Item 7, “Management’s Discussion and Analysis of Financial Condition and Results of Operations”) and will depend on
our earnings, if any, our capital requirements and financial condition, and other relevant factors. Our board of directors does not intend
to declare any cash or other dividends in the foreseeable future, but instead intends to retain earnings, if any, for use in our business
operations.
Sales
of Unregistered Securities and Repurchase of Equity Securities
There
were no sales of unregistered equity securities and no repurchases of our outstanding common stock during the year ended December 31,
2025.
Securities
Authorized for Issuance under Equity Compensation Plans
The
following table sets forth certain information at December 31, 2025 with respect to our equity compensation plans that provide for the
issuance of options, warrants or rights to purchase our securities:
Equity Compensation Plans Approved by Security Holders — $ — 845,984
Equity Compensation Plans Not Approved by Security Holders — — —
Long-term
equity incentives are an important component of compensation and are designed to align the interests of our executive officers and directors
who receive long-term equity awards with the Company’s long-term performance and to increase shareholder value. The Company has
awarded long-term incentive compensation pursuant to three plans:
2025
Long-Term Incentive Plan. The 2025 Long-Term Incentive Plan authorizes the grant of 800,000 shares of our company common stock which
may be granted in the form of stock options, stock appreciation rights, restricted stock, restricted stock units, performance shares,
and other stock-based awards. As of December 31, 2025, we have granted 177,976 shares under this plan and 622,024 shares remained available
for grant under this plan.
2016
Long-Term Incentive Plan. The 2016 Long-Term Incentive Plan, as amended, authorizes the grant of 2,200,000 shares of our common
stock, which may be granted in the form of stock options, stock appreciation rights, restricted stock, deferred stock, stock reload options,
and other stock-based awards, to employees, officers, directors, and consultants of the Company. As of December 31, 2025, we have granted
1,978,404 shares under this plan and 221,596 shares remained available for grant under this plan.
Performance
Equity Plan 2009. The Performance Equity Plan 2009 authorizes the grant of 500,000 stock options, stock appreciation rights,
restricted stock, deferred stock, stock reload options, and other stock-based awards. As of December 31, 2025, we have granted 497,636
shares under this plan and 2,364 shares remained available for grant.
20
Item 6. [RESERVED]
Not
applicable.
The
following discussion and analysis of our financial condition and results of operations should be read together with our consolidated
financial statements and related notes appearing elsewhere in this Annual Report on Form 10-K. Some of the information contained in this
discussion and analysis includes forward-looking statements involving risks and uncertainties and should be read together with the “Risk
Factors” section of this Annual Report on Form 10-K. Such risks and uncertainties could cause actual results to differ materially
from the results described in or implied by the forward-looking statements contained in the following discussion and analysis.
Recent
Developments
On
December 12, 2025, the Company entered into the Loan and Security Agreement with Western Alliance Bank (the “Bank”). The
Loan and Security Agreement provides for a revolving line of credit in the maximum principal amount of $10.0 million (the “Revolving
Line”) and a term loan in the original principal amount of $10.0 million (the “Term Loan” and, together with the Revolving
Line, the “Credit Facilities”).
In
connection with entering into the Loan and Security Agreement, the Company used a portion of the proceeds of the Credit Facilities, including
the full amount of the Term Loan and borrowings under the Revolving Line in the amount of $6,220,722 to repay in full all outstanding
obligations under that certain Amended and Restated Credit Agreement, dated as of March 24, 2016, (as amended), among the Company, the
several lenders from time to time parties thereto and BankUnited, N.A., as sole arranger, administrative agent and collateral agent (the
“BankUnited Credit Agreement”). Upon such repayment, the BankUnited Credit Agreement and the related loan documents were
terminated in accordance with their terms, and all liens and security interests securing the obligations thereunder were released. The
Company did not incur any early termination or prepayment penalties in connection with the termination of the BankUnited Credit Agreement.
Business
Operations
We
are engaged in the contract production of structural aircraft assemblies for fixed wing aircraft and helicopters in both the commercial
and defense markets. We also participate in the aerosystems sector through our production of reconnaissance pod structures and fuel panel
systems. Within the global aerostructures and aerosystems supply chain, we are either a Tier 1 supplier to aircraft OEMs or a Tier 2
subcontractor to major Tier 1 manufacturers. We also are a prime contractor to the U.S. DOD, primarily the USAF. In conjunction with
our assembly operations, we provide engineering, program management, supply chain management and kitting, and MRO services.
