CPI AEROSTRUCTURES INC 10-K/A

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 Comprehensive Form 10-K/A. 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 Comprehensive Form 10-K/A. 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 NYSE American Delinquency Notices On May 25, 2021, we received a notice from NYSE American LLC stating that our failure to timely file our Quarterly Report on Form 10-Q for the three months ended March 31, 2021 caused us to be out of compliance with the NYSE American LLC’s continued listing standards under the timely filing criteria included in Section 1007 of the NYSE American Company Guide (“Company Guide”). Also, our failure to timely file our Quarterly Reports on Form 10-Q for the three months ended June 30, 2021 and September 30, 2021 is an additional noncompliance with the NYSE American LLC’s continued listing standards under the timely filing criteria included in Section 1007 of the Company Guide. In accordance with Section 1007 of the Company Guide, we had six months from May 24, 2021, or until November 24, 2021, to file the Form 10-Q for the period ended March 31, 2021 with the SEC. On November 23, 2021, the Company received a notice from NYSE American LLC informing the Company that it had accepted the Company’s plan to regain compliance with its standards for continued listing of the Company’s common stock under the timely filing criteria included in the NYSE American Company Guide. NYSE American has granted the Company until April 14, 2022, to regain compliance with the timely filing criteria. If the Company is unable to cure the delinquency by April 14, 2022, the Company may request an additional extension up to the maximum cure period of May 24, 2022. In addition, if the Company does not make progress consistent with the plan during the plan period or if the Company does not complete its delayed filings with the SEC by the end of the maximum 12-month cure period on May 24, 2022, NYSE American staff will initiate delisting proceedings. There can be no assurance that we will be able to file the delayed filings as required. On September 17, 2021, we received notice from NYSE American LLC indicating that the Company does not meet the continued listing standards set forth in Part 10 of the Company Guide. The Company is not in compliance with Section 1003(a)(i) of the Company Guide since it has stockholders’ equity of less than $2.0 million and losses from continuing operations and/or net losses in two of its three most recent fiscal years and Section 1003(a)(ii) of the Company Guide since it has stockholders’ equity of less than $4.0 million and losses from continuing operations and/or net losses in three of its four most recent fiscal years. The Company has therefore become subject to the procedures and requirements of Section 1009 of the Company Guide and was required to, and timely did, submit a plan to NYSE American LLC addressing how the Company intends to regain compliance with the continued listing standards by March 17, 2023 (the “Plan”). On November 19, 2021, we received notice from NYSE American LLC that has accepted the Plan, subject to periodic review, including quarterly monitoring, for compliance with the Plan. If the Company is not in compliance with the continued listing standards by March 17, 2023 or if the Company does not make progress consistent with the Plan during the plan period, the NYSE Regulation staff may initiate delisting proceedings, as appropriate. See “Risk Factors - If our common stock is delisted from the NYSE American exchange, our business, financial condition, results of operations and stock price could be adversely affected, and the liquidity of our stock and our ability to obtain financing could be impaired”. Restatement due to Inventory Costing Errors and Insufficient Reserves As previously reported, on June 4, 2021, the audit and finance committee (the “Audit and Finance Committee”) of the board of directors of CPI Aerostructures, Inc. (the “Company”), determined, based on the recommendation of management and in consultation with CohnReznick LLP (“CohnReznick”), the Company’s independent registered public accounting firm, that the Company’s financial statements which were included in its Annual Report on Form 10-K for the year ended December 31, 2020 and Quarterly Reports on Form 10-Q for the quarters ended March 31, 2020, June 30, 2020, and September 30, 2020 as filed with the Securities and Exchange Commission (the “SEC”) should no longer be relied upon due to errors in such financial statements relating to the recording and reporting of inventory costing and related internal controls (the “Inventory Costing Errors”) and that management’s reports on the effectiveness of internal control over financial reporting, press releases, and investor communications describing the Company’s financial statements for such periods should no longer be relied upon. The Company’s management identified the Inventory Costing Errors during its inventory testing procedures for the preparation of the Company’s financial statements for the quarterly period ended March 31, 2021. At the time of the June 2021 disclosure, the Company estimated and disclosed that the Inventory Costing Errors were expected to increase 2020 net loss reported on the Annual Report on Form 10-K for the year ended December 31, 2020 by $1.9 million to $2.3 million. The Company has now determined that the Inventory Costing Errors increased 2020 net loss by $2,010,084. The correction of the Inventory Costing Errors resulted in the determination that certain contracts were in a loss position and certain inventory items required additional reserves. The Company re-evaluated the sufficiency of its provisions for loss contracts and inventory reserves that it had previously recorded and concluded that increases to these reserves were required. The insufficient reserves resulting from such reserve increases are referred to as “Additional Inventory Reserves” and “Loss Contract Reserve” and are together referred to as the “Insufficient Reserves.” It was further determined by management that the appropriate starting point for increasing the Insufficient Reserves was during the fourth quarter of 2019. 26 On November 16, 2021, the Audit and Finance Committee determined, based on the analysis and recommendation of management and in consultation with CohnReznick, that the Company’s financial statements as of and for the period ended December 31, 2019 which were included in the Company’s Annual Report on Form 10-K for the fiscal year ended December 31, 2019 should no longer be relied upon due to errors in such financial statements relating to the recording and reporting of the Insufficient Reserves, that, similarly, management’s reports on the effectiveness of internal control over financial reporting, press releases, and investor communications describing the Company’s financial statements for such period should no longer be relied upon, and stated that the Company expected to restate its Annual Report on Form 10-K for the years ended December 31, 2020 and December 31, 2019, and its Quarterly Reports on Form 10-Q for the quarters ended March 31, 2020, June 30, 2020, and September 30, 2020 as filed with the SEC (the “Original Forms 10-Q”) by filing a comprehensive Form 10-K/A. The Company, upon conducting an analysis of the impact of the Insufficient Reserves on previously reported financial results, determined that net loss for the years ended December 31, 2020 and 2019 is $324,231 and $2,189,728, respectively, greater than the net loss reported in the Annual Report on Form 10-K for the fiscal year ended December 31, 2020 and the Company’s Annual Report on Form 10-K for the fiscal year ended December 31, 2019. Considering both the Inventory Costing Errors and the Insufficient Reserves, the Company determined that the net loss for the years ended December 31, 2020 and 2019 is $2,334,315 and $2,300,083, respectively, greater than the net loss reported in the Annual Report on Form 10-K for the fiscal year ended December 31, 2020 and the Company’s Annual Report on Form 10-K for the fiscal year ended December 31, 2019 and net loss for the quarters ended March 31, 2020 and June 30, 2020 is $544,836 and $763,730, respectively, greater than the net loss reported in the respective Quarterly Reports on Form 10-Q for such periods and the net income for the quarter ended September 30, 2020 is $24,556 more than the net income reported in the Quarterly Report for such period. The Inventory Costing Errors resulted from software processing and coding errors, inconsistent units of measure being used for quantities ordered and quantities received of certain purchased parts, incorrect accruals to accounting periods of the cost of certain goods received and the Company not having a procedure to address over or under absorbed overhead costs at the end of accounting periods. The Inventory Costing Errors affected the income reported with respect to the Company’s product lines for which revenue is recognized when a product ships to customers, which accounted for approximately 15% of total 2020 revenue (the “Non-POC Contracts”). The Inventory Costing Errors did not affect income reported with respect to the Company’s products for which revenue is recognized over time using percentage of completion accounting (the “POC Contracts”). The Loss Contract Reserve and the Additional Inventory Reserves also only affect the income reported with respect to the Company’s Non-POC Contracts, and do not affect the income reported with respect to the Company’s POC Contracts. The Inventory Costing Errors and the Insufficient Reserves did not affect either prior reported revenue or cash flow for fiscal 2020 and 2019. Management has considered the effect of the Inventory Costing Errors and the Insufficient Reserves on the Company’s prior