UNITED
STATES
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
Form
10-K
ANNUAL
REPORT PURSUANT TO SECTION 13 OR 15(d) OF
THE SECURITIES EXCHANGE ACT OF 1934
For
the fiscal year ended December 31, 2025
Commission
file number 1-11398
CPI
AEROSTRUCTURES, INC.
(Exact
name of registrant as specified in its charter)
(State or other jurisdiction of (I.R.S. Employer
incorporation or organization) Identification No.)
91
Heartland Blvd., Edgewood, New York11717
(Address of principal executive offices)
(631)586-5200
(Registrant’s telephone number, including area code)
Securities
registered pursuant to Section 12(b) of the Act:
Title of Each Class Trading Symbol(s) Name of each exchange on which registered
Common Stock, $.001 par value CVU NYSE American
Securities
registered pursuant to Section 12(g) of the Act: None
Indicate
by check mark if the registrant is a well-known seasoned issuer, as defined in Rule 405 of the Securities Act.
Yes
☐ No ☒
Indicate
by check mark if the registrant is not required to file reports pursuant to Section 13 or Section 15(d) of the Act.
Yes
☐ No ☒
Indicate
by check mark whether the registrant (1) has filed all reports required to be filed by Section 13 or 15(d) of the Securities Exchange
Act of 1934 during the preceding 12 months (or for such shorter period that the registrant was required to file such reports), and (2)
has been subject to such filing requirements for the past 90 days.
Yes
☒ No ☐
Indicate
by check mark whether the registrant has submitted electronically every Interactive Data File required to be submitted pursuant to Rule
405 of Regulation S-T (§232.405 of this chapter) during the preceding 12 months (or for such shorter period that the registrant
was required to submit such files). Yes ☒ No ☐
Indicate
by check mark whether the registrant is a large accelerated filer, an accelerated filer, a non-accelerated filer, a smaller reporting
company, or an emerging growth company. See definitions of “large accelerated filer,” “accelerated filer,” “smaller
reporting company,” and “emerging growth company” in Rule 12b-2 of the Exchange Act.
Large accelerated filer ☐ Accelerated filer ☐ Non-accelerated filer ☒
Smaller reporting company ☒ Emerging growth company ☐
If
an emerging growth company, indicate by check mark if the registrant has elected not to use the extended transition period for complying
with any new or revised financial accounting standards provided pursuant to Section 13(a) of the Exchange Act. ☐
Indicate
by check mark whether the registrant has filed a report on and attestation to its management’s assessment of the effectiveness
of its internal control over financial reporting under Section 404(b) of the Sarbanes-Oxley Act (15 U.S.C. 7262(b)) by the registered
public accounting firm that prepared or issued its audit report. ☐
If
securities are registered pursuant to Section 12(b) of the Act, indicate by check mark whether the financial statements of the registrant
included in the filing reflect the correction of an error to previously issued financial statements. ☐
Indicate
by check mark whether any of those error corrections are restatements that required a recovery analysis of incentive-based compensation
received by any of the registrant’s executive officers during the relevant recovery period pursuant to §240.10D-1(b). ☐
Indicate
by check mark whether the registrant is a shell company (as defined in Rule 12-b-2 of the Exchange Act).
Yes
☐ No ☒
As
of June 30, 2025 (the last business day of the registrant’s most recently completed second fiscal quarter), the aggregate market
value of the registrant’s common stock (based on its reported last sale price on NYSE American on June 30, 2025 of $3.50) held
by non-affiliates of the registrant was $41,170,073.
As
of March 26, 2026, the registrant had 13,209,669shares of common stock, $.001 par value, outstanding.
Documents
Incorporated by Reference:
Portions
of the CPI Aerostructures, Inc. Proxy Statement to be filed with the Securities and Exchange Commission within 120 days after the year
covered by this Annual Report on Form 10-K with respect to the registrant’s 2026 Annual Meeting of Stockholders are incorporated
by reference into Part III hereof.