Critical
Accounting Estimates
The
preparation of financial statements in conformity with US GAAP requires management to make estimates and assumptions that affect the
reported amounts of certain assets and liabilities, revenues and expenses, and disclosure of contingencies during the reporting period.
Significant estimates and assumptions include revenue recognition, and the valuation of deferred income taxes. Actual results could differ
from those estimates.
We
believe that the following discussion addresses our critical accounting policies which require management’s most difficult, subjective
and complex judgments, often as a result of the need to make estimates about the effect of matters that are inherently uncertain. For
more discussion of these and other significant accounting policies, refer to Part
II, Item 8, Note 1 “Principal Business Activity and Summary of Significant Accounting Policies”
in our notes to our consolidated financial statements included elsewhere in this Annual Report on Form 10-K.
Revenue
Recognition
In
accordance with ASC 606, the Company recognizes revenue when it transfers control of a promised good or service to a customer in an amount
that reflects the consideration it expects to be entitled to in exchange for the good or service. The majority of the Company’s
performance obligations are satisfied over time as the Company (i) sells products with no alternative use to the Company and (ii) has
an enforceable right to recover costs incurred plus a reasonable profit margin for work completed to date. The application of this method
requires management to make estimates of total contract costs and progress toward completion.
21
Under
the over-time revenue recognition model, revenue and gross profit are recognized over the contract period as work is performed based
on the relationship of actual costs incurred to total estimated costs at completion (the cost-to-cost method). These estimates are reviewed
periodically as work progresses and adjustments to estimated costs may affect the timing and amount of revenue and gross profit recognized.
See Part II, Item 8, Note 1, “Principal Business Activity and Summary of Significant Accounting Policies,” in the notes to
the consolidated financial statements included in this Form 10-K for additional information regarding the Company’s revenue recognition
policy.
Deferred
Income Taxes – Valuation Allowance
On
a quarterly basis, we assess the realizability of our deferred tax assets against future sources of taxable income and record a valuation
allowance if, based on the available evidence, it is more likely than not (defined as a likelihood of more than 50%) that all or a portion
of the deferred tax assets will not be realized.
In
assessing the need for a valuation allowance, the Company evaluates both positive and negative evidence regarding the realizability of
deferred tax assets, including future reversals of existing taxable temporary differences, projected future taxable income, loss carryback
and tax-planning strategies. Greater weight is generally given to objectively verifiable evidence, such as cumulative losses in recent
years, which may represent significant negative evidence regarding realizability.
Results
of Operations
The
following discussion provides an analysis of our results of operations and should be read in conjunction with the accompanying consolidated
financial statements and notes thereto.
Revenue
Revenue for the year ended December 31, 2025 was
$69,262,124 compared to $81,078,864 for the year ended December 31, 2024, representing a decrease of $11,816,740, or 14.6%. The
decrease was driven primarily by an unfavorable contract adjustment associated with the termination of the Boeing A-10 Main Landing Gear
Pods program, and lower revenue recognized on the T-38 Pacer Classic program, partially offset
by the commencement of the L3Harris NGJ Low-Band Pods program.
Revenue
generated from prime government contracts for the year ended December 31, 2025 was $7,415,434 compared to $11,677,152 for the year ended
December 31, 2024, a decrease of $4,261,718, or 36.5%. This decrease primarily reflects lower revenue recognized on the T-38 Pacer Classic
program.
Revenue
generated from government subcontracts for the year ended December 31, 2025 was $55,547,679 compared to $64,704,370 for the year ended
December 31, 2024, a decrease of $9,156,691, or 14.2%. The decrease was primarily related to an
unfavorable contract adjustment associated with the termination of the Boeing A-10 Main Landing Gear Pods program.
Revenue
generated from commercial contracts for the year ended December 31, 2025 was $6,299,011 compared to $4,697,342 for the year ended December
31, 2024, an increase of $1,601,669 or 34.1%. The increase in revenue was primarily driven by the commencement of production on our Embraer
Phenom-100 Engine Inlet Assemblies and Collins Compac Enclosures programs.
Cost
of sales
Cost
of sales for the year ended December 31, 2025 was $58,706,055 compared to $63,840,803 for the year ended December 31, 2024, representing
a decrease of $5,134,748 or 8.0%.
