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 UNITED
STATES
 SECURITIES AND EXCHANGE COMMISSION
 Washington, D.C. 20549

 Form

 ANNUAL
REPORT PURSUANT TO SECTION 13 OR 15(d) OF

THE SECURITIES EXCHANGE ACT OF 1934

 For
the fiscal year ended December 31, 2024

 Commission
file number 1-11398

 CPI
AEROSTRUCTURES, INC.

 (Exact
name of registrant as specified in its charter)

 New
 York

 11-2520310

 (State
 or other jurisdiction of

 (I.R.S.
 Employer

 incorporation
 or organization)

 Identification
 No.)

Heartland Blvd., Edgewood, New York 11717
(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

by check mark if the registrant is a well-known seasoned issuer, as defined in Rule 405 of the Securities Act.

 Yes
 No

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

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

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

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.

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.

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).

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 28, 2024 (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 28, 2024 of
$2.47) held by non-affiliates of the registrant was $ 29,059,837.

 As
of March 28, 2025, the registrant had 13,031,223 shares 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 2024 Annual Meeting of Stockholders
are incorporated by reference into Part III hereof.

 CPI

 FORM
 ANNUAL REPORT

 FOR
THE FISCAL YEAR ENDED DECEMBER 31, 2024

 TABLE
OF CONTENTS

 FORWARD-LOOKING STATEMENTS

 Item 1.

 BUSINESS

 Item 1A.

 RISK FACTORS

 Item 1B

 UNRESOLVED STAFF COMMENTS

 Item 1C

 CYBERSECURITY

 Item 2.

 PROPERTIES

 Item 3.

 LEGAL PROCEEDINGS

 Item 4.

 MINE SAFETY DISCLOSURES

 Item 5.

 MARKET FOR REGISTRANT'S COMMON EQUITY, RELATED STOCKHOLDER MATTERS AND ISSUER PURCHASES OF EQUITY SECURITIES

 Item 6.

 [RESERVED]

 Item 7.

 MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS

 Item 7A.

 QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISK

 Item 8.

 FINANCIAL STATEMENTS AND SUPPLEMENTARY DATA

 Item 9.

 CHANGES IN AND DISAGREEMENTS WITH ACCOUNTANTS ON ACCOUNTING AND FINANCIAL DISCLOSURE

 Item 9A

 CONTROLS AND PROCEDURES

 Item 9B.

 OTHER INFORMATION

 Item 9C

 DISCLOSURE REGARDING FOREIGN JURISDICTIONS THAT PREVENT INSPECTIONS

 Item 10.

 DIRECTORS, EXECUTIVE OFFICERS AND CORPORATE GOVERNANCE

 Item 11.

 EXECUTIVE COMPENSATION

 Item 12.

 SECURITY OWNERSHIP OF CERTAIN BENEFICIAL OWNERS AND MANAGEMENT AND RELATED STOCKHOLDER MATTERS

 Item 13.

 CERTAIN RELATIONSHIPS AND RELATED TRANSACTIONS, AND DIRECTOR INDEPENDENCE

 Item 14.

 PRINCIPAL ACCOUNTANT FEES AND SERVICES

 Item 15.

 EXHIBITS AND FINANCIAL STATEMENT SCHEDULES

 Item 16.

 FORM 10-K SUMMARY

 INDEX TO FINANCIAL STATEMENTS

 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 "believe", "intend", "plan", "will",
"will likely result", "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. 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 Form 10-K speak only as of the date of its filing. Except where required by applicable
law, we expressly disclaim a duty to provide updates to forward-looking statements after the date of this Form 10-K to reflect
subsequent events, changed circumstances, changes in expectations, or the estimates and assumptions associated with them. The
forward-looking statements in this Form 10-K are intended to be subject to the safe harbor protection provided by the federal
securities laws.

 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
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. 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 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

 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. ("CPI Aero"). 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.

 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
Corporation, 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, MRO services, and supply chain and kitting services capabilities to the A&D
industry as follows:

 Aerostructures:
 New Production and Repair/Overhaul of Fielded Wing Structures and other Control
 Surfaces, Rudder Island, 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,
 Panel Assemblies, Mechanical Door Locking Systems, and Canopy Lifting Systems

 Large
 Diameter Tube Bending: Complex Ducts and Tubes in Steel, Aluminum, Titanium,
 and Nickel Alloys

 Complex
 Specialty Welding: Fusion Welded Fluid Tanks and Resistance Welding (Spot and
 Seam) of 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 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 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 our customers' product performance needs and combining product GD&T layout and final tooling
definitions and requirements helps us maximize 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 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.

 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 have also added additional 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. 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 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 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 45 years of experience and expertise in responding to requests for
proposals for government contracts

 Our
Customers

 Approximately
$5.1 million and $6.0 million of our revenue for the years ended December 31, 2024 and 2023, respectively, were from customers
outside the U.S. All other revenue for the years ended December 31, 2024 and 2023 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 or potential defense budget reductions. 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:

 Lockheed
 Martin Corporation - we provide products used in the production of Lockheed Martin
 Corporation's ("Lockheed Martin") F-35 Joint Strike Fighter and an
 international variant of the 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 Components, and Radar Racks) and Collins Aerospace
 (RF Enclosures).

 The
 Boeing Company - we provide critical wing structure for The Boeing Company's
 ("Boeing") A-10 re-wing program and welded structures for the CH-47 Chinook
 helicopter.

 Northrop
 Grumman Corporation – we provide structural components and kits for the
 Northrop Grumman Corporation ("NGC") E-2D Advanced Hawkeye, various integrated
 radar and laser pod structures, welded tubes, and welded fluid tanks for a classified
 program.

 80%
and 81% of our revenue in 2024 and 2023, respectively, 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 recently were awarded a contract
 to manufacture engine inlets for the Phenom 100 business jet.

 6%
and 5% of our revenue in 2024 and 2023, 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. 14% and 14 % of our revenue in 2024 and 2023, 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, 2024 exceed $210 million. We anticipate shipping against these orders into 2025.

 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 totaling $2.8 million and anticipates additional orders in 2025.

 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.

 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 Lot4 with an anticipated Program Value of $32 million and an initial funding
limit of $16 million. In December 2024, Lot 4 was fully funded at $33.4M. We believe that the total value of the NGJ-MB program
through production will be in excess of $254 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. Including additional orders received in 2023, the
total purchase orders received as of December 31, 2024 aggregated $23.8 million. CPI will finish deliveries on this contract in
2025.

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. 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 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. In 2018, the Company received a new long-term agreement valued at approximately $8 million for
lock assemblies for which deliveries were completed in January 2025.

 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 and Ducommun 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.
In late 2024, Sikorsky kicked off proposal efforts for the next SEAHAWK PBL commencing in 2027. Through December 31, 2024, CPI
received orders totaling $6.5 million.

 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.
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.

 CH-53K
King Stallion: The CH-53K is a heavy-lift helicopter produced 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, 2024, we had received orders valued at more than $2.8 million from Spirit AeroSystems, Inc.

 In
addition, the Company also manufactures welded titanium and aluminum tubes for the CH-53K as a Tier 1 supplier to Sikorsky. In
August 2023, CPI received a Long-term Agreement with a ceiling price of $17.4 million and a funding limit of $7.3 million. These
tubes will be required for the multi-year on this program. This statement of work 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 $6.1 million contract modification that changes
the scope of work the Company would perform and increases the quantity of pods to be produced. The program value as of December
31, 2024 was $9.5 million for deliveries into 2025. CPI Aero has been awarded the follow-on to this development statement of work.

 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, 2024 is $3.2 million. Anticipated spares orders are expected to
continue in 2025.

 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 2025.

 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 $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.

 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. Through December 2024, CPI has received funded orders under this long term agreement totaling $48.7 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. We have been producing engine inlet assemblies for Embraer under a long-term
agreement we entered into in 2012. In January 2024, we celebrated the delivery of the 800th Shipset of Inlets. In 2024, we received
funded orders totaling $5.0 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. We anticipate our first deliveries to take place in 2025.

 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, 2024 is $510,271,000.

 Our
total backlog as of December 31, 2024 and 2023 was as follows:

 Backlog
 (Total)

 31,
 2024

 31,
 2023

 Funded

 $

 85,039,000

 $

 118,218,000

 Unfunded

 425,232,000

 395,133,000

 Total

 $

 510,271,000

 $

 513,351,000

 Approximately
95% and 97% of the total amount of our backlog at December 31, 2024 and 2023 was attributable to government contracts. Our backlog
attributable to government contracts at December 31, 2024 and 2023 was as follows:

 Backlog
 (Government)

 31,
 2024

 31,
 2023

 Funded

 $

 82,262,000

 $

 115,681,000

 Unfunded

 404,256,000

 383,574,000

 Total

 $

 486,518,000

 $

 499,255,000

 Our
backlog attributable to commercial contracts at December 31, 2024 and 2023 was as follows:

 Backlog
 (Commercial)

 31,
 2024

 31,
 2023

 Funded

 $

 2,777,000

 $

 2,537,000

 Unfunded

 20,976,000

 11,559,000

 Total

 $

 23,753,000

 $

 14,096,000

 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.

 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.

 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 continue to pursue opportunities that enable us to build
our talent pipeline, particularly for skilled 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, 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, 2024, we had 212 full-time employees as compared to 203 full-time employees as of December 31, 2023. 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.

 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. Diversity within our board of directors is 29%, and our executive management team is comprised of 50% diverse
employees.

 Across
our total employee population and based on employees who self-identify, as of December 31, 2024, approximately 20% of our workforce
are female, 36% are multicultural and 4% 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:

 Safety
 Metric

 2024

 2023

 TRIR

 4.8

 2.9

 DART

 2.7

 1.0

 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. Members of our leadership team participate on the boards of 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.

 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, 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.

 We
face risks relating to government contracts.

 The
funding of U.S. Government programs is subject to congressional budget authorization and appropriation processes. For many programs,
the U.S. Congress appropriates funds on a fiscal year basis even though a program may extend over several fiscal years. Consequently,
programs are often only partially funded initially and additional funds are committed only as Congress makes further appropriations.
Appropriations are driven by numerous factors, including geopolitical events, macroeconomic conditions, the ability of the U.S.
Government to enact relevant legislation, such as appropriations bills and continuing resolutions, the threat or existence of
a government shutdown and potential downgrades of the United States' credit rating, and risks relating to the recent U.S.
presidential election. We cannot predict the extent to which total funding and/or funding for individual programs will be included,
increased or reduced in budgets approved by Congress or be included in the scope of separate supplemental appropriations. In the
event that appropriations for any of our programs becomes unavailable, or is reduced or delayed, our contract or subcontract under
such program may be terminated or adjusted by the U.S. Government, which could have a material adverse effect on our future sales
under such program, and on our financial position, results of operations and cash flows.

 We
also cannot predict the impact of potential changes in priorities due to military transformation and planning and/or the nature
of war-related activity on existing, follow-on, or replacement programs. A shift of government priorities to programs in which
we do not participate and/or reductions in funding for or the termination of programs in which we do participate, unless offset
by other programs and opportunities, could have a material adverse effect on our financial position, results of operations, and
cash flows.

 In
addition, the U.S. Government generally has the ability to terminate contracts, completely or in part, without prior notice, for
convenience or for default based on performance. In the event of termination for the U.S. Government's convenience, contractors
are generally protected by provisions covering reimbursement for costs incurred on the contracts and profit on those costs but
not the anticipated profit that would have been earned had the contract been completed. Termination by the U.S. Government of
a contract for convenience could also result in the cancellation of future work on that program. Termination by the U.S. Government
of a contract due to our default could require us to pay for re-procurement costs in excess of the original contract price, net
of the value of work accepted from the original contract. Termination of a contract due to our default may expose us to liability
and could have a material adverse effect on our ability to compete for contracts. Additionally, we are a subcontractor on some
U.S. Government contracts. In these arrangements, the U.S. Government could terminate the prime contract for convenience or otherwise,
without regard to our performance as a subcontractor. We can give no assurance that we would be awarded new U.S. Government contracts
to offset the revenues lost as a result of the termination of any of our U.S. Government contracts.

 We
have risks associated with competing in the bidding process for contracts.

 We
obtain many of our contracts through a competitive bidding process. In the bidding process, we face the following risks:

 we
 must bid on programs in advance of their completion, which may result in unforeseen technological
 difficulties or cost overruns;

 we
 must devote substantial time and effort to prepare bids and proposals for competitively
 awarded contracts that may not be awarded to us; and

 awarded
 contracts may not generate sales sufficient to result in profitability.

 Further
consolidation in the aerospace industry could adversely affect our business and financial results.

 The
A&D industry has experienced significant consolidation, including among our customers, competitors, and suppliers. While we
believe we have positioned our Company to take advantage of opportunities to market to a broad customer base, which we believe
will reduce the potential impact of industry consolidation, there can be no assurance that industry consolidation will not impact
our business. Consolidation among our customers may result in delays in the awarding of new contracts and losses of existing business.
Consolidation among our competitors may result in larger competitors with greater resources and market share, which could adversely
affect our ability to compete successfully. Consolidation among our suppliers may result in fewer sources of supply and increased
costs to us.

 We
depend upon a select base of large prime defense contractors for the majority of our revenue, which subjects us to unique risks
which may adversely affect us.

 We
currently generate a majority of our revenues by producing products for numerous programs under contracts with three prime defense
contractors to the U.S. Government. These significant customers – Raytheon, Lockheed Martin and United States Air Force
– constituted approximately 36%, 24% and 14%, respectively of our 2024 revenue. Our revenues from these customers are diversified
over several different A&D products, programs, and subsidiaries within these customers, however, any significant change in
production rates by any of these customers would have a material effect on our results of operations and cash flows. There is
no assurance that our current significant customers will continue to buy products from us at current levels, that we will retain
any or all our existing significant customers, or that we will be able to form new relationships with other customers upon the
loss of one or more of our existing significant customers.

