all of the Company’s assets.
The Company has cumulatively paid approximately $962,000 of total debt issuance costs in connection with the BankUnited Facility of which approximately
$36,000 and $82,000 is unamortized and included in other assets at December 31, 2024 and 2023, respectively.
The maturities of the long-term debt (excluding unamortized debt issuance costs) as of December 31, 2024, are 26,483 maturing during 2025.
Included in the long-term debt are financing leases and notes payable totaling $26,483 and $70,981 at December 31, 2024 and 2023, respectively, including a
current portion of $26,483 and $44,498, respectively.
F-17 

CPI AEROSTRUCTURES, INC. AND SUBSIDIARIES
 
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
 
9.
LEASES
The Company leases manufacturing and office space under an agreement classified as an operating lease. On November 10, 2022, the Company executed the
second amendment to the lease agreement for its manufacturing and office space, which extends the lease agreement’s expiration date to April 30, 2026. The
lease agreement does not include any renewal options. The agreement provides for an initial monthly base amount plus annual escalations through the term of
the lease. In addition to the monthly base amounts in the lease agreement, the Company is required to pay real estate taxes and operating expenses during the
lease terms.
The Company also leases office equipment in agreements classified as operating leases.
For the years ended December 31, 2024 and 2023, the Company’s operating lease expense was $2,137,830 and $2,142,338, respectively.
Future minimum lease payments under non-cancellable operating leases as of December 31, 2024 were as follows:
Year ending December 31,
   
 
2025
  $
2,283,354 
2026
   
850,276 
2027
   
111,065 
2028
   
9,228 
2029
   
— 
Total undiscounted operating lease payments
   
3,253,923 
Less imputed interest
   
(153,351)
Present value of operating lease payments
  $
3,100,572 
The following table sets forth the ROU assets and operating lease liabilities as of December 31, 2024 and 2023:
 
2024
   
2023
 
Assets
 
 
      
  
ROU assets, net
 
$
2,856,200    $
4,740,193 
 
 
      
  
Liabilities
 
 
      
  
Current operating lease liabilities
 
$
2,162,154    $
1,999,058 
Long-term operating lease liabilities
 
 
938,418     
3,100,571 
Total lease liabilities
 
$
3,100,572    $
5,099,629 
The Company’s weighted average remaining lease term for its operating leases is 1.5 years as of December 31, 2024. The Company’s weighted average
discount rate for its operating leases is 5.56% as of December 31, 2024. Cash paid for the year ended December 31, 2024 and 2023 was $2,228,784 and
$2,151,050, respectively.
10.
INCOME TAXES
We account for income taxes in accordance with ASC 740 Income Taxes. ASC 740 is an asset and liability approach that requires the recognition of deferred
tax assets and liabilities for the expected tax consequences or events that have been recognized in our consolidated financial statements or tax returns. ASC 740
also clarifies the accounting for uncertainty in income taxes recognized in the consolidated financial statements. The interpretation prescribes a recognition
threshold and measurement attribute for the consolidated financial statements recognition and measurement of a tax position taken, or expected to be taken, in a
tax return.
The Company files income tax returns in the U.S. federal jurisdiction and in various state jurisdictions. The Company generally is no longer subject to U.S. or
state examinations by tax authorities for taxable years prior to 2020. However, net operating losses utilized from prior years in subsequent years’ tax returns are
subject to examination until three years after the filing of subsequent years’ tax returns. The statute of limitations expiration in foreign jurisdictions for
corporate tax returns generally ranges between two and five years depending on the jurisdiction.
F-18 

CPI AEROSTRUCTURES, INC. AND SUBSIDIARIES
 
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
 
The provision (benefit) for income taxes consists of the following:
Year ended December 31,
 
2024
   
2023
 
Current:
 
 
      
  
State
 
$
42,906    $
14,248 
Deferred:
 
 
      
  
Federal
 
 
624,509     
(12,608,425)
State
 
 
476,039     
(755,237)
Total
 
$
1,143,454    $
(13,349,414)
The difference between the income tax provision (benefit) computed at the federal statutory rate and the actual tax benefit is accounted for as follows:
December 31,
 
2024
   
2023
 
Taxes computed at the federal statutory rate
  $
932,985    $
808,876 
State income tax, net
   
409,967     
(585,381)
Research and development tax credit
   
(145,954)    
(133,089)
Change in valuation allowance
   
(20,846)    
(13,531,626)
Other
   
(43,413)    
88,308 
Permanent differences
   
10,715     
3,498 
Provision (Benefit) for income taxes
  $
1,143,454    $
(13,349,414)
The components of deferred income tax assets and liabilities are as follows at December 31:
Deferred Tax Assets:
 
2024
   
2023
 
Allowance for credit losses
  $
45,969    $
20,632 
Capitalized R&D
   
1,705,529     
1,420,263 
Credit carryforwards
   
2,424,596     
2,278,642 
Inventory reserve
   
341,031     
350,073 
Accrued payroll
   
133,052     
151,986 
Loss contracts reserve
   
4,878     
75,402 
Restricted stock
   
55,082     
94,809 
Acquisition costs
   
63,781     
74,136 
Lease liability
   
461,967     
1,139,836 
Disallowed interest expense
   
709,604     
1,067,063 
Net operating loss carryforward
   
14,643,979     
16,356,545 
Other
   
32,642     
45,057 
Deferred tax assets
   
20,622,110     
23,074,444 
   
      
  
Valuation allowance
   
(973,367)    
(569,143)
   
      
  
Deferred Tax Liabilities:
   
      
  
Prepaid expenses
   
66,695     
143,126 
Revenue recognition
   
—     
1,224,106 
Property and equipment
   
134,214     
140,449 
ROU asset
   
610,258     
1,059,496 
Deferred tax liabilities
  $
811,167    $
2,567,177 
Net deferred tax assets
  $
18,837,576    $
19,938,124 
As of December 31, 2024, the Company had approximately $66.0 million of gross net operating loss carryforwards (“NOLs”) for federal tax purposes and
approximately $18.0 million of post apportionment NOLs for state tax purposes. The Federal NOLs begin to expire in 2034. Losses generated in 2018 and
forward of $14.4 million have an indefinite life and can offset up to 80% of taxable income in the future. Federal NOLs generated prior to 2018 can offset
100% of future taxable income. The state NOLs begin to expire in 2034.
F-19 

CPI AEROSTRUCTURES, INC. AND SUBSIDIARIES
 
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
 
The Company will recognize a tax liability in the consolidated financial statements for an uncertain tax position only if management’s assessment is that the
position is “more likely than not” (i.e., a likelihood greater than 50%) to be allowed by the tax jurisdiction based solely on the technical merits of the position.
The term “tax position” refers to a position in a previously filed tax return or a position expected to be taken in a future tax return that is reflected in measuring
current or deferred income tax assets and liabilities for financial reporting purposes. For income tax purposes, the Company has historically calculated taxable
income from its long-term contracts with customers using methodology governed under Internal Revenue Code (“IRC”) Section 460 (“Section 460”) utilizing
the simplified method of cost allocation. The financial statements have been prepared to reflect a change in tax reporting methods to another method that is
acceptable under Section 460, the percentage of completion method which approximates the revenue included for U.S. GAAP reporting. This type of change
from one acceptable method to another is not automatic and subject to an approval process with the IRS. The result of this change had no impact on the
financial position or earnings reported by the Company, and only had disclosure impact in regard to the components of deferred tax assets and liabilities.
Assessing the realizability of deferred tax assets requires the determination of whether it is more likely than not that some portion or all the deferred tax assets
will not be realized. In assessing the need for a valuation allowance, the Company considers all available positive and negative evidence, including future
reversals of existing taxable temporary differences, projected future taxable income, loss carryback and tax-planning strategies. Generally, more weight is given
to objectively verifiable evidence, such as a cumulative loss in recent years, as a significant piece of negative evidence to overcome. For the period ended
December 31, 2023, the Company achieved three years of cumulative book and taxable income, along with projections of profitability, for which management
determined that there was sufficient positive evidence to conclude that it is more likely than not that a portion of the deferred tax assets will be realized. As
such, $14,170,891 of the valuation allowance was released during the fourth quarter of 2023. During 2024 the Company continued to assess its ability to realize
its deferred tax asset. The Company continued to be profitable in 2024 and there was no significant change to the Company’s forecast of income or its ability to
realize the deferred tax asset at December 31, 2024. The increase of $404,224 is most significantly related to the state valuation allowance.
The income tax for the year ended December 31, 2024 was $1,143,454, which was an effective tax rate of 25.7%. The tax rate was primarily due to federal and
state statutory rates in 2024. Management makes these estimates quarterly in order to determine the appropriate level of valuation allowance to include in the
Company’s financial statements at the balance sheet date.
11.
ACCRUED EXPENSES
 