CPI
AEROSTRUCTURES, INC. AND SUBSIDIARIES
FORM
10-K
ANNUAL REPORT
FOR
THE FISCAL YEAR ENDED DECEMBER 31, 2025
TABLE
OF CONTENTS
FORWARD-LOOKING STATEMENTS 1
PART I 1
Item 1. BUSINESS 1
Item 1A. RISK FACTORS 11
Item 1B UNRESOLVED STAFF COMMENTS 18
Item 1C CYBERSECURITY 18
Item 2. PROPERTIES 19
Item 3. LEGAL PROCEEDINGS 19
Item 4. MINE SAFETY DISCLOSURES 19
Item 6. [RESERVED] 21
Item 7A. QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISK 26
Item 8. FINANCIAL STATEMENTS AND SUPPLEMENTARY DATA 26
Item 9A CONTROLS AND PROCEDURES 26
Item 9B. OTHER INFORMATION 27
Item 9C DISCLOSURE REGARDING FOREIGN JURISDICTIONS THAT PREVENT INSPECTIONS 27
PART III 27
Item 10. DIRECTORS, EXECUTIVE OFFICERS AND CORPORATE GOVERNANCE 27
Item 11. EXECUTIVE COMPENSATION 28
Item 14. PRINCIPAL ACCOUNTANT FEES AND SERVICES 28
Item 15. EXHIBITS AND FINANCIAL STATEMENT SCHEDULES 28
INDEX TO FINANCIAL STATEMENTS F-1
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, including statements within the meaning of Section 27A of the Securities Act of 1933 and Section 21E of the Securities Exchange
Act of 1934. When used in this Annual Report on Form 10-K and in future filings by us with the Securities and Exchange Commission (“SEC”),
the words or phrases “believe”, “expect,” “anticipate,” “intend”, “plan”,
“may,” “will”, “should,” “could”, “estimate,” or similar expressions are
intended to identify forward-looking statements. In addition, any statements that refer to projections, forecasts or other characterizations
of future events or circumstances, including any underlying assumptions, are forward-looking statements. These statements are not guarantees
of future performance and are subject to risks and uncertainties. There can be no assurance that future developments will be those that
have been anticipated. We may not actually achieve the plans, intentions or expectations disclosed in our forward-looking statements.
Further, such statements are subject to certain risks and uncertainties that could cause actual results to differ materially from historical
earnings and those presently anticipated or projected. Numerous factors, including the risk factors described in “Item 1A: “Risk
Factors” in this Annual Report on Form 10-K, could cause our actual results to differ materially from those expressed in our
forward-looking statements. We assume no obligation to revise or update any forward-looking statements for any reason except as required
by law.
The
forward-looking statements contained in this Annual Report on Form 10-K speak only as of the date of this report. Except as required
by applicable law, we undertake no obligation to update or revise any forward-looking statements to reflect subsequent events, changed
circumstances, or changes in expectations.
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”) manufactures structural assemblies, integrated systems, and kitting services for the domestic
and international aerospace and defense (“A&D”) markets. Our products are generally used by customers in the production
and refurbishment of fixed wing aircraft, helicopters, electronic warfare (“EW”) systems, intelligence, surveillance, and
reconnaissance (“ISR”) systems, missiles, autonomous systems, and other sophisticated A&D products. CPI Aero is a prime
contractor to the U.S. Department of Defense as well as a Tier 1 subcontractor to some of the largest aerospace and defense contractors
in the world. CPI Aero is recognized as a leader within the international aerospace market in such areas as aircraft structural assemblies,
military advanced tactical pod structures, engine air inlets, and complex welded products. CPI Aero’s international customer base
enjoys a unique combination of large-company capabilities, matched with small-company value, responsiveness, and personal customer service.
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 45 years of experience as a contractor. Our team possesses extensive technical expertise, program and supply chain 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
CPI
Aerostructures, Inc. was founded in 1980 as a technical consulting firm under the name Composite Products International Inc. Within several
years, the Company expanded its activities to include the manufacture of aircraft structural assemblies for U.S. military aircraft under
contracts with the U.S. Government. By the late 1980s, the Company had broadened its operations to include the manufacture of aerostructures
for commercial aircraft. During the 1990s, the Company became publicly traded and changed its name to CPI Aerostructures, Inc. Government
contracts continued to represent a significant portion of the Company’s business, while the Company also increased its participation
in the commercial aerospace market and expanded its relationships with original equipment manufacturers. On September 5, 2000, the Company’s
common stock was listed on the American Stock Exchange (now known as NYSE American). During the following decade, the Company expanded
its operations through additional aerospace program awards and by broadening the range of complex, mixed-commodity assemblies it manufactures.
