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Item 1A. Risk Factors

2025-03-31 compared with 2024-04-08 · 92 added, 139 removed, 299 unchanged (44% of the section changed)

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Government programs is subject to congressional budget authorization and appropriation processes.

programs, the U.S.

For many programs,

Congress appropriates funds on a fiscal year basis even though a program may extend over several fiscal years.

Consequently, programs are often only partially funded initially and additional funds are committed only as Congress makes further

appropriations.

Appropriations are driven by numerous factors, including geopolitical events, macroeconomic conditions, the ability

Government to enact relevant legislation, such as appropriations bills and continuing resolutions, the threat or existence

of a government shutdown and potential downgrades of the United States’ credit rating, and risks relating to the upcoming

Consequently,

programs are often only partially funded initially and additional funds are committed only as Congress makes further appropriations.

Appropriations are driven by numerous factors, including geopolitical events, macroeconomic conditions, the ability of the U.S.

Government to enact relevant legislation, such as appropriations bills and continuing resolutions, the threat or existence of

a government shutdown and potential downgrades of the United States’ credit rating, and risks relating to the recent U.S.

presidential election.

We cannot predict the extent to which total funding and/or funding for individual programs will be

included, increased or reduced in budgets approved by Congress or be included in the scope of separate supplemental appropriations.

the event that appropriations for any of our programs becomes unavailable, or is reduced or delayed, our contract or subcontract

under such program may be terminated or adjusted by the U.S.

Government, which could have a material adverse effect on our

future sales under such program, and on our financial position, results of operations and cash flows.

We cannot predict the extent to which total funding and/or funding for individual programs will be included,

increased or reduced in budgets approved by Congress or be included in the scope of separate supplemental appropriations.

event that appropriations for any of our programs becomes unavailable, or is reduced or delayed, our contract or subcontract under

such program may be terminated or adjusted by the U.S.

Government, which could have a material adverse effect on our future sales

under such program, and on our financial position, results of operations and cash flows.

also cannot predict the impact of potential changes in priorities due to military transformation and planning and/or the nature

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addition, the U.S.

Government generally has the ability to terminate contracts, completely or in part, without prior notice,

for convenience or for default based on performance.

Government generally has the ability to terminate contracts, completely or in part, without prior notice, for

convenience or for default based on performance.

In the event of termination for the U.S.

Government’s convenience,

contractors are generally protected by provisions covering reimbursement for costs incurred on the contracts and profit on those

costs but not the anticipated profit that would have been earned had the contract been completed.

Government’s convenience, contractors

are generally protected by provisions covering reimbursement for costs incurred on the contracts and profit on those costs but

not the anticipated profit that would have been earned had the contract been completed.

Termination by the U.S.

of a contract for convenience could also result in the cancellation of future work on that program.

Government of

a contract for convenience could also result in the cancellation of future work on that program.

Termination by the U.S.

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contractors to the U.S.

These significant customers – Lockheed Martin, Raytheon and NGC – constituted

approximately 30%, 26% and 12%, respectively of our 2023 revenue.

Our revenues from these customers are diversified over several

different A&D products, programs, and subsidiaries within these customers, however, any significant change in production rates

by any of these customers would have a material effect on our results of operations and cash flows.

There is no assurance that

our current significant customers will continue to buy products from us at current levels, that we will retain any or all our

existing significant customers, or that we will be able to form new relationships with other customers upon the loss of one or

more of our existing significant customers.

These significant customers – Raytheon, Lockheed Martin and United States Air Force

– constituted approximately 36%, 24% and 14%, respectively of our 2024 revenue.

Our revenues from these customers are diversified

over several different A&D products, programs, and subsidiaries within these customers, however, any significant change in

production rates by any of these customers would have a material effect on our results of operations and cash flows.

no assurance that our current significant customers will continue to buy products from us at current levels, that we will retain

any or all our existing significant customers, or that we will be able to form new relationships with other customers upon the

loss of one or more of our existing significant customers.

are subject to strict governmental regulations relating to the environment, which could result in fines and remediation expenses

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margin is adversely affected when contract costs that cannot be billed to customers are incurred.

This cost growth can occur

if estimates to complete a contract increase due to technical challenges or if initial estimates used for calculating the contract

This cost growth can occur if

estimates to complete a contract increase due to technical challenges or if initial estimates used for calculating the contract

price were incorrect.