 We
are subject to strict governmental regulations relating to the environment, which could result in fines and remediation expenses
in the event of non-compliance.

 We
are required to comply with extensive and frequently changing environmental regulations at the federal, state, and local levels.
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 substances into the environment. This extensive regulatory framework imposes significant
compliance burdens and risks on us. In addition, these regulations may impose liability for the cost of removal or remediation
of certain hazardous substances released on or in our facilities without regard to whether we knew of, or caused, the release
of such substances. Furthermore, we are required to provide a place of employment that is free from recognized and preventable
hazards that are likely to cause serious physical harm to employees, 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 that are classified under applicable laws as hazardous chemicals and substances.
If we are found not to comply with any of these rules, regulations, or permits, we may be subject to fines, remediation expenses,
and the obligation to change our business practice, any of which could result in substantial costs that would adversely affect
our business operations and financial condition.

 We
may be subject to fines and disqualification for non-compliance with Federal Aviation Administration ("FAA") regulations.

 We
are subject to regulation by the 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 and financial condition.

 If
our subcontractors or suppliers fail to perform their contractual obligations, our contract performance, and our ability to obtain
future business and our profitability could be materially and adversely impacted.

 Most
of our contracts involve subcontracts with other companies upon which we rely to perform a portion of the services that we must
provide to our customers. There is a risk that we may have disputes with our subcontractors, including disputes regarding the
quality and timeliness of work performed by the subcontractor, customer concerns about the subcontract, our failure to extend
existing task orders or issue new task orders under a subcontract, our hiring of personnel of a subcontractor, or disputes concerning
payment. A failure by one or more of our subcontractors to satisfactorily provide on a timely basis the agreed-upon supplies or
perform the agreed-upon services may materially and adversely affect our ability to fulfill our obligations as the prime contractor.
Subcontractor performance deficiencies could result in a customer eliminating our ability to progress bill or terminate our contract
for default. A prohibition on progress billing may have an adverse effect upon our cash flow and profitability and a default termination
could expose us to liability and have a material adverse effect on our ability to compete for future contracts and orders. In
addition, a delay in our ability to obtain components and equipment parts from our suppliers may affect our ability to meet our
customers' needs and may have a material adverse effect upon our profitability.

 Due
to fixed contract pricing, increasing contract costs exposes us to reduced profitability and the potential loss of future business.

 Operating
margin is adversely affected when contract costs that cannot be billed to customers are incurred. This cost growth can occur if
estimates to complete a contract increase due to technical challenges or if initial estimates used for calculating the contract
price were incorrect. The cost estimation process requires significant judgment and expertise. Reasons for cost growth may include
unavailability and productivity of labor, the nature and complexity of the work to be performed, the effect of change orders,
the availability and cost of materials, the effect of any delays in performance, availability, and timing of funding from the
customer, natural disasters, pandemics, and the inability to recover any claims included in the estimates to complete. A significant
increase in cost estimates on one or more programs could have a material adverse effect on our financial position or results of
operations.

 We
use estimates when accounting for contracts. Changes in estimates may affect our profitability and our overall financial position.

 We
primarily recognize revenue from our contracts over the contractual period pursuant to ASC 606. Pursuant to ASC 606, revenue and
gross profit are recognized as work is performed based on the relationship between actual costs incurred and total estimated costs
at the completion of the contract. Recognized revenues that will not be billed under the terms of the contract until a later date
are recorded on our consolidated balance sheet as an asset captioned "Contract assets." Contracts where billings to
date have exceeded recognized revenues are recorded on our consolidated balance sheet as a liability captioned "Contract
liabilities." Changes to the original estimates may be required during the term of the contract. Estimates are reviewed
quarterly and the effect of any change in the estimated gross margin percentage for a contract is reflected in the consolidated
financial statements for the period the change becomes known. ASC 606 requires the use of considerable estimates in determining
revenues and profits and in assigning the amounts to accounting periods. As a result, there can be a significant disparity between
earnings (both for accounting and taxes) as reported and actual cash received by us during any reporting period.

 We
continually evaluate all the issues related to the assumptions, risks and uncertainties inherent with the application of ASC 606;
however, there is no assurance that our estimates will be accurate. If our estimates are not accurate or a contract is terminated,
we will be forced to adjust revenue in later periods. Furthermore, even if our estimates are accurate, we may have a shortfall
in our cash flow and we may need to borrow money to pay for costs until the reported earnings materialize to actual cash receipts.

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

 Our
success, among other things, is dependent on our ability to attract and retain highly qualified senior officers and employees
at all levels. Competition for key personnel is intense. Our ability to attract and retain senior officers and experienced, top
rate employees is dependent on several factors, including prevailing market conditions and compensation and benefit packages offered
by companies competing for the same talent and our reputation in the industry. If our reputation is adversely affected, we may
be unable to recruit, hire, and retain talented personnel. The inability to hire and retain these people may adversely affect
our production operations and other aspects of our business.

 We
are subject to intense competition for the skilled technicians necessary to manufacture our products.

 We
are subject to intense competition for the services of skilled technicians necessary to manufacture our products. The demand for
these individuals may increase as other manufacturers seek to bring to the U.S. manufacturing processes currently outsourced overseas.
If the U.S. economy continues to undergo a period of inflation, our labor costs may increase which could have a material adverse
effect on our business, financial condition, and results of operations.

 We
are subject to the cyclical nature of the commercial aerospace industry, and any future downturn in the commercial aerospace industry
or general economic conditions, including inflation could adversely impact the demand for our products.

 Our
business may be affected by certain characteristics and trends of the commercial aerospace industry or general economic conditions
that affect our customers, such as the current inflationary and high interest rate environment in the U.S. and the resultant impacts
on the supply chain, the labor market and the general economy, as well as fluctuations in the aerospace industry's business
cycle, varying fuel and labor costs, intense price competition and regulatory scrutiny, certain trends, including a possible decrease
in aviation activity and a decrease in outsourcing by aircraft manufacturers, or the failure of projected market growth to materialize
or continue. If these characteristics and trends adversely affect customers in the commercial aerospace industry, they may reduce
the overall demand for our products.

 Our
working capital requirements may negatively affect our liquidity and capital resources.

 Our
working capital requirements can vary significantly, depending in part on the timing of new program awards and the payment terms
with our customers and suppliers. If our working capital needs exceed our cash flows from operations, we would look to our cash
balances and any availability for borrowings under our credit facility to satisfy those needs. See "Risks Related to Our
Indebtedness and Liquidity" below.

 We
incur risks associated with new programs.

 New
programs with new technologies typically carry risks associated with design changes, development of new production tools, increased
capital and funding commitments, ability to meet customer specifications, delivery schedules and unique contractual requirements,
supplier performance, ability of the customer to meet its contractual obligations to us, and our ability to accurately estimate
costs associated with such programs. In addition, any new program may not generate sufficient demand or may experience technological
problems or significant delays in the regulatory or other certification or manufacturing and delivery schedule. If we were unable
to perform our obligations under new programs to the customer's satisfaction, if we were unable to manufacture products
at our estimated costs, or if a new program in which we had made a significant investment was terminated or experienced weak demand,
delays, or technological problems, then our business, financial condition and results of operations could be materially adversely
affected. This risk includes the potential for default, quality problems, or inability to meet specifications, as well as our
inability to negotiate final pricing for program changes and could result in low margin or forward loss contracts, and the risk
of having to write-off contract assets if they were deemed to be unrecoverable. In addition, beginning new work on existing programs
also carries risk associated with the transfer of technology, knowledge, and tooling.

 To
perform on new programs, we may be required to expend up-front costs which may not have been negotiated in our selling price.
Additionally, we may have made margin assumptions related to those costs, that in the case of significant program delays and/or
program cancellations, or if we are not successful in negotiating favorable margin on scope changes, could cause us to 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 adverse impact on our liquidity.

 We
are presently classified as a small business and the loss of our small business status may adversely affect our ability to compete
for government contracts.

 We
are presently classified as a small business under the North American Industry Classification Systems ("NAICS") industry
and product specific codes that are regulated in the U.S. by the Small Business Administration ("SBA"). We are not
considered a small business under all NAICS codes. While we do not presently derive a substantial portion of our business from
contracts that are set aside for small businesses, we are able to bid on small business set-aside contracts as well as contracts
that are open to non-small business entities. As the NAICS codes are periodically revised, it is possible that we may lose our
status as a small business. The loss of small business status would adversely affect our eligibility for special small business
programs and limit our ability to collaborate with other business entities which are seeking to team with small business entities
as may be required under a specific contract.

 Cyber
security attacks, internal system or service failures and technological changes, including the use of machine learning and generative
artificial intelligence, may adversely impact our business and operations.

 Any
system or service disruptions, including those caused by projects to improve our information technology systems, if not anticipated
and appropriately mitigated, could disrupt our business, and impair our ability to effectively provide products and related services
to our customers and could have a material adverse effect on our business. We could also be subject to systems failures, including
network, software, or hardware failures, whether caused by us, third-party service providers, intruders or hackers, computer viruses,
natural disasters, power shortages, or terrorist attacks. Cyber security threats are evolving and include, but are not limited
to, malicious software, phishing, and other unauthorized attempts to gain access to sensitive, confidential, or otherwise protected
information related to us or our products, customers, or suppliers, or other acts that could lead to disruptions in our business.
Because the techniques used by cyber-attackers to access or sabotage networks change frequently and may not be recognized until
launched against a target, we may be unable to anticipate these tactics. Any such failures to prevent or mitigate cyber-attacks
could cause loss of data and interruptions or delays in our business, cause us to incur remediation costs, or subject us to claims
and damage our reputation. In addition, the failure or disruption of our communications or utilities could cause us to interrupt
or suspend our operations or otherwise adversely affect our business. Although we utilize various procedures and controls to monitor
and mitigate the risk of these threats, including contracting with an outside cyber security firm to provide constant monitoring
of our systems, and training our employees to recognize attacks, there can be no assurance that these procedures and controls
will be sufficient. Our property and business interruption insurance may be inadequate to compensate us for all losses that may
occur because of any system or operational failure or disruption which could adversely affect our business, results of operations,
and financial condition. Moreover, expenditures incurred in implementing cyber security and other procedures and controls could
adversely affect our results of operations and financial condition.

 Our
ability to utilize our tax benefits could be substantially limited if we fail to generate sufficient income or if we experience
an "ownership change".

 As
of December 31, 2024, we had approximately $66.0 million of gross net operating losses ("NOLs") for federal tax purposes
and approximately $18.0 million of post-apportionment NOLs for state tax purposes. As a result of the Tax Cuts and Jobs Act of
2017 and the Coronavirus Aid, Relief, and Economic Security Act of 2020, NOLs arising before January 1, 2018, and NOLs arising
after January 1, 2018, are subject to different rules. Our pre-2018 NOLs totaled approximately $51.6 million; these NOLs will
expire in varying amounts from 2034 through 2037, if not utilized, and can offset 100% of future taxable income for regular tax
purposes. Our NOLs arising in 2018, and later years can be carried forward indefinitely
and can offset up to 80% of future taxable income.

 Our
ability to fully recognize the benefits from our NOLs is dependent upon our ability to generate sufficient income prior to their
expiration. In addition, our NOL carryforwards may be limited if we experience an ownership change as defined by Section 382 of
the Internal Revenue Code ("Section 382"). In general, an ownership change under Section 382 occurs if 5% shareholders
increase their collective ownership of the aggregate amount of our outstanding shares by more than 50 percentage points over a
relevant lookback period. The company completed a section 382 analysis for the year ended
December 31, 2024 and believes that no ownership change occurred during the relevant lookback period through December 31, 2024
that would limit our ability to use our NOLs.

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

 We
face potential liability for property damage, personal injury, or death as a result of the failure of products designed or manufactured
by us. Although we currently maintain product liability insurance (including aircraft product liability insurance), any material
product liability not covered by insurance could have a material adverse effect on our financial condition, results of operations,
and cash flows.

 Increased
scrutiny from investors, lenders, regulators and other market participants regarding our environmental, social, governance, sustainability
or climate responsibilities could expose us to additional costs and adversely impact our liquidity, results of operations, reputation,
employee retention, and stock price.

 There
is an increasing focus from certain investors, customers, and other key stakeholders concerning corporate responsibility, specifically
related to environmental, social, and governance ("ESG") factors. Some investors may use ESG criteria to guide their
investment strategies and, in some cases, may choose not to invest in us if they believe our policies relating to corporate responsibilities
are inadequate.

 The
ESG factors by which companies' corporate responsibility practices are assessed may change. This could result in greater
expectations of us and cause us to undertake costly initiatives to satisfy such new criteria. If we are unable to satisfy the
new corporate responsibility criteria, investors may view our policies related to corporate responsibility as inadequate. We risk
damage to our reputation in the event our corporate responsibility procedures or goals do not meet the standards or goals set
by various constituencies. In addition, if our competitors' corporate responsibility performance is perceived to be greater
than ours, potential or current investors may elect to invest in our competitors instead. Further, in the event we communicate
certain initiatives or goals related to ESG, we could fail, or be perceived to have failed, in our achievement of such initiatives
or goals. If we fail to satisfy the expectations of investors and other key stakeholders, or our initiatives are not executed
as planned, our reputation, employee retention, and willingness of our customers and suppliers to do business with us, financial
results, and stock price could be materially and adversely affected.

