UNITED STATES 

SECURITIES AND EXCHANGE COMMISSION 

Washington, DC 20549

 

FORM 10-Q

 

☒	QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934

 

For the quarterly period ended March 31, 2026

 

OR

 

☐	TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934

 

For the transition period from ___________ to __________

 

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		(IRS Employer Identification Number)
of incorporation or organization)

 

91 Heartland Blvd., Edgewood, NY		11717
(Address of principal executive offices)		(Zip code)

 

(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, $0.001 par value per share	CVU	NYSE American

 

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 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, or a smaller reporting 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 is a shell company (as defined in Rule 12b-2 of the Exchange Act). Yes ☐  No ☒

 

As of May 11, 2026 the registrant had 13,209,669 shares of common stock, $.001 par value, outstanding Part I - Financial Information

 

 

	INDEX
Part I - Financial Information	1
Item 1 – Consolidated Financial Statements (Unaudited)	1
Condensed Consolidated Balance Sheets as of March 31, 2026 (Unaudited) and December 31, 2025	1
Condensed Consolidated Statements of Operations for the three months ended March 31, 2026 and 2025 (Unaudited)	2
Condensed Consolidated Statements of Shareholders’ Equity for the three months ended March 31, 2026 and 2025 (Unaudited)	3
Condensed Consolidated Statements of Cash Flows for the three months ended March 31, 2026 and 2025 (Unaudited)	4
Notes to Condensed Consolidated Financial Statements (Unaudited)	5
Item 2 – Management’s Discussion and Analysis of Financial Condition and Results of Operations	13
Item 3 – Quantitative and Qualitative Disclosures About Market Risk	18
Item 4 – Controls and Procedures	18
Part II - Other Information	19
Item 1 – Legal Proceedings	19
Item 1A – Risk Factors	19
Item 2 – Unregistered Sales of Equity Securities and Use of Proceeds	19
Item 3 – Defaults Upon Senior Securities	19
Item 4 – Mine Safety Disclosures	19
Item 5 – Other Information	19
Item 6 – Exhibits	20
Signatures	21

 

 

Item 1 - Consolidated Financial Statements

 

CONDENSED CONSOLIDATED BALANCE SHEETS

 

		March 31, 2026 (Unaudited)				December 31,   2025
ASSETS
Current Assets:
Cash		$	1,002,548			$	899,199
Accounts receivable, net			4,165,949				5,764,928
Contract assets, net			37,021,183				33,670,354
Inventory			725,908				800,823
Prepaid expenses and other current assets			3,055,241				2,272,696
Total Current Assets			45,970,829				43,408,000
Operating lease right-of-use assets			9,150,484				9,515,207
Property and equipment, net			425,879				412,553
Deferred tax asset, net			19,627,037				19,894,796
Goodwill			1,784,254				1,784,254
Other assets			346,831				229,691
Total Assets		$	77,305,314			$	75,244,501
LIABILITIES AND SHAREHOLDERS’ EQUITY
Current Liabilities:
Accounts payable		$	16,531,357			$	14,724,293
Accrued expenses			3,289,821				4,763,719
Contract liabilities			1,371,571				1,628,382
Loss reserve			126,676				138,426
Current portion of long-term debt			250,000				187,500
Operating lease liabilities, current			1,468,989				1,434,385
Income taxes payable			206,540				142,540
Total Current Liabilities			23,244,954				23,019,245
Line of credit, net of current portion			9,173,672				8,373,672
Long-term operating lease liabilities			7,972,638				8,353,120
Long-term debt, net of current portion			9,634,471				9,690,890
Total Liabilities			50,025,735				49,436,927
Commitments and Contingencies (see note 11)							—
Shareholders’ Equity:
Preferred stock - $.001 par value; authorized 5,000,000 shares, 0 shares issued and outstanding			—				—
Common stock - $.001 par value; authorized 50,000,000 shares, 13,189,061 and 13,155,061 shares, respectively, issued and outstanding			13,189				13,155
Additional paid-in capital			75,377,421				75,142,168
Accumulated deficit			(48,111,031	)			(49,347,749	)
Total Shareholders’ Equity			27,279,579				25,807,574
Total Liabilities and Shareholders’ Equity		$	77,305,314			$	75,244,501

 

The Accompanying Notes are an Integral Part of the Condensed Consolidated Financial Statements

CONDENSED CONSOLIDATED STATEMENTS OF OPERATIONS (UNAUDITED) 

 

		For the three months ended March 31,
		2026				2025
Revenue		$	17,359,940			$	15,400,608
Cost of sales			12,880,049				13,751,133
Gross profit			4,479,891				1,649,475
Selling, general and administrative expenses			2,650,263				2,835,777
Income (loss) from operations			1,829,628				(1,186,302	)
Other income			30,373				1,500
Interest expense			(291,935	)			(488,091	)
Income (loss) before provision for income taxes			1,568,066				(1,672,893	)
Provision (benefit) for income taxes			331,348				(348,969	)
Net income (loss)		$	1,236,718			$	(1,323,924	)
Income (loss) per common share, basic		$	0.10			$	(0.10	)
Income (loss) per common share, diluted		$	0.09			$	(0.10	)
Shares used in computing income (loss) per common share:
Basic			12,863,180				12,720,148
Diluted			13,040,998				12,720,148

 

The Accompanying Notes are an Integral Part of the Condensed Consolidated Financial Statements  

CONDENSED CONSOLIDATED STATEMENTS OF SHAREHOLDERS’ EQUITY (UNAUDITED)

 