The cost estimation process requires significant judgment and expertise.

Reasons for cost growth may

include unavailability and productivity of labor, the nature and complexity of the work to be performed, the effect of change

orders, the availability and cost of materials, the effect of any delays in performance, availability, and timing of funding from

the customer, natural disasters, pandemics, and the inability to recover any claims included in the estimates to complete.

Reasons for cost growth may include

unavailability and productivity of labor, the nature and complexity of the work to be performed, the effect of change orders,

the availability and cost of materials, the effect of any delays in performance, availability, and timing of funding from the

customer, natural disasters, pandemics, and the inability to recover any claims included in the estimates to complete.

A significant

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in our cash flow and we may need to borrow money to pay for costs until the reported earnings materialize to actual cash receipts.

the contracts associated with our backlog were terminated, our financial condition and results of operations would be adversely

maximum contract value specified under each contract that we enter is not necessarily indicative of the revenues that we will

realize under that contract.

Because we may not receive the full amount we expect under a contract, we may not accurately estimate

our backlog because the earnings of revenues on programs included in backlog may never occur or may change.

Cancellations of pending

contracts or terminations or reductions of contracts in progress could have a material adverse effect on our business, prospects,

financial condition, or results of operations.

may be unable to attract and retain personnel who are key to our operations.

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If our working capital needs exceed our cash flows from operations, we would look to our cash

balances and availability for borrowings under our credit facility 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.

balances and any availability for borrowings under our credit facility to satisfy those needs.

See “Risks Related to Our

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an “ownership change”.

As of December 31, 2023, we had approximately

$74.7 million of gross net operating losses (“NOLs”) for federal tax purposes and approximately $17.3 million of post-apportionment

NOLs for state tax purposes.

As a result of the Tax Cuts and Jobs Act of 2017 and the Coronavirus Aid, Relief, and Economic Security Act

of 2020, NOLs arising before January 1, 2018, and NOLs arising after January 1, 2018, are subject to different rules.

Our pre-2018 NOLs

totaled approximately $60.3 million;

these NOLs will expire in varying amounts from 2034 through 2039, if not utilized, and can offset

100% of future taxable income for regular tax purposes.

Our NOLs arising in 2018, 2019 and 2020 can generally be carried back five years,

carried forward indefinitely and can offset 100% of taxable income for tax years before January 1, 2021 and up to 80% of taxable income

for tax years after December 31, 2020.

Any NOLs arising on or after January 1, 2021, cannot be carried back, can generally be carried

forward indefinitely and can offset up to 80% of future taxable income.

of December 31, 2024, we had approximately $66.0 million of gross net operating losses (“NOLs”) for federal tax purposes

and approximately $18.0 million of post-apportionment NOLs for state tax purposes.

As a result of the Tax Cuts and Jobs Act of

2017 and the Coronavirus Aid, Relief, and Economic Security Act of 2020, NOLs arising before January 1, 2018, and NOLs arising

after January 1, 2018, are subject to different rules.

Our pre-2018 NOLs totaled approximately $51.6 million;

these NOLs will

expire in varying amounts from 2034 through 2037, if not utilized, and can offset 100% of future taxable income for regular tax

Our NOLs arising in 2018, and later years can be carried forward indefinitely

and can offset up to 80% of future taxable income.

ability to fully recognize the benefits from our NOLs is dependent upon our ability to generate sufficient income prior to their

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relevant lookback period.

The Company completed a Section 382 analysis for the year ended December 31, 2022, and believes that

no ownership change occurred during the relevant lookback period through December 31, 2023 that would limit our ability to use

The company completed a section 382 analysis for the year ended

December 31, 2024 and believes that no ownership change occurred during the relevant lookback period through December 31, 2024

that would limit our ability to use our NOLs.

liability claims in excess of insurance could adversely affect our financial results and financial condition .

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Related to Our Indebtedness and Liquidity

obtained amendments to and received waivers of and consents to non-compliance with certain covenants under our credit facility

with BankUnited and there can be no assurance that we will not fall out of compliance with our covenants in the future.

Company was not in compliance with certain financial covenants under our credit facility (the “BankUnited Facility”

or the “Credit Agreement”) with BankUnited, N.A.