 Risks
Related to Our Indebtedness and Liquidity

 In
the past, CPI obtained amendments to and received waivers of and consents to non-compliance with certain covenants under our
credit facility with BankUnited and there can be no assurance that we will not fall out of compliance with our covenants in
the future.

 If we fall out of compliance with our banking covenants under our credit facility (the "BankUnited
Facility" or the "Credit Agreement") with BankUnited, N.A. ("BankUnited"), they may declare a
default under the BankUnited Facility and, among other remedies, could declare the full amount of the BankUnited Facility
immediately due and payable and could foreclose against our collateral. If this were to occur, we may be unable to secure
outside financing, if needed, to fund ongoing operations and for other capital needs. Any sources of financing that may be
available to us could also be at higher costs and require us to satisfy more restrictive covenants, which could limit or
restrict our operations, cash flows, and earnings. We cannot ensure that additional financing would be available to us or be
sufficient or available on satisfactory terms.

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

 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 no availability for borrowings under
the BankUnited Facility and the Company finances its operations from internally generated cash flow. Note 8 to our consolidated
financial statements included in Part II - Item 8 of this Annual Report on Form 10-K includes a discussion regarding the BankUnited
Facility and recent amendments thereto.

 Our
consolidated financial statements have been prepared assuming we will continue to operate as a going concern, which contemplates
the realization of assets and the satisfaction of liabilities in the normal course of business. If we become unable to continue
as a going concern, we may have to liquidate our assets and the values we receive for our assets in liquidation or dissolution
could be significantly lower than the values reflected in our consolidated financial statements. I t
is management's estimation that there will likely not be any individual conditions or combination of events that will occur
in the coming year which would cause the Company to be unable to continue as a going concern.

 Our
cost of borrowing under the Credit Agreement is based on the Prime Rate of interest per annum published in the Money Rates section
of The Wall Street Journal (the "Prime Rate") plus the margin charged by our lender, and increases in the Prime Rate
negatively impact our profitability.

 Interest
rates under our Credit Agreement are based on the Prime Rate, and as a result, we have exposure to interest rate risk. Certain
central banks, such as the U.S. Federal Reserve, effected multiple interest rate decreases in 2024. Decreases in interest rates
decrease our cost of borrowing and/or potentially make it more viable to refinance our existing indebtedness. Conversely, increases
in interest rates increase our cost of borrowing and/or potentially make it more difficult to refinance our existing indebtedness.

 We
have identified material weaknesses in our internal control over financial reporting over a number of years which adversely affected
our ability to report our financial condition and results of operations in a timely and accurate manner. The material weaknesses
led to multiple restatements of our consolidated financial statements. The material weaknesses and restatements have resulted
in our failure to meet SEC reporting obligations, affected and may continue to affect investor confidence, our stock price and
our ability to raise capital in the future, and have resulted and may continue to result in stockholder litigation.

 In June 2024, the Company entered into a settlement with the SEC to fully remediate
its material weakness in internal control over financial reporting ("ICFR") and have effective ICFR and disclosure
controls and procedures by December 31, 2024 to publicly disclose, concurrent with the filing of the Company's 2024 annual
report, on form 10-K. Per this agreement, if the Company fails to comply with these undertakings, a civil monetary penalty in
the amount of $400,000 will be due to the SEC by June 30, 2025. Although the company believes that it has appropriately remediated
its material weakness in internal controls, the risk exists that the SEC's determination could result in an adverse opinion.

 If
a future failure in internal control should occur, it may cause us to fail to meet SEC reporting obligations, negatively affect
the accuracy of our financial statements and disclosures, investor and customer confidence, our ability to raise capital in the
future and result in events of default under our banking agreement, any of which could have a negative effect on the price of
our common stock, subject us to regulatory investigations and penalties and additional stockholder litigation, and have a material
adverse impact on our business and financial condition.

 Risks
Related to Global Events

 The
conflict between Israel and Hamas, rising tensions between China and Taiwan, the ongoing war between Russia and Ukraine, and terrorist
acts and acts of war may seriously harm our business, results of operations and financial condition.

 U.S.
and global responses to actual or potential military conflicts such as Russia's invasion of Ukraine, terrorism, perceived
nuclear, biological, and chemical threats and other global political crises increase uncertainties with respect to the U.S. and
other business and financial markets. Several factors associated, directly or indirectly, with actual or potential military conflicts,
terrorism, perceived nuclear, biological, and chemical and cyber threats, and other global political crises and responses thereto,
may adversely affect the mix of products purchased by defense departments in the U.S. or other countries to platforms not serviced
by us. A shift in defense budgets to product lines we do not produce could have a material adverse effect on our business, financial
condition and results of operations.

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

 New
or increased economic and trade sanctions, including tariffs, may create economic and political uncertainties and could potentially
impact the cost of our raw materials and subassemblies having an adverse effect on our business, operations and profitability.
Although our supply chain predominantly consists of US based suppliers, any increases in their manufacturing costs may directly
affect the Company's profitability on previously negotiated Firm Fixed Price contracts.

 Item
 1B.
 UNRESOLVED
 STAFF COMMENTS

 Not
applicable.

 Item
 1C.
 CYBERSECURITY

 Cybersecurity

 Cybersecurity
risk management is an important part of our overall risk management efforts. We maintain a cybersecurity program that is comprised
of policies, procedures, controls and plans whose objective is to help us prevent and effectively respond to cybersecurity threats
or incidents. Through our cybersecurity risk management process, we continuously monitor cybersecurity vulnerabilities and potential
attack vectors to company systems. We maintain various measures to safeguard against cybersecurity threats such as monitoring
systems, security controls, policy enforcement, data encryption, employee training, tools and services from third-party providers
and management oversight to assess, identify and mitigate risks from cybersecurity threats. We conduct regular testing of these
controls and systems including vulnerability scanning, penetration testing and simulating the execution of parts of our disaster
recovery plan. All employees are required to pass a mandatory cybersecurity training course on an annual basis and we regularly
conduct phishing simulations to train our employees on how to recognize phishing attempts.

 We
have implemented cybersecurity frameworks, policies and practices which incorporate industry-standards and contractual requirements.
We also contractually flow cybersecurity regulatory requirements to our subcontractors as required by the Defense Federal Acquisition
Regulation Supplement and other government agency specific requirements. These contractual flow downs include the requirement
that our subcontractors implement certain information security controls. Additionally, we gather information and review the SOC-2
reports of certain third-parties who integrate with our systems, such as our payroll processor, managed solutions provider and
software as a service providers on an annual basis to identify and manage risk. We continuously evaluate and seek to improve and
mature our cybersecurity processes. We apply lessons learned from our defense and monitoring efforts to help prevent future attacks
and utilize data analytics to detect anomalies and search for cyber threats. Additionally, our Internal Audit function regularly
assesses our program effectiveness through audits of systems and processes to help maintain compliance with policies.

 Cybersecurity
threats of all types, such as attacks from computer hackers, cyber criminals, nation-state actors, social engineering and other
malicious internet-based activities, continue to increase. We believe that our current preventative actions and response planning
provide adequate measures of protection against cybersecurity risks. While we have implemented measures to safeguard our information
technology systems, the evolving nature of cybersecurity attacks and vulnerabilities means that these protections may not always
be effective. In 2024, we did not identify any cybersecurity threats that have materially affected or are reasonably likely to
materially affect our business strategy, results of operations, or financial condition. However, despite our efforts, we cannot
eliminate all risks from cybersecurity threats, or provide assurances that we have not experienced undetected cybersecurity incidents.
For additional information about these risks, see Part I, Item 1A, "Risk Factors" in this Annual Report on Form 10-K.

 Governance

 Our
board of directors has oversight of our strategic and business risk management and oversees management's execution of our
cybersecurity risk management program. The board receives regular updates from management on our cybersecurity risks. In addition,
management updates the board as necessary, regarding any material cybersecurity incidents, as well as incidents with lesser impact
potential. Management is responsible for identifying, assessing, and managing cybersecurity risks on an ongoing basis, establishing
processes to ensure that such potential cybersecurity risk exposures are monitored, putting in place appropriate mitigation measures,
maintaining cybersecurity policies and procedures, and providing regular reports to our board of directors. In the event of an
incident, we intend to follow our incident response plan, which outlines the steps to be followed from incident detection to mitigation,
recovery and notification, including notifying functional areas (e.g. legal), as well as senior leadership and the board, as appropriate.

 Our
Director of Information Technology leads our cybersecurity program and is responsible for our overall information security strategy,
policy, security engineering, operations and cyber threat detection and response. The Director of Information Technology manages
a team of information technology professionals with broad experience, including in cybersecurity threat assessments and detection,
mitigation technologies, incident response, insider threats and regulatory compliance. Our Director of Information Technology
brings extensive experience in cybersecurity, including conducting DIBCAC (Defense Industrial Base Cybersecurity Assessment Center)
audit and overseeing NIST (National Institute of Standards and Technology) internal audits. This expertise ensures our organization
aligns with strict industry standards and maintains robust compliance measures.

 Our
cybersecurity program is regularly assessed through management self-evaluation and ongoing monitoring procedures to evaluate our
program effectiveness, including assessments associated with internal controls over financial reporting as well as vulnerability
management through active discovery and testing to validate patching and configuration.

 Item
 2.
 PROPERTIES

 CPI
Aero's executive offices and production facility is situated in an approximately 171,000 square foot building located at
91 Heartland Blvd., Edgewood, New York 11717. We use approximately 131,000 square feet of this building for manufacturing space
and 40,000 square feet for offices and laboratories for engineering and design work. CPI Aero occupies this facility under a lease
that expires on April 30, 2026.

 Item
 3.
 LEGAL
 PROCEEDINGS

 This
information is set forth in Note 16 to our Consolidated Financial Statements, which is hereby incorporated by reference.

 Item
 4.
 MINE
 SAFETY DISCLOSURES

 Not
applicable.

 PART
II

 Item
 5.
 MARKET
 FOR REGISTRANT'S COMMON EQUITY, RELATED STOCKHOLDER MATTERS AND ISSUER PURCHASES
 OF EQUITY SECURITIES

 Our
shares of common stock are listed on the NYSE American exchange under the symbol "CVU". On March 28, 2025, there were
 157 holders of record of our shares of common stock. We believe there are
substantially more beneficial holders of our common stock.

 Dividend
Policy

 To
date, we have not paid any dividends on our common stock. Any payment of dividends in the future is within the discretion of our
board of directors (subject to the limitation on dividends contained in the BankUnited Facility, as described more fully in Part
II, Item 7, Management's Discussion and Analysis of Financial Condition and Results of Operations) and will depend on our
earnings, if any, our capital requirements and financial condition and other relevant factors. Our board of directors does not
intend to declare any cash or other dividends in the foreseeable future, but intends instead 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, 2024.

 Securities Authorized for Issuance under
Equity Compensation Plans

 The following table sets forth certain
information at December 31, 2024 with respect to our equity compensation plans that provide for the issuance of options, warrants
or rights to purchase our securities:

 Plan Category

 Number of Securities to
 be Issued upon Exercise of
 Outstanding Options,
 Warrants and Rights

 Weighted-Average
 Exercise Price of
 Outstanding Options,
 Warrants and Rights

 Number of Securities
 Remaining Available for
 Future Issuance under
 Equity Compensation
 Plans (excluding
 securities reflected in the
 first column)

 Equity Compensation Plans Approved by Security Holders

 —

 $
 —

 310,458

 Equity Compensation Plans Not Approved by Security Holders

 —

 —

 —

 Total

 —

 $
 —

 310,458

 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 two plans:

 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, 2024, we have granted 1,891,906 shares
under this plan and 308,094 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, 2024, we have granted 497,636 shares under this plan
and 2,364 shares remained available for grant.

 Item 6.
 [RESE RVED]

 Not applicable.

 Item 7.
 MANAGEMENT'S DIS CUSSION AND ANALYSIS OF FINANCIAL CONDITION
AND RESULTS OF OPERATIONS

 The following discussion and analysis of
our financial condition and results of operations should be read together with our consolidated financial statements and related
notes appearing elsewhere in this Annual Report on Form 10-K. Some of the information contained in this discussion and analysis
includes forward-looking statements involving risks and uncertainties and should be read together with the "Risk Factors"
section of this Annual Report on Form 10-K. Such risks and uncertainties could cause actual results to differ materially from the
results described in or implied by the forward-looking statements contained in the following discussion and analysis.

 Recent Developments

 On November 13, 2024, the Company entered into
a Fourteenth Amendment to the Credit Agreement (the "Fourteenth Amendment"). Under the Fourteenth Amendment, the parties
amended the Credit Agreement by: (i) extending the maturity date of the Company's existing revolving line of credit (the
"Revolving Credit Loans") to August 31, 2026; (ii) reducing the Base Rate Margin (as defined in the Credit Agreement)
from 3.50% to 2.0%; (iii) resetting the aggregate maximum principal amount of all Revolving Credit Loans to $16,890,000 from
January 1, 2025 through March 31, 2025, $16,140,000 from April 1, 2025 through June 30, 2025, $15,390,000 from July
1, 2025 through September 30, 2025, $14,640,000 from October 1, 2025 through December 31, 2025, $13,890,000 from
January 1, 2026 through March 31, 2026, $13,140,000 from April 1, 2026 through June 30, 2026, and $12,390,000 from
July 1, 2026 onward and for payments to be made by the Company to comply therewith (if any such payments are necessary), on
the first day of each such period; and (iv) requiring the Company, if it does not deliver to BankUnited, N.A. by December 31, 2025,
a commitment letter with banks and terms and conditions reasonably acceptable to the Lenders for refinancing the obligations under
the Credit Agreement, to make a payment by January 31, 2026, equal to 2% of the aggregate outstanding principal amount of
the Revolving Credit Loans as of December 31, 2025, with 50% of such payment applied to reduce the aggregate outstanding principal
and the remaining 50% retained by the Lenders as an amendment fee with respect to the Fourteenth Amendment.

