CVU US Equity☆

Item 1A. RISK FACTORS 12

Item 1B UNRESOLVED STAFF COMMENTS 20

Item 2. PROPERTIES 20

Item 3. LEGAL PROCEEDINGS 20

Item 4. MINE SAFETY DISCLOSURES 21

Item 6. [RESERVED] 22

Item 7A. QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISK 29

Item 8. FINANCIAL STATEMENTS AND SUPPLEMENTARY DATA 29

Item 9A CONTROLS AND PROCEDURES 29

Item 9B. OTHER INFORMATION 30

Item 9C DISCLOSURE REGARDING FOREIGN JURISDICTIONS THAT PREVENT INSPECTIONS 30

PART III 30

Item 10. DIRECTORS, EXECUTIVE OFFICERS AND CORPORATE GOVERNANCE 30

Item 11. EXECUTIVE COMPENSATION 30

Item 14. PRINCIPAL ACCOUNTANT FEES AND SERVICES 30

INDEX TO FINANCIAL STATEMENTS F-1

2

FORWARD

LOOKING STATEMENTS

This

Annual Report on Form 10-K contains forward-looking statements within the meaning of the Private Securities Litigation Reform

Act of 1995. When used in this Annual Report on Form 10-K and in future filings by us with the Securities and Exchange Commission

(“SEC”), the words or phrases “will” “will likely result,” “management expects”

or “we expect,” “could,” “will continue,” “anticipated,” “estimated”

or similar expressions are intended to identify forward-looking statements. In addition, any statements that refer to projections,

forecasts or other characterizations of future events or circumstances, including any underlying assumptions, are forward-looking

statements. Readers are cautioned not to place undue reliance on any such forward-looking statements, each of which speaks only

as of the date made. There can be no assurance that future developments will be those that have been anticipated. We may not actually

achieve the plans, intentions or expectations disclosed in our forward-looking statements. Further, such statements are subject

to certain risks and uncertainties that could cause actual results to differ materially from historical earnings and those presently

anticipated or projected. The risks are included in “Item 1A: Risk Factors” included in this Annual Report on Form

10-K. We assume no obligation to revise or update any forward looking statements for any reason except as required by law.

You

should read the financial information set forth below in conjunction with our consolidated financial statements and notes thereto.

PART

I

Item

1. BUSINESS

General

CPI

Aerostructures, Inc., including its wholly owned subsidiary Welding Metallurgy, Inc. (“WMI”) and Compac Development

Corporation, a wholly owned subsidiary of WMI (collectively, “CPI Aero”, the “Company”, “us,”

or “we”) is a manufacturer of structural assemblies, integrated systems, and kitted components for the domestic and

international aerospace and defense (“A&D”) markets. Our products are generally used by customers in the production

of fixed wing aircraft, helicopters, electronic warfare (“EW”) systems, intelligence, surveillance, and reconnaissance

(“ISR”) systems, missiles, and other sophisticated A&D products. We are primarily a Tier 1 supplier to Original

Equipment Manufacturers (“OEMs”). We are also a Tier 2 supplier to larger Tier 1 manufacturers and a prime contractor

to the United States (“U.S.”) Department of Defense (“DOD”), primarily the U.S. Air Force (“USAF”).

Our products are used by OEMs within both commercial aerospace and national security markets. In addition to our assembly operations,

we provide manufacturing engineering, program management, supply chain management, kitting, and maintenance repair and overhaul

(“MRO”) services.

CPI

Aero has over 40 years of experience as a contractor. Our team possesses extensive technical expertise and program management

and integration capabilities. Our competitive advantage lies in our ability to offer large contractor capabilities with the flexibility

and responsiveness of a small company, while staying competitive in cost and delivering superior quality products.

We

maintain a website located at www.cpiaero.com. Our corporate filings, including our Annual Reports on Form 10-K, our Quarterly

Reports on Form 10-Q, our Current Reports on Form 8-K, our proxy statements and reports filed by our officers and directors under

Section 16(a) of the Securities Exchange Act of 1934, as amended (the “Exchange Act”), and any amendments to those

filings, are available, free of charge, on our website as soon as reasonably practicable after we electronically file such material

with the SEC. The contents of our website are not incorporated in or otherwise to be regarded as a part of this Annual Report

on Form 10-K.

History

Conceived

and started as a technical consulting firm on January 11, 1980, within a few years, Composite Products International Inc. (“CPI”)

was manufacturing aircraft structural components for U.S. military aircraft under contract to the U.S. Government. By the late

1980s, CPI was also providing structural components for civil aircraft in the commercial market.

In

the 1990s, CPI became a publicly traded company and changed its name to CPI Aerostructures, Inc. The company continued to grow,

both in size and in its business. U.S. Government contracts served as the mainstay of CPI Aero’s business, and the Company

continued to grow its presence in the commercial market as well. Commitment to customer satisfaction and pride in a job well done

propelled CPI Aero to the forefront as a reputable and hardworking supplier to OEMs.

On

September 5, 2000, CPI Aero shares were listed on the American Stock Exchange (now known as NYSE American). We also started to

focus on diversifying our business model to pursue more commercial contracts. In 2007, the Company won three major contracts and

experienced great growth and expansion.