Accrued expenses consists of the following:
 
December 31,
2024
  
December 31,
2023
 
  
    
  
Accrued purchases
 $
4,683,246  $
7,132,847 
Accrued payroll
  
1,323,018   
1,143,913 
Accrued insurance
  
803,185   
855,190 
Accrued interest
  
487,428   
601,200 
Accrued professional fees and other accrued
expenses
  
625,439   
542,545 
Total
 $
7,922,316  $
10,275,695 
12.
STOCK-BASED COMPENSATION
In 2009, the Company adopted the Performance Equity Plan 2009 (the “2009 Plan”). The 2009 Plan reserved 500,000 common shares for issuance. The 2009
Plan provides for the issuance of either incentive stock options or nonqualified stock options to employees, consultants or others who provide services to the
Company. The Company has 2,364 shares available for grant under the 2009 Plan as of December 31, 2024.
In 2016, the Company adopted the 2016 Long Term Incentive Plan (the “2016 Plan”). The 2016 Plan reserved 600,000 common shares for issuance, provided
that, no more than 200,000 common shares be granted as incentive stock options. Awards may be made or granted to employees, officers, directors and
consultants in the form of incentive stock options, non-qualified stock options, stock appreciation rights, restricted stock, restricted stock units and other stock-
based awards. Any shares of common stock granted in connection with awards other than stock options and stock appreciation rights are counted against the
number of shares reserved for issuance under the 2016 Plan as one and one-half shares of common stock for every one share of common stock granted in
connection with such award. Any shares of common stock granted in connection with stock options and stock appreciation rights are counted against the
number of shares reserved for issuance under the 2016 Plan as one share for every one share of common stock issuable upon the exercise of such stock option
or stock appreciation right awarded. In the fourth quarter of 2020, the Company added 800,000 shares to the 2016 Plan, which increased the number of shares
reserved for issuance under the 2016 Plan to 1,400,000 shares. In the second quarter of 2023, the Company added an additional 800,000 shares to the 2016
Plan, which increased the number of shares for reserved for issuance under the 2016 Plan to 2,200,000 shares. The Company has 308,094 shares available for
grant under the 2016 Plan as of December 31, 2024.
F-20 

CPI AEROSTRUCTURES, INC. AND SUBSIDIARIES
 
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
 
Stock-based compensation expense for restricted stock in the consolidated statements of operations is summarized as follows:
 
2024
  
2023
 
Cost of sales
 $
3,675  $
65,470 
  
    
  
Selling, general and administrative
  
601,007   
705,156 
Total stock-based compensation expense
 $
604,682  $
770,626 
The Company grants restricted stock units (“RSUs”) to its board of directors as partial compensation. These RSUs vest quarterly on a straight-line basis over a
one-year period.
The following table summarizes activity related to outstanding RSUs for the year ended December 31, 2024:
  
RSUs
  
Weighted
Average
Grant Date
 Fair Value of
RSUs
 
Non-vested – January 1, 2024
   
—  $
— 
Granted
   
181,323  $
2.45 
Vested
   
(181,323) $
2.45 
Forfeited
   
—  $
— 
Non-vested – December 31, 2024
   
—  $
— 
The Company grants shares of common stock (“Restricted Stock Awards”) to select employees. These shares have various vesting dates, ranging from vesting
on the grant date to as late as four years from the date of grant. In the event that the employee’s employment is voluntarily terminated prior to certain vesting
dates, portions of the shares may be forfeited. At December 31, 2024, the weighted average remaining amortization period was 1.3 years.
The following table summarizes activity related to outstanding Restricted Stock Awards for the year ended December 31, 2024:
  
Restricted
Stock Awards  
Weighted
Average
Grant Date
 Fair Value of
Restricted
Stock
 Awards  
 
Non-vested – January 1, 2024
   
167,071  $
3.25 
Granted
   
114,104  $
2.38 
Vested
   
(44,819) $
3.04 
Forfeited
   
(83,481) $
2.88 
Non-vested – December 31, 2024
   
152,875  $
2.86 
The Company grants shares of common stock (“Performance Restricted Stock Awards” or “PRSAs”) to select officers as part of our long-term incentive
program that will result in that number of PRSAs being paid out if the target performance metric is achieved. The award vesting is based on specific
performance metrics related to accounts payable delinquency, debt, and net income during the performance period. The PRSAs vest at 0% or 100% and all
three metrics must be met to vest at 100%. The PRSAs granted under this program will vest on the fourth anniversary of the grant date, subject to the
aforementioned performance criteria. At December 31, 2024, the weighted average remaining amortization period was 2.4 years.
F-21 

CPI AEROSTRUCTURES, INC. AND SUBSIDIARIES
 
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
 
The following table summarizes activity related to outstanding PRSAs for the year ended December 31, 2024:
   
PRSAs
   
Weighted
Average
Grant Date
 Fair Value
of PRSAs  
 
Non-vested – January 1, 2024
     
48,050    $
3.27 
Granted
     
64,611    $
2.91 
Vested
     
—    $
— 
Forfeited
     
(68,585)   $
3.12 
Non-vested – December 31, 2024
     
44,076    $
2.98 
The fair value of all RSUs, PRSAs and Restricted Stock Awards is based on the closing price of our common stock on the grant date. All RSUs, PRSAs, and
Restricted Stock Awards vest and settle in common stock (on a one-for-one basis).
As of December 31, 2024, unamortized stock-based compensation costs related to restricted share arrangements was $209,869.
In addition, our income tax liabilities for 2024 and 2023 were reduced by $138,296 and $174,617, respectively, due to recognized tax benefits on stock-based
compensation arrangements.
13.
EMPLOYEE BENEFIT PLAN
On September 11, 1996, the Company’s board of directors instituted a defined contribution plan under Section 401(k) of the Internal Revenue Code (the
“Code”). On October 1, 1998, the Company amended and standardized its plan as required by the Code. Pursuant to the amended plan, qualified employees
may contribute a percentage of their pretax eligible compensation to the Plan and the Company will match a percentage of each employee’s contribution.
Additionally, the Company has a profit-sharing plan covering all eligible employees. Contributions by the Company are at the discretion of management. The
amount of contributions recorded by the Company during the years ended December 31, 2024 and 2023 amounted to $305,934 and $300,600, respectively.
14.
MAJOR CUSTOMERS
 
For the year ended December 31, 2024, 36%, 24%, and 14% of our revenue was generated from our three largest customers. For the year ended December 31,
2023, 30%, 26%, 13% and 12% of our revenue was generated from our four largest customers.
 
At December 31, 2024, 21%, 18%, 16%, 12%, 12% and 12% of accounts receivable were due from our six largest customers. At December 31, 2023, 30%,
17%, 12%, and 11% of accounts receivable were due from our four largest customers.
 
At December 31, 2024, 31%, 27%, and 20% of our contract assets were related to our three largest customers. At December 31, 2023, 26%, 23%, 18%, and
15% of our contract assets were related to our four largest customers.
 
At December 31, 2024, 13%, 12%, 11% and 11% of our AP was from our top 4 largest vendors. At December 31, 2023, no vendors accounted for more than
10% of accounts payable.
 
