CPI AEROSTRUCTURES INC 10-K

Item 5. MARKET FOR REGISTRANT’S COMMON EQUITY, RELATED STOCKHOLDER MATTERS AND ISSUER PURCHASES OF EQUITY SECURITIES Our shares of common stock are listed on the NYSE American exchange under the symbol “CVU.” On March 26, 2026, there were 150 holders of record of our shares of common stock. We believe there are substantially more beneficial holders of our common stock. Dividend Policy To date, we have not paid any dividends on our common stock. Any payment of dividends in the future will be at the discretion of our board of directors (subject to the limitations on dividends contained in the Loan and Security Agreement, as described more fully in Part II, Item 7, “Management’s Discussion and Analysis of Financial Condition and Results of Operations”) and will depend on our earnings, if any, our capital requirements and financial condition, and other relevant factors. Our board of directors does not intend to declare any cash or other dividends in the foreseeable future, but instead intends to retain earnings, if any, for use in our business operations. Sales of Unregistered Securities and Repurchase of Equity Securities There were no sales of unregistered equity securities and no repurchases of our outstanding common stock during the year ended December 31, 2025. Securities Authorized for Issuance under Equity Compensation Plans The following table sets forth certain information at December 31, 2025 with respect to our equity compensation plans that provide for the issuance of options, warrants or rights to purchase our securities: Plan Category Number of Securities to be Issued upon Exercise of Outstanding Options, Warrants and Rights Weighted-Average Exercise Price of Outstanding Options, Warrants and Rights Number of Securities Remaining Available for Future Issuance under Equity Compensation Plans (excluding securities reflected in the first column) Equity Compensation Plans Approved by Security Holders — $ — 845,984 Equity Compensation Plans Not Approved by Security Holders — — — Total — $ — 845,984 Long-term equity incentives are an important component of compensation and are designed to align the interests of our executive officers and directors who receive long-term equity awards with the Company’s long-term performance and to increase shareholder value. The Company has awarded long-term incentive compensation pursuant to three plans: 2025 Long-Term Incentive Plan . The 2025 Long-Term Incentive Plan authorizes the grant of 800,000 shares of our company common stock which may be granted in the form of stock options, stock appreciation rights, restricted stock, restricted stock units, performance shares, and other stock-based awards. As of December 31, 2025, we have granted 177,976 shares under this plan and 622,024 shares remained available for grant under this plan. 2016 Long-Term Incentive Plan. The 2016 Long-Term Incentive Plan, as amended, authorizes the grant of 2,200,000 shares of our common stock, which may be granted in the form of stock options, stock appreciation rights, restricted stock, deferred stock, stock reload options, and other stock-based awards, to employees, officers, directors, and consultants of the Company. As of December 31, 2025, we have granted 1,978,404 shares under this plan and 221,596 shares remained available for grant under this plan. Performance Equity Plan 2009 . The Performance Equity Plan 2009 authorizes the grant of 500,000 stock options, stock appreciation rights, restricted stock, deferred stock, stock reload options, and other stock-based awards. As of December 31, 2025, we have granted 497,636 shares under this plan and 2,364 shares remained available for grant. 20 Item 6. [RESE RVED] Not applicable. Item 7. MANAGEMENT’S DIS CUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS The following discussion and analysis of our financial condition and results of operations should be read together with our consolidated financial statements and related notes appearing elsewhere in this Annual Report on Form 10-K. Some of the information contained in this discussion and analysis includes forward-looking statements involving risks and uncertainties and should be read together with the “Risk Factors” section of this Annual Report on Form 10-K. Such risks and uncertainties could cause actual results to differ materially from the results described in or implied by the forward-looking statements contained in the following discussion and analysis. Recent Developments On December 12, 2025, the Company entered into the Loan and Security Agreement with Western Alliance Bank (the “Bank”). The Loan and Security Agreement provides for a revolving line of credit in the maximum principal amount of $10.0 million (the “Revolving Line”) and a term loan in the original principal amount of $10.0 million (the “Term Loan” and, together with the Revolving Line, the “Credit Facilities”). In connection with entering into the Loan and Security Agreement, the Company used a portion of the proceeds of the Credit Facilities, including the full amount of the Term Loan and borrowings under the Revolving Line in the amount of $6,220,722 to repay in full all outstanding obligations under that certain Amended and Restated Credit Agreement, dated as of March 24, 2016, (as amended), among the Company, the several lenders from time to time parties thereto and BankUnited, N.A., as sole arranger, administrative agent and collateral agent (the “BankUnited Credit Agreement”). Upon such repayment, the BankUnited Credit Agreement and the related loan documents were terminated in accordance with their