(“BankUnited”) for the quarter ended March 31, 2022,

and financial statement submission covenants for the quarters ended March 31, 2022 and June 30, 2022 and obtained amendments to

and received waivers of and consents to the non-compliance, as described in more detail in Note 8 to our consolidated financial

statements included in Part II Item 8 of this Annual Report on Form 10-K.

There can be no assurance that we will be in compliance

with our covenants in the future or that BankUnited will grant further waivers if we fall out of compliance or consents to future

non-compliance.

If we fall out of compliance with our banking covenants, BankUnited may declare a default under the BankUnited

Facility and, among other remedies, could declare the full amount of the BankUnited Facility immediately due and payable and could

foreclose against our collateral.

If this were to occur, we may be unable to secure outside financing, if needed, to fund

ongoing operations and for other capital needs.

Any sources of financing that may be available to us could also be at higher costs

and require us to satisfy more restrictive covenants, which could limit or restrict our operations, cash flows, and earnings.

We cannot ensure that additional financing would be available to us or be sufficient or available on satisfactory terms.

the past, CPI obtained amendments to and received waivers of and consents to non-compliance with certain covenants under our

credit facility with BankUnited and there can be no assurance that we will not fall out of compliance with our covenants in

If we fall out of compliance with our banking covenants under our credit facility (the “BankUnited

Facility” or the “Credit Agreement”) with BankUnited, N.A.

(“BankUnited”), they may declare a

default under the BankUnited Facility and, among other remedies, could declare the full amount of the BankUnited Facility

immediately due and payable and could foreclose against our collateral.

If this were to occur, we may be unable to secure

outside financing, if needed, to fund ongoing operations and for other capital needs.

Any sources of financing that may be

available to us could also be at higher costs and require us to satisfy more restrictive covenants, which could limit or

restrict our operations, cash flows, and earnings.

We cannot ensure that additional financing would be available to us or be

sufficient or available on satisfactory terms.

capital requirements, liquidity and financial condition raise significant risks as to our ability to continue as a going concern .

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the BankUnited Facility and the Company finances its operations from internally generated cash flow.

Notes 8 and 9 to our consolidated

Note 8 to our consolidated

financial statements included in Part II - Item 8 of this Annual Report on Form 10-K includes a discussion regarding the BankUnited

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central banks, such as the U.S.

Federal Reserve, effected multiple interest rate increases in 2022 and 2023.

Increases in interest

rates increase our cost of borrowing and/or potentially make it more difficult to refinance our existing indebtedness.

We have identified material weaknesses in our internal control

over financial reporting over a number of years which adversely affected our ability to report our financial condition and results of

operations in a timely and accurate manner.

The material weaknesses led to multiple restatements of our consolidated financial statements.

The material weaknesses and restatements have resulted in our failure to meet SEC reporting obligations, affected and may continue to

affect investor confidence, our stock price and our ability to raise capital in the future, and have resulted and may continue to result

in stockholder litigation.

We have reported material weaknesses in

internal control over financial reporting and did not maintain effective disclosure controls and procedures for reporting periods

from 2018 through September 2023.

The material weaknesses led to our restatement of our consolidated financial statements for the

nine months ended September 30, 2018 and the years ended December 31, 2018, 2019 and 2020.

Although these material weaknesses have

been remediated as of December 31, 2023, these material weaknesses and restatements have affected investor confidence, our stock

price, and resulted in the past in our failure to meet various SEC reporting requirements and stockholder litigation.

As described in Item 9A of this Annual Report

on Form 10-K, we identified a material weakness in our internal control over financial reporting of income taxes, which led to the restatement

within Note 11 “Income Taxes” of the financial statements within this Annual Report on Form 10-K the Company’s December

31, 2022 deferred tax assets and deferred tax liabilities balances.

The Company is in the process of remediating this material weakness.

If a future failure in internal control should

occur, it may cause us to fail to meet SEC reporting obligations, negatively affect the accuracy of our financial statements and disclosures,

investor and customer confidence, our ability to raise capital in the future and result in events of default under our banking agreement,

any of which could have a negative effect on the price of our common stock, subject us to regulatory investigations and penalties and

additional stockholder litigation, and have a material adverse impact on our business and financial condition.

Federal Reserve, effected multiple interest rate decreases in 2024.

Decreases in interest rates

decrease our cost of borrowing and/or potentially make it more viable to refinance our existing indebtedness.