		Common Stock Shares				Common Stock Amount				Additional Paid-in Capital				Accumulated Deficit				Total Shareholders’ Equity
Balance at January 1, 2026			13,155,061			$	13,155			$	75,142,168			$	(49,347,749	)		$	25,807,574
Net income			—				—				—				1,236,718				1,236,718
Issuance of common stock upon settlement of restricted stock, net			34,000				34				—				—				34
Stock-based compensation expense			—				—				235,253				—				235,253
Balance at March 31, 2026			13,189,061			$	13,189			$	75,377,421			$	(48,111,031	)		$	27,279,579
Balance at January 1, 2025			12,978,741			$	12,979			$	74,424,651			$	(48,504,388	)		$	25,933,242
Net (loss)			—				—				—				(1,323,924	)			(1,323,924	)
Issuance of common stock upon settlement of restricted stock, net			30,553				30				—				—				30
Stock-based compensation expense			—				—				320,199				—				320,199
Balance at March 31, 2025			13,009,294			$	13,009			$	74,744,850			$	(49,828,312	)		$	24,929,547

 

The Accompanying Notes are an Integral Part of the Condensed Consolidated Financial Statements

CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS (UNAUDITED)

 

		For the three months ended March 31,
		2026				2025
Cash flows from operating activities:
Net income (loss)		$	1,236,718			$	(1,323,924	)
Adjustments to reconcile net income (loss) to net cash (used in) operating activities:
Depreciation and amortization			39,729				98,767
Amortization of debt issuance cost			12,162				5,331
Stock-based compensation			235,287				320,229
Deferred income taxes			267,759				(383,590	)
Provision for credit losses			—				(86,814	)
Amortization of operating lease right-of-use assets			364,723				485,536
Changes in operating assets and liabilities:
Decrease (Increase) in accounts receivable			1,598,979				(1,762,502	)
(Increase) decrease in contract assets			(3,350,829	)			751,943
Decrease in inventory			74,915				20,765
(Increase) in prepaid expenses and other assets			(782,545	)			(71,145	)
Increase in accounts payable and accrued expenses			428,838				107,988
Decrease in contract liabilities			(256,811	)			(475,403	)
Decrease in operating lease liabilities			(345,878	)			(519,444	)
(Decrease) increase in loss reserve			(11,750	)			75,702
Increase in income taxes payable			64,000				34,947
Net cash used in operating activities			(424,703	)			(2,721,614	)
Cash flows from investing activities:
Purchase of property and equipment			(53,055	)			(59,403	)
Net cash used in investing activities			(53,055	)			(59,403	)
Cash flows from financing activities:
Principal payments on line of credit			—				(750,000	)
Principal payments on long-term debt			—				(7,747	)
Proceeds from line of credit			800,000				—
Repayments of insurance financing obligation			(95,672	)			(83,619	)
Equity issuance costs			(123,221	)			—
Net cash provided by (used in) financing activities			581,107				(841,366	)
Net increase (decrease) in cash			103,349				(3,622,383	)
Cash at beginning of period			899,199				5,490,963
Cash at end of period		$	1,002,548			$	1,868,580
Supplemental disclosures of cash flow information:
Cash paid during the period for:
Interest		$	279,774			$	488,372

 

The Accompanying Notes are an Integral Part of the Condensed Consolidated Financial Statements

NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (UNAUDITED)

 

1.

INTERIM FINANCIAL STATEMENTS

 

Basis of Presentation

 

The Company consists of CPI Aerostructures, Inc. (“CPI”), Welding Metallurgy, Inc. (“WMI”) and Compac Development Corporation (“Compac”), a wholly owned subsidiary of WMI (collectively the “Company”). 

 

The condensed consolidated interim financial statements of the Company as of March 31, 2026 and for the three months ended March 31, 2026 and 2025 have been prepared pursuant to the rules and regulations of the Securities and Exchange Commission (“SEC”). Certain information and notes normally included in financial statements prepared in accordance with generally accepted accounting principles in the United States of America (“U.S. GAAP”) have been condensed or omitted pursuant to those rules and regulations. The consolidated balance sheet at December 31, 2025 has been derived from audited consolidated financial statements, but does not include all of the information and notes required by U.S. GAAP. The Company believes that the disclosures are adequate to make the information presented not misleading.

 

All adjustments that, in the opinion of management, are necessary for a fair presentation for the periods presented have been reflected. Such adjustments are of a normal, recurring nature. It is suggested that these consolidated financial statements be read in conjunction with the consolidated financial statements and notes thereto included in the Company’s Annual Report on Form 10-K for the year ended December 31, 2025 (the “Form 10-K”). The results of operations for interim periods are not necessarily indicative of the operating results to be expected for the full year or any other interim period.

 

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.

 

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 March 31, 2026, the Company had $603,375 of uninsured balances. The Company limits its credit risk by selecting financial institutions considered to be highly credit worthy.

 

Recently Issued Accounting Standards – Not Adopted

 

In September 2025, the FASB issued ASU No. 2025-06, Intangibles – Goodwill and Other – Internal-Use Software (Subtopic 350-40): Targeted Improvements to the Accounting for Internal-Use Software (“ASU 2025-06”). This guidance removes all references to prospective and sequential stages (referred to as “project stages”) throughout ASC 350-40 and clarifies the threshold entities apply to begin capitalizing costs. Under ASU 2025-06, cost capitalization should only commence when both management has authorized and committed to funding a software project and it is probable the project will be completed and the software will be used to perform the function intended. ASU 2025-06 is effective for annual reporting periods beginning after December 15, 2027 and interim reporting periods within those annual reporting periods. Entities may apply the guidance using a prospective, modified transition or retrospective approach. Early adoption is permitted as of the beginning of an annual reporting period. The Company is currently evaluating the preferred transition approach and assessing the impact of the ASU on our disclosures and financial statements, including the timing of adoption.