In 2018, CPI Aero acquired WMI, which expanded the Company’s manufacturing capabilities to include complex fusion welding and large-diameter
tube bending. The acquisition also included Miller Stuart and Compac Development Corporation, which added capabilities in the fabrication
of electrical cables, harnesses and enclosures. CPI Aero currently manufactures structural assemblies, integrated systems and provides
repair/overhaul and kitting services for customers in the aerospace and defense industry and continues to expand its manufacturing capabilities
in support of its aerospace and defense programs.
1
Products
and Services
CPI
Aero provides a range of manufacturing and related services in support of aerospace and defense programs. These services include program
management, assembly integration, manufacturing engineering, tool design and fabrication, subcontracting, logistics, data management,
configuration control, final assembly and test, quality assurance, product support, and maintenance, repair and overhaul. Our products
are described in the following categories:
● Aerostructures:
New Production and Repair/Overhaul of Fielded Wing Structures and other Control Surfaces, Rudder Island/Drag Chute Canisters, Engine
Inlets/Nacelles, Engine Exhaust Manifolds, Aircraft Doors and Windows, Aircraft Steps and Racks, and other Aircraft Secondary Structures
● Aerosystems:
Airborne Pod Structures and Integration of Internal Systems, Radar Housing Structures and Integrated Radar Housing Rack Systems
● Small-to-Large
Diameter Tube Bending: Complex Ducts and Tubes in Steel, Aluminum, Titanium, and Nickel Alloys, from 1⁄4” to 5” diameter
via fully automated NC Tube bending equipment
● Complex
Specialty Welding: Fusion Welded Fluid Tanks, Aerial Refueling Probes, Plenums, Tubes and Ducts and Resistance Welding (Spot and Seam)
of fairings and complex metallic assemblies
● Electrical
Cables, Harness, and Enclosures: Wire Harnesses, Power Control Systems, Fuel Management Systems, Power Distribution Systems, Fully Integrated
Electrical Control Systems, and RF enclosures
Engineering
Services and Capabilities
As
a build-to-print structural assemblies 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 (“DFMA”), geometric
dimensioning & tolerancing (“GD&T”), and tooling concept support. CPI Aero has experience with 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 many 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 customers’ product performance requirements and incorporating product GD&T layouts and final tooling definitions
and requirements supports product realization.
CPI
Aero’s engineering team supports customer programs through engineering and manufacturing activities associated with the production
and assembly of aerostructures and aerosystems.
2
Business
Strategy
CPI
Aero’s business development strategy focuses on supporting revenue and earnings growth through the expansion of its aerospace and
defense manufacturing programs. 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 past trend of design and build
contracts. This trend aligns with CPI Aero’s build-to-print manufacturing capabilities. In addition, we expect to identify and
close contracts for which the Company can provide additional manufacturing and integration services to customers (such as 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 manufacturing 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.
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 developed over many years and multiple programs. We have also added additional
resources to our business development function to cultivate new relationships with new customers.
The
Company seeks to support customer programs through the delivery of aerostructures and aerosystems in accordance with customer specifications
and program schedules.
The
Market
CPI
Aero participates in the military aerospace market and serves a broad customer base, including defense prime contractors. The Company’s
role as a subcontractor to defense prime contractors has also provided opportunities to act as a subcontractor in the production of commercial
aircraft structures.
Over
time, our Company has expanded its capabilities and operations, including its operational, global supply chain management, program management,
and engineering capabilities, as well as its manufacturing facilities and equipment base. These developments have supported the Company’s
ability to supply larger and more complex aerostructures and aerosystems products in support of government-related programs and to pursue
opportunities within the commercial and business jet markets. The Company’s capabilities have also supported contracts related
to MRO, kitting, tube bending, welding, and electronics.
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. With respect to aerostructures products, we often compete against much larger Tier 1 suppliers, such
as Spirit Aerosystems, Kaman Aerospace, GKN Aerospace, Ducommun, and LMI Aerospace. We compete with these larger companies by delivering
products with comparable levels of quality and performance while maintaining competitive pricing for our customers.
With
respect to aerosystems products, such as our portfolio of EW and ISR integrated pod structures, we generally encounter fewer competitors
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. Our experience related to integrated pod structures, combined with our cost structure,
supports our ability to compete for 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. Our ability to combine manufacturing capabilities with the operational flexibility
and responsiveness of a smaller company supports our ability to compete for certain contracts.