The
components of cost of sales were as follows:
Years ended
Procurement
for the year ended December 31, 2025 was $36,588,501 compared to $40,383,090 for the year ended December 31, 2024, a decrease of $3,794,589
or 9.4%. This decrease was driven primarily by the termination of the Boeing A-10 Main Landing Gear Pods program.
22
Labor
costs for the year ended December 31, 2025 were $5,924,180 compared to $7,303,563 for the year ended December 31, 2024, a decrease
of $1,379,383 or 18.9%. The decrease was primarily driven by the termination of the Boeing A-10 Main Landing Gear Pods program
and timing of work performed on the F-16 Rudder Island program.
Factory
overhead costs for the year ended December 31, 2025 were $16,193,374 compared to $16,154,150 for the year ended December 31, 2024, an
increase of $39,224 or 0.2%.
Gross
profit
Gross
profit for the year ended December 31, 2025 was $10,556,069 compared to $17,238,061 for the year ended December 31, 2024, a decrease
of $6,681,992 or 38.8%. Gross profit percentage (“gross margin”) for the year ended December 31, 2025 was 15.2% compared
to 21.3% for the year ended December 31, 2024.
Favorable/(Unfavorable)
Adjustments to Gross Profit
During
the years ended December 31, 2025 and 2024, we made changes in estimates to various contracts. Such changes in estimates resulted in
net unfavorable adjustments to gross profit totaling $10,171,038 and $3,750,020 for the years ended December 31, 2025 and December 31,
2024. The decrease was primarily related to an unfavorable contract adjustment associated with the termination of the Boeing A-10 Main
Landing Gear Pods program.
Selling,
general and administrative expenses
Selling,
general and administrative expenses (“SG&A”) for the year ended December 31, 2025 were $10,732,451 compared to $10,506,439
for the year ended December 31, 2024, an increase of $226,012 or 2.2%. The increase was primarily due to higher legal fees partially
offset by a decrease in office expenses.
Interest
expense
Interest
expense for the year ended December 31, 2025 was $1,567,840, compared to $2,288,834 for the year ended December 31, 2024, a decrease
of $720,994 or 31.5%. The decrease was the result of lower average outstanding debt balances, lower interest rates during 2025, and the
refinancing of our prior credit facility at a lower interest rate.
(Loss)
income before provision for income taxes
(Loss)
income before provision for income taxes for the year ended December 31, 2025 was $(1,744,222) compared to $4,442,788 for the year ended
December 31, 2024, a decrease of $6,187,010 or 139.3%. The decrease was driven by the decrease in gross profit discussed above and the
increase in SG&A, partially offset by the decrease in interest expense described above.
Provision
(benefit) for income taxes
The
income tax (benefit) for the year ended December 31, 2025 was $(900,861), which was an effective tax (benefit) rate of (51.6%), as compared
to income tax expense of $1,143,454 for the year ended December 31, 2024, which was an effective tax rate of 25.7%. The income tax benefit
recorded in 2025 was primarily due to the application of federal and state statutory tax rates and an increase in the income tax benefit
attributable to the research and development credit. The income tax expense recorded in 2024 was primarily due to the application of
federal and state statutory tax rates, partially offset by a decrease in income tax expense attributable to the research and development
credit.
Net
(loss) income
Net
(loss) income for the year ended December 31, 2025 was $(843,361) compared to $3,299,334 for the year ended December 31, 2024, a decrease
of $4,142,695 or 125.6%. The decrease in net income was driven primarily by the reduction in gross margin related to an unfavorable contract
adjustment associated with the termination of the Boeing A-10 Main Landing Gear Pods program, partially offset by lower interest expense
and the income tax benefit.
23
(Loss)
earnings per share
Basic
(loss) earnings per share was $(0.07) for the year ended December 31, 2025 calculated using 12,788,937 weighted average shares outstanding,
compared to $0.26 for the year ended December 31, 2024, calculated using 12,593,213 weighted average shares outstanding, representing
a decrease of $0.33 per share, or 126.9%. Diluted earnings (loss) per share was $(0.07) for the year ended December 31, 2025 calculated
using 12,788,937 weighted average shares outstanding compared to $0.26 for the year ended December 31, 2024 calculated using 12,709,237
weighted average shares outstanding, representing a decrease of $0.33 per share, or 126.9%. The decrease in basic and diluted earnings
per share was driven primarily by the unfavorable adjustment associated with the termination of
the Boeing A-10 Main Landing Gear Pods program.