3

In

2018, CPI Aero acquired Welding Metallurgy Inc. This allowed for a small but strategically important amount of vertical integration

in complex fusion welding and large diameter tube bending capability. The acquisition included Miller Stuart and Compac Development

Corp., two other business lines that added fabrication of electrical cables, harnesses and enclosures to the Company’s capabilities.

Today,

CPI Aero continues to engage in traditional high quality structural assembly manufacturing while incorporating the latest in technology

to improve quality and streamline production. Our success is rooted in our core company values, the dedication and skill of our

employees, and our commitment to providing our customers the full-service solution they require.

Products

and Services

We

offer design, engineering, manufacture, build, maintenance, repair and overhaul (“MRO”) services, and supply chain

and kitting services capabilities to the aerospace and defense industry as follows:

Engineering

Services and Capabilities

As

a build-to-print structural component manufacturer, CPI Aero’s engineering focus is on executing customer contracts through

product realization, and to support collaborative design development using design for manufacturing and assembly, geometric dimensioning & tolerancing (“GD&T”), and tooling concept support. Although not vertically integrated, CPI Aero has a deep

well of experience on various types of detail part manufacturing that allows us to provide detailed design for manufacturing input

during the design refinement process.

We

have significant experience working in a full model-based definition environment, both CATIA and NX, due to our long sustainment

support on older airframes. CPI Aero also possesses the capability to work with traditional blueprints, mylars and loft. The Company

has executed several projects where older engineering data sets were “rehabilitated” to fully model-based datasets

per customers’ requests.

CPI

Aero is capable and has experience in designing all types of assembly type tools up to and including large floor mounted, articulated

tooling at high levels of precision. We are also capable of designing various types of tooling that can be 3D printed for rapid

response. Understanding our customers’ product performance needs and combining product GD&T layout and final tooling

definitions and requirements helps us ensure product realization success.

Overall,

CPI Aero’s engineering team is dedicated to providing our customers an experience where our activities are an extension

of their business and complement their engineering goals.

Business

Strategy

CPI

Aero is committed to achieving revenue, gross profit margin, and earnings growth through the successful implementation of our

business development strategy. CPI Aero’s future strategic direction is tied to aerostructures, aerosystems, supply chain,

and kitting services, and a deeper market penetration of formerly acquired businesses in welding, tube bending, wire harnesses,

and electronics. To accomplish this strategy, we are focused on executing on our current customer programs while pursuing new

aerospace build-to-print opportunities - in both new production and MRO statements of work.

We

believe that there has been a shift in the market for more build-to-print contracts by OEMs versus the recent past trend of design

and build contracts. This trend fits in well with CPI Aero’s strengths. In addition, we expect to identify and close contracts

for which we can provide more value added content to our customer (like integrating sub-assemblies into higher level Aerostructures

and Aerosystems statements of work) and we intend to pursue statements of work that require proportionately higher CPI Aero value

added content.

Another

tenet of the CPI Aero business development strategy is portfolio reshaping of our existing business by identifying and closing

long-term agreements or multi-year contracts, which provides an opportunity to firm-up supplier agreements and secure supplier

capacity.

4

The

final element of CPI Aero’s business development strategy is to build upon the Company’s existing customer relationships

and to develop relationships with new customers. We intend to increase customer engagements by deploying our business development

personnel to solidify existing customer relationships which have been established by performance excellence, transparency and

trust over many years and multiple programs. We also intend to add resources to our business development function to cultivate

new relationships with new customers.

We

will make sure each customer has the best possible buying experience, by ensuring we are a best value partner through the delivery

of high quality products delivered on time. The CPI Aero team will always work in a collaborative way to meet customers’

needs and solve their problems.

The

Market

We

have positioned the Company to take advantage of opportunities in the military aerospace market to a broad customer base, thereby

reducing the impact of direct government contracting limitations. Our success as a subcontractor to defense prime contractors

has provided us with opportunities to also act as a subcontractor to prime contractors in the production of commercial aircraft

structures.

Over

time, our Company has expanded in both capabilities and size, as evidenced by our growth in our operational, global supply chain

management, program management, and engineering capabilities, as well as the growth in our manufacturing shop floor size and equipment

base. These expansions have provided us the ability to supply larger and more complex Aerostructures and Aerosystems products

in support of our government-based programs as well as to pursue opportunities within the commercial and business jet markets.

Our capabilities have also allowed us to obtain MRO, kitting, tube bending, welding, and electronics related contracts.

Competition

We

face competition in our role as both a prime contractor to the U.S. Government and as a Tier 1 or Tier 2 subcontractor to military

and commercial aircraft manufacturers. Within respect to Aerostructures products, we often compete against much larger Tier 1

suppliers, such as Triumph Group, Spirit Aerosystems, Kaman Aerospace, GKN Aerospace, Ducommun, and LMI Aerospace. We believe

that we can compete effectively with these larger companies by delivering products with the same level of quality and performance

at a better value for our customer. With respect to Aerosystems products, such as our portfolio of EW and ISR integrated pod structures,

we find more limited competition and are not aware of competition from any of the Aerostructures companies mentioned above. In

these cases, we typically compete with the internal manufacturing arm of our customers. We believe our unique skills related to

integrated pod structures combined with a very efficient and generally much lower cost structure create a competitive advantage

for bidding on Aerosystems contracts.