conclusions of the adequacy of its internal control over financial reporting and disclosure controls and procedures as of the end of each of the applicable periods. As a result of the Inventory Costing Errors and the Insufficient Reserves, management has determined that a material weakness existed in the Company’s internal control over financial reporting as of the end of the quarterly periods ended March 31, 2020, June 30, 2020, September 30, 2020 and for the years ended December 31, 2020 and 2019. See Part II Item 9A – Controls and Procedures within this Comprehensive Form 10-K/A for a description of these matters. As a result of the restatement included herein caused by the Inventory Costing Errors and Insufficient Reserves, the Company is reporting herein net loss for the years ended December 31, 2020 and December 31, 2019 which is $2,334,315 and $2,300,083, respectively, greater than the net loss reported in the Original Form 10-K and the Company’s Annual Report on Form 10-K for the fiscal year ended December 31, 2019, net loss for the quarters ended March 31, 2020 and June 30, 2020 which is $544,836 and $763,730, respectively, greater than the net loss reported in the respective Original Forms 10-Q, and net income for the quarter ended September 30, 2020 which is $24,556 greater than the net income reported in the Original Form 10-Q. The Inventory Costing Errors and the Insufficient Reserves did not affect reported revenue or cash flows for the years ended December 31, 2020 or December 31, 2019, or for the quarters ended March 31, June 30 and September 30, 2020. This Comprehensive Form 10-K/A contains our audited restated annual financial statements as of and for the years ended December 31, 2020 and 2019, as well as our unaudited restated quarterly financial statements as of and for the quarters ended March 31, 2020, June 30, 2020 and September 30, 2020. The restatement is discussed below and in more detail within Part II, Item 8, Note 17, “Restatement of Previously Issued Consolidated Financial Statements” in the notes to the consolidated financial statements included in this Comprehensive Form 10-K/A. 27 Amendments and Waivers to the BankUnited Facility On May 11, 2021, we entered into a Waiver and Seventh Amendment (“Seventh Amendment”) to an Amended and Restated Credit Agreement with the Lenders named therein and BankUnited as Sole Arranger, Agent and Collateral Agent, dated as of March 24, 2016 (as amended from time to time, the “Credit Agreement”). Under the Seventh Amendment, the parties amended the Credit Agreement by (a) extending the maturity date of the Company’s existing $24 million revolving line of credit and its existing $6.36 million term loan to July 31, 2022, and (b) amended the leverage ratio covenant for the fiscal quarters ending on and after March 31, 2021, to 4.0 to 1.0, determined at the end of each fiscal quarter for the trailing four-quarter period then ended (or, in the case of the fiscal quarter ended March 31, 2021, determined on an annualized basis for the three-quarter period then ended). Additionally, under the Seventh Amendment, BankUnited waived late delivery of certain financial information. On October 28, 2021, we entered into a Waiver and Eighth Amendment (“Eighth Amendment”) to the Credit Agreement. Under the Eighth 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 December 31, 2022, (b) reducing the aggregate revolving line of credit from $24 million to $21 million while eliminating the requirement to maintain a minimum $3.0 million in a combination of line of credit availability and unrestricted cash, (c) providing for the repayment of an additional $750,000 of the principal balance of the term loan in three installments of $250,000 on November 30, 2021, December 31, 2021 and March 31, 2022 in addition to $200,000 regular monthly principal payments through maturity, (d) amending the minimum debt service coverage ratio covenant for the fiscal quarters ending on and after June 30, 2021 to provide for a ratio of 1.5 to 1.0, and (e) amending the maximum leverage ratio covenant as follows: for the fiscal quarter ending on March 31, 2021 - 5.0 to 1.0; for the fiscal quarter ending June 30, 2021 - 4.75 to 1.0; for the fiscal quarter ending September 30, 2021 - 4.25 to 1.0 and for the fiscal quarter ended December 31, 2021 and thereafter - 4.0 to 1.0, determined at the end of each fiscal quarter for the trailing four-quarter period then ended (or, in the case of the fiscal quarter ended March 31, 2021, determined on an annualized basis for the three-quarter period then ended). Additionally, under the Eighth Amendment, BankUnited waived certain covenant non-compliance and waived temporarily, late delivery of certain financial information. Paycheck Protection Program (PPP) Loan As previously reported, on April 10, 2020, we obtained a loan from Dime Community Bank (formerly BNB Bank) as the lender (“Dime”), in the principal amount of $4,795,000 (“PPP Loan”) pursuant to the Paycheck Protection Program under the Coronavirus Aid, Relief, and Economic Security (CARES) Act as administered by the U.S. Small Business Administration (“SBA”). On November 2, 2020, the Company applied to the lender for full forgiveness of the PPP loan, calculated in accordance with the terms of the CARES Act, as modified by the Paycheck Protection Flexibility Act. On July 13, 2021, the Company received notification through Dime that the PPP Loan and accrued interest thereon have been fully forgiven by the SBA and that the forgiveness payment date was July 1, 2021. The forgiveness of the PPP Loan will be recognized during the Company’s third fiscal quarter ending September 30, 2021. Impact of COVID-19 The impact that the recent COVID-19 pandemic will have on our business remains uncertain. During late 2020, we began to experience an increased rate of employees testing positive for COVID-19 and we took steps to mitigate virus transmission within the workplace. These steps included adding a second manufacturing shift to lessen employee density on the manufacturing floor and to require most non-manufacturing personnel to work from home. These measures continued into the current year. These measures continued into the current year. Despite these measures, during the first three months of 2021 we experienced a relatively high level of absenteeism directly or indirectly related to COVID-19. We believe it is possible that the impact of the COVID-19 pandemic could have an adverse effect on the results of our operations, financial position and cash flow for the year ending December 31, 2021 , particularly in the first fiscal quarter. We have taken mitigating steps in an attempt to reduce the adverse effects. For example, we have curtailed discretionary spending, deferred all business travel, and taken other steps to preserve cash. We have also taken action to more closely manage the flow of materials to be more responsive to unanticipated changes in customer delivery schedules. Since May 2021, we have seen a decrease in the impact of COVID-19 and most non-manufacturing personnel have returned to their regular in-person work schedules and we have returned to a single day shift operation. Certain Transactions The following transactions occurred during the periods covered by this Management's Discussion and Analysis of Financial Condition and Results of Operations: Acquisition of WMI In December 2018, the Company completed the acquisition of WMI from Air Industries for a purchase price of $7.9 million, subject to a potential post-closing working capital adjustment. Of the purchase price, $2 million was placed in escrow at closing and was to be released after the completion of the working capital adjustment and for indemnification contingencies. Air Industries objected to the Company’s calculation of the post-closing working capital adjustment and rejected the determination of BDO USA, LLP (“BDO”), the independent accountant appointed by the parties to resolve the dispute. On September 27, 2019, the Company filed a notice of motion in the Supreme Court of the State of New York, County of New York, against Air Industries seeking, among other things, a judgment against Air Industries in the amount of approximately $4.1 million. In October 2019, Air Industries and the Company jointly authorized the release to the Company of approximately $619,000 from escrow, which represented the value of certain undisputed items. The remaining escrowed amount of approximately $1,381,000 is shown as restricted cash on the consolidated balance sheet. The additional disputed amount of approximately $2.1 million is not on the Company’s consolidated balance sheet due to the uncertainty of collection. 