Business
Outlook
The
statements in the “Business Outlook” section and other forward-looking statements of this Annual Report on Form 10-K are
subject to revision during the course of the year in our quarterly earnings releases and SEC filings and at other times.
Liquidity
and Capital Resources
General
At
December 31, 2025, we had working capital of $20,388,755 compared to working capital of $17,122,111 at December 31, 2024, an increase
of $3,266,644, or 19.1%. The increase is primarily the result of a decreases in accrued expenses.
Cash
Flow
A
large portion of our cash is used to pay for materials and processing costs associated with contracts that are in process and which do
not provide for progress payments. Costs for which we are not able to bill on a progress basis are made up of contract assets on our
consolidated balance sheet and represent the aggregate costs and related earnings for uncompleted contracts for which the customer has
not yet been billed. These costs and earnings are recovered upon shipment of products and presentation of billings in accordance with
contract terms.
Because
ASC 606 requires us to use estimates in determining revenues, costs and profits and in assigning those amounts to accounting periods,
there can be a significant disparity between earnings as reported and the actual cash we receive during any reporting period. Accordingly,
it is possible that we experience shortfalls in our cash flow and may need to borrow money or take steps to delay certain cash outflows
until the reported earnings materialize into actual cash receipts.
Several
of our programs require us to expend up-front costs that may have to be amortized over a portion of production units. In the case
of significant program delays and/or program cancellations, we could experience margin degradation, which may be material for costs that
are not recoverable. Such charges and the loss of up-front costs could have a material impact on our liquidity and results of operations.
We
continue to work to obtain better payment terms with our customers, including accelerated progress payment arrangements, as well as exploring
alternative funding sources.
At
December 31, 2025, our cash balance was $899,199 compared to $5,490,963 at December 31, 2024, a decrease of $4,591,764 or 83.6%. The
decrease was driven by $(5,200,025) in cash used by operations including $1,979,189 increase in accounts receivable and a $1,638,161
increase in prepaid expenses and other current assets, $(65,036) used for the purchase of equipment, partially offset by proceeds
from financing activities of $673,297.
Western
Alliance Bank Loan and Security Agreement
This
information is set forth in Note 8 to the consolidated financial statements, which appears following Item 15 of this Annual Report on
Form 10-K and is incorporated herein by reference.
Leases
This
information is set forth in Note 9 to the consolidated financial statements, which appears following Item 15 of this Annual Report on
Form 10-K and is incorporated herein by reference.
24
Liquidity
Our
working capital requirements can vary significantly, depending in part on the timing of the conclusion of mature programs and new program
awards and the payment terms with our customers and suppliers. There is currently availability for borrowings under the Western Alliance
Bank Loan and Security Agreement, and the Company finances its operations primarily from internally generated cash flow. Note 8 to the
consolidated financial statements included in Part II – Item 8 contains additional information regarding the Western Alliance Bank
Loan and Security Agreement.
Management
has (i) obtained and regularly seeks additional progress payment and advance payment customer contract funding provisions, (ii) maintained
procedures to minimize investments in inventory and contract assets, (iii) remained focused on its military customer base and (iv) maintained
its approximately $91.8 million backlog of funded orders, 97% of which are for military programs. Based on these factors, management
believe there are no conditions or events currently anticipated in the coming year that would cause the Company to be unable to meet
its obligations or otherwise continue as a going concern. However, there can be no assurance that these plans will achieve their intended
results.
Contractual
Obligations
The
table below summarizes information about our contractual obligations as of December 31, 2025 and the effects these obligations are expected
to have on our liquidity and cash flow in future periods.
Payments Due By Period
Inflation
Inflation
historically has not had a material effect on our operations, although the current inflationary environment in the U.S., and its impact
on interest rates, supply chains, labor markets and general economic conditions, are factors that the Company actively monitors in an
effort to mitigate potential negative impacts and risks to the Company. The majority of the Company’s long-term contracts with
its customers and suppliers reflect fixed pricing. When bidding for work, the Company takes inflation risk and supply-side pricing risk
into account when preparing its proposals.
25
Item 7A. QUANTITATIVE AND QUALITATIVE DISCLOSURE ABOUT MARKET RISK
Interest
Rate Risk
We
are exposed to interest rate risk on variable-rate credit facilities for which $18,373,672 was outstanding at December 31, 2025. Additionally,
if we were to refinance our long-term debt in the future, it could be refinanced at higher interest rates.