 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 have
a strong and growing presence in the aerosystems sector of the market, with our production of various reconnaissance pod structures
and fuel panel systems. Within the global aerostructure and aerosystem 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. Under the over time revenue recognition model,
revenue and gross profit are recognized over the contract period as work is performed based on actual costs incurred and an estimate
of costs to complete and resulting total estimated costs at completion. 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 likelihood that we will be able to recover our deferred tax assets against future sources of taxable
income and reduce the carrying amounts of deferred tax assets by recording 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 such assets will not be realized.

 Assessing the realizability of deferred
tax assets requires the determination of whether it is more likely than not that some portion or all the deferred tax assets will
not be realized. In assessing the need for a valuation allowance, the Company considers all available positive and negative evidence,
including future reversals of existing taxable temporary differences, projected future taxable income, loss carryback and tax-planning
strategies. Generally, more weight is given to objectively verifiable evidence, such as a cumulative loss in recent years, as a
significant piece of negative evidence to overcome. For the period ended December 31, 2023, the Company achieved three years of
cumulative book and taxable income, along with projections of profitability, for which management determined that there was sufficient
positive evidence to conclude that it is more likely than not that a portion of the deferred tax assets will be realized. As such,
$14,170,891 of the valuation allowance was released during the fourth quarter of 2023. During 2024 the Company continued to assess
its ability to realize its deferred tax asset. The Company continued to be profitable in 2024 and there was no significant change
to the Company's forecast of income or its ability to realize the deferred tax asset at December 31, 2024. The increase of
$404,224 is most significantly related to the state valuation allowance.

 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,
2024 was $81,078,864 compared to $86,466,321 for the year ended December 31, 2023, representing a decrease of $5,387,457, or 6.2%. The
decrease was primarily related to various programs that neared completion in 2024 including NGC E-2D and Sikorsky HIRRS programs
coupled with the timing of work performed on the Lockheed Martin F-16 program. These decreases were partly offset by NGJ Mid Band
production and Sikorsky Welded Tubes.

 Revenue generated from prime government
contracts for the year ended December 31, 2024 was $11,677,152 compared to $11,842,145 for the year ended December 31, 2023, a
slight decrease of $164,993, or 1.4%. This decrease is the result of decreased revenue recognized on the T-38 Pacer Classic program.

 Revenue generated from government subcontracts
for the year ended December 31, 2024 was $64,704,370 compared to $69,672,602 for the year ended December 31, 2023, a decrease of
$4,968,232, or 7.1%. The decrease was primarily related to various programs that neared completion
in 2024 including NGC E-2D and Sikorsky HIRRS programs coupled with the timing of work performed on the Lockheed Martin F-16 program.
These decreases were partly offset by NGJ Mid Band production and Sikorsky Welded Tubes.

 Revenue generated from commercial contracts
for the year ended December 31, 2024 was $4,697,342 compared to $4,951,574 for the year ended December 31, 2023, a decrease of
$254,232 or 5.1%. The decrease in revenue resulted from decreased revenue recognized on the timing of work performed on the Embraer
Phenom 300 Inlet program.

 Cost of sales

 Cost of sales for the year ended December
31, 2024 was $63,840,803 compared to $69,400,693 for the year ended December 31, 2023, a decrease of $5,559,890 or 8.0%.

 The components of cost of sales were as
follows:

 Years ended

 December 31,
 2024

 December 31,
 2023

 Procurement

 $
 40,100,196

 $
 46,020,628

 Labor

 7,303,563

 7,054,308

 Factory overhead

 16,154,150

 16,028,140

 Other cost of sales

 282,894

 297,617

 Cost of sales

 $
 63,840,803

 $
 69,400,693

 Procurement for the year ended December
31, 2024 was $40,100,196 compared to $46,020,628 for the year ended December 31, 2023, a decrease of $5,920,432 or 12.9%. This
decrease is primarily the result of a decrease in procurement for the NGC E-2D MYP II OWP program, Sikorsky HIRRS program, USAF
T-38 Pacer Classic Structural Modification Kits program, offset by an increase in our Raytheon NGJ – Mid Band Pods program
 and Sikorsky Welded Tubes.

 Labor costs for the year ended December
31, 2024 were $7,303,563 compared to $7,054,308 for the year ended December 31, 2023, an increase of $249,255 or 3.5%. The increase
is primarily the result of work performed on the Boeing A-10 program, offset by decreases on our Raytheon NGJ – Mid Band
Pods program due to efficiencies.

 Factory overhead costs for the year ended
December 31, 2024 were $16,154,150 compared to $16,028,140 for the year ended December 31, 2023, an increase of $126,010 or 0.8%.

 Other cost of sales relates to items that
can increase or decrease cost of sales such as changes in inventory levels, changes in inventory valuation, changes to inventory
reserves, changes in loss contract provisions and direct charges to cost of sales. For the year ended December 31, 2024, there
were costs in the amount of $282,894 compared to $297,617 for the year ended December 31, 2023, a decrease of $14,723 or 4.9%.

 Gross profit

 Gross profit for the year ended December
31, 2024 was $17,238,061 compared to $17,065,628 for the year ended December 31, 2023, an increase of $172,433 or 1.0%. Gross profit
percentage ("gross margin") for the year ended December 31, 2024 was 21.3% compared to 19.7% for year ended December
31, 2023.

 Favorable/(Unfavorable) Adjustments
to Gross Profit

 During the years ended December 31, 2024
and 2023, we made changes in estimates to various contracts. Such changes in estimates resulted in changes in total gross profit
as net unfavorable adjustments totaling $3,750,020 and 1,450,502 for the years ended December 31, 2024 and December 31, 2023.

 Selling,
general and administrative expenses

 Selling, general and administrative expenses
("SG&A") for the year ended December 31, 2024 were $10,506,439 compared to $10,758,624
for the year ended December 31, 2023, a decrease of $252,185 or 2.3%. The decrease was primarily due to a reduction of consulting
and legal fee expenses.

 Interest expense

 Interest expense for the year ended December
31, 2024 was $2,288,834, compared to $2,455,214 for the year ended December 31, 2023, a decrease of $166,380 or 6.8%. The decrease
is the result of a year-over-year decrease in the amount of our outstanding debt under the Credit Agreement coupled with a lower
year-over-year interest rates charged.

 Income before provision for income
taxes

 Income before provision for income taxes
for the year ended December 31, 2024 was $4,442,788 compared to $3,851,790 for the year ended December 31, 2023, an increase of
$590,998 or 15.3%. The increase was driven by the aforementioned increase in gross profit and decreases in both SG&A and interest
expense described above.

 Provision (benefit) for income taxes

 The income tax (benefit) for the year ended
December 31, 2024 was $1,143,454, which was an effective tax (benefit) rate of 25.7%, as compared to the income tax (benefit) of
($13,349,414) for the year ended December 31, 2023, which was an effective tax (benefit) rate of (346.6%). The income tax recorded
in 2024 and income tax benefit realized in 2023 was primarily due to federal and state statutory rates in 2024 and the reduction
of the Company's deferred tax asset valuation allowance recorded by the Company in the fourth quarter of 2023, respectively.

 Net income for the year ended December
31, 2024 was $3,299,334 compared to $17,201,204 for the year ended December 31, 2023, a decrease of $13,901,870 or 80.8%. The decrease
in net income was driven by the 2023 income tax benefit.

 Earnings per share

 Basic earnings per share was $0.26 for
the year ended December 31, 2024 calculating utilizing 12,593,213 weighted average shares outstanding as compared to $1.40 for
the year ended December 31, 2023 calculated utilizing 12,311,219 weighted average shares outstanding, an decrease of $1.14 per
share, or 81.4%. Diluted earnings per share was $0.26 for the year ended December 31, 2024 calculated utilizing 12,709,237 weighted
average shares outstanding as compared to $1.38 for the year ended December 31, 2023 calculated utilizing 12,471,961 weighted average
shares outstanding, an decrease of $1.12 per share, or 81.2%. Decrease in the basic and diluted earnings per share are due to the
reduction of the Company's deferred tax asset valuation allowance recorded by the Company in the fourth quarter of 2023 which
favorably impacted 2023 by $1.12 per share.

 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, 2024, we had working capital
of $17,122,111 compared to working capital of $15,402,381 at December 31, 2023, an increase of $1,719,730, or 11.2%. The increase is
primarily the result of an increase in net contract assets and a decrease to accrued expenses offset by decreases in accounts receivable
and inventory, and an increase in accounts payable.

 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 components 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 the amounts to accounting periods, there can be a significant disparity
between earnings (both for accounting and tax purposes) as reported and actual cash that we receive during any reporting period.
Accordingly, it is possible that we may have a shortfall in our cash flow and may need to borrow money or take steps to defer 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, 2024, our cash balance
was $5,490,963 compared to $5,094,794 at December 31, 2023, an increase of $396,169 or 7.8%. The increase was driven by $3,558,935
in cash provided by operations, partly offset by our pay down of outstanding debt during 2024 of $2,694,498 and purchase of equipment
of $403,854.

 BankUnited Facility

 This information is set forth in Note 8
to our Consolidated Financial Statements, appearing following Item 15 of this Annual Report on Form 10-K which is hereby incorporated
by reference.

 Leases

 This information is set forth in Note 9
to our Consolidated Financial Statements, appearing following Item 15 of this Annual Report on Form 10-K which is hereby incorporated
by reference.

 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 no availability for borrowings under
the BankUnited Facility and the Company finances its operations from internally generated cash flow. Note 8 to our consolidated
financial statements included in Part II - Item 8 includes a discussion regarding the BankUnited Facility and recent amendments
thereto which provide, among other things, for increases in principal payments and the interest rate on the loans provided for
therein. Management has (i) negotiated and executed a further amendment to the Credit Agreement which extended the maturity date
of the Credit Agreement to August 31, 2026, (ii) obtained and regularly seeks additional progress payment and advance payment customer
contract funding provisions, (iii) maintained procedures to minimize investments in inventory and contract assets, (iv) remained
focused on its military customer base and (v) maintained its approximately $85.0 million backlog of funded orders, 97% of which
are for military programs. Based upon the aforementioned factors, it is management's estimation that there will likely not
be any individual conditions or combination of events that will occur in the coming year which 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 such plans will accomplish
their intended goals.

 Contractual Obligations

 The table below summarizes information
about our contractual obligations as of December 31, 2024 and the effects these obligations are expected to have on our liquidity
and cash flow in the future years.

 Payments Due By Period

 Contractual Obligations

 Total

 Less than 1
 year

 1-3 years

 4-5 years

 After 5
 years

 Line of credit

 $
 17,390,000

 $
 2,750,000

 $
 14,640,000

 $
 —

 $
 —

 Finance Leases

 26,483

 26,483

 —

 —

 —

 Operating Leases

 3,100,572

 2,162,154

 938,418

 —

 —

 Insurance Financing Agreement

 278,679

 278,679

 —

 —

 —

 Total Contractual Cash Obligations

 $
 20,795,734

 $
 5,217,316

 $
 15,578,418

 $
 —

 $
 —

 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
chain, labor markets and general economic conditions, are factors that the Company actively monitors in an attempt to mitigate
and manage potential negative impacts on and risks faced by 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 in its proposals.

 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 there was $17,390,000 outstanding at December 31, 2024. Additionally, if we were to refinance
our long-term debt, it may be refinanced at higher interest rates.

 Item 8.

 FINANCIAL STATEMENTS AND SUPPLEMENTARY DATA

 This information appears following Item
15 of this Annual Report on Form 10-K and is incorporated herein by reference.

 Item 9.

 CHANGES IN AND DISAGREEMENTS WITH ACCOUNTANTS ON ACCOUNTING AND FINANCIAL DISCLOSURE

 See the company's current Report on Form 8-K filed June
17, 2024.

 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:

 pertain to the maintenance of records that, in reasonable detail, accurately and fairly reflect the transactions and dispositions of our assets;

 provide reasonable assurance that transactions are recorded as necessary to permit preparation of financial statements in accordance with U.S. GAAP, and that our receipts and expenditures are being made only in accordance with authorizations of our management and directors; and

 provide reasonable assurance regarding prevention or timely detection of unauthorized acquisition, use or disposition of our assets that could have a material effect on our consolidated financial statements.

 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, 2024.

 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.

 In
connection with management's evaluation of the Company's internal control over financial reporting described above,
management identified a material weakness in its internal controls for the twelve months ended December 31, 2023 relating to the
inadequate review, assessment of and reporting of the Company's temporary differences between book and taxable income. The
Company remediated the aforementioned material weakness. The Company's remediation included (a) we replaced the Company's outside tax accounting and tax return preparer with a new firm (the "Tax Accounting Firm"); (b) we retained
the Tax Accounting Firm (i) to prepare the Company's income tax accounting and disclosures for the year ended December 31, 2024 and (ii)
to review the income tax accounting and disclosures prepared by the predecessor firm for the quarter ended March 31, 2024 prior to the
filing of the Form 10-Q for the quarter ended March 31, 2024; (c) we updated our financial risk assessment to reflect tax accounting as
a high risk area, and (d) we adopted a tax accounting review checklist provided by our Sarbanes-Oxley consulting firm for use by CPI's
finance management in reviewing the quarterly and annual work of the Tax Accounting Firm, beginning with the tax accounting for the quarter
ended June 30, 2024 and continuing through the year ended December 31, 2024.

 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, 2024 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.