 

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, which will be our interim period beginning January 1, 2028. Early adoption of ASU 2024-03 is permitted. The Company is currently evaluating the impact of these standards on its consolidated financial statements and related disclosures. 

 

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 Ef ective 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, which will be our interim period beginning January 1, 2028. Early adoption of ASU 2024-03 is permitted. We are evaluating the impact of ASU 2025-01 in conjunction with ASU 2024-03.

 

2.

REVENUE

 

Disaggregation of Revenue

 

The following tables present the Company’s revenue disaggregated by contract type and revenue recognition method:

 

		Three months ended March 31,
		2026				2025
Government subcontracts		$	14,678,977			$	11,326,608
Prime government contracts			1,764,056				2,793,612
Commercial contracts			916,907				1,280,388
		$	17,359,940			$	15,400,608

 

		Three months ended March 31,
		2026				2025
Revenue recognized using over time revenue recognition model		$	17,359,218			$	15,257,792
Revenue recognized using point in time revenue recognition model			722				142,816
		$	17,359,940			$	15,400,608

 

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 three months ended March 31, 2026 and 2025:

 

		Three months ended
		March 31, 2026				March 31, 2025
Net adjustments		$	(732,189)			$	(3,129,230	)

 

 

The net adjustment of $0.7 million for the three months ended March 31, 2026 is driven primarily by an unfavorable adjustment on our Embraer Phenom-300 Engine Inlet Assemblies program.

 

Transaction Price Allocated to Remaining Performance Obligations

 

As of March 31, 2026, the aggregate amount of transaction price allocated to the remaining performance obligations was approximately $96.1 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 March 31, 2026.

 

3.	CONTRACT ASSETS AND LIABILITIES

 

Contract assets represent revenue recognized on contracts in excess of amounts invoiced to the customers 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 as well as military contractor 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 and military contract or 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.

 Schedule of contract assets and liabilities

		March 31,  2026				December 31,  2025				December 31, 2024
Contract assets		$	37,021,183			$	33,670,354			$	32,832,290
Contract liabilities			1,371,571				1,628,382				2,430,663

 

Revenue recognized for the three months ended March 31, 2026 and 2025 that was included in the contract liabilities balance as of January 1, 2026 and 2025, respectively, was approximately $1.2 million and $0.7 million, respectively.

 

4.

INVENTORY

 

The components of inventory consisted of the following:

 

		March 31,   2026				December 31,  2025
Raw materials		$	433,693			$	524,883
Work in progress			16,154				7,547
Finished goods			276,061				268,393
Inventory		$	725,908			$	800,823

   

5.	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 March 31, 2026. 

 

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 214,967 shares available for grant under the 2016 Plan as of March 31, 2026.

 

On June 24, 2025, the shareholders of the Company approved the 2025 Long-Term Incentive Plan (the “2025 Plan”) at the Company’s 2025 annual meeting of shareholders. The 2025 Plan had previously been approved by the Company’s Board of Directors (the “Board”) on April 28, 2025, upon the recommendation of the Company’s Compensation and Human Resources Committee, subject to shareholder approval. The 2025 Plan is intended to advance the Company’s interests by providing equity-based incentives to attract, retain, and motivate employees, officers, directors, and consultants. The plan authorizes the issuance of up to 800,000 shares of the Company’s common stock and allows for a variety of award types, including stock options, stock appreciation rights, restricted stock, restricted stock units, performance shares, and other stock-based awards. The 2025 Plan is administered by the Company’s Compensation and Human Resources Committee, which has broad authority to determine the terms of individual awards, including eligibility, size, vesting conditions, performance criteria, and other terms. Awards may generally not be transferred and are subject to forfeiture under certain conditions. The Company had 656,885 shares available for grant under the 2025 Plan as of March 31, 2026.

 

Stock-based compensation expense for restricted stock in the consolidated statements of operations is summarized as follows:

 

		Three months ended March 31,
		2026				2025
Cost of sales		$	(7,748	)		$	—
Selling, general and administrative			243,035				320,229
Total stock-based compensation expense		$	235,287			$	320,229

 

The Company grants restricted stock units (“RSUs”) to its board of directors as partial compensation. The 2026 RSUs vest annually. and are expensed on a straight-line basis. These RSUs will fully vest on January 10, 2027.

 

The following table summarizes activity related to outstanding RSUs for the three months ended March 31, 2026:

 

			RSUs				Weighted Average  Grant Date Fair Value of  RSUs
Non-vested – January 1, 2026				—			$	—
Granted				125,003			$	4.18
Vested				—			$	—
Forfeited				—			$	—
Non-vested – March 31, 2026				125,003			$	4.18

 

The Company grants shares of common stock (“Restricted Stock Awards” or “RSAs”) 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 March 31, 2026, the weighted average remaining amortization period was 2.2 years.

 

The following table summarizes activity related to outstanding Restricted Stock Awards for the three months ended March 31, 2026:

 

			Restricted  Stock Awards				Weighted Average  Grant Date Fair Value of  Restricted Stock Awards
Non-vested – January 1, 2026				148,127			$	2.92
Granted				4,419			$	3.96
Vested				(4,419	)		$	3.96
Forfeited				(9,260	)		$	3.04
Non-vested – March 31, 2026				138,867			$	2.92

 

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 March 31, 2026, the weighted average remaining amortization period was 1.6 years.

 

The following table summarizes activity related to outstanding PRSAs for the three months ended March 31, 2026:

 

			PRSAs				Weighted Average Grant Date  Fair Value of  PRSAs
Non-vested – January 1, 2026				57,376			$	2.96
Granted				—			$	—
Vested				—			$	—
Forfeited				—			$	—
Non-vested – March 31, 2026				57,376			$	2.96

 

The fair value of all RSUs, PRSAs and RSAs 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 March 31, 2026, unamortized stock-based compensation costs related to restricted share arrangements was $516,599.