Item 8. FINANCIAL STATEMENTS AND SUPPLEMENTARY DATA
The
consolidated financial statements and supplementary data appear following Item 15 of this Annual Report on Form 10-K and are incorporated
herein by reference.
See
the Company’s Current Report on Form 8-K, filed with the SEC on June 17, 2024 and the Company’s Current Report on Form 8-K,
filed with the SEC on April 25, 2025.
Item 9A. CONTROLS AND PROCEDURES
Evaluation
of Disclosure Controls and Procedures
Our
management, with the participation of our Chief Executive Officer and Chief Financial Officer, has evaluated the effectiveness of our
disclosure controls and procedures, as of the end of the period covered by this Annual Report on Form 10-K. Based on such evaluation,
our Chief Executive Officer and Chief Financial Officer have concluded that as of such date, our disclosure controls and procedures were
effective to provide reasonable assurance that information we are required to disclose in reports
that we file or submit under the Exchange Act is (1) recorded, processed, summarized, and reported within the time periods specified
in the Securities and Exchange Commission's (SEC) rules and forms and (2) accumulated and communicated to our management, including our
CEO and CFO, as appropriate to allow timely decisions regarding required disclosures.
Management’s
Annual Report on Internal Control over Financial Reporting
Management
is responsible for establishing and maintaining adequate internal control over financial reporting. Internal control over financial reporting,
as defined in Exchange Act Rules 13a-15(f) and 15d-15(f), is a process designed by, or under the supervision of, our principal executive
and principal financial officers and effected by our board of directors, management and other personnel, to provide reasonable assurance
regarding the reliability of financial reporting and the preparation of financial statements for external purposes in accordance with
U.S. GAAP and includes those policies and procedures that:
Because
of its inherent limitations, internal control over financial reporting may not prevent or detect misstatements. Projections of any evaluation
of effectiveness to future periods are subject to the risk that controls may become inadequate because of changes in conditions, or that
the degree of compliance with the policies or procedures may deteriorate.
Management
conducted an evaluation of the effectiveness of internal control over financial reporting based on criteria established in Internal
Control- Integrated Framework (2013) issued by the Committee of Sponsoring Organizations of the Treadway Commission (“COSO”).
Based on this evaluation, management concluded that the Company’s internal control over financial reporting was effective at the
reasonable assurance level as of December 31, 2025.
During
the second quarter, a material weakness was identified concerning the application of ASC-470 – Debt, more specifically as it relates
to 470-10-45-11, that if a company is in violation of a debt covenant and it is probable that the borrower will not be able to comply
with the covenant at measurement dates within the next twelve months, this debt shall be classified as short term. Due to the financial
impact of the Boeing A-10 program, the Company was not able to meet the financial covenants for the second quarter and therefore obtained
a waiver to remediate the non-compliance. Because the waiver did not extend for twelve months from the date of the Company’s financial
statements, there was a potential misclassification of short-term and long-term debt.
26
On
August 19, 2025, the Company executed a Fifteenth Amendment to the Credit Agreement (the “Fifteenth Amendment”). The amendment
revised certain financial covenants to reflect specified adjustments for the quarters ended March 31, 2025 and June 30, 2025. These covenant-based
adjustments were designed to offset the effect of the termination of the Company’s Boeing A-10 Program on covenant compliance
A
material weakness is a deficiency, or a combination of deficiencies, in internal control over financial reporting, such that there is
a reasonable possibility that a material misstatement of the Company’s annual or interim consolidated financial statements will
not be prevented or detected on a timely basis.
The
Company implemented new controls designed to remediate the aforementioned material weakness pertaining to the application of ASC-470
– Debt during the quarter ended September 30, 2025. As of December 31, 2025 the Company believes it has fully remediated the identified
material weakness.
Conclusion
As
described above, under the supervision and with the participation of our management, including our Chief Executive Officer and Chief
Financial Officer, we conducted an evaluation of our disclosure controls and procedures (as defined in Exchange Act Rules 13a-15(e) and
15d-15(e)) as of December 31, 2025, management believes that the consolidated financial statements and related financial information
included in this Annual Report on Form 10-K fairly present in all material respects our financial position, results of operations, and
cash flows as of and for the dates presented, and for the periods ended on such dates, in conformity with U.S. GAAP.