For

certain unrestricted contracts for the U.S. Government, we may compete against well-established prime contractors, including Northrop

Grumman, Lockheed Martin, and Boeing. All of these competitors possess significantly larger infrastructures, greater resources

and the capabilities to respond to much larger contracts. We believe that our competitive advantage lies in our ability to offer

large contractor capabilities with the flexibility and responsiveness of a small company, while staying competitive in cost and

delivering superior quality products. While larger prime contractors compete for significant modification awards, they generally

do not compete for awards in smaller modifications, spares and replacement parts, even for aircraft for which they are the original

manufacturer. In certain instances, the large prime contractors often subcontract much of the work they win to their Tier 1 suppliers

so we also may act as a subcontractor to them in these situations. Furthermore, in some cases these prime contractors are not

permitted to bid, for example when the U.S. Government designates a contract as a Small Business Set-Aside. In these restricted

contracts for the U.S. Government, CPI Aero typically competes against numerous small business competitors. We believe we compete

effectively against the smaller competitors because of our 40 years of experience and expertise in responding to requests for

proposals for government contracts.

Our

Customers

Approximately

$6.1 million and $4.7 million of our revenue for the years ended December 31, 2022 and 2021, respectively, were from customers

outside the U.S. All other revenue for the years ended December 31, 2022 and 2021 has been attributable to customers within the

U.S. We have no assets outside the U.S.

We

have positioned our Company to take advantage of opportunities in the military aerospace market to a broad customer base, which

we believe will reduce the potential impact of industry consolidation. Our success as a subcontractor to defense prime contractors

has provided us with opportunities to also act as a subcontractor to prime contractors in the production of commercial aircraft

structures, which we believe will also reduce our exposure to defense industry consolidation, government spending decisions, and

other defense industry risks.

Our

OEM customers in the defense sector include leading prime defense contractors such as:

5

82%

and 87% of our revenue in 2022 and 2021, respectively, was generated by subcontracts with defense prime contractors.

Our

OEM customers in the civil aviation market include:

7%

and 6% of our revenue in 2022 and 2021, respectively, was generated by commercial contract sales.

CPI

Aero also is a prime contractor to the DOD, primarily through contracts directly with the USAF and the Defense Logistics Agency

(“DLA”), providing supply chain management, assembly & integration, and kitting services for the F-16 and T-38

programs. 10% and 7% of our revenue in 2022 and 2021, respectively, were generated by direct government sales.

Significant

Contracts

Our

most significant contracts are described below:

Military

Aircraft – Subcontracts with Prime Contractors

E-2D

Advanced Hawkeye: The NGC E-2D Advanced Hawkeye is an all-weather, carrier-based tactical Airborne Early Warning aircraft.

The twin turboprop aircraft was designed and developed in the 1950s by the Grumman Aircraft Company for the U.S. Navy. The U.S.

Navy aircraft has been progressively updated with the latest variant, the E-2D, first flying in 2007. In 2008, we received an

initial $7.9 million order from NGC to provide structural kits used in the production of Outer Wing Panels (“OWP”)

of the E-2D. We initially valued the long-term agreement at approximately $98 million over an eight-year period, with the potential

to be in excess of $195 million over the life of the aircraft program. In February of 2019, we announced a new multi-year award

valued at up to approximately $47.5 million. In June 2020, we announced that we had received firm orders valued in excess of $43

million and $5 million in long-lead funding in anticipation of purchase orders for OWP structural components and kits. In 2021,

we received additional orders valued at approximately $11 million. Since 2008, the cumulative orders we have received on this

program through December 31, 2022 exceed $209 million.

In

addition, in 2015 we won an award to supply structural components and kits for the Wet Outer Wing Panel (“WOWP”) on

the E-2D Advanced Hawkeye airborne early warning and control (“AEW&C”) aircraft that will be manufactured for

the Japan Air Self Defense Force (“JASDF”). We are responsible for component source selection, supply chain management,

delivery of kits, and providing manufacturing engineering services to NGC during the integration of the components into the WOWP

E-2D. In late 2019, CPI Aero received additional WOWP kit requirements increasing the total value of this program for the JASDF

to be in excess of $20 million.

In

February 2020, the Company’s subsidiary WMI received approximately $4 million in purchase orders from NGC to produce numerous

welded structures and tubes for the E-2D Advanced Hawkeye. Under the terms of the purchase orders, WMI manufactured more than

140 different items in support of the production of at least 25 E-2D aircraft. The period of performance was through December

31, 2022 with strong potential for follow-on orders.

ALQ-249

Next Generation Jammer – Mid-Band Pod (“NGJ-MB”): The Raytheon NGJ-MB pod is an external jamming pod

that will disrupt and degrade enemy aircraft and ground radar and communication systems, and will replace the ALQ-99 system on

the U.S. Navy’s EA-6B Growler carrier-based electronic warfare aircraft. The U.S. Navy plans to install these pods on 139

EA-18G Growlers during the production phase. There are two pods per aircraft. There are also 11 EA-18Gs operated by the Royal

Australian Air Force. Raytheon received a $1 billion sole source contract from the U.S. Navy in April 2016, and CPI Aero has a

contract with Raytheon to assemble the pod structural housing and air management system (“AMS”) and integrate customer

furnished equipment. In 2019, Raytheon authorized CPI Aero to begin production of pod structures and AMS components for the System

Demonstration and Test Article (“SDTA”) phase of the NGJ-MB program. All SDTA pods and AMS components orders received

were valued in excess of $60 million and completed delivery as of December 31, 2022.