28 The Company and Air Industries entered into a settlement agreement dated as of December 23, 2020, to resolve the post-closing working capital adjustment dispute in exchange for the release to the Company of the $1,381,000 cash remaining in escrow. Such amount was released from escrow to the Company on December 28, 2020. As part of the settlement agreement CPI Aero agreed to give up the right to pursue the additional disputed working capital amount of approximately $2.1 million. Honda Aircraft Company, Inc. Settlement and Release Agreement In January 2020, the Company requested a modification to the recurring sales price contained in the Master Purchase Agreement dated January 14, 2019 (“Honda MPA”) with Honda Aircraft Company, Inc. (“HACI”) for the manufacture of engine inlet assemblies for the HondaJet aircraft. HACI denied the Company’s request. HACI and the Company subsequently commenced discussions that would result in the Company exiting the program. On December 23, 2020 HACI and the Company entered into a Settlement and Release Agreement that, subject to the terms and conditions therein, terminates the Honda MPA and cancels all remaining purchase orders placed with the Company thereunder. Gulfstream G650 Program On April 29, 2020, the Company received a letter from Triumph Group stating that due to the COVID-19 pandemic, it had received a significant schedule change from its customer, Gulfstream Aerospace, and requested that we immediately stop work on the contract we have to produce certain fixed leading edge assemblies on the wing of the G650 business jet. In May 2020, Triumph Group cancelled nearly all open orders with the Company, decreasing our G650 leading edge backlog by $3.6 million. On May 27, 2020, Triumph Group announced it had reached an agreement in principle to sell the G650 wing program to Gulfstream Aerospace. On June 12, 2020, the Company received a joint communication from Gulfstream Aerospace and Triumph Group that stated Gulfstream Aerospace’s intention at the conclusion of the transaction is to continue to purchase G650 wing components from the Company. In December 2020, the Company received purchase orders from Gulfstream Aerospace for G650 wing components. Business Operations We are engaged in the contract production of structural aircraft parts for fixed wing aircraft and helicopters in both the commercial and defense markets. We also have a strong and growing presence in the aerosystems segment 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 Policies Revenue Recognition Effective January 1, 2018, the Company adopted Accounting Standards Codification Topic 606, “Revenue from Contracts with Customers” (“ASC 606”), using the modified retrospective method. 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 overtime 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 2 “Revenue Recognition” in the notes to the consolidated financial statements included in this Comprehensive Form 10-K/A for additional information regarding the Company's revenue recognition policy. 29 Leases In February 2016, the Financial Accounting Standards Board (“FASB”) issued Accounting Standards Update (“ASU”) No. 2016-02, “Leases (“ASC 842”)”, which sets out the principles for the recognition, measurement, presentation and disclosure of leases for both lessees and lessors. On January 1, 2019, the Company adopted the new lease standard using the optional transition method under which comparative financial information will not be restated and continue to apply the provisions of the previous lease standard in its annual disclosures for the comparative periods. In addition, the new lease standard provides a number of optional practical expedients in transition. The Company elected the package of practical expedients. As such, the Company did not have to reassess whether expired or existing contracts are or contain a lease; did not have to reassess the lease classifications or reassess the initial direct costs associated with expired or existing leases. ASC 842 also provides practical expedients for an entity's ongoing accounting. The Company elected the short-term lease recognition exemption under which the Company will not recognize right-of-use (“ROU”) assets or lease liabilities, and this includes not recognizing ROU assets or lease liabilities for existing short-term leases. The Company elected the practical expedient to not separate lease and non-lease components for certain classes of assets (office building). On January 1, 2019, the Company recognized ROU assets and lease liabilities of approximately $5.3 million and $5.9 million, respectively, on its consolidated balance sheet using an estimated incremental borrowing rate of 6%. As of December 31, 2020 the Company has ROU assets and lease liabilities of approximately $4.1 million and $4.4 million, respectively, on its consolidated balance sheet. Goodwill In January 2017, the FASB issued Accounting Standards Update No. 2017-04, “Intangibles - Goodwill and Other (Topic 350): Simplifying the Test for Goodwill Impairment (“ASU-2017-04). ASU 2017-04 is intended to simplify how all entities assess goodwill for impairment. This is accomplished by removing the requirement to determine the fair value of individual assets and liabilities in order to calculate a reporting unit’s “implied” goodwill. The goodwill impairment test consists of one step comparing the fair value of a reporting unit with its carrying amount. An entity should recognize a goodwill impairment charge for the amount by which the carrying amount exceeds the reporting unit’s fair value. An entity may still perform the optional qualitative assessment for a reporting unit to determine if it is more likely than not that goodwill is impaired. However, the ASU 2017-04 eliminates the requirement to perform a qualitative assessment for any reporting unit with zero or negative carrying amount. The Company adopted ASU-2017-4 for the year ended December 31, 2020. 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. Year Ended December 31, 2020 (as restated) as Compared to the Year Ended December 31, 2019 (as restated) Revenue . Revenue for the year ended December 31, 2020 was $87,584,690 compared to $87,518,688 for the year ended December 31, 2019, representing an increase of $66,002. We experienced revenue increases on our E2-D wing panel kits, our Pacer Classic III Phase 2 program with USAF as this effort transitions to Phase 3, and our Lockheed Martin F-16 Rudder Island program. The revenue increases were partially offset by decreases on our Raytheon NGJ-MB program as we transitioned to our follow on order, and on the G650 fixed leading edge program. Overall, revenue generated from prime government contracts for the year ended December 31, 2020 was $9,115,983 compared to $6,429,860 for the year ended December 31, 2019, an increase of $2,686,123. This increase is primarily a result of increased revenue recognized on the T-38C Pacer Classic phase 2 aircraft structural modification program which is transitioning from Phase 2 to Phase 3. CPI Aero was awarded the Phase 3 contract in 2019. Revenue generated from government subcontracts for the year ended December 31, 2020 was $70,106,741 compared to $62,319,526 for the year ended December 31, 2019, an increase of $7,787,215. The increase in revenue related to the start of a new multi-year award for the Northrop Grumman E2D program as well as increases related to the NGC WOWP, and the F16 Rudder Island program, offset by a decrease in the Raytheon NGJ-MB program as described above. Revenue generated from commercial contracts was $8,361,966 for the year ended December 31, 2020 compared to $18,769,302 for the year ended December 31, 2019, a decrease of $10,407,336. Most of this decrease resulted from decreased production of the Gulfstream G650 fixed leading edge assembly. We also had year-over-year revenue declines in our program with Honda as we negotiated an exit to this unprofitable program. Revenue from Embraer also declined largely due to decreased business jet demand. 30 Cost of sales . Cost of sales for the years ended December 31, 2020 and 2019 were $77,824,732 and $80,687,080, respectively, an increase of $2,862,348 or 4%. The components of cost of sales were as follows: Years ended December 31, 2020 December 31, 2019 Procurement $ 56,337,476 $ 49,920,962 Labor 6,414,658 7,870,728 Factory overhead 20,803,029 20,745,188 Other cost of sales (5,730,431 ) 2,150,202 Cost of sales $ 77,824,732 $ 80,687,080 Procurement for the year ended December 31, 2020 was $56,337,476 compared to $49,920,962 for the year ended December 31, 2019, an increase of $6,416,514 or 12.9%. This increase is primarily the result of an increase in procurement for the E2D and WOWP programs. Labor costs for the year ended December 31, 2020 were $6,414,658 compared to $7,870,728 for the year ended December 31, 2019, a decrease of $1,456,070 or 18.5%. The decrease is primarily the result of the absence in 2020 of labor associated with the NGJ pod program, which was very labor intensive, as well as lower labor on the HondaJet and G650 programs. Factory overhead costs for the year ended December 31, 2020 were $20,803,029 compared to $20,745,188 for the year ended December 31, 2019, an increase of $57,841 or 0.3%. 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, 2020, there was a reduction of costs in the amount of ($5,730,431), primarily the result of changes in inventory levels and reductions in loss contract reserves. For the year ended December 31, 2019, there was an increase in costs of $2,150,202, primarily the result of increases to loss contract provisions and inventory reserves. Gross profit . Gross profit for the year ended December 31, 2020 was $9,759,958 compared to $6,831,608 for the year ended December 31, 2019, an increase of $2,928,350 or 43%. Gross profit percentage (“gross margin”) for the year ended December 31, 2020 was 11.1% compared to 7.8% for the same period last year. The increase was primarily on our E2-D kitting programs which experienced a growth in revenue, reduction in loss contract reserves and inventory provisions, as well as exit from unprofitable programs, partially offset by a decrease in gross profit on our NGJ-MB program due to lower volumes. Favorable/Unfavorable Adjustments to Gross Profit During the years ended December 31, 2020 and 2019, we made changes in estimates to various contracts. Such changes in estimates resulted in changes in total gross profit as follows: Years Ended December 31, 2020 December 31, 2019 Favorable adjustments $ 2,241,357 $ 409,226 Unfavorable adjustments (3,975,745 ) (3,444,850 ) Net adjustments $ (1,734,388 ) $ (3,035,624 ) 31 Selling, general and administrative expenses Selling, general and administrative expenses (“SG&A”) for the year ended December 31, 2020 were $12,046,171 compared to $11,562,781 for the year ended December 31, 2019, an increase of $483,390 or 4.2%. This increase was primarily due to increased legal and accounting expenses compared to the prior period