 CPI is a non-accelerated
filer for 2024. As such, CPI is not subject to the requirement to have an auditor attestation report on internal control over financial
reporting in the 10-K filed in 2025 for 2024.

 Changes in Internal Control Over Financial Reporting

 Other than as disclosed above, there were
no changes in our internal control over financial reporting during the quarter ended December 31, 2024 that materially affected,
or are reasonably likely to materially affect, our internal control over financial reporting.

 Disclosure Pursuant to SEC Order Dated June 20, 2024

 As mandated by the SEC in its Order Instituting Cease-and-Desist Proceedings Pursuant to Section 21C of the Securities Exchange Act of 1934, dated June 20, 2024 (Release No. 34-100389) (the "SEC Order"), and as previously disclosed in the Company's Current Report on Form 8-K filed with the SEC on June 21, 2024, the Company undertook, among other things, to fully remediate its material weaknesses in ICFR and have effective ICFR and disclosure controls and procedures ("DCP") by December 31, 2024 and to publicly disclose, concurrent with the filing of this Annual Report on Form 10-K, whether, in management's opinion, the Company has fully remediated its material weaknesses in ICFR and has effective ICFR and DCP.

 In compliance with the SEC Order, management confirms that, as of December 31, 2024, in its opinion, the Company has fully remediated its material weaknesses in ICFR and that the Company's ICFR and DCP were effective as of that date.

 Item 9B.

 OTHER INFORMATION

 None.

 Item 9C.

 DISCLOSURE REGARDING FOREIGN JURISDICTIONS THAT PREVENT INSPECTIONS

 None.

 Item 10.

 DIRECTORS, EXECUTIVE OFFICERS AND CORPORATE GOVERNANCE

 I ncorporated herein by
reference from the Company's definitive proxy statement, which will be filed no later than 120 days after December 31, 2024.

 Insider Trading
Policy and Procedures

 The Company has
adopted an insider trading policy and related procedures that govern the purchase, sale, and other dispositions of Company securities
by directors, officers, and employees. This policy is designed to promote compliance with insider trading laws, rules, and regulations,
as well as NYSE American listing standards. The Company recognizes its obligation to comply with all applicable laws and regulations
regarding its own transactions in Company securities.

 The Company's
insider trading policy is filed as Exhibit 19 to this Annual Report on Form 10-K.

 Item 11.

 EXECUTIVE COMPENSATION

 I ncorporated herein by
reference from the Company's definitive proxy statement, which will be filed no later than 120 days after December 31, 2024.

 Item 12.

 SECURITY OWNERSHIP OF CERTAIN BENEFICIAL OWNERS AND MANAGEMENT AND RELATED STOCKHOLDER MATTERS

 I ncorporated herein by
reference from the Company's definitive proxy statement, which will be filed no later than 120 days after December 31, 2024.

 Item 13.

 CERTAIN RELATIONSHIPS AND RELATED TRANSACTIONS, AND DIRECTOR INDEPENDENCE

 I ncorporated herein by
reference from the Company's definitive proxy statement, which will be filed no later than 120 days after December 31, 2024.

 Item 14.

 PRINCIPAL ACCOUNTANT FEES AND SERVICES

 I ncorporated
herein by reference from the Company's definitive proxy statement, which will be filed no later than 120 days after December
31, 2024.

 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, 2024 and 2023

 Consolidated Statements of Operations for the Years Ended December 31, 2024 and 2023

 Consolidated Statements of Shareholders' Equity for the Years Ended December 31, 2024 and 2023

 Consolidated Statements of Cash Flows for the Years Ended December 31, 2024 and 2023

 Notes to Financial Statements

 (2)
Financial Statement Schedules:

 None.

 (3)
The following Exhibits are filed as part of this report:

 Exhibit
 No.

 Description

 3.1

 of Incorporation of the Company, as amended, (incorporated by reference to Exhibit 3.1 to the Company's Annual Report
 on Form 10-K, filed on August 25, 2020).

 3.1.1

 of Amendment of the Certificate of Incorporation of Composite of Precision Industries, Inc., dated May 9, 1989 (incorporated
 by reference to Exhibit 3.1.1 to the Company's Annual Report on Form 10-K, filed on August 25, 2020).

 3.1.2

 of Amendment of the Certificate of Incorporation of Consortium Products International, Inc., dated June 30, 1992 (incorporated
 by reference to Exhibit 3.1.2 to the Company's Annual Report on Form 10-K, filed on August 25, 2020).

 3.1.3

 of Amendment of the Certificate of Incorporation of CPI Aerostructures, Inc., dated August 7, 1992 (incorporated by reference
 to Exhibit 3.1.3 to the Company's Annual Report on Form 10-K, filed on August 25, 2020).

 3.1.4

 of Amendment of the Certificate of Incorporation of CPI Aerostructures, Inc., dated June 3, 1997 (incorporated by reference
 to Exhibit 3.1.4 to the Company's Annual Report on Form 10-K, filed on August 25, 2020).

 3.1.5

 of Amendment of the Certificate of Incorporation of CPI Aerostructures, Inc., dated June 16, 1998 (incorporated by reference
 to Exhibit 3.1.5 to the Company's Annual Report on Form 10-K, filed on August 25, 2020).

 3.2

 Amended and Restated By-laws of the Company (incorporated by reference to Exhibit 3.2 to the Company's Annual Report on Form 10-K/A filed on November 24, 2021).

 3.2.1

 Amended
 Article V, Section 6 of Amended and Restated By-laws of the Company (incorporated by reference to Exhibit 3.1 to the Company's
 Current Report on Form 8-K filed on November 22, 2021).

 4.1*

 Securities of the Registrant.

 10.1**

 Performance
 Equity Plan 2009 (incorporated by reference to Appendix A to the Company's Proxy Statement on Schedule 14A filed on
 April 30, 2009).

 10.2**

 2016 Long-Term Incentive Plan, as amended (incorporated by reference from Exhibit 99.1 to the Company's Registration Statement on Form S-8 filed on June 28, 2023).

 10.3.1

 Agreement
 of Lease, dated June 30, 2011, between Heartland Boys II L.P. and CPI Aerostructures, Inc. (incorporated by reference to Exhibit
 10.1 to the Company's Quarterly Report on Form 10-Q filed on August 15, 2011).

 10.3.2

 Lease
 Amendment, dated November 11, 2020, between Heartland Boys II L.P. and CPI Aerostructures, Inc. (incorporated by reference
 to Exhibit 10.3.2 to the Company's Annual Report on Form 10-K/A filed on November 24, 2021).

 10.3.3

 Second
 Lease Amendment, dated November 10, 2021, between Heartland Boys II L.P. and CPI Aerostructures, Inc. (incorporated by reference
 from Exhibit 10.1 to the Company's Current Report on Form 8-K filed on November 12, 2021).

 10.4.1

 Amended
 and Restated Credit Agreement, dated as of March 24, 2016, among CPI Aerostructures, Inc., the several lenders from time to
 time party thereto, and BankUnited, N.A. (incorporated by reference from Exhibit 10.1 to the Company's Current Report
 on Form 8-K filed on March 28, 2016).

 10.4.2

 First
 Amendment to the Amended and Restated Credit Agreement (incorporated by reference from Exhibit 10.1 to the Company's
 Current Report on Form 8-K filed on May 10, 2016).

 10.4.3

 Second
 Amendment to the Amended and Restated Credit Agreement (incorporated by reference from Exhibit 10.4.3 to the Company's
 Annual Report on Form 10-K filed on August 25, 2020).

 10.4.4

 Third
 Amendment to the Amended and Restated Credit Agreement (incorporated by reference from Exhibit 10.1 to the Company's
 Current Report on Form 8-K filed on August 16, 2018).

 10.4.5

 Fourth
 Amendment to the Amended and Restated Credit Agreement (incorporated by reference from Exhibit 10.2 to the Company's
 Current Report on Form 8-K filed on December 27, 2018).

 10.4.6

 Fifth
 Amendment to the Amended and Restated Credit Agreement (incorporated by reference from Exhibit 10.1 to the Company's
 Current Report on Form 8-K filed on June 26, 2019).

 10.4.7

 Waiver
 and Sixth Amendment to the Amended and Restated Credit Agreement (incorporated by reference from Exhibit 10.1 to the Company's
 Current Report on Form 8-K filed on August 24, 2020).

 10.4.8

 Waiver
 and Seventh Amendment to the Amended and Restated Credit Agreement (incorporated by reference from Exhibit 10.1 to the Company's
 Current Report on Form 8-K filed on May 17, 2021).

 10.4.9

 Waiver
 and Eighth Amendment to the Amended and Restated Credit Agreement (incorporated by reference from Exhibit 10.1 to the Company's
 Current Report on Form 8-K filed on October 28, 2021).

 10.4.10

 Consent,
 Waiver and Ninth Amendment to the Amended and Restated Credit Agreement (incorporated by reference from Exhibit 10.1 to the
 Company's Current Report on Form 8-K filed on April 12, 2022).

 10.4.11

 Consent, Waiver and Tenth Amendment to the Amended and Restated Credit Agreement (incorporated by reference from Exhibit 10.1 to the Company's Current Report on Form 8-K filed on August 19, 2022).

 10.4.12

 Eleventh
 Amendment to the Amended and Restated Credit Agreement (incorporated by reference from Exhibit 10.1 to the Company's
 Current Report on Form 8-K filed on November 11, 2022).

 10.4.13

 Twelfth
 Amendment to the Amended and Restated Credit Agreement (incorporated by reference from Exhibit 10.1 to the Company's
 Current Report on Form 8-K filed on March 23, 2023).

 10.4.14

 Thirteenth
 Amendment to the Amended and Restated Credit Agreement (incorporated by reference from Exhibit 10.1 to the Company's
 Current Report on Form 8-K filed on February 21, 2024.

 10.4.15

 Fourteenth Amendment to the Amended and Restated Credit Agreement (incorporated by reference from Exhibit 10.1 to the Company 's Current Report on Form 8-K filed on November 13, 2024.

 10.5

 19*

 Amended
 and Restated Continuing General Security Agreement among CPI Aerostructures, Inc. and BankUnited
 N.A. (incorporated by reference to Exhibit 10.2 to the Company's Current Report on
 Form 8-K filed on March 28, 2016).

 Insider Trading Policy

 21*

 Subsidiaries of the Registrant.

 23.1*

 Consent of Marcum LLP.

 23.2*

 Consent of RSM US LLP.

 31.1*

 Certification of Chief Executive Officer pursuant to Section 302 of the Sarbanes-Oxley Act of 2002.

 31.2*

 Certification of Chief Financial Officer pursuant to Section 302 of the Sarbanes-Oxley Act of 2002.

 32.1***

 Certification Pursuant to 18 U.S.C. Section 1350, as Adopted Pursuant to Section 905 of the Sarbanes-Oxley Act of 2002.

 97*

 The Company's Clawback Policy Relating to the Recovery of excessive Incentive-Based Compensation from Executive Officers in the Event of an Accounting Restatement.

 101.INS*

 Instanse Document.

 101.SCH*

 Taxonomy Extension Scheme Document.

 101.CAL*

 Taxonomy Extension Calculation Linkbase Document.

 101.DEF*

 Taxonomy Extension Definition Linkbase Document.

 101.LAB*

 Taxonomy Extension Label Linkbase Document.

 101.PRE*

 Taxonomy Extension Presentation Linkbase Document.

 104*

 Cover

 *

 Filed herewith.

 **

 Management contract compensatory plan or arrangement.

 ***

 Furnished herewith.

 Item 16.

 FORM 10-K SUMMARY

 None

 CPI

TO FINANCIAL STATEMENTS

 Report of Independent Registered Public Accounting Firm (PCAOB ID: 688)

 Report of Independent Registered Public Accounting Firm (PCAOB ID: 49)

 Consolidated
 Financial Statements:

 Consolidated Balance Sheets as of December 31, 2024 and 2023

 Consolidated Statements of Operations for the Years Ended December 31, 2024 and 2023

 Consolidated Statements of Shareholders' Equity for the Years Ended December 31, 2024 and 2023

 Consolidated Statements of Cash Flows for the Years Ended December 31, 2024 and 2023

 Notes to Consolidated Financial Statements

 F-9 - F-24

 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, 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, based on our audit, 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.

 Critical Audit Matters

 The critical audit matter communicated
below is a matter 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 this critical audit matters did not alter in any way
our opinion on the financial statements, taken as a whole, and we are not, by communicating this critical audit matter below, providing
a separate opinion on this critical audit matter or on the accounts or disclosures to which they relate.

 F- 2

 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, 2024, the Company recognized approximately $80.1 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. Complex auditor judgment was required in evaluating initial cost estimates
and expected costs to complete which was our principal consideration in determining the manner in which the Company recognizes revenue
was a critical audit matter.

 The
primary procedures we performed to address this critical audit matter included the following:

 •
 Obtaining an understanding of management's process in developing
the cost estimates;

 •
 Performed substantive test of details on a sample of contracts
with customers to ensure contract terms and any modifications were agreed to by the customer and ensuring overtime revenue recognition
was appropriate and in alignment with relevant accounting guidance based on the contracts terms and conditions;

 •
 Evaluating management's ability to reasonably estimate costs
by performing a comparison of the actual costs to prior period estimates, including evaluating the timely identification of circumstances
that may warrant a modification to the estimated costs;

 •
 Tested the estimated costs to complete on in process jobs that
were not completed during the year ended December 31, 2024 by comparing the estimated costs to complete at December 31, 2024 to actual
costs incurred subsequent to December 31, 2024;

 •
 Performed inquiries with the Company's program management regarding
their basis of estimates, challenges or opportunities related to the program, actual performance to date compared to plan, and any recent
correspondence between the Company and the customer on changes in scope or terms;

 •
 Tested the existence, accuracy, and completeness of costs incurred
to date on a sample of contracts; and

 •
 Tested the mathematical accuracy of managements calculations
of revenue recognized on a sample basis.