 

6.	NET INCOME (LOSS) PER SHARE

 

Basic and diluted income (loss) per common share for the three months ended March 31, 2026 and 2025 is computed using the weighted average number of common shares outstanding adjusted for the effect of unvested RSUs. Incremental shares of 177,769 were used in the calculation of diluted income per common share for the three months ended March 31, 2026. Incremental shares of 171,048 were not used in the calculation of diluted loss per common share for the three months ended March 31, 2025 as these shares were considered anti-dilutive.

 

7.	LINE OF CREDIT AND LONG-TERM DEBT

 

On December 12, 2025, the Company entered into a Loan and Security Agreement (the “Loan and Security Agreement”) with Western Alliance Bank (the “Bank”). The Loan and Security Agreement provides for a revolving line of credit in the maximum principal amount of $10,000,000 (the “Revolving Line”) and a term loan in the original principal amount of $10,000,000 (the “Term Loan” and, together with the Revolving Line, the “Credit Facilities”). WMI and Compac, have guaranteed the Company’s obligations under the Loan and Security Agreement.

 

Borrowings under the Credit Facilities bear interest at a variable rate equal to the 1-month Term Secured Overnight Financing Rate (“SOFR”) plus an applicable margin as set forth in the Loan and Security Agreement. During the continuance of an event of default, all outstanding obligations bear interest at a rate equal to 5% above the rate otherwise applicable.

 

The SOFR Rate was 3.7% as of March 31, 2026 and as such, the Company’s interest rate on the Revolving Line and Term Loan was 6.2% as of March 31, 2026.

 

The Credit Facilities mature on December 12, 2030. The Term Loan was funded in full on the closing date and is repayable in scheduled quarterly installments beginning on April 5, 2026. Maturities on long term debt are as follows:

 

Period			Year Ended December 31,
2026			$	187,500
2027			$	250,000
2028			$	437,500
2029			$	687,500
2030			$	8,437,500
Total			$	10,000,000

 

Borrowings under the Revolving Line may be made, repaid and reborrowed from time to time before the maturity date, subject to the other conditions set forth in the Loan and Security Agreement. Voluntary prepayments of the Credit Facilities are permitted at any time without premium or penalty, other than customary breakage amounts, and the Loan and Security Agreement requires mandatory prepayments in certain circumstances.

 

The Loan and Security Agreement requires the Company to pay an unused commitment fee equal to 0.40% per annum on the unused portion of the Revolving Line and to pay fees and charges in connection with any letters of credit and any cash management services provided by the Bank and to reimburse the Bank’s expenses as provided in the Loan and Security Agreement.

 

The Company’s obligations under the Loan and Security Agreement, and the guaranties of WMI and Compac, are secured by a first-priority security interest in substantially all of the personal property assets of the Company and the guarantors, in each case subject to permitted liens and customary exclusions as set forth in the Loan and Security Agreement and related security documents.

 

The Loan and Security Agreement contains customary affirmative, negative and financial covenants. Among other things, these covenants impose limitations, subject to agreed exceptions, on the ability of the Company and its subsidiaries to incur additional indebtedness, grant liens, make certain investments, dispose of assets, pay dividends and other restricted payments, enter into certain transactions with affiliates and effect certain mergers or other fundamental changes. The Loan and Security Agreement also includes quarterly tested financial covenants, including a minimum Consolidated Fixed Charge Coverage Ratio of 1.25 to 1.00 and a maximum Funded Leverage Ratio that is initially 3.75 to 1.00 through December 31, 2026 and is reduced to 3.50 to 1.00 from January 1, 2027 onward, in each case as defined in and calculated under the Loan and Security Agreement.

 

The Loan and Security Agreement includes customary events of default, including payment defaults, covenant defaults, certain cross-defaults, certain events of bankruptcy or insolvency, certain unsatisfied judgments, certain ERISA events and certain change-of-control events. If an event of default occurs and is continuing, the Bank may, subject to the terms of the Loan and Security Agreement, declare all or a portion of the outstanding obligations under the Credit Facilities to be immediately due and payable, terminate the commitments and exercise other rights and remedies available to it, including with respect to the collateral.

 

As of March 31, 2026 the Company had $19,173,672 outstanding under the Loan and Security Agreement; $9,173,672 under the Revolving Line and $10,000,000 under the Term Loan. On December 31, 2025 the Company had $18,373,672 outstanding under the Loan and Security Agreement; $8,373,672 under the Revolving Line and $10,000,000 under the Term Loan. Both loans mature December 12, 2030. 

 

As of March 31, 2026, the Company had cumulatively incurred approximately $243,220 of debt issuance costs in connection with the Loan and Security Agreement, of which approximately $231,060 remained unamortized. Of the unamortized amount, approximately $115,530 was included in other assets and approximately $115,530 was reflected as a reduction of the Term Loan as of March 31, 2026. As of December 31, 2025, approximately $243,220 of debt issuance costs remained unamortized, of which approximately $121,610 was included in other assets and approximately $121,610 was reflected as a reduction of the Term Loan as of December 31, 2025. 

 

 

8.	MAJOR CUSTOMERS AND VENDORS

 

During the three months ended March 31, 2026, our four largest customers accounted for 38%, 18%, 14% and 10% of revenue. During the three months ended March 31, 2025, our four largest customers accounted for 23%, 22%, 20% and 18% of revenue.

 

At March 31, 2026, 27%, 27%, 12%, 12% and 10% of our accounts receivable were from five of our largest customers. At December 31, 2025, 53%, 17%, and 12% of accounts receivable were due from our three largest customers. 