Conversely, increases

in interest rates increase our cost of borrowing and/or potentially make it more difficult to refinance our existing indebtedness.

have identified material weaknesses in our internal control over financial reporting over a number of years which adversely affected

our ability to report our financial condition and results of operations in a timely and accurate manner.

The material weaknesses

led to multiple restatements of our consolidated financial statements.

The material weaknesses and restatements have resulted

in our failure to meet SEC reporting obligations, affected and may continue to affect investor confidence, our stock price and

our ability to raise capital in the future, and have resulted and may continue to result in stockholder litigation.

In June 2024, the Company entered into a settlement with the SEC to fully remediate

its material weakness in internal control over financial reporting (“ICFR”) and have effective ICFR and disclosure

controls and procedures by December 31, 2024 to publicly disclose, concurrent with the filing of the Company’s 2024 annual

report, on form 10-K.

Per this agreement, if the Company fails to comply with these undertakings, a civil monetary penalty in

the amount of $400,000 will be due to the SEC by June 30, 2025.

Although the company believes that it has appropriately remediated

its material weakness in internal controls, the risk exists that the SEC’s determination could result in an adverse opinion.

a future failure in internal control should occur, it may cause us to fail to meet SEC reporting obligations, negatively affect

the accuracy of our financial statements and disclosures, investor and customer confidence, our ability to raise capital in the

future and result in events of default under our banking agreement, any of which could have a negative effect on the price of

our common stock, subject us to regulatory investigations and penalties and additional stockholder litigation, and have a material

adverse impact on our business and financial condition.

Related to Global Events

ongoing war between Russia and Ukraine, and the retaliatory measures imposed by the U.S., United Kingdom, European Union and other

countries and the responses of Russia to such measures have caused significant disruptions to domestic and foreign economies.

invasion of Ukraine by the Russian Federation had an immediate impact on the global economy resulting in higher prices for oil

and other commodities.

The U.S., United Kingdom, European Union, and other countries responded to Russia’s invasion of Ukraine

by imposing various economic sanctions and bans.

Russia has responded with its own retaliatory measures.

These measures have impacted

the availability and price of certain raw materials and transportation costs.

The invasion and retaliatory measures also disrupted

economic markets.

The global impact of these measures is continually evolving and cannot be predicted with certainty and there

is no assurance that Russia’s invasion of Ukraine and responses thereto will not further disrupt the global economy and

supply chain.

Further, there is no assurance that even when the invasion of Ukraine ceases, that nations will not continue to

impose sanctions and bans on other nations.

these events have not interrupted our operations or materially impacted our ability to obtain raw materials, these or future developments

resulting from the invasion of Ukraine such as a cyberattack on the U.S., us or our suppliers, could make it difficult for or

increase the cost of certain raw materials and transportation costs, or make it difficult to access debt and equity capital on

attractive terms, if at all, and impact our ability to fund business activities and repay debt on a timely basis.

invasion of Ukraine may alter countries’ willingness to rely on others as the source of certain products and material.

Historically,

prime contractors and OEMs in the U.S.

A&D industry have relied upon suppliers outside the U.S.

for products and raw materials.

Russia’s invasion of Ukraine and the economic disruption resulting from retaliatory measures may cause many of these companies

to rethink these strategies and seek sources of supply within the U.S.

To the extent they do so, it could disrupt domestic markets

for raw materials and supplies, and the market for the skilled laborers we need to manufacture our products.

cannot forecast with any certainty whether the disruptions caused by the Russian invasion of Ukraine, restrictions imposed by

various governments in response thereto and resulting changes in business practices, may materially impact our business and our

consolidated financial position, results of operations, and cash flows.

conflict between Israel and Hamas, rising tensions between China and Taiwan, the ongoing war between Russia and Ukraine, and terrorist

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condition and results of operations.

cannot predict the consequences of future geo-political events on our operations or our profitability .

or increased economic and trade sanctions, including tariffs, may create economic and political uncertainties and could potentially

impact the cost of our raw materials and subassemblies having an adverse effect on our business, operations and profitability.

Although our supply chain predominantly consists of US based suppliers, any increases in their manufacturing costs may directly

affect the Company’s profitability on previously negotiated Firm Fixed Price contracts.

Compared sentence by sentence after normalising whitespace, quotation marks, case and digits, so re-formatting and restated figures do not read as changed language. Wording changes appear as one removal and one addition. The current filing and the prior one are authoritative.

What changed 10-K

Item 1A. Risk Factors