The
Company is a non-accelerated filer. Accordingly, it is not required to obtain an auditor attestation report on internal control over
financial reporting for the year ended December 31, 2025.
Changes
in Internal Control Over Financial Reporting
There were no changes in our internal control
over financial reporting during the quarter ended December 31, 2025 that materially affected, or are reasonably likely to materially affect,
our internal control over financial reporting.
Item 9B. OTHER INFORMATION
None.
Item 9C. DISCLOSURE REGARDING FOREIGN JURISDICTIONS THAT PREVENT INSPECTIONS
None.
PART
III
Item 10. DIRECTORS, EXECUTIVE OFFICERS AND CORPORATE GOVERNANCE
The
information required by this Item 10 is incorporated herein by reference from the Company’s definitive proxy statement for its
2026 Annual Meeting of Shareholders or will be included in an amendment to this Annual Report on Form 10-K, in either case, to be filed
with the Securities and Exchange Commission not later than 120 days after December 31, 2025.
Insider
Trading Policy and Procedures
The
Company has adopted an insider trading policy governing the purchase, sale, and other dispositions of the Company’s securities
by its directors, officers, and employees. The Company believes that its insider trading policy is reasonably designed to promote compliance
with applicable insider trading laws, rules, and regulations. The Company’s insider trading policy is filed as Exhibit 19 to the
Company’s Annual Report on Form 10-K for the year ended December 31, 2024 and is incorporated herein by reference.
27
Item 11. EXECUTIVE COMPENSATION
The
information required by this Item 11 is incorporated herein by reference from the Company’s definitive proxy statement for its
2026 Annual Meeting of Shareholders or will be included in an amendment to this Annual Report on Form 10-K, in either case, to be filed
with the Securities and Exchange Commission not later than 120 days after December 31, 2025.
The
information required by this Item 12 is incorporated herein by reference from the Company’s definitive proxy statement for its
2026 Annual Meeting of Shareholders or will be included in an amendment to this Annual Report on Form 10-K, in either case, to be filed
with the Securities and Exchange Commission not later than 120 days after December 31, 2025.
The
information required by this Item 13 is incorporated herein by reference from the Company’s definitive proxy statement for its
2026 Annual Meeting of Shareholders or will be included in an amendment to this Annual Report on Form 10-K, in either case, to be filed
with the Securities and Exchange Commission not later than 120 days after December 31, 2025.
Item 14. PRINCIPAL ACCOUNTANT FEES AND SERVICES
The
information required by this Item 14 is incorporated herein by reference from the Company’s definitive proxy statement for its
2026 Annual Meeting of Shareholders or will be included in an amendment to this Annual Report on Form 10-K, in either case, to be filed
with the Securities and Exchange Commission not later than 120 days after December 31, 2025.
PART
IV
Item 15. EXHIBITS AND FINANCIAL STATEMENT SCHEDULES
(a) The following documents are filed as part of this report:
(1)
Financial Statements:
Report of Independent Registered Public Accounting Firm
Consolidated Balance Sheets as of December 31, 2025 and 2024
Notes to Financial Statements
(2)
Financial Statement Schedules:
None.
(3)
The following Exhibits are filed as part of this report:
Exhibit No. Description
28
4.1* Securities of the Registrant.
23.1* 23.2* Consent of CBIZ CPAs P.C. Consent of Marcum LLP
101.INS* XBRL Instanse Document.
101.SCH* XBRL Taxonomy Extension Scheme Document.
101.CAL* XBRL Taxonomy Extension Calculation Linkbase Document.
101.DEF* XBRL Taxonomy Extension Definition Linkbase Document.
101.LAB* XBRL Taxonomy Extension Label Linkbase Document.
101.PRE* XBRL Taxonomy Extension Presentation Linkbase Document.
104* Cover page formatted as Inline XBRL and contained in Exhibit 101.
* Filed herewith.