 

At March 31, 2026, 26%, 22%, 17% and 16% of our contract assets were from four of our largest customers. At December 31, 2025, 27%, 21%, 19%, and 17% of our contract assets were related to our four largest customers.

 

At March 31, 2026, 13% of our accounts payable was from our largest vendor. At December 31, 2025, no vendors accounted for more than 10% of accounts payable.

 

9.

LEASES

 

The Company leases manufacturing and office space under an agreement classified as an operating lease. The Company entered into an amendment to the lease agreement for its operating facility on April 15, 2025 that extends the term of the lease until April 30, 2031. 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 three months ended March 31, 2026 and 2025, the Company’s operating lease expense was $594,979 and $526,343, respectively.

 

Future minimum lease payments under non-cancellable operating leases as of March 31, 2026 were as follows:

 

For the Year Ending December 31,
Remainder of 2026		$	1,728,400
2027			2,336,077
2028			2,300,990
2029			2,360,515
2030			2,431,331
Thereafter			818,389
Total undiscounted operating lease payments			11,975,702
Less imputed interest			(2,534,075	)
Present value of operating lease payments		$	9,441,627

 

The following table sets forth the right-of-use assets and operating lease liabilities as of: 

 

		March 31, 2026				December 31, 2025
Assets
Right-of-use assets, net		$	9,150,484			$	9,515,207
Liabilities
Current operating lease liabilities		$	1,468,989			$	1,434,385
Long-term operating lease liabilities			7,972,638				8,353,120
Total lease liabilities		$	9,441,627			$	9,787,505

 

The Company’s weighted average remaining lease term for its operating leases is 5.0 years as of March 31, 2026. The Company’s weighted average discount rate for its operating leases is 9.52% as of March 31, 2026.

 

 

10.	INCOME TAXES

 

The provision (benefit) for income tax for the three months ended March 31, 2026, and March 31, 2025 was 331,348 and ($348,969), respectively.

 

The effective income tax rate for the three months ended March 31, 2026 and 2025 approximated the statutory rate of approximately 21%.

 

During the three months ended March 31, 2026 and 2025, the Company made no cash payments for income taxes. 

 

11.	COMMITMENTS AND CONTINGENCIES

 

On May 7, 2025, the Company submitted to The Boeing Company a Request for Equitable Pricing Adjustment on the Boeing A-10 program addressing higher manufacturing costs on its 2019 firm fixed price contract. Subsequently, on July 14, 2025, the Company received a Termination Notice from The Boeing Company with respect to the Boeing A-10 program directing the Company to scrap and return materials and tooling to the Air Force prior to August 15, 2025 when funding would no longer be available, as well as a claim for damages incurred by Boeing as a result of the alleged contract default. The Company continues to have correspondence with the Boeing Company over the termination of the Boeing A10 program. In light of these events, and in conjunction with the Air Force’s decision to accelerate the retirement of the Boeing A-10 fleet, the Company evaluated the situation and recognized an adjustment to its contract revenues and costs to address the contract termination during the quarter ended June 30, 2025. The Company will continue to evaluate the customers claim and will recognize any contingent losses, if required, in the period in which additional losses become both probable, and reasonably estimable. 

 

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. 

 

12.	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 Condensed Consolidated Balance Sheet as of March 31, 2026 and December 31, 2025 and the Condensed Consolidated Statements of Operations for the financial information with respect to the Company’s single operating segment for the three months ended March 31, 2026 and 2025.

 

13.	RISK AND UNCERTAINTIES

 

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, and our material costs are established on issued purchase orders, future procurements may be impacted by economic and political uncertainties including tariffs, and may directly affect the Company’s profitability on previously negotiated Firm Fixed Price contracts.

  

 

Item 2 – Management’s Discussion and Analysis of Financial Condition and Results of Operations 

 

The following discussion should be read in conjunction with the Company’s consolidated financial statements and notes thereto contained in this report.

 

Forward Looking Statements

 

This Form 10-Q contains forward-looking statements within the meaning of the Private Securities Litigation Reform Act of 1995, including statements within the meaning of Section 27A of the Securities Act of 1933 and Section 21E of the Securities Exchange Act of 1934. When used in this Form 10-Q and in future filings by us with the Securities and Exchange Commission (“SEC”), the words or phrases “believe”, “expect,” “anticipate,” “intend”, “plan”, “may,” “will”, “should,” “could”, “estimate,” 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. The risks are included in Part I, Item 1A – Risk Factors of our Annual Report on Form 10-K for the year ended December 31, 2025 (the “Form 10-K”).

 

The forward-looking statements contained in this Form 10-Q speak only as of the date of this report. Except as required by applicable law, we undertake no obligation to update or revise any forward-looking statements to reflect subsequent events, changed circumstances, or changes in expectations.

 

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 participate in the aerosystems sector through our production of reconnaissance pod structures and fuel panel systems. Within the global aerostructures and aerosystems 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. 

 

Backlog

 

We produce custom assemblies pursuant to long-term contracts and customer purchase orders. Funded backlog consists of the aggregate funded value of remaining performance obligations 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.

 

Backlog is not necessarily indicative of future revenues or the timing of such revenues. The realization of backlog depends on a number of factors, including program funding, customer requirements, and the continuation of the underlying programs. Backlog may also include amounts associated with options or anticipated orders under existing contracts that are not yet funded or awarded and are subject to change. 

 

Our total backlog as of March 31, 2026 and December 31, 2025 is shown below.