6

On

November 16, 2021 the Company announced it was authorized by Raytheon to start the production phase of the program. The Company

was awarded low rate production (“LRIP”) I and II orders valued at approximately $18.5 million. LRIP III, for which

the Company was awarded an order of approximately $14.0 million in October 2022, is estimated to be a greater than $25 million

program. We believe that the total value of the NGJ-MB program through production will be in excess of $210 million through 2030.

A-10

Thunderbolt II “Warthog”: The Boeing A-10 Thunderbolt II, also known as the Warthog, is a twin-engine aircraft

that provides close-air support of ground forces and employs a wide variety of conventional munitions including general-purpose

bombs. This simple, effective and survivable single-seat aircraft can be used against all ground targets, including tanks and

other armored vehicles. On August 21, 2019, Boeing announced that it had received an Indefinite Delivery/Indefinite Quantity (“IDIQ”)

contract award from the USAF with a maximum contract value of $999 million to manage the production of up to 112 new wing sets

and spares kits for A-10 aircraft, and the USAF ordered 27 wing sets from Boeing immediately at contract award. In 2019, CPI Aero

announced the receipt of an IDIQ contract with a maximum ceiling value of $48 million from Boeing for structural assemblies for

the A-10. Under the terms of the IDIQ contract, CPI Aero will manufacture major structural subassemblies of the A-10 aircraft’s

wing. The Company also announced that it had received initial purchase orders under the IDIQ contract valued at approximately

$6 million for the production of four shipsets of assemblies and associated program start-up costs. In May 2020, CPI Aero announced

the receipt of additional purchase orders totaling approximately $14 million from Boeing. In March of 2022, CPI Aero announced

the receipt of additional purchase orders totaling approximately $3.2 million, bringing the total purchase orders received to

$23.4 million.

F-35

Lightning II: The Lockheed Martin F-35 Lightning II is a family of single-seat, single-engine, all-weather stealth multirole

fighter aircraft that provides unmatched multi-role capability, survivability, and connectivity with data sharing capabilities

essential for joint all-domain operations. Current DOD plans call for acquiring a total of 2,456 F-35s. U.S. allies are expected

to purchase hundreds of additional F-35s, with eight nations participating as cost-sharing partners in the program with the United

States, and six other nations allied with the U.S. purchasing the F-35 via foreign military sales agreements with the DOD. The

Company has two significant contracts for products used on the F-35. In 2015, CPI Aero was awarded a multi-year contract to supply

four different lock assemblies for the arresting gear door on the F-35C Carrier Take Off and Landing variant. CPI Aero made its

first delivery under that contract in May 2017. In 2018, the Company received a new long-term agreement valued at approximately

$8 million for lock assemblies to be delivered between 2020 and 2024. In November 2017, CPI Aero was awarded an additional $15.8

million multi-year contract to manufacture canopy activation drive shaft assemblies for the F-35A, F-35B, and F-35C variants.

UH-60

“BLACK HAWK”: The Sikorsky UH-60 BLACK HAWK helicopter is the leader in multi-mission rotary wing aircraft.

Among the mission configurations it serves are troop transport, medical evacuation, electronic warfare, attack, assault support,

and special operations. More than 4,000 BLACK HAWK helicopters are in use today, operating in 29 countries. CPI Aero manufactures

several different structural assemblies, including welded structure for the BLACK HAWK. The majority of CPI Aero’s contracts

for the BLACK HAWK are as a Tier 1 supplier to Sikorsky. The Company also is a Tier 2 supplier to GKN Aerospace for products ultimately

used on the BLACK HAWK. In 2017, CPI Aero received an approximately $21 million long-term agreement through 2022 for the production

of fuel panel assemblies, work it has performed for Sikorsky since 2010. Also in 2017, the Company received an $8 million long-term

agreement through 2022 to manufacture machine gunner window assemblies for the BLACK HAWK, continuing work it has performed since

2010. A third five-year long-term agreement was awarded in January 2022, also for gunner window assemblies, estimated at $13.6

million with a period of performance from 2023-2027. Also, since October 2018, CPI Aero has received multiple purchase orders

totaling $22 million for hover infrared suppression system (“HIRSS”) module assemblies for use as spares on older

variants of the BLACK HAWK. The HIRSS is a defensive countermeasures system that is integral to the survival of the BLACK HAWK

by reducing the opportunity for an infrared-seeking threat system to acquire, lock onto, track, and destroy the aircraft. Finally,

in May 2021, the Company announced receiving a multi-year contract valued at up to $17.2 million for the repair and overhaul

of outboard stabilator assemblies in support of the Sikorsky MH-60 SEAHAWK.