terms, and all liens and security interests securing the obligations thereunder were released. The Company did not incur any early termination or prepayment penalties in connection with the termination of the BankUnited Credit Agreement. Business Operations We are engaged in the contract production of structural aircraft assemblies for fixed wing aircraft and helicopters in both the commercial and defense markets. We also participate in the aerosystems sector through our production of reconnaissance pod structures and fuel panel systems. Within the global aerostructures and aerosystems supply chain, we are either a Tier 1 supplier to aircraft OEMs or a Tier 2 subcontractor to major Tier 1 manufacturers. We also are a prime contractor to the U.S. DOD, primarily the USAF. In conjunction with our assembly operations, we provide engineering, program management, supply chain management and kitting, and MRO services. Critical Accounting Estimates The preparation of financial statements in conformity with US GAAP requires management to make estimates and assumptions that affect the reported amounts of certain assets and liabilities, revenues and expenses, and disclosure of contingencies during the reporting period. Significant estimates and assumptions include revenue recognition, and the valuation of deferred income taxes. Actual results could differ from those estimates. We believe that the following discussion addresses our critical accounting policies which require management’s most difficult, subjective and complex judgments, often as a result of the need to make estimates about the effect of matters that are inherently uncertain. For more discussion of these and other significant accounting policies, refer to Part II, Item 8, Note 1 “ Principal Business Activity and Summary of Significant Accounting Policies” in our notes to our consolidated financial statements included elsewhere in this Annual Report on Form 10-K. Revenue Recognition In accordance with ASC 606, the Company recognizes revenue when it transfers control of a promised good or service to a customer in an amount that reflects the consideration it expects to be entitled to in exchange for the good or service. The majority of the Company’s performance obligations are satisfied over time as the Company (i) sells products with no alternative use to the Company and (ii) has an enforceable right to recover costs incurred plus a reasonable profit margin for work completed to date. The application of this method requires management to make estimates of total contract costs and progress toward completion. 21 Under the over-time revenue recognition model, revenue and gross profit are recognized over the contract period as work is performed based on the relationship of actual costs incurred to total estimated costs at completion (the cost-to-cost method). These estimates are reviewed periodically as work progresses and adjustments to estimated costs may affect the timing and amount of revenue and gross profit recognized. See Part II, Item 8, Note 1, “Principal Business Activity and Summary of Significant Accounting Policies,” in the notes to the consolidated financial statements included in this Form 10-K for additional information regarding the Company’s revenue recognition policy. Deferred Income Taxes – Valuation Allowance On a quarterly basis, we assess the realizability of our deferred tax assets against future sources of taxable income and record a valuation allowance if, based on the available evidence, it is more likely than not (defined as a likelihood of more than 50%) that all or a portion of the deferred tax assets will not be realized. In assessing the need for a valuation allowance, the Company evaluates both positive and negative evidence regarding the realizability of deferred tax assets, including future reversals of existing taxable temporary differences, projected future taxable income, loss carryback and tax-planning strategies. Greater weight is generally given to objectively verifiable evidence, such as cumulative losses in recent years, which may represent significant negative evidence regarding realizability. Results of Operations The following discussion provides an analysis of our results of operations and should be read in conjunction with the accompanying consolidated financial statements and notes thereto. Revenue Revenue for the year ended December 31, 2025 was $69,262,124 compared to $81,078,864 for the year ended December 31, 2024, representing a decrease of $11,816,740, or 14.6%. The decrease was driven primarily by an unfavorable contract adjustment associated with the termination of the Boeing A-10 Main Landing Gear Pods program, and lower revenue recognized on the T-38 Pacer Classic program, partially offset by the commencement of the L3Harris NGJ Low-Band Pods program. Revenue generated from prime government contracts for the year ended December 31, 2025 was $7,415,434 compared to $11,677,152 for the year ended December 31, 2024, a decrease of $4,261,718, or 36.5%. This decrease primarily reflects lower revenue recognized on the T-38 Pacer Classic program. Revenue generated from government subcontracts for the year ended December 31, 2025 was $55,547,679 compared to $64,704,370 for the year ended December 31, 2024, a decrease of $9,156,691, or 14.2%. The decrease was primarily related to an unfavorable contract adjustment associated with the termination of the Boeing A-10 Main Landing Gear Pods program. Revenue generated from commercial contracts for the year ended December 31, 2025 was $6,299,011 compared to $4,697,342 for the year ended December 31, 