15.
COMMITMENTS AND CONTINGENCIES
The Company may be involved in various claims, suits, assessments, investigations, and legal proceedings that arise from time to time in the ordinary course of
its business. The Company accrues a liability when it is both probable a liability has been incurred and the amount of the loss can be reasonably estimated. The
Company reviews these accruals at least quarterly and adjusts them to reflect ongoing negotiations, settlements, rulings, advice of legal counsel, and other
relevant information. To the extent new information is obtained and the Company’s views on the probable outcomes of claims, suits, assessments,
investigations, or legal proceedings change, changes in the Company’s accrued liabilities would be recorded in the period such determination is made. For
some matters, the amount of liability is not probable or the amount cannot be reasonably estimated and, therefore, accruals have not been made.
The Company reached a settlement with the SEC on June 20, 2024 related to the Company's previously announced and filed restatements of certain of its
financial statements for fiscal periods between January 1, 2018 and December 31, 2022. Under the terms of this settlement, if the Company fails to comply
with various undertakings, a civil monetary penalty in the amount of $400,000 will be due to the SEC by June 30, 2025 (the “Undertakings”). The
Undertakings are as follows: (a) the Company shall fully remediate its outstanding material weaknesses in Internal Controls over Financial Reporting (“ICFR”)
and have effective ICFR and disclosure controls and procedures (“DCP”) by December 31, 2024; (b) the Company shall publicly disclose, concurrent with the
filing of the 2024 Form 10-K, whether in management's opinion, the Company has fully remediated its material weaknesses in ICFR and has effective ICFR
and DCP; and (c) the Company shall certify, in writing, compliance with the undertaking(s) set forth above. The certification shall be made by the Company's
CEO and identify the undertaking(s), provide written evidence of compliance in the form of a narrative, and be supported by exhibits sufficient to demonstrate
compliance. The certification and supporting material shall be submitted to the SEC no later than sixty (60) days from the date of the completion of the
undertakings.

F-22 

CPI AEROSTRUCTURES, INC. AND SUBSIDIARIES
 
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
 
Termination of Shareholder Derivative Actions and Class Action Lawsuit
Termination of Shareholder Derivative Actions
In 2020 and 2021, four shareholder derivative actions were filed against certain current and former members of our board of directors and certain of our current
and former officers. All four of the actions—each described in further detail below—were based on substantially the same allegations and claims – specifically,
that the defendants allegedly breached their fiduciary duties and/or violated securities laws by permitting false and misleading statements to be included in the
Company’s registration statement and prospectus supplements issued in connection with the Company’s October 16, 2018 securities offering and/or by
permitting false and misleading statements to be made in the Company’s periodic reports filed between March 22, 2018 and February 14, 2020.
The first action (captioned Moulton v. McCrosson, et.al., No. 20-cv-02092) was filed on May 7, 2020, in the U.S. District Court for the Eastern District of New
York. It purported to assert derivative claims against the individual defendants for violations of Section 10(b) and 21D of the Exchange Act, breach of fiduciary
duty, and unjust enrichment and sought to recover on behalf of the Company for any liability the Company might incur as a result of the individual defendants’
alleged misconduct. The complaint also sought declaratory, equitable, injunctive, and monetary relief, as well as attorneys’ fees and other costs.
The second action (captioned Woodyard v. McCrosson, et al., Index No. 613169/2020) was filed on September 17, 2020, in the Supreme Court of the State of
New York (Suffolk County). It purported to assert derivative claims against the individual defendants for breach of fiduciary duty and unjust enrichment and
sought to recover on behalf of the Company for any liability the Company might incur as a result of the individual defendants’ alleged misconduct, along with
declaratory, equitable, injunctive, and monetary relief, as well as attorneys’ fees and other costs.
The third action (captioned Berger v. McCrosson, et al., No. 1:20-cv-05454) was filed on November 10, 2020, in the U.S. District Court for the Eastern District
of New York. The complaint, which was based on the shareholder’s inspection of certain corporate books and records, purported to assert derivative claims
against the individual defendants for breach of fiduciary duty and unjust enrichment, and sought to implement reforms to the Company’s corporate governance
and internal procedures and to recover on behalf of the Company an unspecified amount of monetary damages. The complaint also sought equitable, injunctive,
and monetary relief, as well as attorneys’ fees and other costs.
On March 19, 2021, the parties to the Moulton and Berger actions filed a joint stipulation consolidating the actions (under the caption In re CPI Aerostructures
Stockholder Derivative Litigation, No. 20-cv-02092) and staying the consolidated action.
The fourth action (captioned Wurst, et al. v. Bazaar, et al., Index No. 605244/2021) was filed on March 24, 2021, in the Supreme Court of the State of New
York (Suffolk County). The complaint purported to assert derivative claims against the individual defendants for breach of fiduciary duty, unjust enrichment,
and waste of corporate assets, and sought to recover on behalf of the Company for any liability the Company might incur as a result of the individual
defendants’ alleged misconduct. The complaint also sought declaratory, equitable, injunctive, and monetary relief, as well as attorneys’ fees and other costs.
On June 13, 2022, plaintiffs in the consolidated federal action informed the court that the Company and all defendants had reached an agreement in principle
with all plaintiffs to settle the shareholder derivative lawsuits described above. On June 16, 2022, plaintiffs in the consolidated federal action filed an
unopposed motion for preliminary approval of the settlement. On February 14, 2023, the magistrate judge recommended that the court grant the motion in its
entirety. On March 6, 2023, the Court granted preliminary approval of the proposed settlement.
On May 17, 2023, plaintiffs in the consolidated federal action filed an unopposed motion for final approval of the settlement. The magistrate judge held a final
approval hearing on June 7, 2023. On October 27, 2023, the magistrate judge recommended that the Court grant the final approval motion in its entirety. On
December 11, 2023, the Court adopted that recommendation and entered orders granting final approval to the settlement and closing the case.
Pursuant to the settlement agreement, after the federal court’s final approval of the settlement, the plaintiffs in the Woodyard and Wurst state-court actions
voluntarily requested that those actions be dismissed. The parties to the Woodyard action filed a stipulation of dismissal on December 15, 2023, and the Court
entered an order dismissing the action on December 19, 2023. The parties to the Wurst action filed a stipulation of dismissal on December 14, 2023, and the
Court entered an order dismissing the action on December 18, 2023.
F-23 