 /s/
Marcum LLP

 Marcum
LLP

 We
have served as the Company's auditor since 2024

 Melville,
New York

 F- 3

 Report
of Independent Registered Public Accounting Firm

 To the Shareholders and the Board of Directors of CPI Aerostructures,
Inc.

 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, 2023, the related consolidated statements of operations, shareholders'
equity and cash flows for the year then ended, and the related notes (collectively, 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, 2023, and the results of
its operations and its cash flows for the year then ended 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 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.

 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/ RSM US LLP

 We served as the Company's auditor from 2021 to 2024.

 New York, New York

 April 5, 2024

 F- 4

 CPI

 CONSOLIDATED
BALANCE SHEETS

 31,

 2024

 31,

 2023

 ASSETS

 Current Assets:

 Cash

 $

 5,490,963

 $

 5,094,794

 Accounts receivable,
 net

 3,716,378

 4,352,196

 Contract assets,
 net

 32,832,290

 35,312,068

 Inventory

 918,288

 1,436,647

 Prepaid expenses
 and other current assets

 634,534

 718,026

 Total Current
 Assets

 43,592,453

 46,913,731

 Operating lease
 right-of-use assets

 2,856,200

 4,740,193

 Property and equipment,
 net

 767,904

 794,056

 Deferred tax asset,
 net

 18,837,576

 19,938,124

 Goodwill

 1,784,254

 1,784,254

 Other assets

 143,615

 189,774

 Total Assets

 $

 67,982,002

 $

 74,360,132

 LIABILITIES AND
 SHAREHOLDERS' EQUITY

 Current Liabilities:

 Accounts
 payable

 $

 11,097,685

 $

 10,487,012

 Accrued expenses

 7,922,316

 10,275,695

 Contract liabilities

 2,430,663

 5,937,629

 Loss reserve

 22,832

 337,351

 Current portion
 of line of credit

 2,750,000

 2,400,000

 Current portion
 of long-term debt

 26,483

 44,498

 Operating lease
 liabilities

 2,162,154

 1,999,058

 Income taxes payable

 58,209

 30,107

 Total Current
 Liabilities

 26,470,342

 31,511,350

 Line of credit,
 net of current portion

 14,640,000

 17,640,000

 Long-term operating
 lease liabilities

 938,418

 3,100,571

 Long-term debt,
 net of current portion

 —

 26,483

 Total Liabilities

 42,048,760

 52,278,404

 Commitments and
 Contingencies (see note 15)

 Shareholders'
 Equity:

 Common stock - $.001
 par value; authorized 50,000,000 shares, 12,978,741 and 12,771,434 shares, respectively, issued and outstanding

 12,979

 12,771

 Additional paid-in
 capital

 74,424,651

 73,872,679

 Accumulated deficit

 ( 48,504,388)

 ( 51,803,722)

 Total Shareholders'
 Equity

 25,933,242

 22,081,728

 Total Liabilities
 and Shareholders' Equity

 $

 67,982,002

 $

 74,360,132

 see
notes to CONSOLIDATED financial statements

 F- 5

 CPI

 CONSOLIDATED
STATEMENTS OF OPERATIONS

 Years
ended December 31, 2024 and 2023

 2024

 2023

 Revenue

 $

 81,078,864

 $

 86,466,321

 Cost of sales

 63,840,803

 69,400,693

 Gross profit

 17,238,061

 17,065,628

 Selling, general
 and administrative expenses

 10,506,439

 10,758,624

 Income from operations

 6,731,622

 6,307,004

 Interest expense

 ( 2,288,834

)

 ( 2,455,214

)

 Income before benefit
 for income taxes

 4,442,788

 3,851,790

 Provision (Benefit)
 for income taxes

 1,143,454

 ( 13,349,414

)

 $

 3,299,334

 $

 17,201,204

 Income per common
 share-basic

 $

 0.26

 $

 1.40

 Income per common
 share-diluted

 $

 0.26

 $

 1.38

 Shares used in computing
 income per common share:

 Basic

 12,593,213

 12,311,219

 Diluted

 12,709,237

 12,471,961

 see
notes to CONSOLIDATED financial statements

 F- 6

 CPI

 CONSOLIDATED
STATEMENTS OF SHAREHOLDERS' EQUITY

 Years
ended December 31, 2024 and 2023

 Common

 Stock Shares

 Common

 Stock

 Amount

 Additional
 Paid-in

 Capital

 Accumulated

 Deficit

 Total

 Shareholders'
 Equity (Deficit)

 Balance at January 1, 2023

 12,506,795

 $

 12,507

 $

 73,189,449

 $

 ( 69,004,926)

 $

 4,197,030

 —

 —

 —

 17,201,204

 17,201,204

 Issuance of common stock upon settlement of
 restricted stock, net

 264,639

 —

 —

 Stock-based compensation expense

 —

 —

 770,362

 —

 770,362

 Shares withheld for tax withholdings

 —

 —

 ( 87,132)

 —

 ( 87,132)

 Balance at December 31, 2023

 12,771,434

 12,771

 73,872,679

 ( 51,803,722

)

 22,081,728

 —

 —

 —

 3,299,334

 3,299,334

 Issuance of common stock upon settlement of
 restricted stock, net

 207,307

 —

 —

 Stock-based compensation expense

 —

 —

 604,474

 —

 604,474

 Shares withheld for tax withholdings

 —

 —

 ( 52,502)

 —

 ( 52,502)

 Balance at December 31, 2024

 12,978,741

 $

 12,979

 $

 74,424,651

 $

 ( 48,504,388)

 $

 25,933,242

 see
notes to CONSOLIDATED financial statements

 F- 7

 CPI

 CONSOLIDATED
STATEMENTS OF CASH FLOWS

 Years
ended December 31, 2024 and 2023

 2024

 2023

 Cash flows from operating
 activities:

 $

 3,299,334

 $

 17,201,204

 Adjustments to reconcile net income to net cash
 provided by operating activities:

 Depreciation and amortization

 430,006

 470,950

 Amortization of debt issuance costs

 46,159

 103,304

 Stock-based compensation expense

 604,682

 770,626

 Deferred income taxes

 1,100,548

 ( 13,363,661

)

 Provision for credit losses

 144,565

 —

 Changes in operating assets and liabilities:

 Decrease in accounts receivable

 491,253

 505,576

 Decrease in insurance recovery receivable

 —

 3,600,000

 Decrease (increase) in contract assets

 2,479,778

 ( 7,927,528

)

 Decrease in inventory

 518,359

 1,056,422

 Decrease in prepaid expenses and other current
 assets

 83,492

 297,804

 Decrease in operating right-of-use assets

 1,883,993

 1,786,434

 (Decrease) increase in accounts payable and
 accrued expenses

 ( 1,730,794)

 5,107,211

 Decrease in litigation settlement obligation

 —

 ( 3,600,000)

 Decrease in contract liabilities

 ( 3,506,966)

 ( 64,097)

 Decrease in lease liabilities

 ( 1,999,057)

 ( 1,795,417

)

 Decrease in loss reserve

 ( 314,519)

 ( 239,198

)

 Increase in income taxes payable

 28,102

 18,711

 Net cash provided by operating activities

 3,558,935

 3,928,341

 Cash flows from investing activities:

 Purchase of property and equipment

 ( 403,854)

 ( 140,450

)

 Net cash used in investing activities

 ( 403,854)

 ( 140,450

)

 Cash flows from financing activities:

 Principal payments on line of credit

 ( 2,650,000)

 ( 960,000

)

 Principal payments on long-term debt

 ( 44,498)

 ( 1,719,766

)

 Proceeds from insurance financing obligation

 326,125

 330,482

 Repayments of insurance financing obligation

 ( 338,037)

 ( 49,572)

 Taxes paid related to net share settlement of
 equity awards

 ( 52,502)

 ( 87,132)

 Debt issuance costs

 —

 ( 54,334)

 Net cash used in financing activities

 ( 2,758,912)

 ( 2,540,322

)

 Net increase in cash

 396,169

 1,247,569

 Cash at beginning of year

 5,094,794

 3,847,225

 Cash at end of year

 $

 5,490,963

 $

 5,094,794

 Supplemental disclosure of cash flow information:

 Cash paid during the year for interest

 $

 2,356,447

 $

 2,454,065

 Cash paid for income taxes

 $

 5,484

 $

 4,364

 See
notes to CONSOLIDATED financial statements

 F- 8

 CPI

 NOTES

 1.

 PRINCIPAL
 BUSINESS ACTIVITY AND SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES

 The
Company consists of CPI Aerostructures, Inc. ("CPI"), Welding Metallurgy, Inc. ("WMI") and Compac Development
Corporation, a wholly owned subsidiary of WMI (collectively the "Company").

 CPI
is a U.S. supplier of aircraft parts for fixed wing aircraft and helicopters in both the commercial and defense markets. CPI manufactures
complex aerostructure assemblies, as well as aerosystems. Additionally, CPI supplies parts for maintenance, repair and overhaul
("MRO") and kitting contracts.

 An
operating segment, in part, is a component of an enterprise whose operating results are regularly reviewed by the chief operating
decision maker (the "CODM") to make decisions about resources to be allocated to the segment and assess its performance.
Operating segments may be aggregated only to a limited extent. The Company's CODM, the Chief Executive Officer, reviews
financial information presented on a consolidated basis for purposes of making operating decisions and assessing financial performance.
The Company has determined that it has a single operating and reportable segment.

 Basis
of Presentation and Principles of Consolidation

 The
accompanying consolidated financial statements have been prepared in accordance with accounting principles generally accepted
in the United States of America ("U.S. GAAP") and applicable rules and regulations of the United States Securities
and Exchange Commission ("SEC"). The consolidated financial statements include the accounts of the Company and its
wholly-owned subsidiaries. All intercompany accounts and transactions have been eliminated in consolidation.

 Use
of Estimates

 The
preparation of financial statements in conformity with U.S. GAAP requires the use of estimates by management. Actual results could
differ from these estimates.

 Revenue
Recognition

 The
Company follows Accounting Standards Codification Topic 606, "Revenue from Contracts with Customers" ("ASC 606").
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. This is known as the over time revenue recognition model. Under the over time revenue recognition model, revenue and
gross profit are recognized over the contract period as work is performed based on actual costs incurred and an estimate of costs
to complete and resulting total estimated costs at completion.

 The
Company also has contracts that are considered point in time. Under the point in time revenue recognition model, revenue is recognized
when control of the components has transferred to the customer; in most cases this will be based on shipping terms.

 The
majority of the Company's revenues are from long-term contracts with the U.S. government and commercial contractors. The
Company accounts for a contract when it has approval and commitment from both parties, the rights of the parties are identified,
payment terms are identified, the contract has commercial substance and collectability of consideration is probable. For the Company,
the contract under ASC 606 is typically established upon execution of a purchase order either in accordance with a long-term customer
contract or on a standalone basis.

 To
determine the proper revenue recognition for our contracts, we must evaluate whether two or more contracts should be combined
and accounted for as a single contract, and whether the combined or single contract should be accounted for as one performance
obligation or more than one performance obligation. This evaluation requires significant judgment and the decision to combine
a group of contracts or to separate a contract into multiple performance obligations could change the amount of revenue and profit
recorded in a period. A performance obligation is a promise within a contract to transfer a distinct good or service to the customer
in exchange for payment and is the unit of account for recognizing revenue. The Company's performance obligations in its
contracts with customers are typically the sale of each individual product contemplated in the contract or a single performance
obligation representing a series of products when the contract contains multiple products that are substantially the same. The
Company has elected to account for shipping performed after control over a product has transferred to a customer as fulfillment
activities. When revenue is recognized in advance of incurring shipping costs, the costs related to the shipping are accrued.
Shipping costs are included in costs of sales. The Company provides warranties on many of its products; however, since customers
cannot purchase such warranties separately and they do not provide services beyond standard assurances, warranties are not separate
performance obligations.

 F- 9

 CPI

 NOTES

 A
contract's transaction price is allocated to each distinct performance obligation and recognized as revenue when or as the
performance obligation is satisfied. For contracts with more than one performance obligation, the Company allocates the transaction
price to each performance obligation based on its estimated standalone selling price. When standalone selling prices are not available,
the transaction price is allocated using an expected cost plus margin approach as pricing for such contracts is typically negotiated
on the basis of cost.

 The
contracts directly with the U.S. government or subcontracted through its prime contractors, typically are subject to the Federal
Acquisition Regulation ("FAR"), which provides guidance on the types of costs that are allowable in establishing prices
for goods and services provided under U.S. government contracts. The pricing for commercial contractors are based on the specific
negotiations with each customer and any taxes imposed by governmental authorities are excluded from revenue. The transaction price
is primarily comprised of fixed consideration as the customer typically pays a fixed fee for each product sold. The Company does
not adjust the amount of revenue to be recognized under a customer contract for the effects of the time value of money when the
timing difference between receipt of payment and transferring the good or service is less than one year.

 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 Company uses the cost-to-cost input method to measure progress for its performance obligations because it best depicts
the transfer of control to the customer which occurs as the Company incurs costs on its contracts.

 The
Company generally utilizes the portfolio approach to estimate the amount of revenue to recognize for its contracts and groups
contracts together that have similar characteristics. Contract gross profit margins are calculated using the estimated costs for
either the individual contract or the portfolio as applicable. Significant judgment is used to determine which contracts are grouped
together to form a portfolio. The portfolio approach is utilized only when the result of the accounting is not expected to be
materially different than if applied to individual contracts.