associated with the prior restatement of our consolidated financial statements for several prior periods. Interest expense Interest expense for the year ended December 31, 2020 was $1,421,955, compared to $2,104,851 for the year ended December 31, 2019, a decrease of $682,896 or 32%. The decrease in interest expense is the result of continued principal repayment on our term loan with BankUnited, lower overall interest rates and a favorable 1% interest rate on our PPP Loan with the SBA which we are accruing but not paying. If the PPP loan is forgiven, the accrual will be reversed. Loss from operations We had a loss from operations for the year ended December 31, 2020 of ($3,708,167) compared to a loss from operations of ($6,746,358) for the year ended December 31, 2019. This decrease in loss was primarily the result of lower loss contract reserves and inventory reserves recorded during the year. Provision (Benefit) for income taxes . The income tax (benefit) for the year ended December 31, 2020 was ($53,414), an effective tax rate of 1.4%. The tax benefit consists of a refund received from the 2014 NOL carryback claim and state minimum taxes. In February 2019, the Company received information that the net operating loss carryback that was utilized in 2014 was under examination and could possibly be partially disallowed by the Internal Revenue Service (“IRS”). This adjustment was an issue of timing of the loss and had no income tax provision effect. In June 2020, the Company received a letter from the IRS stating that the returns will be accepted as filed. In September 2020, the Company received additional refunds related to the tax years under examination. The examination is now closed and there is no uncertain tax position recorded for this item. Net Loss Net loss for the year ended December 31, 2020 was $(3,654,753) or $(0.31) per basic share, compared to a loss of $(6,750,235) or $(0.57) per basic share, for the same period last year. Diluted loss per share was $(0.31) for the year ended December 31, 2020 calculated utilizing 11,884,307 weighted average shares outstanding. Diluted loss per share was $(0.57) for the year ended December 31, 2019 calculated utilizing 11,808,052 weighted average shares outstanding. The decrease in net loss was primarily driven by the decrease in cost of sales as described above. Business Outlook The statements in the “Business Outlook” section and other forward-looking statements of this Comprehensive Form 10-K/A 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, 2020, we had working capital of $7,674,974 compared to working capital of $11,551,636 at December 31, 2019, a decrease of $3,876,660, or 33.6%. This decrease is primarily the result of an increase in accounts payable and accrued expenses, partly offset by an increase in contract assets and inventory. 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. 32 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, 2020, our cash balance was $6,033,537 compared to $4,052,109 at December 31, 2019, an increase of $1,981,428. Our accounts receivable balance at December 31, 2020 decreased to $4,962,906 from $7,029,602 at December 31, 2019. BankUnited Facility On March 24, 2016, the Company entered into the BankUnited Facility. The Credit Agreement entered into in connection with the BankUnited Facility 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 as defined in the Credit Agreement. On August 24, 2020, the Company entered into a Sixth Amendment and Waiver (the “Sixth Amendment”) to the Credit Agreement. Under the Sixth Amendment, the parties amended the Credit Agreement by extending the maturity date of the Revolving Loan and Term Loan to May 2, 2022 and making conforming changes to the repayment schedule of the Term Loan, by increasing the Term Loan by $6.0 million and reducing the Revolving Loan by $6.0 million. The maturities of the Term Loan are included in the maturities of long-term debt. The BankUnited Facility, as amended by the Sixth Amendment, required us to maintain the following financial covenants: (a) maintain a Fixed Cost (Debt Service) coverage ratio of no less than 1.5 to 1.0 at December 31, 2020 and no less than 1.25 to 1.0 for the trailing four quarter period at the end of each quarter thereafter; (b) maintain a minimum net income, after taxes, of no less than $1.00; (c) effective March 31, 2021, maintain a maximum leverage ratio at the end of each quarter for the trailing four quarter period of no more than 4.0 to 1.0; (d) maintain a minimum adjusted EBITDA at the end of each quarter of no less than $1 million; and (e) maintain a minimum liquidity of $3 million at all times. As of December 31, 2020, the Company was in compliance with all of the covenants contained in the BankUnited Facility as amended by the Eighth Amendment as described below. As of December 31, 2020 and December 31, 2019, the Company had $20.7 million and $26.7 million, respectively, outstanding under the BankUnited Facility. On May 11, 2021, the Company entered into the Seventh Amendment. Under the Seventh Amendment, the parties amended the Credit Agreement by (a) extending the maturity date of the $24 million Revolving Loan and $6.36 million Term Loan to July 31, 2022, and (b) amending the leverage ratio covenant for the fiscal quarters ending on and after March 31, 2021, to 4.0 to 1.0, determined at the end of each fiscal quarter for the trailing four-quarter period then ended (or, in the case of the fiscal quarter ended March 31, 2021, determined on an annualized basis for the three-quarter period then ended). Additionally, under the Seventh Amendment, BankUnited waived late delivery of certain financial information. See Part II, Item 8, Note 18, “Subsequent Events” in the notes to the consolidated financial statements included in this Comprehensive Form 10-K/A for a discussion of the Seventh Amendment. On October 28, 2021, the Company entered into the Eighth Amendment. Under the Eighth Amendment, the parties amended the Credit Agreement by (a) extending the maturity date of the Revolving Loan and the Term Loan to December 31, 2022, (b) reducing the aggregate revolving line of credit from $24 million to $21 million while eliminating the requirement to maintain a minimum $3.0 million in a combination of line of credit availability and unrestricted cash, (c) providing for the repayment of an additional $750,000 of the principal balance of the term loan in three installments of $250,000 on November 30, 2021, December 31, 2021 and March 31, 2022 in addition to $200,000 regular monthly principal payments through maturity, (d) amending the minimum debt service coverage ratio covenant for the fiscal quarters ending on and after June 30, 2021 to provide for a ratio of 1.5 to 1.0, and (e) amending the maximum leverage ratio covenant as follows: for the fiscal quarter ending on March 31, 2021 - 5.0 to 1.0; for the fiscal quarter ending June 30, 2021 - 4.75 to 1.0; for the fiscal quarter ending September 30, 2021 - 4.25 to 1.0 and for the fiscal quarter ended Deccember 31, 2021 and thereafter - 4.0 to 1.0, determined at the end of each fiscal quarter for the trailing four-quarter period then ended (or, in the case of the fiscal quarter ended March 31, 2021, determined on an annualized basis for the three-quarter period then ended). Additionally, under the Eighth Amendment, BankUnited waived certain covenant non-compliance and waived temporarily, late delivery of certain financial information. See Part II, Item 8, Note 18, “Subsequent Events” in the notes to the consolidated financial statements included in this Comprehensive Form 10-K/A for a discussion of the Eighth Amendment. PPP Loan On April 10, 2020, we entered into the PPP Loan with Dime as the Lender, in an aggregate principal amount of $4,795,000, pursuant to the Paycheck Protection Program under the CARES Act. The PPP Loan was evidenced by a promissory note (“Note”). Subject to the terms of the Note, the PPP Loan bore interest at a fixed rate of one percent (1%) per annum, with the first six months of interest deferred, had an initial term of two years, and was unsecured and guaranteed by the SBA. The Note provided for customary events of default including, among other things, cross-defaults on any other loan with the Lender. The PPP Loan may be accelerated upon the occurrence of an event of default. 33 On November 2, 2020, the Company applied to the Lender for full forgiveness of the PPP Loan as calculated in accordance with the terms of the CARES Act, as modified by the Paycheck Protection Flexibility Act. On July 13, 2021, the Company received notification through Dime that the PPP Loan and accrued interest thereon have been fully forgiven by the SBA and that the forgiveness payment date was July 1, 2021. The forgiveness of the PPP Loan will be recognized during the Company’s third fiscal quarter ending September 30, 2021. We believe that our existing resources 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. If our working capital needs exceed our cash flows from operations, we would look to our cash balances and availability for borrowings under our borrowing arrangement to satisfy those needs, as well as potential sources of additional capital, which may not be available on satisfactory terms and in adequate amounts, if at all. Contractual Obligations . The table below summarizes information about our contractual obligations as of December 31, 2020 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 Debt $ 12,028,333 $ 6,245,833 $ 5,782,500 $ — $ — Finance Lease Obligations 678,428 255,833 351,614 70,981 — Operating Leases 4,356,386 1,819,237 2,537,149 — — Total Contractual Cash Obligations $ 17,063,147 $ 8,320,903 $ 8,671,263 $ 70,981 $ — Inflation. Inflation historically has not had a material effect on our operations. 