F-16V

Fighting Falcon: The Lockheed Martin F-16 is the world’s most successful, combat-proven multirole fighter. Approximately

3,000 operational F-16s are in service today in 25 countries. The F-16V is a new variant, sold exclusively to international air

forces and is the most technologically advanced fourth generation fighter in the world. In 2019, the Company announced it had

been awarded a multi-year contract by Lockheed Martin to manufacture rudder island and drag chute canister (“RI/DCC”)

assemblies for the F-16V. The RI/DCC is a large structural sub-assembly that is installed on the tail section of the aircraft.

Deliveries began in 2021 and will continue through 2024. In June 2020, the Company announced that it had been awarded an order

from Lockheed Martin as part of the previously announced multi-year contract to manufacture RI/DCC assemblies for new production

F-16 Block 70/72 aircraft, in March 2021 the Company announced that it had received an additional order for these assemblies for

$9.2 million and in November 2022, the Company announced another follow-on order for these assemblies for $4 million. The total

value of the RI/DCC program multi-year contract is approximately $25 million.

7

Given

the strength of Lockheed Martin’s international sales forecast for the F-16, we believe a follow-on to the existing multi-year

contract is possible.

CH-53K

King Stallion: The CH-53K is a heavy-lift helicopter being developed by Sikorsky for the U.S. Marine Corps. We manufacture

composite electronics racks as a Tier 2 supplier to Spirit AeroSystems, Inc., the manufacturer of the CH-53K cockpit and cabin.

Through December 31, 2022, we had received orders valued at more than $2.7 million from Spirit AeroSystems, Inc.

In

addition, the Company also manufactures welded tubes for the CH-53K as a Tier 1 supplier to Sikorsky. As of December 31, 2022,

the total value of orders received was $0.8 million. These tubes will also be required for the multi-year on this program. A component

of this statement of work also includes CPI Aero intellectual property.

Undisclosed

Pod Structure: In 2019, the Company received an initial purchase order from Raytheon to manufacture pod structures for

an undisclosed application. The value of the order was approximately $2.3 million for manufacturing engineering services, development

of assembly tooling, and the production of the prototypes. The undisclosed pod structure is currently under development. In October

2021, the Company announced that Raytheon awarded the Company an approximately $6 million contract modification that changes the

scope of work the Company would perform and increases the quantity of pods to be produced.

Undisclosed

Vehicle: In 2018, the Company started production of a welded tank for NGC for an undisclosed application on an undisclosed

platform. The total value of orders received as of December 31, 2022 is approximately $3.2 million.

B-52

Radar Rack: In late 2021, the Company received an initial purchase order from Raytheon to manufacture radar rack structures

for the B-52 Radar Modernization Program. The value of the order was approximately $4.0 million for manufacturing engineering

services, development of assembly tooling, and the production of the initial units. The Radar Rack structure is currently under

development with initial delivery expected in 2023. We believe the potential total value of the program to be approximately $20.0

million.

Military

Aircraft – Prime Contracts with U.S. Government

F-16

“Fighting Falcon”: Since 2014, we have been a prime contractor to the DLA to provide structural wing components

and logistical support for global F-16 aircraft MRO operations. Through December 31, 2022, we had received almost $15 million

in orders on this program.

T-38

Pacer Classic III, Phase 2: For more than 50 years, the NGC T-38 has been the principal supersonic jet trainer used by

the USAF. The T-38C Pacer Classic III Fuselage Structural Modification Kit Integration program (“PC III”) and the

Talon Repair Inspection and Maintenance (“TRIM”) program are expected to increase the structural service life of the

T-38 beyond 2030. In 2015, CPI Aero was awarded Phase 2 of PC III and has received purchase orders valued at approximately $2

million from the USAF to provide structural modification kits for the PC III aircraft structural modification program. Through

December 31, 2022, we have received approximately $23 million in orders on this program.

T-38

Pacer Classic III, Phase 3 and TRIM: In July 2019, the Company announced a new $65.7 million IDIQ contract from the USAF

for the final phase of PC III as well as TRIM. The TRIM program is a separate USAF structural modification effort that will extend

the structural service life of T-38A and T-38 model types, as well as T-38C models that were not modified during PC III. Through

December 31, 2020, the Company had received orders valued at approximately $15.3 million for the PC III, Phase 3 and TRIM programs,

and in 2021, the Company announced it had received three separate orders for additional requirements valued at approximately $16.2

million. In addition, CPI Aero received orders valued at approximately $2.3 million in 2022, bringing total orders under this

long term contract to approximately $34 million.

Commercial

Aircraft – Subcontracts with Prime Contractors

Embraer

Phenom 300: The Phenom 300 is a twin-engine, executive jet produced by Brazilian aircraft company Embraer that can carry

between six and 10 passengers and a crew of two. We have been producing engine inlet assemblies for Embraer under a long-term

agreement we entered into in 2012. We have received approximately $49 million in orders on this program through December 31, 2022.

We estimate the potential value of the program to be in excess of $56 million.