CPI AEROSTRUCTURES, INC. AND SUBSIDIARIES
 
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
 
As part of the settlement, the Company agreed to undertake (or confirm that it has undertaken already) certain corporate governance reforms. In addition, the
Company and/or its insurer have agreed to pay a total of $585,000 in attorneys’ fees to plaintiffs’ counsel. The Company’s insurer paid the full amount due of
$585,000. Because the settlement amount was transferred to counsel for plaintiffs on May 5, 2023 from the escrow account established for this purpose, we
relieved from our balance sheet, as of that date, the amounts previously owed from our directors’ and officers’ insurance carrier and to that plaintiff.
Termination of Class Action Lawsuit
A consolidated class action lawsuit (captioned Rodriguez v. CPI Aerostructures, Inc., et al., No. 20-cv-01026) was filed in the U.S. District Court for the
Eastern District of New York against the Company; Douglas McCrosson, the Company’s former Chief Executive Officer; Vincent Palazzolo, the Company’s
former Chief Financial Officer; and the two underwriters of the Company’s October 16, 2018 offering of common stock, Canaccord Genuity LLC and B. Riley
FBR. The Amended Complaint in the action asserted claims on behalf of two plaintiff classes: (i) purchasers of the Company’s common stock issued pursuant
to and/or traceable to the Company’s offering conducted on or about October 16, 2018; and (ii) purchasers of the Company’s common stock between March 22,
2018 and February 14, 2020. The Amended Complaint alleged that the defendants violated Sections 11, 12(a)(2), and 15 of the Securities Act by negligently
permitting false and misleading statements to be included in the registration statement and prospectus supplements issued in connection with its October 16,
2018 securities offering. The Amended Complaint also alleged that the defendants violated Sections 10(b) and 20(a) of the Securities Exchange Act of 1934, as
amended (the “Exchange Act”), and Rule 10b-5 promulgated by the SEC, by making false and misleading statements in the Company’s periodic reports filed
between March 22, 2018 and February 14, 2020. Plaintiff sought unspecified compensatory damages, including interest; rescission or a rescissory measure of
damages; unspecified equitable or injunctive relief; and costs and expenses, including attorney’s fees and expert fees. On February 19, 2021, the Company
moved to dismiss the Amended Complaint. Plaintiff submitted a brief in opposition to the motion to dismiss on April 23, 2021.
On May 20, 2021, the parties reached a settlement in the amount of $3,600,000, subject to court approval. On July 9, 2021, Plaintiff filed an unopposed motion
for preliminary approval of the settlement. On November 10, 2021, a magistrate judge recommended that the court grant the motion for preliminary approval in
its entirety. The Court adopted the recommendation on May 27, 2022, and entered an order granting preliminary approval of the settlement on June 7, 2022. On
August 5, 2022, the Plaintiff filed an unopposed motion for final approval. The magistrate judge held a hearing on the final approval motion on September 9,
2022. On February 16, 2023, the magistrate judge recommended that the Court grant the final approval motion in its entirety. The Court adopted that
recommendation in its entirety on March 10, 2023, and terminated the case on March 13, 2023. On May 5, 2023, the Settlement Amount was transferred to
plaintiff’s counsel from the escrow account established for this purpose.
Litigation Settlement Obligation and Insurance Recovery Receivable Pertaining to the Class Action Lawsuit and Shareholder Derivative Action
The attorneys’ fees for both the class action lawsuit and the shareholder derivative actions were covered and paid by our directors’ and officers’ insurance
carrier, after satisfaction of our $750,000 retention. As of December 31, 2023, we had previously paid and accrued to our financial statements covered expenses
totaling $750,000, and had therefore met our insurance carrier’s directors’ and officers’ retention requirement, which capped the Company’s expenses
pertaining to the class action suit at $750,000. Because the Settlement Amount was transferred to counsel for plaintiff in the class action lawsuit on May 5,
2023, from the escrow account established for this purpose, we have relieved from our balance sheet, as of that date, the amounts previously owed from our
directors’ and officers’ insurance carrier and to that plaintiff.
17.
SEGMENT REPORTING 
We manage our business activities on a consolidated basis and operate as a single operating segment. We primarily derive our revenue in the United States by
supplying aircraft parts, complex aerostructure assemblies, aerosystems, MRO and kitting contracts for fixed wing aircraft and helicopters in both the
commercial and defense markets. The accounting policies are the same as those described in Note 1 – Principal Business Activity and Summary of Significant
Accounting Policies.
Our CODM is our Chief Executive Officer, Dorith Hakim. The CODM reviews financial information presented on a consolidated basis for purposes of making
operating decisions including the allocation of resources and assessing financial performance.
As the Company has only one operating segment and is managed on a consolidated basis, the measure of profit or loss is consolidated net income or loss,
which include all significant expenses and assets as presented in the consolidated financial statements which is consistent with the information provided to the
CODM. Refer to the Consolidated Balance Sheet and the Consolidated Statements of Operations for the financial information with respect to the Company’s
single operating segment for the years ended December 31, 2024 and 2023.
F-24 

Pursuant to the requirements of Section 13 or 15(d) of the Securities Exchange Act of 1934, the registrant has duly caused this report to be signed on its behalf
by the undersigned, thereunto duly authorized.
Dated: March 31, 2025 
CPI AEROSTRUCTURES, INC.
(Registrant)
 
 
By: /s/ Philip Passarello
 
Philip Passarello
Chief Financial Officer
(Principal financial and accounting officer) 
 
Pursuant to the requirements of the Securities Exchange Act of 1934, this report has been signed below by the following persons on behalf of the
registrant and in the capacities and on the dates indicated:
 
Signature
  Title
  Date
   
   
/s/ Carey Bond
  Chairman of the Board of Directors
  March 31, 2025
Carey Bond
   
   
   
   
/s/ Richard Caswell
  Director
  March 31, 2025
Richard Caswell
   
   
   
   
/s/ Michael Faber
  Director
  March 31, 2025
Michael Faber
   
   
   
   
/s/ Dorith Hakim
  Chief Executive Officer and President
  March 31, 2025
Dorith Hakim
  (Principal Executive Officer)
   
   
   
/s/ Pamela Levesque
  Director
  March 31, 2025
Pamela Levesque
   
   
   
   
/s/ Philip Passarello
  Chief Financial Officer
  March 31, 2025
Philip Passarello
  (Principal Financial and Accounting Officer)
   
   
   
/s/ Rick Rosenjack
  Director
  March 31, 2025
Rick Rosenjack
   
   
   
   
/s/ Terry Stinson
   Vice Chairman of the Board of Directors
  March 31, 2025
Terry Stinson
   
   

CPI AEROSTRUCTURES, INC. 10-K
Exhibit 4.1
 
DESCRIPTION OF REGISTRANT’S SECURITIES
REGISTERED PURSUANT TO SECTION 12 OF THE
SECURITIES EXCHANGE ACT OF 1934
 
The following description of the securities of CPI Aerostructures, Inc. (the “Company”, “we”, “our” or similar terms) is based upon the Company’s amended
and restated certificate of incorporation (“Charter”), the Company’s bylaws (“Bylaws”) and applicable provisions of law. We have summarized certain portions
of the Charter and Bylaws below. The summary is not complete and is subject to, and is qualified in its entirety by express reference to, the provisions of our
Charter and Bylaws, each of which is filed as an exhibit to the Annual Report on Form 10-K of which this Exhibit 4.1 is a part.
Authorized Capital Stock
Pursuant to our Charter, our authorized capital stock consists of 55,000,000 shares, of which 50,000,000 is voting Common Stock, $0.0001 par value per share,
and 5,000,000 is Preferred Stock, $0.001 par value per share.
Common Stock
Authorization. The outstanding shares of the Company’s common stock are duly authorized, validly issued, fully paid and nonassessable.
Trading Market. The Company’s common stock is traded on the NYSE American exchange under the ticker symbol “CVU.”
Voting Rights. Common stockholders of record are entitled to one vote for each share held on all matters to be voted on by stockholders.
Preemptive Rights, Etc. Our stockholders have no preemptive or other subscription rights. There are no sinking fund provisions applicable to our common
stock, except that upon the consummation of our initial business combination, subject to the limitations described herein, we will provide our stockholders with
the opportunity to redeem their shares of our common stock for cash equal to their pro rata share of the aggregate amount then on deposit in the trust account.
Preferred Stock
Our Charter provides that shares of preferred stock may be issued from time to time in one or more series. Our board of directors will be authorized to fix the
voting rights, if any, designations, powers, preferences, the relative, participating, optional or other special rights and any qualifications, limitations and
restrictions, applicable to the shares of each series. Our board of directors will be able, without stockholder approval, to issue preferred stock with voting and
other rights that could adversely affect the voting power and other rights of the holders of the common stock and could have anti-takeover effects.
We currently have no preferred stock issued or outstanding.
Provisions of New York Law and Our Charter and Bylaws
Certain provisions of New York law and of our Charter and Bylaws could make our acquisition by a third party, a change in our incumbent management, or a
similar change of control more difficult. The provisions described below, and the board of directors’ right to issue shares of our preferred stock from time to
time in one or more classes or series without shareholder approval, as described above, may discourage certain types of coercive takeover practices and
inadequate takeover bids and encourage persons seeking to acquire control of us to first negotiate with our board of directors. We believe that these provisions
help to protect our potential ability to negotiate with the proponent of an unfriendly or unsolicited proposal to acquire or restructure us, and that this benefit
outweighs the potential disadvantages of discouraging such a proposal because our ability to negotiate with the proponent could result in an improvement of
the terms of the proposal.
1 