34 Three and Nine Months Ended September 30, 2020 (as restated) as Compared to the Three and Nine Months Ended September 30, 2019 The following discussion should be read in conjunction with the Company’s consolidated financial statements and notes thereto contained in this report. 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 ASC 606. Unfunded backlog is the estimated amount of future orders under the expected duration of the programs. Substantially all of our 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. Our total backlog as of September 30, 2020 and December 31, 2019 was as follows: Backlog (Total) September 30, 2020 December 31, 2019 Funded $ 189,600,000 $ 147,647,000 Unfunded 347,300,000 414,231,000 Total $ 536,900,000 $ 561,878,000 Approximately 89% of the total amount of our backlog at September 30, 2020 was attributable to government contracts. Our backlog attributable to government contracts at September 30, 2020 and December 31, 2019 was as follows: Backlog (Government) September 30, 2020 December 31, 2019 Funded $ 183,900,000 $ 136,932,000 Unfunded 296,300,000 359,770,000 Total $ 480,200,000 $ 496,702,000 Our backlog attributable to commercial contracts at September 30, 2020 and December 31, 2019 was as follows: Backlog (Commercial) September 30, 2020 December 31, 2019 Funded $ 5,700,000 $ 10,715,000 Unfunded 51,000,000 54,461,000 Total $ 56,700,000 $ 65,176,000 The total backlog at September 30, 2020 is primarily comprised of long-term programs with Raytheon (NGJ-MB), Northrop Grumman (E-2D and Wet Outer Wing Panel (“WOWP”)), U.S. Air Force (T-38), Boeing A-10, HIRRS (Hovering InfraRed Suppression System), Embraer E175, F16 Rudder Island, and Sikorsky Stabilator. Funded backlog is primarily from purchase orders under long-term contracts with Northrop Grumman (E-2D and WOWP), Raytheon (NGJ-MB), Boeing A-10, HIRRS, and U.S. Air Force (T-38). Results of Operations Revenue Revenue for the three months ended September 30, 2020 was $25,576,718 compared to $22,689,762 for the same period last year, an increase of $2,886,956 or 12.7%. The increase was primarily related to the new multi-year award for the Northrop Grumman E2D program as well as increases related to the programs T-38 Pacer, Northrop Grumman WOWP and the F16 Rudder Island. These revenue increases were offset primarily by the Raytheon NGJ-MB program, which was essentially complete by December 31, 2019. There was also a decrease in the G650 program. 35 Revenue for the nine months ended September 30, 2020 was $62,175,872 compared to $64,779,858 for the same period last year, a decrease of $2,603,986 or 4%. The year to date decrease was driven by the Raytheon NGJ-MB program and the G650 program as described above. In addition, we had year to date decreases in the Sikorsky fuel panels and WPA (Weapons Pylon Assembly) programs. Revenue from government subcontracts was $20,887,968 for the three months ended September 30, 2020 compared to $16,179,389 for the three months ended September 30, 2019, an increase of $4,708,579 or 29%. The increase in revenue related to the start of a new multi-year award for the Northrop Grumman E2D program as well as increases related to the following programs NGC WOWP, and F16 Rudder Island, and was partially offset by a decrease in the Raytheon NGJ-MB program as described above. Revenue from government subcontracts was $47,829,529 for the nine months ended September 30, 2020 compared to $44,592,902 for the nine months ended September 30, 2019, an increase of $3,236,627 or 7.2%. The increase was primarily related to the Raytheon NGJ-MB program as described above and the Sikorsky fuel panels and WPA programs offset by increases in the following programs NGC E2D, WOWP, F16 Rudder Island, Lockheed Martin F35 and the Boeing A10. Revenue from direct military contracts was $3,778,686 for the three months ended September 30, 2020 compared to $1,702,951 for the three months ended September 30, 2019, an increase of $2,075,735 or 121.9%. The increase in revenue is primarily driven by an increase in revenue from the Pacer Classic III program which will vary period to period due to the nature of indefinite delivery indefinite quantity (“IDIQ”) contracts. Revenue from direct military contracts was $7,947,977 for the nine months ended September 30, 2020 compared to $5,690,080 for the nine months ended September 30, 2019, an increase of $2,257,897 or 39.7%. The increase in revenue is primarily driven by an increase in revenue from the Pacer Classic III program mentioned above offset by a decrease in WMI programs. Revenue from commercial subcontracts was $910,064 for the three months ended September 30, 2020 compared to $4,807,422 for the three months ended September 30, 2019, a decrease of $3,897,358 or 81%. The decrease is primarily the result of lower revenue from the G650 program and lower revenue from the Embraer program. Revenue from commercial subcontracts was $6,398,366 for the nine months ended September 30, 2020 compared to $14,496,876 for the nine months ended September 30, 2019, a decrease of $8,098,510 or 55.9%. The decrease is driven by the same programs as the quarterly decrease mentioned above. Cost of Sales Cost of sales for the three months ended September 30, 2020 and 2019 was $21,369,687 and $20,757,649, respectively, an increase of $612,038 or 2.9%. The increase in this quarter is substantially less than the increase in revenue due to more margin contribution from higher margin defense programs, and decreases to the loss contract reserve. Cost of sales for the nine months ended September 30, 2020 and 2019 was $55,999,518 and $58,120,687, respectively, a decrease of $2,121,169 or 3.6%. This decrease is due to more margin contribution from higher margin defense programs offset by changes in inventory levels. The components of the cost of sales were as follows: Three months ended Nine months ended September 30, 2020 September 30, 2019 September 30, 2020 September 30, 2019 Procurement $ 17,422,838 $ 11,941,699 $ 39,301,649 $ 37,128,787 Labor 1,670,257 1,967,144 4,919,711 5,876,663 Factory OH 4,715,955 5,164,788 15,032,135 15,088,391 Inventory Change (1,748,037 ) 1,647,414 (3,310,199 ) (764,898 ) Other costs (credit) (691,326 ) 36,604 56,222 791,744 Cost of sales $ 21,369,687 $ 20,757,649 $ 55,999,518 $ 58,120,687 36 Procurement for the three months ended September 30, 2020 was $17,422,838 compared to $11,941,699 for the three months ended September 30, 2019, an increase of $5,481,139 or 45.9%. This increase is primarily the result of an increase in procurement for the E2D and WOWP programs. Procurement for the nine months ended September 30, 2020 was $39,301,649 compared to $37,128,787 for the nine months ended September 30, 2019, an increase of $2,172,862 or 5.9%. This increase was primarily due to an increase in procurement for the E2D and WOWP programs. Labor costs for the three months ended September 30, 2020 were $1,670,257 compared to $1,967,144 for the three months ended September 30, 2019, a decrease of $296,887 or 15.1%. The decrease is primarily the result of lower direct labor requirements on the Raytheon NGJ-MB, Honda Jet and G650 programs. Labor costs for the nine months ended September 30, 2020 were $4,919,711 compared to $5,876,663 for the nine months ended September 30, 2019, a decrease of $956,952 or 16.3%. The decrease is primarily the result of the absence in 2020 of labor associated with the NGJ pod program, which was very labor intensive, as well as lower labor on the HondaJet and G650 programs. Factory overhead for the three months ended September 30, 2020 was $4,715,955 compared to $5,164,788 for the three months ended September 30, 2019, a decrease of $448,833 or 8.7%. This decrease is primarily due to a decrease in factory supplies and indirect labor. Factory overhead for the nine months ended September 30, 2020 was $15,032,135 compared to $15,088,391 for the nine months ended September 30, 2019, a decrease of $56,256 or 0.4%. Changes in inventory for the three months ended September 30, 2020 resulted in a change to cost of sales (COS) of $(1,748,037) compared to $1,647,414 for the three months ended September 30, 2019 primarily due to changes in investment in the WMI product line. Changes in inventory for the nine months ended September 30, 2020 resulted in a change to COS of $(3,310,199) compared to $(764,898) for the nine months ended September 30, 2019 primarily due to changes in investment in the WMI product line. Other costs (credit), net for the three months ended September 30, 2020 were $(691,326) compared to $36,604 for the three months ended September 30, 2019 primarily the result of changes to loss contract reserves, absorption variances and other direct charges to cost of goods sold. Other costs (credit), net for the nine months ended September 30, 2020 were $56,222 compared to $791,944 for the nine months ended September 30, 2019 primarily the result of changes to loss contract reserves, inventory reserves absorption variances and other direct charges to cost of goods sold. Gross Profit Gross profit for the three months ended September 30, 2020 was $4,207,031 compared to $1,932,113 for the three months ended September 30, 2019, an increase of $2,274,918 or 117.7%. This was primarily the result of an increase in revenue on higher margin defense programs. Gross profit for the nine months ended September 30, 2020 was $6,176,354 compared to $6,659,171 for the nine months ended September 30, 2019, a decrease of $482,817 or 7.3%, primarily driven by increases to the loss contract reserves and inventory reserves offset by a favorable mix of higher margin defense programs offset by lower revenue. Favorable/Unfavorable Adjustments to Gross Profit (Loss) During the nine months ended September 30, 2020 and 2019, circumstances required that we make changes in estimates to various contracts. Such changes in estimates resulted in changes in