3
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, and we 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 compete for these contracts based on our experience and expertise in responding to requests for proposals for
government contracts.
Our
Customers
Approximately
$5.8 million and $5.1 million of our revenue for the years ended December 31, 2025 and 2024, respectively, were from customers outside
the U.S. All other revenue for the years ended December 31, 2025 and 2024 has been attributable to customers within the U.S. We have
no assets outside the U.S.
We
serve a broad customer base in the military aerospace market, which we believe may reduce the potential impact of industry consolidation
or potential defense budget reductions. Our role as a subcontractor to defense prime contractors has also provided opportunities to act
as a subcontractor in the production of commercial aircraft structures, which we believe may 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:
●
Lockheed Martin Corporation - we provide products used in the production of Lockheed Martin Corporation’s (“Lockheed Martin”)
F-16 Fighting Falcon. We also provide structural assemblies to Sikorsky, a Lockheed Martin company (“Sikorsky”), for many
of their military helicopter platforms including the UH-60 BLACK HAWK©, MH-60 Seahawk, CH-53E and CH-53K King Stallion, and a special
purpose helicopter.
● RTX
Corporation, formerly Raytheon Technologies – we provide products to multiple business divisions of RTX Corporation (“Raytheon”):
Raytheon (Next Generation Jammer – Mid-Band Pod, Advanced Tactical Pods, Intelligence, Surveillance and Airborne Reconnaissance
Pods, Missile Wings, and Radar Racks) and Collins Aerospace (RF Enclosures).
● Northrop
Grumman Corporation – we provide structural assemblies and kitting services for the Northrop Grumman Corporation (“NGC”)
E-2D Advanced Hawkeye, various integrated radar and laser pod structures, welded tubes and aerial refueling probes, and welded fluid
tanks for a classified program.
80%
of our revenue in 2025 and 2024, was generated by subcontracts with defense prime contractors.
Our
OEM customers in the civil aviation market include:
● Embraer
S.A. Executive Jets – we provide engine inlet assemblies for Embraer S.A.’s (“Embraer”) Phenom 300 business jet
and were subsequently awarded a contract to manufacture engine inlets for the Phenom 100 business jet.
9%
and 6% of our revenue in 2025 and 2024, 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 T-38 program.
11% and 14% of our revenue
in 2025 and 2024, respectively, were generated by direct government sales.
4
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 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, 2025 exceed $210 million. We anticipate continuing to ship against
these orders into 2026.
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. CPI received follow-on orders for additional quantities of welded products
in 2024 and 2025 totaling $2.2 million with deliveries out through 2028.
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
an approximate $1.0 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 assemblies for the System Demonstration and Test Article (“SDTA”)
phase of the NGJ-MB program. All SDTA pods and AMS assemblies’ orders received were valued in excess of $60.0 million and completed
delivery as of December 31, 2022.
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, and later definitized at $32.5 million. In November 2023, Raytheon issued a
Memorandum for Record for Lot 4 with an anticipated Program Value of $32 million and an initial funding limit of $16.0 million. In December
2024, Lot 4 was fully funded at $33.4 million. In September of 2025, Lot 5 was awarded with ceiling price of $42.3 million. The Company
estimates that the total value of the NGJ-MB program through production will be in excess of $254.4 million through 2030.
UH-60
“BLACK HAWK”: The Sikorsky UH-60 BLACK HAWK helicopter is a multi-mission rotary wing aircraft used by the U.S. military
and other military operators. 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. 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 and Ducommun for products ultimately
used on the BLACK HAWK. In 2017, CPI Aero received an approximate $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. In October 2024, CPI Aero received multiple purchase orders totaling $2.3 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 with deliveries
through 2027. In late 2024, Sikorsky kicked off proposal efforts for the next SEAHAWK PBL commencing in 2027. In 2025, CPI received orders
totaling $4.1 million.
5
F-16V
Fighting Falcon: The Lockheed Martin F-16 multirole fighter aircraft widely used by military forces around the world. Approximately
3,000 operational F-16s are in service today in 25 countries. The F-16V is a newer variant sold to international air forces. 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. CPI Aero deliveries began in 2021. 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. On August 28, 2023 CPI announced the receipt of a
2nd Multiyear long-term agreement with not-to-exceed funding of $34.4 million. The total value of the RI/DCC program, including both
multi-year contracts is approximately $60 million. In 2024, Lockheed initiated proposal efforts for the next pricing period, the anticipated
LTA3. This order will see deliveries out in 2029 and 2030 worth approximately $15 million.