 The
Company's contracts are often modified to account for changes in contract specifications and requirements. The Company considers
contract modifications to exist when the modification either creates new or changes the existing enforceable rights and obligations.
The effect of a contract modification on the transaction price, and the measure of progress for the performance obligation to
which it relates, are recognized prospectively when the remaining goods or services are distinct and on a cumulative catch-up
basis when the remaining goods or services are not distinct.

 The
Company also has contracts that are considered point in time. Under the point in time revenue recognition model, revenue is recognized
when control of the components has transferred to the customer.

 Certain
contracts contain forms of variable consideration, such as price discounts and performance penalties. The Company generally estimates
variable consideration using the most likely amount based on an assessment of all available information (i.e., historical experience,
current and forecasted performance) and only to the extent it is probable that a significant reversal of revenue recognized will
not occur when the uncertainty is resolved.

 In
applying the cost-to-cost input method, the Company compares the actual costs incurred relative to the total estimated costs expected
at completion to determine its progress towards satisfying its performance obligation and to calculate the corresponding amount
of revenue to recognize. For any costs incurred that do not depict the Company's performance in transferring control of
goods or services to the customer, the Company excludes such costs from its input method measure of progress as the amounts are
not reflected in the price of the contract. Costs that are inputs to the satisfaction of a performance obligation include labor,
materials and subcontractors' costs, other direct costs and an allocation of indirect costs.

 Changes
to the original estimates may be required during the life of the contract. Estimates are reviewed quarterly and the effect of
any change in the total estimated costs expected at completion for a contract is reflected in revenue in the period the change
becomes known. ASC 606 involves considerable use of estimates and judgment in determining revenues, costs and profits and in assigning
the amounts to accounting periods. For instance, management must make assumptions and estimates regarding labor productivity and
availability, the complexity of the work to be performed, the availability of materials, the length of time to complete the performance
obligation, execution by our subcontractors, the availability and timing of funding from the customer, and overhead cost rates,
among other variables. The Company continually evaluates all of the factors related to the assumptions, risks and uncertainties
inherent with the application of the cost-to-cost input method; however, it cannot be assured that estimates will be accurate.
If estimates are not accurate, or a contract is terminated which will affect estimates at completion, the Company is required
to adjust revenue in the period the change is determined.

 F- 10

 CPI

 NOTES

 When
changes are required for the estimated total revenue on a contract, these changes are recognized on a cumulative catch-up basis
in the current period. A significant change in one or more estimates could affect the profitability of one or more of our performance
obligations. If estimates of total costs to be incurred exceed estimates of total consideration the Company expects to receive,
a provision for the remaining loss on the contract is recorded in the period in which the loss becomes evident.

 Contract
acquisition costs are those incremental costs that the Company incurs to obtain a contract with a customer that it would not have
incurred if the contract had not been obtained. The Company does not typically incur contract acquisition costs or contract fulfillment
costs that are subject to capitalization in accordance with the guidance in Accounting Standards Codification Subtopic 340-40,
"Other Assets and Deferred Costs—Contracts with Customers."

 Government
Contracts

 The
Company's government contracts and subcontracts 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
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, the Company may be audited in respect to the direct and allocated indirect costs attributable thereto. These audits
may result in adjustments to the Company's contract cost, and/or revenue.

 When
contractual terms allow, the Company invoices its customers on a progress basis.

 Cash

 The
Company maintains its cash in multiple financial institutions. The balances are insured by the Federal Deposit Insurance Corporation
up to the limit of $ 250,000. From time to time, the Company's balances may exceed these limits. As of December 31, 2024
and 2023, the Company had $ 5,270,629 and $ 4,943,628, respectively, of uninsured balances. The Company limits its credit risk by
selecting financial institutions considered to be highly credit worthy.

 Allowance
for Credit Losses

 The
Company maintains an allowance for credit losses on accounts receivable and contract assets. The adequacy of the allowance is
assessed quarterly through consideration of factors such as age of the receivable and identification of any anticipated collectability
issues by account, if applicable. The Company writes off accounts when they are deemed to be uncollectible.

 Inventory

 Inventories,
which consist of raw materials, work in progress and finished goods, are reported at lower of cost or net realizable value using
the weighted average cost method. The Company capitalizes labor, material, subcontractor
and overhead costs as work-in-process for contracts where control has not yet passed to the customer. The Company regularly reviews
inventory quantities on hand, future purchase commitments with its suppliers, and the estimated usability for its inventory. If
the Company's review indicates a reduction in usability below carrying value, it reduces its net inventory to its net realizable
value.

 Property
and Equipment

 Property
and equipment are carried at cost, net of accumulated depreciation. Depreciation is computed utilizing the straight-line method
over the estimated useful life of the asset. Leasehold improvements depreciation is computed over the shorter of the lease term
or estimated useful life of the asset. Additions and improvements that extend the useful lives are capitalized, while repairs
and maintenance are expensed as incurred.

 Leases

 The
Company leases a building and various equipment. Under ASC 842, Leases ("ASC 842"), at contract inception we determine
whether the contract is or contains a lease and whether the lease should be classified as an operating or a finance lease. Operating
leases are included in right-of-use ("ROU") assets and operating lease liabilities in our consolidated balance sheets.

 F- 11

 CPI

 NOTES

 ROU
assets represent the Company's right to use an underlying asset during the lease term, and lease liabilities represent the
Company's obligation to make lease payments arising from the lease. The determination of the length of lease terms is affected
by options to extend or terminate the lease when it is reasonably certain that the Company will exercise that option. The existence
of significant economic incentive is the primary consideration when assessing whether the Company is reasonably certain of exercising
an option in a lease. ROU assets and liabilities are recognized at commencement date and measured as the present value of lease
payments to be made over the lease term. As the interest rate implicit in the lease is not readily available for most of the Company's
leases, the Company uses its estimated incremental borrowing rate in determining the present value of lease payments. The estimated
incremental borrowing rate is derived from information available at the lease commencement date. The lease ROU asset recognized
at commencement is adjusted for any lease payments related to initial direct costs, prepayments, and lease incentives. Operating
lease expense is recognized on a straight-line basis over the expected lease term and recognized in cost of sales and selling,
general and administrative expenses.

 At
December 31, 2024, the Company has right of use assets and lease liabilities of $ 2,856,200 and $ 3,100,572, respectively. At December
31, 2023, the Company had right of use assets and lease liabilities of $ 4,740,193 and $ 5,099,629, respectively.

 Finance
leases are treated as the purchase of an asset on a financing basis. Assets under finance leases, which primarily represent machinery
and equipment, computer equipment, and leasehold improvements, are included in property and equipment, net, with the related liabilities
included in current portion of long-term debt and long-term debt on the consolidated balance sheets.

 Goodwill

 Goodwill
represents the excess of purchase price of an acquisition over the fair value of net assets acquired. Goodwill is not amortized
but instead is assessed for impairment annually as of December 31 st and when events and circumstances warrant an evaluation.
The Company has determined that it has a single operating and reporting unit, and assesses during its evaluation whether it believes
it is more likely than not that the fair value of this reporting unit is greater than or less than its carrying amount by comparing
the fair value of this reporting unit with its carrying value. If the carrying amount of a reporting unit exceeds the reporting
unit's fair value, the amount by which the carrying value exceeds the fair value is recognized as an impairment loss. The
Company performed its annual impairment assessment of goodwill as of December 31, 2024 and concluded that goodwill was not impaired.
The Company assessed goodwill using qualitative factors to determine whether it was more likely than not that the fair value is
less than its carrying value (step 0) and determined that no further testing was required.

 Long-Lived
Assets

 The
Company reviews its long-lived assets and certain related intangibles for impairment whenever changes in circumstances indicate that
the carrying amount of an asset may not be fully recoverable by comparing the estimated undiscounted cash flow expected to result
from the use of the asset and the estimated amounts expected to be realized upon the asset's eventual disposition with
the carrying value of the asset. If the carrying amount of the asset exceeds the aforementioned estimated expected undiscounted cash
flows and estimated expected disposition proceeds, the Company measures the amount of the impairment to record by comparing the
carrying amount of the asset with its estimated fair value. As of December 31, 2024 and 2023, the Company determined that long-lived
assets were not impaired.

 Fair
Value

 The
fair value hierarchy has three levels based on the reliability of the inputs used to determine fair value. Level 1 refers to fair
values determined based on quoted prices in active markets for identical assets. Level 2 refers to fair values estimated using
significant other observable inputs and Level 3 includes fair values estimated using significant unobservable inputs.

 At
December 31, 2024 and 2023, the fair values of the Company's current assets and current liabilities approximated their carrying
values because of the short-term nature of these instruments.

 The
carrying value of the line of credit and long-term debt approximates fair value (level 2) as the interest rate is based on market
quotes.

 Earnings
per Share

 The
Company complies with the accounting and disclosure requirements of FASB ASC Topic 260, "Earnings Per Share" and uses
the treasury stock method in the calculation of earnings per share. Net income per common share is computed by dividing net income
by the weighted average number of common shares outstanding during the period.

 Basic
and diluted income per common share is computed using the weighted average number of common shares outstanding. Diluted income
per common share is adjusted for the incremental shares attributed to unvested RSUs. There were 116,024 and 160,742 incremental
shares used in the calculation of diluted income per common share for the years ended December 31, 2024 and 2023, respectively.

 F- 12

 CPI

 NOTES

 Income
Taxes

 Income
taxes are accounted for under the asset and liability method whereby deferred tax assets and liabilities are recognized for future
tax consequences attributable to the temporary differences between the consolidated financial statements carrying amounts of assets
and liabilities and their respective tax bases and operating loss and tax credit carryforwards. Deferred tax assets and liabilities
are measured using enacted tax rates expected to apply in the years in which those temporary differences are expected to be recovered
or settled. The effect on deferred tax assets and liabilities of a change in tax rates is recognized in the period that includes
the enactment date. Deferred tax assets are reduced by a valuation allowance when, in the opinion of management, it is more likely
than not that some portion or all of the deferred tax assets will not be realized. The Company recognizes the effect of an income
tax position only if, based on its merits, the position is more likely than not to be sustained on audit by the taxing authorities.

 The
Company's policy is to record estimated interest and penalties related to uncertain tax positions in income tax expense.

 Stock-Based
Compensation

 The
Company accounts for stock-based compensation in accordance with ASC 718, Compensation - Stock Compensation ("ASC 718").
ASC 718 establishes accounting for stock-based awards exchanged for employee and nonemployees. Under the provisions of ASC 718,
stock-based compensation cost is measured at the grant date, based on the fair value of the award on the grant date, and is recognized
as expense over the employee's requisite service period (generally the vesting period of the equity grant).

 Restricted
stock awards are granted at the discretion of the Company's board of directors. These awards are restricted as to the transfer
of ownership and generally vest over the requisite service period. The Company recognizes forfeitures at the time the forfeiture
occurs.

 Research
and Development

 Customer-funded
research and development ("R&D") costs are incurred pursuant to contractual arrangements requiring us to provide
a product meeting certain defined performance or other specifications, such as designs, and such contractual arrangements are
accounted for principally by the over time revenue recognition method. Customer-funded R&D is included in the "Revenue"
and "Cost of sales" line items in our Consolidated Statements of Operations.

 Prior
Period Reclassification

 Certain
amounts in prior periods have been reclassified to conform with current period presentation.

 Recently
Issued Accounting Standards – Adopted

 In
2024, the Company adopted ASU No. 2023-07, Segment Reporting (Topic 280): Improvements to Reportable Segment Disclosures, requiring
public entities to disclose information about their reportable segments' significant expenses and other segment items on
an interim and annual basis. Public entities with a single reportable segment are required to apply the disclosure requirements
in ASU 2023-07, as well as all existing segment disclosures and reconciliation requirements in ASC 280 on an interim and annual
basis. The Company adopted ASU 202-07 during the year ended December 31, 2024. See Note 17. Segment Reporting in the accompanying
notes to the consolidated financial statements for further detail.

 Recently
Issued Accounting Standards – Not Adopted

 In
November 2024, the FASB issued ASU 2024-03, Income Statement-Reporting Comprehensive Income-Expense Disaggregation Disclosures
(Subtopic 220-40): Disaggregation of Income Statement Expenses, which requires disclosure in the notes to the financial statements
of specified information about certain costs and expenses. In January 2025, the FASB issued ASU 2025-01, Income Statement-Reporting
Comprehensive Income-Expense Disaggregation Disclosures (Subtopic 220-40): Clarifying the Effective Date, which amends the
effective date of ASU 2024-03 to clarify that all public business entities are required to adopt the guidance in annual reporting
periods beginning after December 15, 2026, and interim periods within annual reporting periods beginning after December 15, 2027.
Early adoption of ASU 2024-03 is permitted. ASU 2024-03 should be applied either prospectively to financial statements issued
for reporting periods after the effective date or retrospectively to any or all prior periods presented in the financial statements.
The Company is currently evaluating the new guidance to determine the impact it may have on its consolidated financial statements
and related disclosures, but expects additional disclosures upon adoption.