 

Backlog (Total)		March 31, 2026				December 31, 2025
Funded		$	96,138,000			$	91,818,000
Unfunded			398,817,000				412,704,000
Total		$	494,955,000			$	504,522,000

 

Approximately 96% of the total amount of our backlog at March 31, 2026 was attributable to government and military contractor contracts. Our backlog attributable to government contracts at March 31, 2026 and December 31, 2025 was as follows:

 

Backlog (Government)		March 31, 2026				December 31, 2025
Funded		$	93,299,000			$	89,067,000
Unfunded			380,079,000				393,530,000
Total		$	473,378,000			$	482,597,000

 

Our backlog attributable to commercial contracts at March 31, 2026 and December 31, 2025 was as follows:

 

Backlog (Commercial)		March 31, 2026				December 31, 2025
Funded		$	2,839,000			$	2,751,000
Unfunded			18,738,000				19,174,000
Total		$	21,577,000			$	21,925,000

 

The total backlog at March 31, 2026 is primarily comprised of long-term programs with Raytheon (Next Generation Jammer-Mid Band Pods and Advanced Tactical Pods), L3Harris (Next Generation Jammer-Low Band Pods), Lockheed Martin (F-16 RI/DCC’s), Raytheon (B-52 Radar Racks), Sikorsky (UH-60 BLACKHAWK Stabilator MRO) and USAF (T-38 Classic Structural Modification Kits).

 

The funded backlog at March 31, 2026 is primarily from purchase orders under long-term contracts with Raytheon (NGJ – Mid Band Pods and Advanced Tactical Pods), USAF (T-38 Classic Structural Modification Kits), and Lockheed Martin (F-16 RI/DCC’s).

 

Critical Accounting Estimates

 

We make a number of significant estimates, assumptions and judgments in the preparation of our financial statements. See Management’s Discussion and Analysis of Financial Condition and Results of Operations in the Form 10-K, for a discussion of our critical accounting estimates. There have been no significant changes to the application of our critical accounting estimates during the quarter ended March 31, 2026.

 

Results of Operations

 

Revenue

 

Total Revenue for the three months ended March 31, 2026 was $17,359,940 compared to $15,400,608 for the same period last year, an increase of $1,959,332 or 12.7%. The increase was driven primarily by favorable adjustments on our NGJ – Mid Band Pods and Advanced Tactical Pods program and NGJ – Low Band Pods program, partially offset by unfavorable adjustments to our F-16 RI/DCC’s program and Embraer Phenom-300 Engine Inlet Assemblies program.

 

Revenue from military subcontracts was $14,678,977 for the three months ended March 31, 2026 compared to $11,326,608 for the three months ended March 31, 2025, an increase of $3,352,369 or 29.6%. The increase was driven primarily by favorable adjustments on our NGJ – Mid Band Pods and Advanced Tactical Pods program and NGJ – Low Band Pods program.

 

Revenue from prime government military contracts was $1,764,056 for the three months ended March 31, 2025 compared to $2,793,612 for the three months ended March 31, 2025, a decrease of $1,029,556 or 36.9%. The decrease was driven primarily by a decrease in our USAF T-38 Pacer Classic Structural Modification Kits program due to timing of material receipts.

 

Revenue from commercial subcontracts was $916,907 for the three months ended March 31, 2026 compared to $1,280,388 for the three months ended March 31, 2025, a decrease of $363,481 or 28.4%. The decrease was driven primarily by a decrease in our Embraer Phenom-300 Engine Inlet Assemblies program, partially offset by the commencement of production on our Embraer Phenom-100 Engine Inlet Assemblies and Collins Compac Enclosures programs.

 

Cost of Sales

 

Total Cost of Sales for the three months ended March 31, 2026 and 2025 was $12,880,049 and $13,751,133, respectively, a decrease of $871,084 or 6.3%.

 

The components of the cost of sales were as follows:

 

		Three months ended
		March 31, 2026				March 31, 2025
Procurement		$	7,509,709			$	8,294,588
Labor			1,316,157				1,642,586
Factory overhead			3,937,186				4,118,581
Other cost of sales			116,997				(304,622	)
Cost of sales		$	12,880,049			$	13,751,133

 

Procurement for the three months ended March 31, 2026 was $7,509,709 compared to $8,294,588 for the three months ended March 31, 2025, a decrease of $784,879 or 9.5%, driven primarily by lower material receipts for Embraer Phenom-300 Engine Inlet Assemblies program and the Collins MS-110 program.

 

Labor costs for the three months ended March 31, 2026 were $1,316,157 compared to $1,642,586 for the three months ended March 31, 2025, a decrease of $326,429 or 19.9% primarily driven by decreased work performed on the A-10 Main Landing Gear Pods program due to termination.

 

Factory overhead for the three months ended March 31, 2026 was $3,937,186 compared to $4,118,581 for the three months ended March 31, 2025, a decrease of $181,395 or 4.4%.

 

Other cost of sales relates to items that can increase or decrease cost of sales such as changes in inventory reserves, changes in loss contract provisions, absorption variances and direct charges to cost of sales. Other cost of sales for the three months ended March 31, 2026 was $116,997 compared to a $(304,622) for the three months ended March 31, 2025, an increase of $421,619 or 138.4%. The increase is primarily the result less benefits realized on programs nearing completion and higher loss reserve requirements during the three months ended March 31, 2026 as compared to the three months ended March 31, 2025.

 

Gross Profit

 

Gross profit and gross profit percentage (“gross margin”) for the three months ended March 31, 2026 and March 31, 2025 was $4,479,891 and 25.8% compared to $1,649,475 and 10.7%, respectively, an increase of $2,830,416, or 171.6%, for the reasons noted above associated with the A-10 program.