total gross profit as follows: Nine months ended September 30, 2020 September 30, 2019 Favorable adjustments $ 1,670,388 $ 1,483,225 Unfavorable adjustments (2,831,947 ) (1,609,212 ) Net adjustments $ (1,161,559 ) $ (125,987 ) 37 Selling, General and Administrative Expenses Selling, general and administrative expenses for the three months ended September 30, 2020 were $3,050,644 compared to $2,806,498 for the three months ended September 30, 2019, an increase of $244,146 or 8.7%. This increase was primarily driven by an increase in professional fees related to the restatement of our prior period financial statements, conducted during the first half of 2020. Selling, general and administrative expenses for the nine months ended September 30, 2020 were $8,958,986 compared to $8,259,945 for the nine months ended September 30, 2019, an increase of $699,041 or 8.5%. This increase was driven by an increase in professional fees related to the restatement, offset by decreases in WMI moving expenses and salaries. Income (Loss) Before Provision for Income Taxes Income (loss) before provision for income taxes for the three months ended September 30, 2020 was $847,379 compared to $(1,252,580) for the same period last year, an increase in income of $2,099,959 or 167.7%. The increase was driven by a combination of an increase in gross profit as a result of an increase in revenue and a favorable program mix, an increase in SG&A expenses as a result of increased accounting and legal fees related to the restatement and a decrease in interest expense. Income (loss) before provision for income taxes for the nine months ended September 30, 2020 was $(3,868,437) compared to $(3,065,150) for the same period last year, an increase in loss of $803,287 or 26.2%. The increase in loss is a combination of a decrease in gross profit as a result of unfavorable program mix, additional inventory reserves and increase in SG&A expenses as a result of increased accounting and legal fees related to the restatement and a decrease in interest expense. Provision for Income Taxes Provision for income taxes was $9,714 for the nine months ended September 30, 2020, compared to a provision for income taxes of $5,784 for the nine months ended September 30, 2019. The tax provision relates to state minimum and franchise taxes for the year. Net Income (Loss) Net income (loss) for the three months ended September 30, 2020 was $839,765 or $0.07 per basic share, compared to a loss of $(1,255,051) or $(0.11) per basic share, for the same period last year. Diluted income (loss) per share was $0.07 for the three months ended September 30, 2020 calculated utilizing 11,917,149 weighted average shares outstanding. Diluted income (loss) per share was $(0.11) for the three months ended September 30, 2019 calculated utilizing 11,838,862 weighted average shares outstanding. The decrease in net loss was primarily driven by an increase in gross profit, as well as an increase in SG&A. Net loss for the nine months ended September 30, 2020 was $(3,878,151) or $(0.33) per basic share, compared to a loss of $(3,070,934) (restated) or $(0.26) per basic share, for the same period last year. Diluted income (loss) per share was $(0.33) for the nine months ended September 30, 2020 calculated utilizing 11,862,506 weighted average shares outstanding. Diluted loss per share was $(0.26) for the nine months ended September 30, 2019 calculated utilizing 11,796,580 weighted average shares outstanding. The decrease in net loss was primarily driven by an increase in gross profit, an increase in SG&A, offset by lower interest expense. Liquidity and Capital Resources General At September 30, 2020, we had working capital of $8,900,938 compared to working capital of $11,551,636 at December 31, 2019, a decrease of $2,650,698 or 22.9%. 38 Cash Flow A large portion of our cash flow 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 sheets 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 revenue, 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 to raise additional capital, 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 be required to bear impairment charges, 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 alternate funding sources. At September 30, 2020, we had a cash balance of $3,589,095 compared to $4,052,109 at December 31, 2019. The cash balance as of September 30, 2020 excluded an administratively delayed cash receipt from the U.S. Government of $2.6 million that was received October 5, 2020. Additionally, at September 30, 2020 and December 31, 2019, we had $1,380,684 of restricted cash, which is cash held in escrow pursuant to the WMI acquisition and the determination of a final working capital adjustment. As disclosed elsewhere in this Form 10-K/A, as of December 23, 2020, the Company and Air Industries entered into the Settlement Agreement, which resolves the post-closing working capital adjustment dispute in exchange for the release to the Company of the $1,381,000 cash remaining in escrow. Such amount was released from escrow to the Company on December 28, 2020. The BankUnited Facility contains a minimum liquidity covenant that requires the Company to maintain at all times a minimum amount of $3 million in either unrestricted cash or revolving credit availability or any combination thereof. We believe that our existing resources as of September 30, 2020, which includes $3.3 million of availability under the BankUnited Facility, 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. 39 Three and Six Months Ended June 30, 2020 (as restated) as Compared to the Three and Six Months Ended June 30, 2019 The following discussion should be read in conjunction with the Company’s consolidated financial statements and notes thereto contained in this report. 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 ASC 606. Unfunded backlog is the estimated amount of future orders under the expected duration of the programs. Substantially all of our 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. Our total backlog as of June 30, 2020 and December 31, 2019 was as follows: Backlog (Total) June 30, 2020 December 31, 2019 Funded $ 205,176,000 $ 147,647,000 Unfunded 337,439,000 414,231,000 Total $ 542,615,000 $ 561,878,000 Approximately 90% of the total amount of our backlog at June 30, 2020 was attributable to government contracts. Our backlog attributable to government contracts at June 30, 2020 and December 31, 2019 was as follows: Backlog (Government) June 30, 2020 December 31, 2019 Funded $ 201,815,000 $ 136,932,000 Unfunded 285,452,000 359,770,000 Total $ 487,267,000 $ 496,702,000 Our backlog attributable to commercial contracts at June 30, 2020 and December 31, 2019 was as follows: Backlog (Commercial) June 30, 2020 December 31, 2019 Funded $ 3,361,000 $ 10,715,000 Unfunded 51,987,000 54,461,000 Total $ 55,348,000 $ 65,176,000 The total backlog at June 30, 2020 is primarily comprised of long-term programs with Raytheon (NGJ-MB), Northrop Grumman (E-2D and WOWP), USAF (T-38) and Boeing A-10. Funded backlog is primarily from purchase orders under long-term contracts with Northrop Grumman (E-2D and WOWP), Raytheon (NGJ-MB), Boeing A-10 and HIRRS (Hovering InfraRed Suppression System). Results of Operations Revenue Revenue for the three months ended June 30, 2020 was $19,740,767 compared to $20,101,713 (restated) for the same period last year, a decrease of $360,946 or 1.8%. The decrease was primarily related to timing of the Raytheon NGJ-MB program. We had significant revenue in the year-ago period from the first development phase of the Raytheon NGJ-MB program, which was essentially complete by December 31, 2019. There was also a decrease in the G650 program which has been terminated. These revenue decreases were partially offset by an increase in revenue relating to the start of a new multi-year award for the Northrop Grumman E2D program as well as increases related to the T-38 Pacer program and the NGC WOWP program. 40 Revenue for the six months ended June 30, 2020 was $36,599,154 compared to $42,090,096 (restated) for the same period last year, a decrease of $5,490,942 or 13%. The year to date decrease was driven by the same programs as the quarterly decrease stated above and in addition we had year to date decreases in the Sikorsky fuel panels and WPA programs. Revenue from government subcontracts was $14,235,552 for the three months ended June 30, 2020 compared to $13,663,551 (restated) for the three months ended June 30, 2019, an increase of $572,001 or 4.2%. The increase in revenue relating to the start of a new multi-year award for the Northrop Grumman E2D program as well as increases related to the NGC WOWP program was offset by a decrease in the Raytheon NGJ-MB program as described above. Revenue from government subcontracts was $26,941,560 for the six months ended June 30, 2020 compared to $28,413,514 (restated) for the six months ended June 30, 2019, a decrease of $1,471,954 or 5.2%. The decrease was primarily related to the Raytheon NGJ-MB program as described above and the Sikorsky fuel panels and WPA programs offset by increases in the NGC E2D and WOWP programs. Revenue from direct military contracts was $3,615,343 for the three months ended June 30, 2020 compared to $1,561,504 (restated) for the three months ended June 30, 2019, an increase of $2,053,839 or 131.5%. The increase in revenue is primarily driven by an increase in revenue from the Pacer Classic III program which will vary period to period due to the nature of indefinite delivery indefinite quantity (“IDIQ”) contracts. Revenue from direct military contracts was $4,169,291 for the six months ended June 30, 2020 compared to $3,987,129 (restated) for the six months ended June 30, 2019, an increase of $182,162 or 4.6%. The increase in revenue is primarily driven by an increase in revenue from the Pacer Classic III