Gulfstream

G650/G650ER/G700: The Gulfstream G650 is a twin-engine business jet airplane produced by Gulfstream

Aerospace that can be configured to carry from 11 to 18 passengers. Gulfstream began the G650 program in 2005 and revealed it

to the public in 2008. The G650 is Gulfstream’s largest and fastest business jet. The G650ER is an extended range version

of the aircraft. In 2020, Gulfstream announced the launch of a new derivative the G700. In March 2008, Spirit AeroSystems, Inc.

awarded us a contract to provide fixed leading edges for the Gulfstream G650 business jet, and derivative models, a commercial

program that Spirit was supporting. In December 2014, Spirit transferred its work-scope on this program to Triumph Group. Due

to the impact of the COVID-19 pandemic, in May 2020, Triumph Group cancelled nearly all open orders with the Company. On May 27,

2020, Triumph Group announced it had reached an agreement in principle to sell the G650 wing program to Gulfstream Aerospace,

and on June 12, 2020, we received a joint communication from Gulfstream Aerospace and Triumph Group that stated Gulfstream’s

intention to continue to purchase G650 wing components from the Company. Since October of 2020, we received purchase orders directly

from Gulfstream for wing components for use on the G650, G650ER and/or G700 aircraft valued at approximately $4 million. The Company

completed deliveries to Gulfstream in 2022.

8

Backlog

We

produce custom assemblies pursuant to long-term contracts and customer purchase orders. Funded backlog consists of aggregate funded

values under such contracts and purchase orders, excluding the portion previously included in operating revenues pursuant to Accounting

Standards Codification Topic 606 (“ASC 606”). Unfunded backlog is the estimated amount of future orders under the

expected duration of the program. Substantially all of our unfunded backlog is subject to termination at will and rescheduling,

without significant penalty. Funds are often appropriated for programs or contracts on a yearly or quarterly basis, even though

the contract may call for performance that is expected to take a number of years. Therefore, our funded backlog does not include

the full value of our contracts.

The

total backlog at December 31, 2022 is primarily comprised of long-term programs with Raytheon (NGJ-MB; Advanced Tactical Pods,

B-52 Radar Rack), USAF (T-38), Boeing (A-10), Sikorsky (UH-60 and CH-53K), NGC (E-2D), Lockheed Martin (F-16; F-35), Collins Aerospace

(MS-110 and TacSAR pods) and Embraer (Phenom 300). Funded backlog is primarily from purchase orders under long-term contracts

with the USAF (T-38), Boeing (A-10), Sikorsky (UH-60), Raytheon (NGJ-MB, Advanced Tactical Pods, B-52 Radar Rack), Lockheed Martin

(F-16; F-35), NGC (E-2D), Collins Aerospace (MS-110 and TacSAR pods) and Embraer (Phenom 300).

Our

total backlog as of December 31, 2022 and 2021 was as follows:

Approximately

98% of the total amount of our backlog at both December 31, 2022 and 2021 was attributable to government contracts. Our backlog

attributable to government contracts at December 31, 2022 and 2021 was as follows:

Our

backlog attributable to commercial contracts at December 31, 2022 and 2021 was as follows:

Material

and Parts

We

subcontract production of substantially all parts incorporated into our products to third-party manufacturers under firm fixed

price orders. Our decision to purchase certain components generally is based upon whether the components are available to meet

required specifications at a cost and with a delivery schedule consistent with customer requirements. From time to time, we are

required to purchase custom made parts from sole suppliers and manufacturers in order to meet specific customer requirements.

We

obtain our raw materials from several commercial sources. Although certain items are only available from limited sources of supply,

we believe that the loss of any single supplier would not have a material adverse effect on our business.

9

COVID-19

Coronavirus Pandemic Impact on Our Business

The

outbreak of the COVID-19 coronavirus was declared a pandemic by the World Health Organization during our first quarter of 2020.

During the latter part of that quarter and subsequent to that quarter end, the COVID-19 pandemic grew, causing non-essential businesses

to shut down and many people to observe the shelter-in-place directive from our state government. Our business and operations

and the industries in which we operate have been impacted by public and private sector policies and initiatives in the U.S. to

address the transmission of COVID-19, such as the imposition of travel restrictions and the adoption of remote work. The COVID-19

pandemic has contributed to a general slowdown in the global economy, continued supply chain challenges and an adverse impacts

to the businesses of certain of our customers and suppliers. During 2020 in response to the COVID-19 impact on our business, we

took actions to preserve capital and protect the long-term needs of our businesses, including negotiating progress payments with

our customers and reducing discretionary spending.

During

2021 and 2022, we continued to follow and adapt measures implemented in 2020 in an attempt to reduce the adverse effects of COVID-19

on our business, workplace and workforce. For example, we have curtailed discretionary spending and 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 experienced a decrease in the impact of COVID-19.

However, we do continue to experience employees and business partners with new COVID-19 diagnoses on an intermittent basis and

we take needed steps to mitigate these impacts on the Company’s operation as they occur.

For

more information on the current and potential impact of the COVID-19 pandemic on our business, see Risk Factors included in Part

I, Item 1A of this Annual Report on Form 10-K

Government

Regulation

Environmental

Regulation

We

are subject to regulations administered by the U.S. Environmental Protection Agency, the U.S. Occupational Safety and Health Administration,

various state, county, and local agencies acting in cooperation with federal and state authorities. Among other things, these

regulatory bodies impose restrictions to control air, soil, and water pollution, to protect against occupational exposure to chemicals,

including health and safety risks, and to require notification or reporting of the storage, use, and release of certain hazardous

chemicals and substances. The extensive regulatory framework imposes compliance burdens and risks on us. Governmental authorities

have the power to enforce compliance with these regulations and to obtain injunctions or impose civil and criminal fines in the

case of violations.