 

Favorable/Unfavorable Adjustments to Gross Profit

 

During the three months ended March 31, 2025 and 2024, circumstances required that we make changes in estimates to various contracts. Such changes in estimates resulted in changes in total gross profit as follows:

 

		Three months ended
		March 31, 2026				March 31, 2025
Net adjustments		$	(732,189	)		$	(3,129,230	)

 

The net adjustment of $0.7 million for the three months ended March 31, 2026 is driven primarily by an unfavorable adjustment on our Embraer Phenom-300 Engine Inlet Assemblies program.

 

Selling, General and Administrative Expenses

 

Selling, general and administrative expenses for the three months ended March 31, 2026 were $2,650,263 compared to $2,835,777 for the three months ended March 31, 2025, a decrease of $185,514 or 6.5%. The decrease was primarily the due to lower salary related costs.

 

Interest expense

 

Interest expense for the three months ended March 31, 2026 was $291,935, compared to $488,091 for the three months ended March 31, 2025, a decrease of $196,156 or 40.2%. The decrease was the result of lower year-over-year interest rates charged on our outstanding debt under the Loan and Security Agreement.

 

Income (loss) Before Provision for Income Taxes

 

Income (loss) before provision for income taxes for the three months ended March 31, 2026 was $1,568,066 compared to $(1,672,893) for the three months ended March 31, 2025, an increase of $3,240,959 or 193.7% for the reasons noted above.

 

Provision/(Benefit) for Income Taxes

 

Provision for income taxes for the three months ended March 31, 2026 was $331,348 compared to (benefit) for income taxes of $(348,969) for the three months ended March 31, 2025, an increase of $680,317 or 195.0%.

 

The effective income tax rate for the three months ended March 31, 2026 and 2025 approximated the statutory rate of approximately 21%.

 

Net (Loss)/Income and Earnings per Share

 

Net income (loss) for the three months ended March 31, 2026 was $1,236,718 or $0.10 per basic share, compared to net loss of $(1,323,924) or $(0.10) per basic share, for the same period last year. Diluted income per share was $0.09 for the three months ended March 31, 2026 calculated utilizing 13,040,998 weighted average shares outstanding. Diluted (loss) per share was $(0.10) for the three months ended March 31, 2025 calculated utilizing 12,720,148 weighted average shares outstanding. The increase in net income was primarily driven by an increase in gross profit.

 

Liquidity and Capital Resources

 

General

 

At March 31, 2026, we had working capital of $22,725,875 compared to $20,388,755 at December 31, 2025, an increase of $2,337,120 or 11.5%. The increase was driven primarily by an increase in cash and contract assets partly offset by a decrease in accounts receivable.

 

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 made up 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 those amounts to accounting periods, there can be a significant disparity between earnings as reported and the actual cash we receive during any reporting period. Accordingly, it is possible that we experience shortfalls in our cash flow and may need to borrow money or take steps to delay certain cash outflows until the reported earnings materialize into actual cash receipts. 

 

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 March 31, 2026, we had cash of $1,002,548 compared to $899,199 at December 31, 2025, an increase of $103,349 or 11.5%. This increase was primarily the result of positive cash flows from the reduction in accounts receivable during the quarter.

 

Bank Credit Facilities

 

On December 12, 2025, the Company entered into a Loan and Security Agreement (the “Loan and Security Agreement”) with Western Alliance Bank (the “Bank”). The Loan and Security Agreement provides for a revolving line of credit in the maximum principal amount of $10,000,000 (the “Revolving Line”) and a term loan in the original principal amount of $10,000,000 (the “Term Loan” and, together with the Revolving Line, the “Credit Facilities”). WMI and Compac, have guaranteed the Company’s obligations under the Loan and Security Agreement.

 

Borrowings under the Credit Facilities bear interest at a variable rate equal to the 1-month Term Secured Overnight Financing Rate (“SOFR”) plus an applicable margin as set forth in the Loan and Security Agreement. During the continuance of an event of default, all outstanding obligations bear interest at a rate equal to 5% above the rate otherwise applicable.

 

The SOFR Rate was 3.7% as of March 31, 2026 and as such, the Company’s interest rate on the Revolving Loan and Term Loan was 6.2% as of March 31, 2026.

 

The Credit Facilities mature on December 12, 2030. The Term Loan was funded in full on the closing date and is repayable in scheduled quarterly installments beginning on April 5, 2026. Maturities on long term debt are as follows:

 

Period			Year Ended December 31,
2026			$	187,500
2027			$	250,000
2028			$	437,500
2029			$	687,500
2030			$	8,437,500
Total			$	10,000,000

 

Borrowings under the Revolving Line may be made, repaid and reborrowed from time to time before the maturity date, subject to the other conditions set forth in the Loan and Security Agreement. Voluntary prepayments of the Credit Facilities are permitted at any time without premium or penalty, other than customary breakage amounts, and the Loan and Security Agreement requires mandatory prepayments in certain circumstances.

 

The Loan and Security Agreement requires the Company to pay an unused commitment fee equal to 0.40% per annum on the unused portion of the Revolving Line and to pay fees and charges in connection with any letters of credit and any cash management services provided by the Bank and to reimburse the Bank’s expenses as provided in the Loan and Security Agreement.

 

The Company’s obligations under the Loan and Security Agreement, and the guaranties of WMI and Compac, are secured by a first-priority security interest in substantially all of the personal property assets of the Company and the guarantors, in each case subject to permitted liens and customary exclusions as set forth in the Loan and Security Agreement and related security documents.