2024, an increase of $1,601,669 or 34.1%. The increase in revenue was primarily driven by the commencement of production on our Embraer Phenom-100 Engine Inlet Assemblies and Collins Compac Enclosures programs. Cost of sales Cost of sales for the year ended December 31, 2025 was $58,706,055 compared to $63,840,803 for the year ended December 31, 2024, representing a decrease of $5,134,748 or 8.0%. The components of cost of sales were as follows: Years ended December 31, 2025 December 31, 2024 Procurement $ 36,588,501 $ 40,383,090 Labor 5,924,180 7,303,563 Factory overhead 16,193,374 16,154,150 Cost of sales $ 58,706,055 $ 63,840,803 Procurement for the year ended December 31, 2025 was $36,588,501 compared to $40,383,090 for the year ended December 31, 2024, a decrease of $3,794,589 or 9.4%. This decrease was driven primarily by the termination of the Boeing A-10 Main Landing Gear Pods program. 22 Labor costs for the year ended December 31, 2025 were $5,924,180 compared to $7,303,563 for the year ended December 31, 2024, a decrease of $1,379,383 or 18.9%. The decrease was primarily driven by the termination of the Boeing A-10 Main Landing Gear Pods program and timing of work performed on the F-16 Rudder Island program. Factory overhead costs for the year ended December 31, 2025 were $16,193,374 compared to $16,154,150 for the year ended December 31, 2024, an increase of $39,224 or 0.2%. Gross profit Gross profit for the year ended December 31, 2025 was $10,556,069 compared to $17,238,061 for the year ended December 31, 2024, a decrease of $6,681,992 or 38.8%. Gross profit percentage (“gross margin”) for the year ended December 31, 2025 was 15.2% compared to 21.3% for the year ended December 31, 2024. Favorable/(Unfavorable) Adjustments to Gross Profit During the years ended December 31, 2025 and 2024, we made changes in estimates to various contracts. Such changes in estimates resulted in net unfavorable adjustments to gross profit totaling $10,171,038 and $3,750,020 for the years ended December 31, 2025 and December 31, 2024. The decrease was primarily related to an unfavorable contract adjustment associated with the termination of the Boeing A-10 Main Landing Gear Pods program. Selling, general and administrative expenses Selling, general and administrative expenses (“SG&A”) for the year ended December 31, 2025 were $10,732,451 compared to $10,506,439 for the year ended December 31, 2024, an increase of $226,012 or 2.2%. The increase was primarily due to higher legal fees partially offset by a decrease in office expenses. Interest expense Interest expense for the year ended December 31, 2025 was $1,567,840, compared to $2,288,834 for the year ended December 31, 2024, a decrease of $720,994 or 31.5%. The decrease was the result of lower average outstanding debt balances, lower interest rates during 2025, and the refinancing of our prior credit facility at a lower interest rate. (Loss) income before provision for income taxes (Loss) income before provision for income taxes for the year ended December 31, 2025 was $(1,744,222) compared to $4,442,788 for the year ended December 31, 2024, a decrease of $6,187,010 or 139.3%. The decrease was driven by the decrease in gross profit discussed above and the increase in SG&A, partially offset by the decrease in interest expense described above. Provision (benefit) for income taxes The income tax (benefit) for the year ended December 31, 2025 was $(900,861), which was an effective tax (benefit) rate of (51.6%), as compared to income tax expense of $1,143,454 for the year ended December 31, 2024, which was an effective tax rate of 25.7%. The income tax benefit recorded in 2025 was primarily due to the application of federal and state statutory tax rates and an increase in the income tax benefit attributable to the research and development credit. The income tax expense recorded in 2024 was primarily due to the application of federal and state statutory tax rates, partially offset by a decrease in income tax expense attributable to the research and development credit. Net (loss) income Net (loss) income for the year ended December 31, 2025 was $(843,361) compared to $3,299,334 for the year ended December 31, 2024, a decrease of $4,142,695 or 125.6%. The decrease in net income was driven primarily by the reduction in gross margin related to an unfavorable contract adjustment associated with the termination of the Boeing A-10 Main Landing Gear Pods program, partially offset by lower interest expense and the income tax benefit. 23 (Loss) earnings per share Basic (loss) earnings per share was $(0.07) for the year ended December 31, 2025 calculated using 12,788,937 weighted average shares outstanding, compared to $0.26 for the year ended December 31, 2024, calculated using 12,593,213 weighted average shares outstanding, representing a decrease of $0.33 per share, or 126.9%. Diluted earnings (loss) per share was $(0.07) for the year ended December 31, 2025 calculated using 12,788,937 weighted average shares outstanding compared to $0.26 for the year ended December 31, 2024 calculated using 12,709,237 weighted average shares outstanding, representing a decrease of $0.33 per share, or 126.9%. The decrease in basic and diluted earnings per share was driven primarily by the unfavorable adjustment associated with the termination of the Boeing A-10 Main Landing Gear Pods program. Business Outlook The statements in the “Business Outlook” section and other forward-looking statements of this Annual Report on Form 10-K are subject to revision during the course of the year in our quarterly earnings releases and SEC