program mentioned above offset by a decrease in WMI programs. Revenue from commercial subcontracts was $1,889,872 for the three months ended June 30, 2020 compared to $4,876,658 (restated) for the three months ended June 30, 2019, a decrease of $2,986,786 or 61.2%. The decrease is primarily the result of lower revenue from the G650 program and lower revenue from the Embraer program. Revenue from commercial subcontracts was $5,488,303 for the six months ended June 30, 2020 compared to $9,689,453 (restated) for the six months ended June 30, 2019, a decrease of $4,201,150 or 43.4%. The decrease is driven by the same programs as the quarterly decrease mentioned above. Cost of Sales Cost of sales for the three months ended June 30, 2020 and 2019 was $17,924,428 and $17,858,070 (restated), respectively, an increase of $66,358 or 0.4%. This increase is the result of the increase in other cost factors noted below. Cost of sales for the six months ended June 30, 2020 and 2019 was $34,629,831 and $37,363,038 (restated), respectively, a decrease of $2,733,207 or 7.3%. This decrease is the result of the comparable decrease in revenue and the specific program related factors noted below. The components of the cost of sales were as follows: Three months ended Six months ended June 30, 2020 June 30, 2019 (restated) June 30, 2020 June 30, 2019 (restated) Procurement $ 11,622,405 $ 12,295,771 $ 21,878,811 $ 25,187,087 Labor 1,731,273 1,929,761 3,351,476 3,909,520 Factory overhead 4,880,981 4,907,050 10,316,180 9,923,603 Other costs (credit) (310,231 ) (1,274,512 ) (916,636 ) (1,657,172 ) Cost of sales $ 17,924,428 $ 17,858,070 $ 34,629,831 $ 37,363,038 Procurement for the three months ended June 30, 2020 was $11,622,405 compared to $12,295,771 (restated) for the three months ended June 30, 2019, a decrease of $673,366 or 5.5%. This decrease is primarily the result of a push out of procurement costs based on need dates. 41 Procurement for the six months ended June 30, 2020 was $21,878,811 compared to $25,187,087 (restated) for the six months ended June 30, 2019, a decrease of $3,308,276 or 13.1%. This decrease is primarily the result of a decrease in procurement related to the Raytheon NGJ-MB program which was essentially complete by December 31, 2019. This decrease was partially offset by an increase in procurement for the E2D and WOWP programs. Labor costs for the three months ended June 30, 2020 were $1,731,273 compared to $1,929,761 (restated) for the three months ended June 30, 2019, a decrease of $198,488 or 10.3%. The decrease is primarily the result of lower direct labor application due to effects of COVID-19. Labor costs for the six months ended June 30, 2020 were $3,351,476 compared to $3,909,520 (restated) for the six months ended June 30, 2019, a decrease of $558,044 or 14.3%. The decrease is primarily the result of the absence in 2020 of labor associated with the NGJ pod program, which was very labor intensive, as well as lower labor in the G650 program. Factory overhead for the three months ended June 30, 2020 was $4,880,981 compared to $4,907,050 (restated) for the three months ended June 30, 2019, a decrease of $26,069 or 0.5%. This decrease is primarily due to a decrease in rent and factory supplies offset by an increase in indirect labor. Factory overhead for the six months ended June 30, 2020 was $10,316,180 compared to $9,923,603 (restated) for the six months ended June 30, 2019, an increase of $392,577 or 4.0%. This decrease is primarily a result of changes in overhead absorption. Other costs (credit), net for the three months ended June 30, 2020 were $(310,231) compared to $(1,274,512) (restated) for the three months ended June 30, 2019, a decrease of the credit of $964,281. Other costs (credit) primarily include net changes to ending net inventory values and loss contract reserves. Other costs (credit), net for the six months ended June 30, 2020 were $(916,636) compared to $(1,657,172) (restated) for the six months ended June 30, 2019, a decrease of the credit of $740,536. This decrease is primarily due to changes to ending net inventory values and loss contract reserves. Gross Profit Gross profit for the three months ended June 30, 2020 was $1,816,339 compared to $2,243,643 (restated) for the three months ended June 30, 2019, a decrease of $427,304 or 19%, primarily the result of unfavorable program mix. Gross profit for the six months ended June 30, 2020 was $1,969,323 compared to $4,727,058 (restated) for the six months ended June 30, 2019, a decrease of $2,757,735 or 58.3%, primarily driven by lower revenue, unfavorable program mix and additional inventory and loss contract reserves. Favorable/Unfavorable Adjustments to Gross Profit (Loss) During the six months ended June 30, 2020 and 2019, circumstances required that we make changes in estimates to various contracts. Such changes in estimates resulted in changes in total gross profit as follows: Six months ended June 30, 2020 June 30, 2019 Favorable adjustments $ 1,268,033 $ 1,832,378 Unfavorable adjustments (2,017,618 ) (755,632 ) Net adjustments $ (749,585 ) $ 1,076,746 Selling, General and Administrative Expenses Selling, general and administrative expenses for the three months ended June 30, 2020 were $2,815,252 compared to $2,547,762 (restated) for the three months ended June 30, 2019, an increase of $267,490 or 10.5%. This increase was primarily driven by an increase in professional fees related to the restatement. 42 Selling, general and administrative expenses for the six months ended June 30, 2020 were $5,908,342 compared to $5,453,447 (restated) for the six months ended June 30, 2019, an increase of $454,895 or 8.3%. This increase was driven by an increase in professional fees related to the restatement offset by decreases in WMI moving expenses and salaries. Loss Before Provision for Income Taxes Loss before provision for income taxes for the three months ended June 30, 2020 was $(1,359,039) compared to $(879,531) (restated) for the same period last year, an increase in loss of $479,508 or 54.5%. The decrease in loss was driven by a combination of a decrease in gross profit as a result of unfavorable program mix, an increase in SG&A expenses as a result of increased accounting and legal fees related to the restatement and a decrease in interest expense. Loss before provision for income taxes for the six months ended June 30, 2020 was $(4,715,816) compared to $(1,812,570) (restated) for the same period last year, an increase in loss of $2,903,246 or 160.2%. The increase in loss is a combination of a decrease in gross profit as a result of lower revenue, unfavorable program mix, additional inventory and loss contract reserves and an increase in SG&A expenses as a result of increased accounting and legal fees related to the restatement and a decrease in interest expense. Provision for (Benefit from) Income Taxes Provision for (benefit from) income taxes was $2,100 for the six months ended June 30, 2020, compared to a provision for (benefit from) income taxes of $3,313 (restated) for the six months ended June 30, 2019. The tax provision relates to state minimum and franchise taxes for the year. Net Loss Net loss for the three months ended June 30, 2020 was $(1,360,561) or $(0.11) per basic share, compared to a loss of $(881,167) (restated) or $(0.07) per basic share, for the same period last year. Diluted loss per share was $(0.11) for the three months ended June 30, 2020 calculated utilizing 11,855,404 weighted average shares outstanding. Diluted loss per share was $(0.07) for the three months ended June 30, 2019 calculated utilizing 11,817,713 weighted average shares outstanding. The increase in net loss was primarily driven by a decrease in gross profit, an increase in SG&A and a decrease in interest expense as described above. Net loss for the six months ended June 30, 2020 was $(4,717,916) or $(0.40) per basic share, compared to a loss of $(1,815,883) (restated) or $(0.15) per basic share, for the same period last year. Diluted loss per share was $(0.40) for the six months ended June 30, 2020 calculated utilizing 11,846,260 weighted average shares outstanding. Diluted loss per share was $(0.15) for the six months ended June 30, 2019 calculated utilizing 11,776,107 weighted average shares outstanding. The increase in net loss was primarily driven by the decrease in gross profit as a result of lower revenue unfavorable program mix, additional inventory and loss contract reserves as described above. Liquidity and Capital Resources General At June 30, 2020, we had working capital of $9,092,724 compared to working capital of $11,551,636 at December 31, 2019, a decrease of $2,458,912 or 21.3%. Cash Flow A large portion of our cash flow 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 sheets 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 revenue, 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 to raise additional capital, until the reported earnings materialize into actual cash receipts. 43 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 be required to bear impairment charges, 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 June 30, 2020, we had a cash balance of $6,749,201 compared to $4,052,109 at December 31, 2019. Additionally, at June 30, 2020 and December 31, 2019, we had $1,380,684 of restricted cash, which is cash held in escrow pursuant to the WMI acquisition and the determination of a final working capital adjustment. The BankUnited Facility contains a minimum liquidity covenant that requires the Company to maintain at all times a minimum amount of $3 million in either unrestricted cash or revolving credit availability or any combination thereof. We believe that our existing resources, together with the availability under the BankUnited Facility, 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. 