CH-53K
King Stallion: The CH-53K is a heavy-lift helicopter produced by Sikorsky for the U.S. Marine Corps. We manufacture build-to-specification
titanium and aluminum welded tubes, The design of these tubes is proprietary to CPI Aero. In 2023, CPI received an undefinitized ceiling
price order with a not-to-exceed of $17.4M. Through December 31, 2025, we had received orders totaling $9.4 million.
Airborne
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 $6.1 million contract modification that changes the
scope of work the Company would perform and increases the quantity of pods to be produced. In December 2024 CPI received the initial
funding for the follow-on order with additional funding received in June 2025. This program adds to the growing list of Airborne Pod
Programs in CPI’s aerosystems portfolio. The SOW includes the design and development of assembly tools and fixturing,
procurement of complex monolithic machine parts and other mixed-commodity parts, assembly and integration of the complete pod
structure, and required testing. The total funding received as of December 31, 2025 was $22.7 million with additional funded orders
anticipated in 2026.
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, 2025 is $3.9 million. NGC awarded a new spares order in November 2025 with deliveries
in 2026.
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 non-recurring and tooling phase of the program was completed and the
initial 11 racks have been delivered in 2024. CPI submitted proposals for follow-on lots of racks and an award is anticipated in 2026.
Hypersonic
Missile Wings: In March 2025, CPI received an order from Raytheon for wings for an undisclosed hypersonic missile program. This
initial contract is worth approximately $3.8 million. Raytheon also requested proposals for the next two lots of missiles.
Next
Generation Jammer – Low Band Pod: In August of 2024, the Company received a letter contract from a new customer, L3Harris
Technologies to manufacture pod structures for the Next Generation Low Band Program. The estimated value of this first development phase
of the program is approximately $12.1 million with initial Purchase Order funding received in fourth quarter of 2024 of $5 million for
long lead material, manufacturing engineering services, development of assembly tooling, and the production of the initial units. The
balance of funding, $7.1 million, for this development phase of the program is anticipated in 2026.
MS-110
& TacSAR Reconnaissance Airborne Pods: After nearly a decade-long hiatus, Raytheon (formerly Collins/UTC) awarded CPI Aero
a contract to build an upgraded reconnaissance pod for sale to foreign air forces known as the Multispectral 110 or MS110 Pod. The MS-110
represents the next generation of the DB-110 Dual Band Reconnaissance System, which provides day and nighttime wide area, long-range
imagery coverage. The initial contract was awarded to CPI in 2022 for approximately $7.5 million. Through June of 2025 an additional $2.0
million was added to the contract. Also in 2022, CPI was awarded a Developmental program for a Tactical Synthetic Aperture Radar (TacSAR)
variant of the MS-110 Optical based Pod. The TacSAR Contract was funded at $4.0 million and includes Non-Recurring Engineering, Tooling,
and one prototype pod.
6
Military
Aircraft – Prime Contracts with U.S. Government
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 $2.0 million from the USAF to provide structural
modification kits for the PC III aircraft structural modification 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 2025, CPI received
orders totaling $12.4 million. Through December 2025, CPI has received funded orders under this long-term agreement totaling $61.1 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 ten passengers and a crew of two. It is a widely used light business
jet. We have been producing engine inlet assemblies for Embraer under a Life-of-Program agreement we entered into in 2012. In January
2024, we delivered the 800th shipset of inlets. In 2025, we received funded orders totaling $2.4 million.
Embraer
Phenom 100: The Phenom 100 is a light executive business jet twin-engine, produced by Brazilian aircraft company Embraer that
can carry up to six passengers and a crew of two. Embraer unveiled the Phenom 100EX, the Company’s latest evolution from the Phenom
100 series with over 400 aircraft in operation. Embraer has informed us in December 2024 that we have been selected to produce the engine
inlets for this aircraft. In early 2025, we received an initial order of $1.4 million for Non-recurring Engineering, Tooling, and Low
rate production of Inlets and incorporated these inlets into our Life-of-Program agreement with this customer. We anticipate our first
deliveries to take place in 2026.