The

Comprehensive Environmental Response, Compensation and Liability Act of 1980 (“CERCLA”) imposes strict, joint and

several liability on the present and former owners and operators of facilities that release hazardous substances into the environment.

The Resource Conservation and Recovery Act of 1976 (“RCRA”) regulates the generation, transportation, treatment, storage,

and disposal of hazardous waste. In New York State, the handling, storage, and disposal of hazardous substances are governed by

the Environmental Conservation Law, which contains the New York counterparts of CERCLA and RCRA. In addition, the Occupational

Safety and Health Act, which requires employers to provide a place of employment that is free from recognized and preventable

hazards that are likely to cause serious physical harm to employees, obligates employers to provide notice to employees regarding

the presence of hazardous chemicals and to train employees in the use of such substances.

Our

operations require the use of a limited amount of chemicals and other materials for painting and cleaning, including solvents

and thinners, which are classified under applicable laws as hazardous chemicals and substances. We follow all federal, state and

local rules and regulations regarding the disposal of these chemicals and associated waste. We have obtained a permit from the

Town of Islip, New York, Building Division in order to maintain a paint booth containing flammable liquids.

Federal

Aviation Administration Regulation

We

are subject to regulation by the Federal Aviation Administration (“FAA”) under the provisions of the Federal Aviation

Act of 1958, as amended. The FAA prescribes standards and licensing requirements for aircraft and aircraft components. We are

subject to inspections by the FAA and may be subjected to fines and other penalties (including orders to cease production) for

noncompliance with FAA regulations. Our failure to comply with applicable regulations could result in the termination of or our

disqualification from some of our contracts, which could have a material adverse effect on our operations.

Government

Contract Compliance

Our

government contracts and sub-contracts are subject to the procurement rules and regulations of the U.S. Government. Many of the

contract terms are dictated by these rules and regulations. Specifically, cost-based pricing is determined under the Federal Acquisition

Regulation (“FAR”), which provide guidance on the types of costs that are allowable in establishing prices for goods

and services under U.S. Government contracts. For example, costs such as those related to charitable contributions, advertising,

interest expense, and public relations are unallowable, and therefore not recoverable through sales. During and after the fulfillment

of a government contract, we may be audited in respect of the direct and allocated indirect costs attributed thereto. These audits

may result in adjustments to our contract costs. Additionally, we may be subject to U.S. Government inquiries and investigations

because of our participation in government procurement. Any inquiry or investigation can result in fines or limitations on our

ability to continue to bid for government contracts and fulfill existing contracts. We believe that we are in compliance with

all federal, state, and local laws and regulations governing our operations and have obtained all material licenses and permits

required for the operation of our business.

10

The

U.S. Government generally has the ability to terminate our contracts, in whole or in part, without prior notice, for convenience

or for default based on performance. If a U.S. Government contract were to be terminated for convenience, we generally would be

protected by provisions covering reimbursement for costs incurred on the contract and profit on those costs, but not the anticipated

profit that would have been earned had the contract been completed. In the unusual circumstance where a U.S. Government contract

does not have such termination protection, we attempt to mitigate the termination risk through other means. Termination resulting

from our default may expose us to liability and could have a material adverse effect on our ability to compete for other contracts.

The U.S. Government also has the ability to stop work under a contract for a limited period of time for its convenience. In the

event of a stop work order, we generally would be protected by provisions covering reimbursement for costs incurred on the contract

to date and for costs associated with the temporary stoppage of work on the contract. However, such temporary stoppages and delays

could introduce inefficiencies for which we may not be able to negotiate full recovery from the U.S. Government, and could ultimately

result in termination for convenience or reduced future orders on certain contracts. Additionally, we may be required to continue

to perform for some period of time on certain of our U.S. Government contracts, even if the U.S. Government is unable to make

timely payments.

Insurance

We

maintain a $2.0 million general liability insurance policy, a $100 million products liability insurance policy, and a $5.0 million

umbrella liability insurance policy. Additionally, we maintain $10.0 million of director and officers’ liability insurance.

We believe this coverage is adequate for claims that have been and may be brought against us, and for the types of products presently

marketed because of the strict inspection standards imposed on us by our customers before they take possession of our products.

Additionally, the FAR generally provide that we will not be held liable for any loss of or damage to property of the U.S. Government

that occurs after the U.S. Government accepts delivery of our products and that results from any defects or deficiencies in our

products unless the liability results from willful misconduct or lack of good faith on the part of our managerial personnel.

Proprietary

Information

None

of our current assembly processes or products is protected by patents. We rely on proprietary know-how and information and employ

various methods to protect the processes, concepts, ideas, and documentation associated with our products. These methods, however,

may not afford complete protection and there can be no assurance that others will not independently develop such processes, concepts,

ideas, and documentation.

CPI

Aero® is a registered trademark of the Company.

Human

Capital Management

Our

ability to attract, develop and retain top talent across all of our business functions, and particularly in highly technical areas,

has a significant impact on organizational success. Accordingly, our human capital management strategy places a significant focus

on both attracting a diverse, highly skilled workforce and engaging and developing talent from within by creating a work environment

that promotes inclusion and equitability. By providing our valued employees the opportunity to enhance their skillsets, develop

their careers and pursue excellence through numerous training and development opportunities, we consistently emphasize the importance

of innovation and continuous improvement throughout our organization.