Classified Board of Directors. Our board of directors is divided into three classes. The members of each class are elected for a term of three years and only one
class of directors is elected annually. Thus, it would take at least two annual elections to replace a majority of our board of directors. Nominations for our board
of directors may be made by our board or, in certain situations, by any holder of common stock. A shareholder entitled to vote for the election of directors may
nominate a person for election as director only if the shareholder provides written notice of his nomination to our secretary not later than 120 days in advance
of the same day and month that our proxy statement was released to shareholders in connection with the previous year’s annual meeting of shareholders or, if
no annual meeting was held in the previous year, then by the end of the fiscal year to which the annual meeting in which the nomination will be made relates
to.
Stockholder Meetings. A special meeting of our shareholders may be called only by our board of directors or our chairman of the board, if one has been elected,
or our president. Any action required or permitted to be taken by a vote of our shareholders may be taken without a meeting by written consent, except that
such written consent must be signed by the holders of all of the shares entitled to vote thereon.
New York anti-takeover law. We are subject to certain “business combination” provisions of Section 912 of the NYBCL and expect to continue to be so subject
if and for so long as we have a class of securities registered under Section 12 of the Exchange Act. Section 912 provides, with certain exceptions, that a New
York corporation may not engage in a “business combination” (e.g., merger, consolidation, recapitalization or disposition of stock) with any “interested
shareholder” for a period of five years from the date that such person first became an interested shareholder unless the business combination or the transaction
resulting in a person becoming an interested shareholder was approved by the board of directors of the corporation prior to that person becoming an interested
shareholder. No New York corporation may engage at any time in any business combination with an interested shareholder other than (i) a business
combination that is approved by the board of directors of the corporation prior to that person becoming an interested shareholder, or where the transaction
resulting in a person becoming an interested shareholder was approved by the board of directors of the corporation prior to that person becoming an interested
shareholder; (ii) a business combination that is approved by a majority of the outstanding stock not held by the interested shareholder or an affiliate of the
interested shareholder at a meeting called no earlier than five years after the interested shareholder’s stock acquisition date; or (iii) the business combination
that meets certain valuation requirements for the consideration paid. An “interested shareholder” is defined as any person who (a) is the beneficial owner of
20% or more of the outstanding voting stock of a New York corporation or (b) is an affiliate or associate of a corporation that at any time during the prior five
years was the beneficial owner, directly or indirectly, of 20% or more of the then outstanding voting stock. A “business combination” includes mergers, asset
sales and other transactions resulting in a financial benefit to the interested shareholder. The “stock acquisition date”, with respect to any person and any New
York corporation, means the date that such person first becomes an interested shareholder of such corporation.
2 

CPI AEROSTRUCTURES, INC. 10-K
Exhibit 19
 
CPI AEROSTRUCTURES, INC.
 
Policy on Insider Trading
 
This Insider Trading Policy describes the standards of CPI Aerostructures, Inc. and its subsidiaries (the “Company”) on trading, and causing the
trading of, the Company’s securities or securities of certain other publicly traded companies while in possession of confidential information. This Policy is
divided into two parts: the first part prohibits trading in certain circumstances and applies to all directors, officers and employees and their respective
immediate family members, and the second part imposes special additional trading restrictions and applies to all (i) directors of the Company, (ii) officers of
the Company at the level of Vice President and above (together with the directors, “Company Insiders”), (iii) the employees listed on Appendix A (persons
specified in items (i)-(iii) collectively, “Covered Persons”) and (iv) certain other employees that the Company may designate from time to time as “Covered
Persons” because of their position, responsibilities or their actual or potential access to material information.
 
One of the principal purposes of the federal securities laws is to prohibit so-called “insider trading.” Simply stated, insider trading occurs when a
person uses material nonpublic information obtained through involvement with the Company to make decisions to purchase, sell, give away or otherwise trade
the Company’s securities or the securities of certain other companies or to provide that information to others outside the Company. The prohibitions against
insider trading apply to trades, tips and recommendations by virtually any person, including all persons associated with the Company, if the information
involved is “material” and “nonpublic.” These terms are defined in this Policy under Part I, Section 3 below. The prohibitions would apply to any director,
officer or employee who buys or sells securities on the basis of material nonpublic information that he or she obtained about the Company, its customers,
suppliers, partners, competitors or other companies with which the Company has contractual relationships or may be negotiating transactions.
 
PART I
 
1.
Applicability
This Policy applies to all trading or other transactions in (i) the Company’s securities, including common stock and any other securities that the
Company may issue, such as options, preferred stock, notes, bonds and convertible securities, as well as to derivative securities relating to any of the
Company’s securities and (ii) the securities of certain other companies, including common stock, options and other securities issued by those companies as well
as derivative securities relating to any of those companies’ securities, where the person trading used information obtained while working for the Company.
 
This Policy applies to all employees and officers of the Company and to all members of the Company’s board of directors and their respective family
members.
 
2.
General Policy: No Trading or Causing Trading While in Possession of Material Nonpublic Information
(a)       No director, officer or employee or any of their immediate family members may purchase or sell, or offer to purchase or sell, any Company
security while in possession of material nonpublic information about the Company. (The terms “material” and “nonpublic” are defined in Part I, Section 3(a)
and (b) below.)
 
3 

 
No director, officer or employee or any of their immediate family members who knows of any material nonpublic information about the Company may
communicate that information to (“tip”) any other person, including family members and friends, or otherwise disclose such information without the
Company’s authorization.
(a)
No director, officer or employee or any of their immediate family members may purchase or sell any security of any other publicly traded company
while in possession of material nonpublic information that was obtained in the course of his or her involvement with the Company. No director,
officer or employee or any of their immediate family members who knows of any such material nonpublic information may communicate that
information to, or tip, any other person, including family members and friends, or otherwise disclose such information without the Company’s
authorization.
(b)
For compliance purposes, you should never trade, tip or recommend securities (or otherwise cause the purchase or sale of securities) while in
possession of information that you have reason to believe is material and nonpublic unless you first consult with, and obtain the advance approval of,
the Compliance Officer (which is defined in Part I, Section 3(c) below).
(c)
Covered Persons must “pre-clear” all trading in securities of the Company in accordance with the procedures set forth in Part II, Section 3 below.
3.
Definitions
(a)              Material. Insider trading restrictions come into play only if the information you possess is “material.” Materiality, however, involves a
relatively low threshold. Information is generally regarded as “material” if it has market significance, that is, if its public dissemination is likely to affect the
market price of securities, or if it otherwise is information that a reasonable investor would want to know before making an investment decision.
 
Information dealing with the following subjects is reasonably likely to be found material in particular situations:
 
(i)
significant changes in the Company’s prospects;
(ii)
significant write-downs in assets or increases in reserves;
(iii)
developments regarding significant litigation or government agency investigations;
(iv)
liquidity problems;
(v)
changes in earnings estimates or unusual gains or losses in major operations;
(vi)
major changes in the Company’s management or the board of directors;
(vii)
changes in dividends;
(viii)
extraordinary borrowings;
(ix)
major changes in accounting methods or policies;
(x)
award or loss of a significant contract;
(xi)
cybersecurity risks and incidents, including vulnerabilities and breaches;
(xii)
changes in debt ratings;
(xiii)
proposals, plans or agreements, even if preliminary in nature, involving mergers, acquisitions, divestitures, recapitalizations,
strategic alliances, licensing arrangements, or purchases or sales of substantial assets; and
(xiv)
offerings of Company securities.
4 

Material information is not limited to historical facts but may also include projections and forecasts. With respect to a future event, such as a merger,
acquisition or introduction of a new product, the point at which negotiations or product development are determined to be material is determined by balancing
the probability that the event will occur against the magnitude of the effect the event would have on a company’s operations or stock price should it occur.
Thus, information concerning an event that would have a large effect on stock price, such as a merger, may be material even if the possibility that the event will
occur is relatively small. When in doubt about whether particular nonpublic information is material, you should presume it is material. If you are unsure
whether information is material, you should either consult the Compliance Officer before making any decision to disclose such information (other than to
persons who need to know it) or to trade in or recommend securities to which that information relates or assume that the information is material.
(a)
Nonpublic. Insider trading prohibitions come into play only when you possess information that is material and “nonpublic.” The fact that information
has been disclosed to a few members of the public does not make it public for insider trading purposes. To be “public” the information must have
been disseminated in a manner designed to reach investors generally, and the investors must be given the opportunity to absorb the information. Even
after public disclosure of information about the Company, you must wait until the close of business on the second trading day after the information
was publicly disclosed before you can treat the information as public.
Nonpublic information may include:
(xv)
information available to a select group of analysts or brokers or institutional investors;
(xvi)
undisclosed facts that are the subject of rumors, even if the rumors are widely circulated; and
(xvii)
information that has been entrusted to the Company on a confidential basis until a public announcement of the information has
been made and enough time has elapsed for the market to respond to a public announcement of the information (normally two
trading days).
As with questions of materiality, if you are not sure whether information is considered public, you should either consult with the Compliance Officer or assume
that the information is nonpublic and treat it as confidential.
(b)
Compliance Officer. The Company has appointed the Chief Executive Officer as the Compliance Officer for this Policy. The duties of the
Compliance Officer include, but are not limited to, the following:
(xviii)
assisting with implementation and enforcement of this Policy;
(xix)
circulating this Policy to all employees and ensuring that this Policy is amended as necessary to remain up-to-date with insider
trading laws;
(xx)
pre-clearing all trading in securities of the Company by Covered Persons in accordance with the procedures set forth in Part II,
Section 3 below; and
(xxi)
providing approval of any Rule 10b5-1 plans under Part II, Section 1(c) below and any prohibited transactions under Part II,
Section 4 below.
(xxii)
providing a reporting system with an effective whistleblower protection mechanism.
4.
Exception
The trading restrictions of this Policy do not apply to exercising stock options granted under the Company’s equity incentive plans for cash or the
delivery of previously owned Company stock. However, the sale of any shares issued on the exercise of Company-granted stock options and any cashless
exercise of Company-granted stock options are subject to trading restrictions under this Policy.
 