44 Three Months Ended March 31, 2020 (as restated) as Compared to the Three Months Ended March 31, 2019 The following discussion should be read in conjunction with the Company’s consolidated financial statements and notes thereto contained in this report. 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 ASC 606. Unfunded backlog is the estimated amount of future orders under the expected duration of the programs. Substantially all of our 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. Our total backlog as of March 31, 2020 and December 31, 2019 was as follows: Backlog (Total) March 31, 2020 December 31, 2019 Funded $ 207,295,000 $ 147,647,000 Unfunded 345,268,000 414,231,000 Total $ 552,563,000 $ 561,878,000 Approximately 90% of the total amount of our total backlog at March 31, 2020 was attributable to government contracts. Our backlog attributable to government contracts at March 31, 2020 and December 31, 2019 was as follows: Backlog (Government) March 31, 2020 December 31, 2019 Funded $ 202,611,000 $ 136,932,000 Unfunded 292,714,000 359,770,000 Total $ 495,325,000 $ 496,702,000 Our backlog attributable to commercial contracts at March 31, 2020 and December 31, 2019 was as follows: Backlog (Commercial) March 31, 2020 December 31, 2019 Funded $ 4,684,000 $ 10,715,000 Unfunded 52,554,000 54,461,000 Total $ 57,238,000 $ 65,176,000 The total backlog at March 31, 2020 is primarily comprised of long-term programs with Raytheon (NGJ-MB), Northrop Grumman (E-2D and WOWP), Sikorsky (fuel panels), Lockheed Martin (F35), USAF (T-38), Boeing A-10 and Honda (HondaJet). Funded backlog is primarily from purchase orders under long-term contracts with Northrop Grumman (E-2D and WOWP), Raytheon (NGJ-MB), Boeing A-10 and HIRRS (Hovering InfraRed Suppression System) and the USAF (T-38). Results of Operations Revenue Revenue for the three months ended March 31, 2020 was $16,858,386 compared to $21,988,384 (restated) for the same period last year, a decrease of $5,129,998 or 23.3%. The decrease was primarily related to timing. We had significant revenue in the year-ago period from the first development phase of the Raytheon NGJ-MB program, which was essentially complete by December 31, 2019. The revenue decrease was partially offset by an increase in revenue relating to the start of a new multi-year award for the Northrop Grumman E2D program. 45 Revenue from government subcontracts was $12,706,008 for the three months ended March 31, 2020 compared to $14,749,963 (restated) for the three months ended March 31, 2019, a decrease of $2,043,955 or 13.9%. The decrease in revenue is primarily the result of the substantial completion of the Raytheon NGJ-MB program by December 31, 2019, offset by an increase relating to the start of a new multi-year award for the Northrop Grumman E2D program. Revenue from direct military contracts was $553,948 for the three months ended March 31, 2020 compared to $2,425,626 (restated) for the three months ended March 31, 2019, a decrease of $1,871,678 or 77.2%. The decrease in revenue is primarily driven by a decrease in revenue from the Pacer Classic III program which will vary period to period due to the nature of indefinite delivery indefinite quantity (“IDIQ”) contracts. Revenue from commercial subcontracts was $3,598,430 for the three months ended March 31, 2020 compared to $4,812,795 (restated) for the three months ended March 31, 2019, a decrease of $1,214,365 or 25.2%. The decrease is primarily the result of lower revenue from Embraer and the HondaJet program, both of which have had rate reductions. Cost of Sales Cost of sales for the three months ended March 31, 2020 and 2019 was $16,705,403 and $19,504,968 (restated), respectively, a decrease of $2,799,565 or 14.4%. This decrease is the result of the comparable decrease in revenue and the specific program related factors noted below. The components of the cost of sales were as follows: Three months ended March 31, 2020 March 31, 2019 (restated) Procurement $ 10,256,406 $ 12,891,316 Labor 1,736,854 1,979,759 Factory overhead 5,435,199 5,016,553 Other costs (credits) (723,056 ) (382,660 ) Cost of Sales $ 16,705,403 $ 19,504,968 Procurement for the three months ended March 31, 2020 was $10,256,406 compared to $12,891,316 (restated) for the three months ended March 31, 2019, a decrease of $2,634,910 or 20.4%. This decrease is primarily the result of a decrease in procurement related to the Raytheon NGJ-MB development program which was essentially complete by December 31, 2019. Labor costs for the three months ended March 31, 2020 were $1,736,854 compared to $1,979,759 (restated) for the three months ended March 31, 2019, a decrease of $242,905 or 12.3%. The decrease is primarily the result of the absence in 2020 of labor associated with the NGJ-MB program, which was very labor intensive. Factory overhead for the three months ended March 31, 2020 was $5,435,199 compared to $5,016,553 (restated) for the three months ended March 31, 2019, an increase of $418,646 or 8.3%. This increase is due to an increase in indirect labor and healthcare costs. Other costs (credit), net for the three months ended March 31, 2020 were $(723,056) compared to $(382,660) (restated) for the three months ended March 31, 2019, an increase of the credit of $340,396. Other costs / (credits) primarily include net changes to ending net inventory values, loss contract reserves and absorption variances. The change in the three months ended March 31, 2020 is primarily due to growth in inventory and increase in the inventory reserves. 46 Gross Profit Gross profit for the three months ended March 31, 2020 was $152,983 compared to $2,483,416 (restated) for the three months ended March 31, 2019, a decrease of $2,330,433 or 93.8%, primarily the result of lower gross profit on the Raytheon NGJ-MB program due to the program’s substantial completion in December 2019 and unfavorable program mix and increases to the inventory reserve. Favorable/Unfavorable Adjustments to Gross Profit (Loss) During the three months ended March 31, 2020 and 2019, circumstances required that we make changes in estimates to various contracts. Such changes in estimates resulted in decreases in total gross profit as follows: Three months ended March 31, 2020 March 31, 2019 Favorable adjustments $ 488,762 $ 1,701,213 Unfavorable adjustments (1,831,566 ) (407,576 ) Net adjustments $ 1,342,804 $ 1,293,637 Selling, General and Administrative Expenses Selling, general and administrative expenses for the three months ended March 31, 2020 were $3,093,090 compared to $2,905,686 (restated) for the three months ended March 31, 2019, an increase of $187,404 or 6.4%. This increase was primarily driven by an increase in professional fees. Loss Before Provision for Income Taxes Loss before provision for income taxes for the three months ended March 31, 2020 was $(3,356,777) compared to $(933,039) (restated) for the same period last year, an increase in loss of $2,423,738 or 259.8%. The increase in loss was primarily driven by the decrease in revenue as described above. Provision for (benefit from) Income Taxes Provision for (benefit from) income taxes was $578 for the three months ended March 31, 2020, compared to a provision for income taxes of $1,677 (restated) for the three months ended March 31, 2019. In February 2019, the Company received information that the net operating loss carryback that was generated in 2014 and carried back to 2012-13 was under examination and could possibly be disallowed by the IRS. As of June 2020, the Company has received notification that the returns will be accepted as filed. Net Loss Net loss for the three months ended March 31, 2020 was $(3,357,355) or $(0.29) per basic share, compared to a loss of $(934,716) (restated) or $(0.08) per basic share, for the same period last year. Diluted loss per share was $(0.29) for the three months ended March 31, 2020 calculated utilizing 11,837,014 weighted average shares outstanding. Diluted loss per share was $(0.08) for the three months ended March 31, 2019 calculated utilizing 11,736,305 weighted average shares outstanding. The increase in net loss was primarily driven by the decrease in revenue as described above. 47 Liquidity and Capital Resources General At March 31, 2020, we had working capital of $8,148,760 compared to working capital of $11,551,636 at December 31, 2019, a decrease of $3,402,876 or 29.5%. Cash Flow A large portion of our cash flow 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 sheets 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 ASC606 requires us to use estimates in determining revenue, 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 to raise additional capital, 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 be required to bear impairment charges, 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, 2020, we had a cash balance of $1,998,697 compared to $4,052,109 at December 31, 2019. Additionally, at March 31, 2020 and December 31, 2019, we had $1,380,684 of restricted cash, which is cash held in escrow pursuant to the WMI acquisition and the determination of a final working capital adjustment. The BankUnited Facility contains a minimum liquidity covenant requires the Company to maintain at all times a minimum amount of $3 million in either unrestricted cash or revolving credit availability or any combination thereof. We believe that our existing resources, together with the availability under the BankUnited Facility, 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. 48 Item 7A. QUANTITATIVE AND QUALITATIVE DISCLOSURE ABOUT MARKET RISK Not applicable. Item 8. FINANCIAL STATEMENTS AND SUPPLEMENTARY DATA This information appears following Item 15 of this Comprehensive Form 10-K/A and is incorporated herein by reference. Item 9. CHANGES IN AND DISAGREEMENTS WITH ACCOUNTANTS ON ACCOUNTING AND FINANCIAL DISCLOSURE None.