filings and at other times. Liquidity and Capital Resources General At December 31, 2025, we had working capital of $20,388,755 compared to working capital of $17,122,111 at December 31, 2024, an increase of $3,266,644, or 19.1%. The increase is primarily the result of a decreases in accrued expenses. Cash Flow A large portion of our cash is used to pay for materials and processing costs associated with contracts that are in process and which do not provide for progress payments. Costs for which we are not able to bill on a progress basis are made up of contract assets on our consolidated balance sheet and represent the aggregate costs and related earnings for uncompleted contracts for which the customer has not yet been billed. These costs and earnings are recovered upon shipment of products and presentation of billings in accordance with contract terms. Because ASC 606 requires us to use estimates in determining revenues, costs and profits and in assigning those amounts to accounting periods, there can be a significant disparity between earnings as reported and the actual cash we receive during any reporting period. Accordingly, it is possible that we experience shortfalls in our cash flow and may need to borrow money or take steps to delay certain cash outflows until the reported earnings materialize into actual cash receipts. Several of our programs require us to expend up-front costs that may have to be amortized over a portion of production units. In the case of significant program delays and/or program cancellations, we could experience margin degradation, which may be material for costs that are not recoverable. Such charges and the loss of up-front costs could have a material impact on our liquidity and results of operations. We continue to work to obtain better payment terms with our customers, including accelerated progress payment arrangements, as well as exploring alternative funding sources. At December 31, 2025, our cash balance was $899,199 compared to $5,490,963 at December 31, 2024, a decrease of $4,591,764 or 83.6%. The decrease was driven by $(5,200,025) in cash used by operations including $1,979,189 increase in accounts receivable and a $1,638,161 increase in prepaid expenses and other current assets, $(65,036) used for the purchase of equipment, partially offset by proceeds from financing activities of $673,297. Western Alliance Bank Loan and Security Agreement This information is set forth in Note 8 to the consolidated financial statements, which appears following Item 15 of this Annual Report on Form 10-K and is incorporated herein by reference. Leases This information is set forth in Note 9 to the consolidated financial statements, which appears following Item 15 of this Annual Report on Form 10-K and is incorporated herein by reference. 24 Liquidity Our working capital requirements can vary significantly, depending in part on the timing of the conclusion of mature programs and new program awards and the payment terms with our customers and suppliers. There is currently availability for borrowings under the Western Alliance Bank Loan and Security Agreement, and the Company finances its operations primarily from internally generated cash flow. Note 8 to the consolidated financial statements included in Part II – Item 8 contains additional information regarding the Western Alliance Bank Loan and Security Agreement. Management has (i) obtained and regularly seeks additional progress payment and advance payment customer contract funding provisions, (ii) maintained procedures to minimize investments in inventory and contract assets, (iii) remained focused on its military customer base and (iv) maintained its approximately $91.8 million backlog of funded orders, 97% of which are for military programs. Based on these factors, management believe there are no conditions or events currently anticipated in the coming year that would cause the Company to be unable to meet its obligations or otherwise continue as a going concern. However, there can be no assurance that these plans will achieve their intended results. Contractual Obligations The table below summarizes information about our contractual obligations as of December 31, 2025 and the effects these obligations are expected to have on our liquidity and cash flow in future periods. Payments Due By Period Contractual Obligations Total 2026 2027 - 2029 2030 - 2031 Line of credit $ 8,373,672 $ — $ — $ 8,373,672 Term Loan 10,000,000 187,500 1,375,000 8,437,500 Operating Leases 12,551,835 2,304,533 6,997,582 3,249,720 Insurance Financing Agreement 369,467 369,467 — — Total Contractual Cash Obligations $ 31,294,974 $ 2,861,500 $ 8,372,582 $ 20,060.892 Inflation Inflation historically has not had a material effect on our operations, although the current inflationary environment in the U.S., and its impact on interest rates, supply chains, labor markets and general economic conditions, are factors that the Company actively monitors in an effort to mitigate potential negative impacts and risks to the Company. The majority of the Company’s long-term contracts with its customers and suppliers reflect fixed pricing. When bidding for work, the Company takes inflation risk and supply-side pricing risk into account when preparing its proposals. 25 Item 7A. QUANTITATIVE AND QUALITATIVE DISCLOSURE ABOUT MARKET RISK Interest Rate Risk We are exposed to interest rate risk on variable-rate credit facilities for which $18,373,672 was outstanding at December 31, 2025. Additionally, if we were to refinance our long-term debt in the future, it could be refinanced at higher interest rates.