5.
Violations of Insider Trading Laws
Penalties for trading on or communicating material nonpublic information can be severe, both for individuals involved in such unlawful conduct and
their employers and supervisors, and may include jail terms, criminal fines, civil penalties and civil enforcement injunctions. Given the severity of the potential
penalties, compliance with this Policy is absolutely mandatory.
 
5 

 
(a)       Legal Penalties. A person who violates insider trading laws by engaging in transactions in a company’s securities when he or she has material
nonpublic information can be sentenced to a substantial jail term and required to pay a criminal penalty of several times the amount of profits gained or losses
avoided.
 
In addition, a person who tips others may also be liable for transactions by the tippees to whom he or she has disclosed material nonpublic
information. Tippers can be subject to the same penalties and sanctions as the tippees, and the SEC has imposed large penalties even when the tipper did not
profit from the transaction.
 
The SEC can also seek substantial civil penalties from any person who, at the time of an insider trading violation, “directly or indirectly controlled the
person who committed such violation,” which would apply to the Company and/or management and supervisory personnel. These control persons may be held
liable for up to the greater of $2,301,065 or three times the amount of the profits gained or losses avoided. Even for violations that result in a small or no profit,
the SEC can seek penalties from a company and/or its management and supervisory personnel as control persons.
 
(b)       Company-Imposed Penalties. Employees who violate this Policy may be subject to disciplinary action by the Company, including dismissal for
cause. Any exceptions to the Policy, if permitted, may only be granted by the Compliance Officer and must be provided before any activity contrary to the
above requirements takes place.
 
6.
Inquiries
If you have any questions regarding any of the provisions of this Policy, please contact the Compliance Officer at DHakim@cpiaero.com.
 
PART II
 
1.
Blackout Periods
All Covered Persons are prohibited from trading in the Company’s securities during blackout periods as defined below.
 
(a)           Quarterly Blackout Periods. Trading in the Company’s securities is prohibited during the period beginning at the close of the market on two
weeks before the end of each fiscal quarter and ending at the close of business on the second trading day following the date the Company’s financial results are
publicly disclosed and Form 10-Q or Form 10-K is filed. During these periods, Covered Persons generally possess or are presumed to possess material
nonpublic information about the Company’s financial results.
 
Other Blackout Periods. From time to time, other types of material nonpublic information regarding the Company (such as negotiation of mergers, acquisitions
or dispositions, investigation and assessment of cybersecurity incidents or new product developments) may be pending and not be publicly disclosed. While
such material nonpublic information is pending, the Company may impose special blackout periods during which Covered Persons are prohibited from trading
in the Company’s securities. If the Company imposes a special blackout period, it will notify the Covered Persons affected.
(a)
Exception. These trading restrictions do not apply to transactions under a pre-existing written plan, contract, instruction, or arrangement under Rule
10b5-1 under the Securities Exchange Act of 1934 (an “Approved 10b5-1 Plan”) that meet the following requirements:
(i)           it has been reviewed and approved by the Compliance Officer at least five days in advance of being entered into (or, if revised or
amended, such proposed revisions or amendments have been reviewed and approved by the Compliance Officer at least five days in advance of being entered
into);
 
(ii)          it provides that no trades may occur thereunder until expiration of the applicable cooling-off period specified in Rule 10b5-1(c)(ii)
(B), and no trades occur until after that time. The appropriate cooling-off period will vary based on the status of the Covered Person. For directors and officers,
the cooling-off period ends on the later of (x) ninety days after adoption or certain modifications of the 10b5-1 plan; or (y) two business days following
disclosure of the Company’s financial results in a Form 10-Q or Form 10-K for the quarter in which the 10b5-1 plan was adopted. For all other Covered
Persons, the cooling-off period ends 30 days after adoption or modification of the 10b5-1 plan. This required cooling-off period will apply to the entry into a
new 10b5-1 plan and any revision or modification of a 10b5-1 plan;
 
6 

 
(iii)         it is entered into in good faith by the Covered Person, and not as part of a plan or scheme to evade the prohibitions of Rule 10b5-1,
at a time when the Covered Person is not in possession of material nonpublic information about the Company; and, if the Covered Person is a director or
officer, the 10b5-1 plan must include representations by the Covered Person certifying to that effect;
 
(iv)         it gives a third party the discretionary authority to execute such purchases and sales, outside the control of the Covered Person, so
long as such third party does not possess any material nonpublic information about the Company; or explicitly specifies the security or securities to be
purchased or sold, the number of shares, the prices and/or dates of transactions, or other formula(s) describing such transactions; and
 
(v)          it is the only outstanding Approved 10b5-1 Plan entered into by the Covered Person (subject to the exceptions set out in Rule 10b5-
1(c)(ii)(D)).
 
No Approved 10b5-1 Plan may be adopted during a blackout period.
If you are considering entering into, modifying or terminating an Approved 10b5-1 Plan or have any questions regarding Approved Rule 10b5-1 Plans,
please contact the Compliance Officer at DHakim@cpiaero.com. You should consult your own legal and tax advisors before entering into, or modifying or
terminating, an Approved 10b5-1 Plan. A trading plan, contract, instruction or arrangement will not qualify as an Approved 10b5-1 Plan without the prior
review and approval of the Compliance Officer as described above.
 
2.
Trading Window
Covered Persons are permitted to trade in the Company’s securities when no blackout period is in effect. Generally, this means that Covered Persons can trade
during the period beginning on the second trading day following the date the Company’s financial results are publicly disclosed and Form 10-Q or Form 10-K
is filed and ending on two weeks before the end of each fiscal quarter. However, even during this trading window, a Covered Person who is in possession of
any material nonpublic information should not trade in the Company’s securities until the information has been made publicly available or is no longer
material. In addition, the Company may close this trading window if a special blackout period under Part II, Section 1(b) above is imposed and will re-open the
trading window once the special blackout period has ended.
3.
Pre-Clearance of Securities Transactions
(a)       Because Company Insiders are likely to obtain material nonpublic information on a regular basis, the Company requires all such persons to
refrain from trading, even during a trading window under Part II, Section 2 above, without first pre-clearing all transactions in the Company’s securities.
 
(b)       Subject to the exemption in subsection (d) below, no Company Insider may, directly or indirectly, purchase or sell (or otherwise make any
transfer, gift, pledge or loan of) any Company security at any time without first obtaining prior approval from the Compliance Officer. These procedures also
apply to transactions by such person’s spouse, other persons living in such person’s household and minor children and to transactions by entities over which
such person exercises control.
 
(c)       The Compliance Officer shall record the date each request is received and the date and time each request is approved or disapproved. Unless
revoked, a grant of permission will normally remain valid until the close of trading two business days following the day on which it was granted. If the
transaction does not occur during the two-day period, pre-clearance of the transaction must be re-requested.
 
(d)       Pre-clearance is not required for purchases and sales of securities under an Approved 10b5- 1 Plan once the applicable cooling-off period has
expired. No trades may be made under an Approved 10b5- 1 Plan until expiration of the applicable cooling-off period. With respect to any purchase or sale
under an Approved 10b5-1 Plan, the third party effecting transactions on behalf of the Company Insider should be instructed to send duplicate confirmations of
all such transactions to the Compliance Officer.
 