We

attract and compensate our employees by offering a competitive total rewards package which includes benefits, resources, and programs

that support health, physical, mental, and financial wellness. The benefits package we offer, coupled with employee recognition

opportunities and employee engagement activities help create a comprehensive employee experience. We periodically benchmark our

benefits programs and associated costs to remain competitive.

As

of December 31, 2022, we had 208 full-time employees as compared to 249 full-time employees as of December 31, 2021. On an as-needed

basis, we employ temporary personnel with specialized disciplines to fill staffing gaps. We do not have any employees represented

by a union, and we believe that our relations with our employees are good. We provide our team members with ongoing opportunities

to share thoughts and perspectives on company and employment-related matters through surveys, all-hands meetings, and management

open door policies. Our management, with oversight from the Compensation and Human Resources Committee of our board of directors,

monitors the hiring, retention, and management of our employees and regularly conducts succession planning to ensure that we continue

to cultivate the pipeline of talent needed to operate our business.

In

response to the COVID-19 pandemic, we began allowing employees to work from home and made changes to shift work to promote social

distancing among our manufacturing personnel. We are implementing a continuing work from home program to provide our employees

with flexibility and a competitive work benefit. We are prepared to implement shift changes should an uptick in COVID-19 require

such a response.

11

During

the first quarter of 2022, the Company implemented a cost reduction initiative designed to improve operational efficiency and

reduce costs during fiscal year 2022. Management has reallocated resources and reduced operating and general administrative expenses

to more properly align the Company’s costs to revenue given the timing differences between the conclusion of certain mature

programs and the commencement of new programs in 2022. In connection with the cost reduction initiative, the Company executed

a headcount reduction and furlough action in March 2022 and implemented cost controls and cuts during the balance of fiscal year

2022. The Company recorded severance costs related to the headcount reduction in its first fiscal quarter of 2022 and the cost

reductions of these actions positively impacted the financial results of the Company beginning in the second fiscal quarter of

2022.

Diversity

and Inclusion

We

value diversity and inclusion in our workforce as we understand that diversity of background, thought, and experience leads to

greater innovation and improved business results. We are committed to increasing and retaining diversity at all levels of our

workforce, and focus on diversity and inclusion throughout our recruitment, hiring, and

onboarding processes. Over the last two years, we have increased diversity on our board of directors by 16% and executive management

team by 40%.

Across

our total employee population and based on employees who self-identify, as of December 31, 2022, approximately 20% of our workforce

are female, 33% are multicultural and 5% are veterans.

Safety

Ensuring

the safety and well-being of our employees is a top priority. The goal of our safety program is to increase safety knowledge and

awareness throughout the organization to ensure occupational health, reduce risk, and prevent incidents. We regularly benchmark

our safety performance, self-audit our safety compliance, and provide our employees with safety-related training. We conduct an

investigation, including root cause analysis and corrective action, any time a safety incident or a near miss occurs.

Our

Safety Committee is comprised of employees from various disciplines throughout the organization who meet on a regular basis to

execute continuous improvement strategies, develop methods to increase ownership of safety throughout the organization, establish

new safety initiatives, and assess safety performance.

We

monitor the effectiveness of our safety program by comparing recordable incidents and incident severity year over year. We measure

the number of safety incidents with the total recordable incident rate (“TRIR”) metric and the severity of incidents

with the days away restricted and transferred (“DART”) metric. The table below represents our result from the two

most recent calendar years:

TRIR

= total number of recordable cases x 200,000 / total hours worked

DART

= number of cases with days away from work x 200,000 / total hours worked by all employees

Community

Involvement

Having

a positive impact on the community around us is one of our most important values. We donate to local charitable organizations,

such as United Way of Long Island, through both monetary contributions, as well as “drives” to collect and deliver

employee donated food and school supplies. We actively engage and educate local high school students from surrounding districts

about the manufacturing and engineering industry and career trajectory. This includes, hosting educational experiences and shop

tours with high school and trade school classes, participating in career development fairs and other industry events, and offering

internship and apprenticeship opportunities for students from local trade schools. In addition to educational involvement, members

of our leadership team participate on the boards of the local aviation college and trade associations that support and advance

the interests of the local community.

Item

1A. RISK FACTORS

In

addition to other risks and uncertainties described in this Annual Report on Form 10-K, the following material risk factors should

be carefully considered in evaluating our business because such factors may have a significant impact on our business, operating

results, liquidity, and financial condition. As a result of the risk factors set forth below, actual results did and could continue

to differ materially from those projected in any forward-looking statements.

12

Risks

Related to Our Business

We

depend on government contracts for a significant portion of our revenues.

We

are a supplier, either directly or as a subcontractor, to the U.S. Government and its agencies. We depend on government contracts

for a significant portion of our business. If we are suspended or barred from contracting with the U.S. Government, if our reputation

or relationship with individual federal agencies were impaired, whether due to the recent restatements and errors in our financial

statements or otherwise, or if the U.S. Government otherwise ceased doing business with us or significantly decreased the amount

of business it does with us, our business, prospects, financial condition, and operating results would be materially adversely

affected.