 

The Loan and Security Agreement contains customary affirmative, negative and financial covenants. Among other things, these covenants impose limitations, subject to agreed exceptions, on the ability of the Company and its subsidiaries to incur additional indebtedness, grant liens, make certain investments, dispose of assets, pay dividends and other restricted payments, enter into certain transactions with affiliates and effect certain mergers or other fundamental changes. The Loan and Security Agreement also includes quarterly tested financial covenants, including a minimum Consolidated Fixed Charge Coverage Ratio of 1.25 to 1.00 and a maximum Funded Leverage Ratio that is initially 3.75 to 1.00 through December 31, 2026 and is reduced to 3.50 to 1.00 from January 1, 2027 onward, in each case as defined in and calculated under the Loan and Security Agreement.

 

The Loan and Security Agreement includes customary events of default, including payment defaults, covenant defaults, certain cross-defaults, certain events of bankruptcy or insolvency, certain unsatisfied judgments, certain ERISA events and certain change-of-control events. If an event of default occurs and is continuing, the Bank may, subject to the terms of the Loan and Security Agreement, declare all or a portion of the outstanding obligations under the Credit Facilities to be immediately due and payable, terminate the commitments and exercise other rights and remedies available to it, including with respect to the collateral. 

 

As of March 31, 2026 and December 31, 2025, the Company had $19,173,672 and $18,373,672 outstanding under the Loan and Security Agreement, respectively.

 

 

Shelf Registration Statement and At-the-Market Offering Program

 

On March 31, 2026, the Company filed a shelf registration statement on Form S-3 registering the potential offer and sale from time to time of up to $30 million of the Company’s securities. In connection with the shelf registration statement, the Company also entered into an At Market Issuance Sales Agreement with Craig-Hallum Capital Group LLC relating to an at-the-market offering program pursuant to which the Company may offer and sell shares of its common stock having an aggregate offering price of up to approximately $17 million from time to time, subject to market conditions and the Company’s capital needs. The registration statement was declared effective by the SEC on April 14, 2026. 

 

Liquidity

 

We believe that our existing liquidity resources as of March 31, 2026 will be sufficient to meet our current working capital needs for at least the next 12 months from the date of issuance of our consolidated financial statements. However, 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. To the extent additional liquidity is required, we may utilize our cash balances, availability for borrowings under our credit facilities and other potential sources of liquidity, including our existing shelf registration statement and at-the-market offering program, although such additional liquidity may not be available on satisfactory terms and in adequate amounts, if at all.

 

Contractual Obligations

 

For information concerning our contractual obligations, see Contractual Obligations under Item 7 of Management’s Discussion and Analysis of Financial Condition and Results of Operations in the Form 10-K.

 

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 effort to mitigate and manage potential negative impacts 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.

 

Item 3 – Quantitative and Qualitative Disclosures About Market Risk

 

Not applicable.

 

Item 4 – Controls and Procedures

 

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 March 31, 2026.  

 

Changes in Internal Control Over Financial Reporting

 

There were no changes in our internal control over financial reporting during the quarter ended March 31, 2026 that materially affected, or are reasonably likely to materially affect, our internal control over financial reporting.

 

Part II - Other Information

None.

Item 1 – Legal Proceedings

 

None.

 

Item 1A – Risk Factors

 

“Part I Item 1A - Risk Factors” of our Form 10-K for the year ended December 31, 2025, includes a discussion of significant factors known to us that could materially adversely affect our business, financial condition, or results of operations. There have been no material changes from the risk factors described in such report.

 

Item 2 – Unregistered Sales of Equity Securities and Use of Proceeds

 

None.

 

Item 3 – Defaults Upon Senior Securities

 

None.

 

Item 4 – Mine Safety Disclosures

 

Not applicable.

 

Item 5 – Other Information

 

During the fiscal quarter ended March 31, 2026, no director or officer adopted or terminated a Rule 10b5-1 trading arrangement or non-Rule 10b5-1 trading arrangement, as each term is defined in Item 408(a) of Regulation S-K. 

 

Item 6 – Exhibits

 

Exhibit No.	Description
31.1*	Section 302 Certification by Chief Executive Officer and President
31.2*	Section 302 Certification by Chief Financial Officer (Principal Accounting Officer)
32.1**	Section 906 Certification by Chief Executive Officer and Chief Financial Officer
101.INS**	Inline XBRL Instance Document. The instance document does not appear in the Interactive Data File because its XBRL tags are embedded within the Inline XBRL document.
101.SCH*	Inline XBRL Taxonomy Extension Schema Document.
101.CAL*	Inline XBRL Taxonomy Extension Calculation Linkbase Document.
101.DEF*	Inline XBRL Taxonomy Extension Definition Linkbase Document.
101.LAB*	Inline XBRL Taxonomy Extension Label Linkbase Document.
101.PRE*	Inline XBRL Taxonomy Extension Presentation Linkbase Document.
104**	Cover Page Interactive Data File. The cover page XBRL tags are embedded within the Inline XBRL document.

 

* Filed herewith   

** Furnished herewith

 

Attached as Exhibit 101 to this report are the following formatted in Inline XBRL (Extensible Business Reporting Language): (i) Condensed Consolidated Statement of Operations for the three months ended March 31, 2026 and 2025, (ii) Condensed Consolidated Balance Sheet as of March 31, 2026 and December 31, 2025, (iii) Condensed Consolidated Statement of Cash Flows for the three months ended March 31, 2026 and 2025, (iv) Condensed Consolidated Statement of Changes in Equity for the three months ended March 31, 2026 and 2025 and (v) Notes to Condensed Consolidated Financial Statements.

SIGNATURES

 

Pursuant to the requirements 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.

 

	CPI AEROSTRUCTURES, INC.
Dated: May 15, 2026	By.	/s/ Dorith Hakim
		Dorith Hakim
		Chief Executive Officer and President  (Principal Executive Officer)
Dated: May 15, 2026	By.	/s/ Robert Mannix
		Robert Mannix
		Chief Financial Officer  (Principal Financial and Accounting Officer)