7 

 
4.
Prohibited Transactions
(a)       Covered Persons, including any person’s spouse, other persons living in such person’s household and minor children and entities over which
such person exercises control, are prohibited from engaging in the following transactions in the Company’s securities unless advance approval is obtained from
the Compliance Officer:
 
(i)           Short-term trading. Company Insiders who purchase Company securities may not sell any Company securities of the same class for
at least six months after the purchase.
 
(ii)          Short sales. Covered Persons may not sell the Company’s securities short;
(iii)          Options trading. Covered Persons may not buy or sell puts or calls or other derivative securities on the Company’s securities;
 
(iv)         Trading on margin or pledging. Covered Persons may not hold Company securities in a margin account or pledge Company
securities as collateral for a loan; and
 
Hedging. Covered Persons may not enter into hedging or monetization transactions or similar arrangements with respect to Company securities.
 
APPENDIX A
 
Covered Persons include the any employee with one of the following job titles:
●
Accounts Receivable & Billing Coordinator I-III
●
Assistant Controller – Accounting Operation
●
Assistant Controller – Compliance & Financial Reporting
●
Contracts Manager
●
Cost Accountant I-IV
●
Director, Business Development
●
Director, Engineering
●
Director, Financial Planning & Analysis
●
Director, Manufacturing & Facilities
●
Director, Material Planning & Management
●
Director, Procurement
●
Director, Quality
●
Information Technology Manager
●
Planning Manager
●
Program Manager I-IV
●
Senior Accountant
●
Senior Controller
●
Senior Program Manager
●
Senior Proposal Manager
●
Senior Supply Chain Program Manager
●
Supply Chain Program Manager I-III
●
Treasurer
If you are unsure whether or not you are included as a Covered Person, you should confer with the Compliance Officer for clarification.
 
8 

 
CPI AEROSTRUCTURES, INC. 10-K
Exhibit 21
 
SUBSIDIARIES OF REGISTRANT
Welding Metallurgy, Inc.
Compac Development Corporation

CPI AEROSTRUCTURES, INC. 10-K
Exhibit 23.1
 
Independent Registered Public Accounting Firm’s Consent 
We consent to the incorporation by reference in the Registration Statements on Form S-8 (Nos. 333-272991, 333-255551, 333-212837, 333-164687 and 333-
130077) of our report dated March 31, 2025 relating to the financial statements of CPI Aerostructures, Inc. appearing in this Annual Report on Form 10-K for
the year ended December 31, 2024.
/s/ Marcum LLP
Melville, NY
March 31, 2025

CPI AEROSTRUCTURES, INC. 10-K
Exhibit 23.2
 
CONSENT OF INDEPENDENT REGISTERED PUBLIC ACCOUNTING FIRM
 
We consent to the incorporation by reference in the Registration Statements (Nos. 333-272991 , 333- 255551, 333-212837, 333-164687 and 333-130077) on
Form S-8 of CPI Aerostructures, Inc. of our report dated April 5, 2024, relating to the consolidated financial statements of CPI Aerostructures, Inc and
Subsidiaries, appearing in this Annual Report on Form 10-K of CPI Aerostructures, Inc. for the year ended December 31, 2024.
/s/ RSM US LLP
New York, New York
March 31, 2025

CPI AEROSTRUCTURES, INC. 10-K
Exhibit 31.1
 
CERTIFICATION  PURSUANT TO
SECTION 302 OF THE SARBANES-OXLEY
 ACT OF 2002
 
I, Dorith Hakim, certify that:
1.
I have reviewed this Annual Report on Form 10-K of CPI Aerostructures, Inc.;
2.
Based on my knowledge, this report does not contain any untrue statement of a material fact or omit to state a material fact necessary to make the
statements made, in light of the circumstances under which such statements were made, not misleading with respect to the period covered by this
report;
3.
Based on my knowledge, the financial statements, and other financial information included in this report, fairly present in all material respects the
financial condition, results of operations and cash flows of the registrant as of, and for, the periods presented in this report;
4.
The registrant’s other certifying officer and I are responsible for establishing and maintaining disclosure controls and procedures (as defined in
Exchange Act Rules 13a-15(e) and 15d -15(e)) and internal control over financial reporting (as defined in Exchange Act Rules 13a-15(f) and 15d-
15(f) for the registrant and have:
(a)
Designed such disclosure controls and procedures, or caused such disclosure controls and procedures to be designed under our
supervision, to ensure that material information relating to the registrant, including its consolidated subsidiaries, is made known to us by
others within those entities, particularly during the period in which this report is being prepared;
(b)
Designed such internal control over financial reporting, or caused such internal control over financial reporting to be designed under our
supervision, to provide reasonable assurance regarding the reliability of financial reporting and the preparation of financial statements for
external purposes in accordance with generally accepted accounting principles;
(c)
Evaluated the effectiveness of the registrant’s disclosure controls and procedures and presented in this report our conclusions about the
effectiveness of the disclosure controls and procedures, as of the end of the period covered by this report based on such evaluation; and
(d)
Disclosed in this report any change in the registrant’s internal control over financial reporting that occurred during the registrant’s fourth
fiscal quarter that has materially affected, or is reasonably likely to materially affect, the registrant’s internal control over financial
reporting; and
5.
The registrant’s other certifying officer and I have disclosed, based on our most recent evaluation of internal control over financial reporting, to the
registrant’s auditors and to the audit committee of the registrant’s board of directors (or persons performing the equivalent functions):
(a)
All significant deficiencies and material weaknesses in the design or operation of internal control over financial reporting which are
reasonably likely to adversely affect the registrant’s ability to record, process, summarize and report financial information; and
(b)
Any fraud, whether or not material, that involves management or other employees who have a significant role in the registrant’s internal
control over financial reporting.
 
 
 
Dated: March 31, 2025 
CPI AEROSTRUCTURES, INC.
(Registrant)
 
 
By:/s/ Dorith Hakim
 
Dorith Hakim
 
CHIEF EXECUTIVE OFFICER, PRESIDENT AND DIRECTOR
 
(PRINCIPAL EXECUTIVE OFFICER)

CPI AEROSTRUCTURES, INC. 10-K
Exhibit 31.2
 
CERTIFICATION  PURSUANT TO
SECTION 302 OF THE SARBANES-OXLEY
 ACT OF 2002
 
I, Philip Passarello, certify that:
1.
I have reviewed this Annual Report on Form 10-K of CPI Aerostructures, Inc.;
2.
Based on my knowledge, this report does not contain any untrue statement of a material fact or omit to state a material fact necessary to make the
statements made, in light of the circumstances under which such statements were made, not misleading with respect to the period covered by this
report;
3.
Based on my knowledge, the financial statements, and other financial information included in this report, fairly present in all material respects the
financial condition, results of operations and cash flows of the registrant as of, and for, the periods presented in this report;
4.
The registrant’s other certifying officer and I are responsible for establishing and maintaining disclosure controls and procedures (as defined in
Exchange Act Rules 13a-15(e) and 15d-15(e)) and internal control over financial reporting (as defined in Exchange Act Rules 13a-15(f) and 15d-
15(f) for the registrant and have:
 
(a)
Designed such disclosure controls and procedures, or caused such disclosure controls and procedures to be designed under our
supervision, to ensure that material information relating to the registrant, including its consolidated subsidiaries, is made known to us by
others within those entities, particularly during the period in which this report is being prepared;
(b)
Designed such internal control over financial reporting, or caused such internal control over financial reporting to be designed under our
supervision, to provide reasonable assurance regarding the reliability of financial reporting and the preparation of financial statements for
external purposes in accordance with generally accepted accounting principles;
(c)
Evaluated the effectiveness of the registrant’s disclosure controls and procedures and presented in this report our conclusions about the
effectiveness of the disclosure controls and procedures, as of the end of the period covered by this report based on such evaluation; and
(d)
Disclosed in this report any change in the registrant’s internal control over financial reporting that occurred during the registrant’s fourth
fiscal quarter that has materially affected, or is reasonably likely to materially affect, the registrant’s internal control over financial
reporting; and
5.
The registrant’s other certifying officer and I have disclosed, based on our most recent evaluation of internal control over financial reporting, to the
registrant’s auditors and to the audit committee of the registrant’s board of directors (or persons performing the equivalent functions):
(a)
All significant deficiencies and material weaknesses in the design or operation of internal control over financial reporting which are
reasonably likely to adversely affect the registrant’s ability to record, process, summarize and report financial information; and
(b)
Any fraud, whether or not material, that involves management or other employees who have a significant role in the registrant’s internal
control over financial reporting.
Dated: March 31, 2025 
CPI AEROSTRUCTURES, INC.
(Registrant)
 