** Management contract compensatory plan or arrangement.
*** Furnished herewith.
Item 16. FORM 10-K SUMMARY
None
29
CPI
AEROSTRUCTURES, INC. AND SUBSIDIARIES
INDEX
TO FINANCIAL STATEMENTS
Report of Independent Registered Public Accounting Firm (PCAOB ID: 199) F-2
Report of Independent Registered Public Accounting Firm (PCAOB ID: 688) F-4
Consolidated Financial Statements:
Consolidated Balance Sheets as of December 31, 2025 and 2024 F-5
Notes to Consolidated Financial Statements F-9 - F-26
F-1
Report
of Independent Registered Public Accounting Firm
To
the Shareholders and Board of Directors of
CPI Aerostructures, Inc. and Subsidiaries
Opinion
on the Financial Statements
We have audited the accompanying consolidated balance sheet of CPI Aerostructures,
Inc. and Subsidiaries (the “Company”) as of December 31, 2025, the related consolidated statements of operations, shareholders’
equity and cash flows for the year ended December 31, 2025, and the related notes (collectively referred to as the “financial statements”).
In our opinion, the financial statements present fairly, in all material respects, the financial position of the Company
as of December 31, 2025, and the results of its operations and its cash flows for the year ended December 31, 2025, in conformity with
accounting principles generally accepted in the United States of America.
Basis
for Opinion
These financial statements are the responsibility
of the Company's management. Our responsibility is to express an opinion on the Company's financial statements based on our audit. We
are a public accounting firm registered with the Public Company Accounting Oversight Board (United States) ("PCAOB") and are
required to be independent with respect to the Company in accordance with the U.S. federal securities laws and the applicable rules and
regulations of the Securities and Exchange Commission and the PCAOB.
We conducted our audit in accordance with the standards
of the PCAOB. Those standards require that we plan and perform the audit to obtain reasonable assurance about whether the financial statements
are free of material misstatement, whether due to error or fraud. The Company is not required to have, nor were we engaged to perform,
an audit of its internal control over financial reporting. As part of our audit we are required to obtain an understanding of internal
control over financial reporting but not for the purpose of expressing an opinion on the effectiveness of the Company's internal control
over financial reporting. Accordingly, we express no such opinion.
Our audit included performing procedures to assess
the risks of material misstatement of the financial statements, whether due to error or fraud, and performing procedures that respond
to those risks. Such procedures included examining, on a test basis, evidence regarding the amounts and disclosures in the financial statements.
Our audit also included evaluating the accounting principles used and significant estimates made by management, as well as evaluating
the overall presentation of the financial statements. We believe that our audit provides a reasonable basis for our opinion.
Critical
Audit Matters
The critical audit matters communicated below are matters arising from
the current period audit of the financial statements that were communicated or required to be communicated to the audit committee and
that: (1) relate to accounts or disclosures that are material to the financial statements and (2) involved our especially challenging,
subjective, or complex judgments. The communication of critical audit matters does not alter in any way our opinion on the financial statements,
taken as a whole, and we are not, by communicating the critical audit matters below, providing separate opinions on the critical audit
matters or on the accounts or disclosures to which they relate.
Revenue
Recognition
Description
of the Matter
As discussed in Notes 1 and 2 to the consolidated financial statements,
the Company recognizes revenue from long-term contracts with performance obligations satisfied over time by using an input method based
on costs incurred as it best depicts the Company’s progress toward satisfaction of the performance obligation. Under this method,
revenue arising from such contracts is recognized as work is performed based on the ratio of costs incurred to date to the total estimated
costs at completion of the performance obligations. The estimation of these costs requires judgment by the Company given the unique product
specifications and requirements for contracts related to the design, development, and manufacture of the product. During the year ended
December 31, 2025, the Company recognized approximately $68.6 million of revenue over time.
Subjective judgment is required by management in determining the assumptions
in estimating the estimated costs to complete on contracts for which revenue is recognized over time using a cost-to-cost model. The principal
consideration in determining revenue recognition related to long term contracts with performance obligations satisfied over time was a
critical audit matter was the complexity and subjective nature of management’s estimates regarding the initial costs and expected
costs to complete.
F-2
The
primary procedures we performed to address this critical audit matter included the following:
/s/
CBIZ CPAs P.C.
CBIZ
CPAs P.C
We have served as the Company’s auditor since 2024 (such date takes
into account the acquisition of the attest business of Marcum llp by CBIZ CPAs P.C. effective
November 1, 2024).