Backlog
We
produce custom assemblies pursuant to long-term contracts and customer purchase orders. Funded backlog consists of the aggregate funded
value of remaining performance obligations under such contracts and purchase orders, excluding the portion previously included in operating
revenues pursuant to Accounting Standards Codification Topic 606 (“ASC 606”). Unfunded backlog is the estimated amount of
future orders under the expected duration of the program. Substantially all of our unfunded backlog is subject to termination at will
and rescheduling, without significant penalty. Funds are often appropriated for programs or contracts on a yearly or quarterly basis,
even though the contract may call for performance that is expected to take a number of years. Therefore, our funded backlog does not
include the full value of our contracts.
Backlog
is not necessarily indicative of future revenues or the timing of such revenues. The realization of backlog depends on a number of factors,
including program funding, customer requirements, and the continuation of the underlying programs. Backlog may also include amounts associated
with options or anticipated orders under existing contracts that are not yet funded or awarded and are subject to change.
Our
total backlog as of December 31, 2025 and 2024 was as follows:
7
Approximately
96% and 95% of the total amount of our backlog at December 31, 2025 and 2024 was attributable to government contracts. Our backlog attributable
to government contracts at December 31, 2025 and 2024 was as follows:
Our
backlog attributable to commercial contracts at December 31, 2025 and 2024 was as follows:
Material
and Parts
We
subcontract the production of substantially all the detail parts incorporated into our products to third-party manufacturers under firm
fixed-price orders. Our decision of what to buy from which company is generally based upon whether the detail parts are available to
meet required specifications at a cost and delivery schedule consistent with CPI’s build plan and our customer’s requirements.
From time to time, we are required to purchase custom-made parts from sole suppliers or manufacturers in order to meet specific customer
requirements.
We
obtain our raw materials from several commercial sources. Although certain items are available only from limited sources of supply, we
believe that alternative sources generally are available and that the loss of any single supplier would not have a material adverse effect
on our business.
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,
and 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 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 workplace free from recognized 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 believe that we are in material compliance with
applicable 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 to maintain a paint booth containing flammable liquids.
8
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 . 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 provides 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 to such contract. 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 material compliance with applicable federal, state, and local laws
and regulations governing our operations and that we have obtained all material licenses and permits required for the operation of our
business.
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 general liability insurance coverage of $2.0 million, products liability insurance coverage of $100 million, and umbrella liability
insurance coverage of $5.0 million. Additionally, we maintain $15.0 million of directors’ and officers’ liability insurance
coverage. We believe this coverage is adequate for the types of claims that have been and may be brought against us, and for the types
of products presently marketed, particularly in light of the strict inspection standards imposed on us by our customers before they take
possession of our products. Additionally, the FAR generally provides 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. However,
there can be no assurance that our insurance coverage will be sufficient to cover all claims that may arise.
Proprietary
Information
WMI
has two programs that include Proprietary Designs: 1) The Aux Tanks for Northrop Grumman; and 2) The CH-53K Titanium and Aluminum Tubes/Ducts
for Sikorsky. Both of these products were developed as Design and Build-to-Specification. All other Company programs are Build-to-Print
utilizing design and technical data developed and provided by our customers. 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 similar processes, concepts,
ideas, or documentation.
CPI
Aero® is a registered trademark of the Company.
9
Human
Capital Management
Our
ability to attract, develop and retain top talent across all of our business functions, and particularly in highly technical areas, is
important to the operation and development of our business. Accordingly, our human capital management strategy places a significant focus
on both attracting a, highly skilled workforce and engaging and developing talent from within by creating a work environment that promotes
equitable treatment. We provide employees opportunities to enhance their skills and develop their careers through training and development
programs and emphasize innovation and continuous improvement throughout our organization. We continue to pursue opportunities that enable
us to build our talent pipeline, particularly for skilled manufacturing labor, including running an apprentice training program several
times over the course of the year and forging relationships with local high school and trade schools.
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, together with employee recognition opportunities
and employee engagement activities helps create a comprehensive employee experience. We periodically benchmark our benefits programs
and associated costs to remain competitive.
As
of December 31, 2025, we had 192 full-time employees as compared to 212 full-time employees as of December 31, 2024. 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 we maintain good relations with our employees. 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