 
By:/s/ Philip Passarello
 
Philip Passarello
 
CHIEF FINANCIAL OFFICER
 
(PRINCIPAL FINANCIAL AND ACCOUNTING OFFICER)

CPI AEROSTRUCTURES, INC. 10-K
Exhibit 32.1
 
CERTIFICATION PURSUANT TO
18 U.S.C. SECTION 1350
AS ADOPTED PURSUANT TO
SECTION 906 OF THE SARBANES-OXLEY ACT OF 2002
 
In connection with the Annual Report of CPI Aerostructures, Inc. (the “Company”) on Form 10-K for the year ended December 31, 2024 as filed with
the Securities and Exchange Commission (the “Report”), the undersigned, in the capacities and on the date indicated below, hereby certifies pursuant to 18
U.S.C. Section 1350, as adopted pursuant to Section 906 of the Sarbanes-Oxley Act of 2002, that:
 
1.
The Report fully complies with the requirements of Section 13(a) or 15(d) of the Securities Exchange Act of 1934; and
2.
The information contained in the Report fairly presents, in all material respects, the financial condition and results of operation of the Company.
Dated: March 31, 2025
CPI AEROSTRUCTURES, INC.
(Registrant)
 
 
By:/s/ Dorith Hakim
 
Dorith Hakim
 
CHIEF EXECUTIVE OFFICER, PRESIDENT AND DIRECTOR
 
(PRINCIPAL EXECUTIVE OFFICER)
Dated: March 31, 2025
CPI AEROSTRUCTURES, INC.
(Registrant)
 
 
By:/s/ Philip Passarello
 
Philip Passarello
 
CHIEF FINANCIAL OFFICER
 
(PRINCIPAL FINANCIAL AND ACCOUNTING OFFICER)

CPI AEROSTRUCTURES, INC. 10-K
Exhibit 97
 
CPI AEROSTRUCTURES, INC.
 
CLAWBACK POLICY
 
Introduction
The Board of Directors (the “Board”) of CPI Aerostructures, Inc. (the “Company”) believes that it is in the best interests of the Company and its shareholders
to create and maintain a culture that emphasizes integrity and accountability and that reinforces the Company’s pay-for-performance compensation philosophy.
The Board has therefore adopted this policy which provides for the recoupment of certain executive compensation in the event of an accounting restatement
resulting from material noncompliance with financial reporting requirements under the federal securities laws (the “Policy”).
Administration
This Policy shall be administered by the Board or, if so designated by the Board, the Compensation and Human Resources Committee, in which case references
herein to the Board shall be deemed references to the Compensation and Human Resources Committee. Any determinations made by the Board shall be final
and binding on all affected individuals.
Covered Executives
This Policy applies to the Company’s current and former executive officers, as determined by the Board in accordance with Section 10D of the Securities
Exchange Act of 1934, as amended (the “Exchange Act”), and the listing standards of the national securities exchange on which the Company’s securities are
listed, and such other senior executives and employees who may from time to time be deemed subject to the Policy by the Board (“Covered Executives”).
Recoupment; Accounting Restatement
In the event the Company is required to prepare an accounting restatement of its financial statements due to the Company’s material noncompliance with any
financial reporting requirement under the securities laws, the Board will require reimbursement or forfeiture of any excess Incentive Compensation (as defined
below) received by any Covered Executive during the three completed fiscal years immediately preceding the date on which the Company is required to
prepare an accounting restatement.
Incentive Compensation
For purposes of this Policy, Incentive Compensation means any of the following:
Annual bonuses and other short- and long-term cash incentives;
 
Stock options;
 
Stock appreciation rights;
 
Restricted stock;
 
Restricted stock units;
 
Performance shares; or
 
Performance units,
 
provided that, such compensation is granted, earned or vested based wholly or in part on the attainment of a financial reporting measure. Financial reporting
measures include, but are not limited to:
Company stock price;
 
Total shareholder return;
 
Revenues;

Net income;
 
Earnings before interest, taxes, depreciation, and amortization (EBITDA);
 
Funds from operations;
 
Liquidity measures such as working capital or operating cash flow;
 
Return measures such as return on invested capital or return on assets; and
 
Earnings measures such as earnings per share.
 
Excess Incentive Compensation: Amount Subject to Recovery
The amount to be recovered will be the excess of the Incentive Compensation paid to the Covered Executive based on the erroneous data over the Incentive
Compensation that would have been paid to the Covered Executive had it been based on the restated results, as determined by the Board.
If the Board cannot determine the amount of excess Incentive Compensation received by the Covered Executive directly from the information in the accounting
restatement, then it will make its determination based on a reasonable estimate of the effect of the accounting restatement.
Method of Recoupment
The Board will determine, in its sole discretion, the method for recouping Incentive Compensation hereunder which may include, without limitation:
(a) requiring reimbursement of cash Incentive Compensation previously paid;
 
(b) seeking recovery of any gain realized on the vesting, exercise, settlement, sale, transfer, or other disposition of any equity-based awards;
 
(c) offsetting the recouped amount from any compensation otherwise owed by the Company to the Covered Executive;
 
(d) cancelling outstanding vested or unvested equity awards; and/or
 
(e) taking any other remedial and recovery action permitted by law, as determined by the Board.
 
No Indemnification
The Company shall not indemnify any Covered Executives against the loss of any incorrectly awarded Incentive Compensation.
Interpretation
The Board is authorized to interpret and construe this Policy and to make all determinations necessary, appropriate, or advisable for the administration of this
Policy. Any determination of the Board shall be conclusive and binding on the Company and the applicable Covered Executives. The determination of the
Board need not be uniform with respect to one or more Covered Executives.
It is intended that this Policy be interpreted in a manner that is consistent with the requirements of Section 10D of the Exchange Act and any applicable rules or
standards adopted by the Securities and Exchange Commission or any national securities exchange on which the Company’s securities are listed as such
requirements may be amended, supplemented, or changed.
Effective Date
This Policy shall be effective as of the date it is adopted by the Board (the “Effective Date”) and shall apply to Incentive Compensation that is approved,
awarded, or granted to Covered Executives on or after that date.
Amendment; Termination
The Board may amend this Policy from time to time in its discretion and shall amend this Policy as it deems necessary to comply with regulations adopted by
the Securities and Exchange Commission under Section 10D of the Exchange Act, any rules or standards adopted by any national securities exchange on which
the Company’s securities are listed and any other “clawback” provision required by law. The Board may terminate this Policy at any time.

Other Recoupment Rights
The Board intends that this Policy will be applied to the fullest extent of the law. The Board may require that any employment agreement, equity award
agreement, or similar agreement entered into on or after the Effective Date shall, as a condition to the grant of any benefit thereunder, require a Covered
Executive to agree to abide by the terms of this Policy. Any right of recoupment under this Policy is in addition to, and not in lieu of, any other remedies or
rights of recoupment that may be available to the Company pursuant to the terms of any similar policy in any employment agreement, equity award agreement,
or similar agreement and any other legal remedies available to the Company, including termination of employment, the initiation of civil or criminal
proceedings, and any right to repayment under applicable law.
Impracticability
The Board shall recover any excess Incentive Compensation in accordance with this Policy unless such recovery would be impracticable, as determined by the
Board in accordance with Rule 10D-1 of the Exchange Act and the listing standards of the national securities exchange on which the Company’s securities are
listed.
Successors
This Policy shall be binding and enforceable against all Covered Executives and, to the extent required by applicable law or guidance from the Securities and
Exchange Commission, their beneficiaries, heirs, executors, administrators, or other legal representatives.