Melville,
New York
March 31, 2026
F-3
Report
of Independent Registered Public Accounting Firm
To the Shareholders and Board of Directors of
CPI Aerostructures, Inc. and Subsidiaries
Opinion on the Financial Statements
We have audited the accompanying consolidated balance
sheet of CPI Aerostructures, Inc. and Subsidiaries (the “Company”) as of December 31, 2024, the related consolidated statements
of operations, shareholders’ equity and cash flow for the year ended December 31, 2024, and the related notes (collectively referred
to as the “financial statements”). In our opinion, the financial statements present fairly, in all material
respects, the financial position of the Company as of December 31, 2024, and the results of its operations and its cash flow for the year
ended December 31, 2024 in conformity with accounting principles generally accepted in the United States of America.
Basis for Opinion
These financial statements are the responsibility
of the Company's management. Our responsibility is to express an opinion on the Company's financial statements based on our audit. We
are a public accounting firm registered with the Public Company Accounting Oversight Board (United States) ("PCAOB") and are
required to be independent with respect to the Company in accordance with the U.S. federal securities laws and the applicable rules and
regulations of the Securities and Exchange Commission and the PCAOB.
We conducted our audit in accordance with the standards
of the PCAOB. Those standards require that we plan and perform the audit to obtain reasonable assurance about whether the financial statements
are free of material misstatement, whether due to error or fraud. The Company is not required to have, nor were we engaged to perform,
an audit of its internal control over financial reporting. As part of our audit we are required to obtain an understanding of internal
control over financial reporting but not for the purpose of expressing an opinion on the effectiveness of the Company's internal control
over financial reporting. Accordingly, we express no such opinion.
Our audit included performing procedures to assess
the risks of material misstatement of the financial statements, whether due to error or fraud, and performing procedures that respond
to those risks. Such procedures included examining, on a test basis, evidence regarding the amounts and disclosures in the financial statements.
Our audit also included evaluating the accounting principles used and significant estimates made by management, as well as evaluating
the overall presentation of the financial statements. We believe that our audit provides a reasonable basis for our opinion.
/s/ Marcum llp
Marcum llp
We have served as the Company’s auditor from 2024 to 2025.
Melville, New York
March 31, 2026
F-4
CPI
AEROSTRUCTURES, INC. AND SUBSIDIARIES
CONSOLIDATED
BALANCE SHEETS
ASSETS
Current Assets:
LIABILITIES AND SHAREHOLDERS’ EQUITY
Current Liabilities:
Current portion of line of credit — 2,750,000
Long-term debt, net of current portion 9,690,890 —
Commitments and Contingencies (see note 15)
Shareholders’ Equity:
The
accompanying notes are an integral part of the consolidated financial statements.
F-5
CPI
AEROSTRUCTURES, INC. AND SUBSIDIARIES
CONSOLIDATED
STATEMENTS OF OPERATIONS
Years
ended December 31, 2025 and 2024
(Loss) income before benefit (provision) for income taxes (1,744,222 ) 4,442,788
(Loss) income per common share-basic $ (0.07 ) $ 0.26
(Loss) income per common share-diluted $ (0.07 ) $ 0.26
Shares used in computing (loss) income per common share:
The
accompanying notes are an integral part of the consolidated financial statements.
F-6
CPI
AEROSTRUCTURES, INC. AND SUBSIDIARIES
CONSOLIDATED
STATEMENTS OF SHAREHOLDERS’ EQUITY
Years
ended December 31, 2025 and 2024
Shares withheld for tax withholdings — — (52,502 ) — (52,502 )
Shares withheld for tax withholdings — — (88,917 ) — (88,917 )
The
accompanying notes are an integral part of the consolidated financial statements.
F-7
CPI
AEROSTRUCTURES, INC. AND SUBSIDIARIES
CONSOLIDATED
STATEMENTS OF CASH FLOWS
Years
ended December 31, 2025 and 2024
Cash flows from operating activities:
Changes in operating assets and liabilities:
Net cash (used in) provided by operating activities (5,200,025 ) 3,558,935
Cash flows from investing activities:
Net cash used in investing activities (65,036 ) (403,854 )
Cash flows from financing activities:
Proceeds from line of credit 8,373,672 —
Proceeds from long-term debt 10,000,000 —
Repayments of insurance financing obligation (281,496 ) (338,037 )
Taxes paid related to net share settlement of equity awards (88,917 ) (52,502 )
Debt issuance costs (282,946 ) —
Net cash provided by (used in) financing activities 673,297 (2,758,912 )
Supplemental disclosure of cash flow information:
Supplemental disclosure of non-cash item:
The
accompanying notes are an integral part of the consolidated financial statements.
F-8