 In
December 2023, the FASB issued ASU No. 2023-09, Income Taxes (Topic 740): Improvements to Income Tax Disclosures, which focuses
on the rate reconciliation and income taxes paid. ASU No. 2023-09 requires a public business entity ("PBE") to disclose,
on an annual basis, a tabular rate reconciliation using both percentages and currency amounts, broken out into specified categories
with certain reconciling items further broken out by nature and jurisdiction to the extent those items exceed a specified threshold.
In addition, all entities are required to disclose income taxes paid, net of refunds received disaggregated by federal, state/local,
and foreign and by jurisdiction if the amount is at least 5% of total income tax payments, net of refunds received. For PBEs,
the new standard is effective for annual periods beginning after December 15, 2024, with early adoption permitted. An entity may
apply the amendments in this ASU prospectively by providing the revised disclosures for the period ending December 31, 2025 and
continuing to provide the pre-ASU disclosures for the prior periods, or may apply the amendments retrospectively by providing
the revised disclosures for all period presented. We expect this ASU to only impact our disclosures with no impacts to our results
of operations, cash flows, and financial condition.

 F- 13

 CPI

 NOTES

 2.

 REVENUE

 Disaggregation
of Revenue

 The
following table presents the Company's revenue disaggregated by contract type and revenue recognition method:

 Year
 Ended

 31,

 2024

 31,

 2023

 Government subcontracts

 $

 64,704,370

 $

 69,672,602

 Prime government
 contracts

 11,677,152

 11,842,145

 Commercial contracts

 4,697,342

 4,951,574

 Total

 $

 81,078,864

 $

 86,466,321

 Year
 Ended

 31, 2024

 31, 2023

 Revenue recognized using
 over time revenue recognition model

 $

 80,123,031

 $

 82,713,436

 Revenue recognized using point in time revenue
 recognition model

 955,833

 3,752,885

 Total

 $

 81,078,864

 $

 86,466,321

 Favorable/(Unfavorable)
Adjustments to Gross Profit

 We
review our Estimates at Completion ("EAC") at least quarterly. Due to the nature of the work required to be performed
on many of the Company's performance obligations, the estimation of total revenue and cost at completion is complex, subject
to many inputs, and requires significant judgment by management on a contract-by-contract basis. As part of this process, management
reviews information including, but not limited to, any outstanding key contract matters, progress towards completion and the related
program schedule, identified risks and opportunities, and the related changes in estimates of revenues and costs. The risks and
opportunities relate to management's judgment about the ability and cost to achieve the schedule, consideration of customer-directed
delays or reductions in scheduled deliveries, technical requirements, customer activity levels, and related variable consideration.
Management must make assumptions and estimates regarding contract revenue and costs, including estimates of labor productivity
and availability, the complexity and scope of the work to be performed, the availability and cost of materials including any impact
from changing costs or inflation, the length of time to complete the performance obligation, the availability and timing of funding
from our customer, and overhead cost rates, among others.

 Changes
in estimates of net sales, cost of sales, and the related impact to operating profit on contracts recognized over time are recognized
on a cumulative catch-up basis, which recognizes the cumulative effect of the profit changes on current and prior periods based
on a performance obligation's percentage-of-completion in the current period. A significant change in one or more of these
estimates could affect the profitability of one or more of our performance obligations. Our EAC adjustments also include the establishment
of, and changes to, loss provisions for our contracts accounted for on a percentage-of-completion basis.

 Net
EAC adjustments had the following impact on our gross profit during the years ended December 31, 2024 and 2023:

 Years
 Ended

 31,

 2024

 31,

 2023

 Net adjustments

 $

 ( 3,750,020

)

 $

 ( 1,450,502

)

 Net
unfavorable adjustments during the year ended December 31, 2024 compared to the year ended December 31, 2023 were a result of
increased material costs on various programs.

 F- 14

 CPI

 NOTES

 Transaction
Price Allocated to Remaining Performance Obligations

 As
of December 31, 2024, the aggregate amount of transaction price allocated to the remaining performance obligations was approximately
$ 85.0 million. This represents the amount of revenue the Company expects to recognize in the future on contracts with unsatisfied
or partially satisfied performance obligations as of December 31, 2024.

 3.

 CONTRACT ASSETS
 AND LIABILITIES

 Contract
assets represent revenue recognized on contracts in excess of amounts invoiced to the customer and the Company's right to
consideration is conditional on something other than the passage of time. Amounts may not exceed their net realizable value. Under
the typical payment terms of our government contracts, the customer retains a portion of the contract price until completion of
the contract, as a measure of protection for the customer. Our government contracts therefore typically result in revenue recognized
in excess of billings, which we present as contract assets. Contract assets are classified as current assets. The Company's
contract liabilities represent customer payments received or due from the customer in excess of revenue recognized. Contract liabilities
are classified as current liabilities.

 Schedule of contract assets and liabilities

 31,

 2024

 31,

 2023

 31,

 2022

 Contract assets

 $

 32,832,290

 $

 35,312,068

 27,384,540

 Contract liabilities

 2,430,663

 5,937,629

 6,001,726

 Contract
assets at December 31, 2024 decreased $ 2,479,778 from December 31, 2023 due to the timing of billings as compared to the recognition
of revenue during 2024 upon the satisfaction or partial satisfaction of performance obligations.

 Contract
liabilities decreased $ 3,506,966 during 2024, primarily due to revenue recognized on these performance obligations in excess of
payments received.

 Revenue
recognized for the year ended December 31, 2024, that was included in the contract liabilities balances as of January 1, 2024
was $ 5,635,629. Revenue recognized for the year ended December 31, 2023, that was included in the contract liabilities balances
as of January 1, 2023 was $ 3,816,336.

 4.

 ACCOUNTS RECEIVABLE

 Accounts
receivable consists of trade receivables as follows:

 December 31, 2024

 December 31, 2023

 December 31, 2022

 Billed receivables

 $
 3,931,527

 $
 4,444,504

 $
 5,139,757

 Less: allowance for expected credit losses

 ( 215,149
)

 ( 92,308
)

 ( 281,985
)

 Total accounts receivable, net

 $
 3,716,378

 $
 4,352,196

 $
 4,857,772

 F- 15

 CPI AEROSTRUCTURES, INC. AND SUBSIDIARIES

 NOTES

 5.

 INVENTORY

 The
components of inventory consist of the following:

 31,

 2024

 2023

 Raw materials

 $

 414,806

 $

 648,264

 Work in progress

 60,719

 75,795

 Finished goods

 442,763

 712,588

 Inventory

 $

 918,288

 $

 1,436,647

 6.

 PROPERTY AND
 EQUIPMENT

 The
components of property and equipment consist of the following:

 31,

 Estimated

 2024

 2023

 Useful
 Life (years)

 Machinery and equipment

 $

 4,247,671

 $

 4,004,779

 5 to

 Computer equipment

 4,393,060

 4,242,437

 5 to 10

 Furniture and fixtures

 709,350

 709,350

 Automobiles and trucks

 13,162

 13,162

 Leasehold improvements

 2,702,891

 2,692,552

 Lesser of lease
 term or 10 years

 Total gross property and equipment

 12,066,134

 11,662,280

 Less accumulated depreciation and amortization

 ( 11,298,230

)

 ( 10,868,224

)

 Total property and equipment, net

 $

 767,904

 $

 794,056

 Depreciation
expense for the years ended December 31, 2024 and 2023 was $ 430,006 and $ 470,950, respectively.

 7.

 GOODWILL

 The
Company acquired WMI on December 20, 2018. The acquisition was accounted for as a business combination in accordance with ASC
Topic 805. Accordingly, the Company recorded the fair value of the assets and liabilities assumed at the date of acquisition.
As a result of the acquisition of WMI on December 30, 2018, the Company recorded Goodwill of $ 1,784,254.

 8.

 LINE OF CREDIT
 AND LONG-TERM DEBT

 On
March 24, 2016, the Company entered into an Amended and Restated Credit Agreement with the lenders named therein and BankUnited,
N.A. ("BankUnited") as Sole Arranger, Agent and a Lender, dated as of March 24, 2016 (as amended, the "Credit
Agreement" or the "BankUnited Facility"). The BankUnited Facility originally provided for a revolving credit
loan commitment of $ 30 million (the "Revolving Loan") and a $ 10 million term loan ("Term Loan"). The Revolving
Loan bears interest at a rate based upon a pricing grid, as defined in the Credit Agreement.

 F- 16

 CPI

 NOTES

 On
March 23, 2023, the Company entered into a Twelfth Amendment to the Credit Agreement (the "Twelfth Amendment"). Under
the Twelfth Amendment, the parties amended the Credit Agreement by: (a) extending the maturity date of the Company's existing
revolving line of credit and its existing term loan to November 30, 2024 (under the terms of the Credit Agreement, the outstanding
principal balance of the term loan will be repaid by June 30, 2023); (b) providing for reduction of the aggregate maximum principal
amount of all revolving line of credit loans to $ 20,520,000 from October 1, 2023 through December 31, 2023, $ 19,800,000 from January
1, 2024 through March 31, 2024, $ 19,080,000 from April 1, 2024 through June 30, 2024, $ 18,360,000 from July 1, 2024 through September
30, 2024, and $ 17,640,000 from October 1, 2024 and thereafter, and for payments to be made by the Company to comply therewith
(if any such payments are necessary), on the first day of each such period; and (c) payment of a $ 250,000 capitalized fee incurred
in connection with the Eighth Amendment to the Credit Agreement in two installments, the first installment to be paid on June
1, 2023 in the amount of $ 116,667 and the second installment to be paid July 1, 2023 in the amount of $ 133,333, together with
all unpaid interest accrued at the term loan interest rate on the capitalized fee through each such date.

 The
Credit Agreement, as amended, requires us to maintain the following financial covenants (subject to the exclusions provided for
in the previous paragraph): (a) minimum debt service coverage ratio of no less than 1.5 to 1.0 for the trailing four quarter period
ended March 31, 2022, 0.95 to 1.0 for the trailing four quarter period ended June 30, 2022, and 1.5 to 1.0 for the trailing four
quarter period ended September 30, 2022 and for the trailing four quarter periods ended thereafter; (b) maximum leverage ratio
of no less than 7.30 to 1.0 for the trailing four quarter period ended March 31, 2022, 6.30 to 1.0 for the trailing four quarter
period ended June 30, 2022, 5.0 to 1.0 for the trailing four quarter period ended September 30, 2022 and 4.0 to 1.0 for the trailing
four quarter periods thereafter; (c) minimum net income after taxes as of the end of each fiscal quarter being no less than $ 1.00
commencing June 30, 2022; and (d) a minimum adjusted EBITDA at the end of each quarter of no less than $ 1.0 million (waived for
the quarter ended March 31, 2022). The additional principal payments, increase in interest and an amendment fee provided for in
the Eighth and Ninth Amendments are excluded for purposes of calculating compliance with each of the financial covenants.

 On
February 20, 2024, the Company entered into a Thirteenth Amendment to the Credit Agreement (the "Thirteenth Amendment").
Under the Thirteenth Amendment, the parties amended the Credit Agreement by (a) extending the maturity date of the Company's
existing revolving line of credit to August 31, 2025; and (b) setting the aggregate maximum principal amount of all revolving
line of credit loans to $ 19,800,000 from January 1, 2024 through March 31, 2024, $ 19,080,000 from April 1, 2024 through June 30,
2024, $ 18,360,000 from July 1, 2024 through September 30, 2024, $ 17,640,000 from October 1, 2024 through December 31, 2024, $ 16,920,000
from January 1, 2025 through March 31, 2025, $ 16,200,000 from April 1, 2025 through June 30, 2025 and $ 15,480,000 thereafter,
and for payments to be made by the Company to comply therewith (if any such payments are necessary), on the first day of each
such period.

 On
November 13, 2024, the Company entered into a Fourteenth Amendment to the Credit Agreement (the "Fourteenth Amendment").
Under the Fourteenth Amendment, the parties amended the Credit Agreement by: (i) extending the maturity date of the Company's
existing revolving line of credit (the "Revolving Credit Loans") to August 31, 2026; (ii) reducing the Base Rate Margin
(as defined in the Credit Agreement) from 3.50 % to 2.0 %; (iii) resetting the aggregate maximum principal amount of all Revolving
Credit Loans to $ 16,890,000 from January 1, 2025 through March 31, 2025, $ 16,140,000 from April 1, 2025 through June 30, 2025,
 $ 15,390,000 from July 1, 2025 through September 30, 2025, $ 14,640,000 from October 1, 2025 through December 31, 2025, $ 13,890,000
from January 1, 2026 through March 31, 2026, $ 13,140,000 from April 1, 2026 through June 30, 2026, and $ 12,390,000 from July 1,
2026 onward and for payments to be made by the Company to comply therewith (if any such payments are necessary), on the first
day of each such period; and (iv) requiring the Company, if it does not deliver to BankUnited, N.A. by December 31, 2025, a commitment
letter with banks and terms and conditions reasonably acceptable to the Lenders for refinancing the obligations under the Credit
Agreement, to make a payment by January 31, 2026, equal to 2 % of the aggregate outstanding principal amount of the Revolving Credit
Loans as of December 31, 2025, with 50 % of such payment applied to reduce the aggregate outstanding principal and the remaining
 50 % retained by the Lenders as an amendment fee with respect to the Fourteenth Amendment.

 As
of December 31, 2024 and 2023, the Company had $ 17,390,000
and $ 20,040,000, respectively, outstanding under the BankUnited Revolving Loan Facility. $ 2,750,000 of the revolving line of credit
matures and is payable by December 31, 2025 and the remaining balance of $ 14,640,000 of the revolving line of credit matures and is
payable by August 31, 2026.

 The
BankUnited Facility is secured by all of the Company's assets and both the Revolving Loan and Term Loan bear interest at
the Prime Rate + 2.0 % per the 14 th Amendment effective on November 13, 2024. Prior to the amendment, interest was equal
to the prime rate + 3.5 %. The Prime Rate was 7.50 % as of December 31, 2024 and as such, the Company's interest rate on the
Revolving Loan and Term Loan was 9.50 % as of December 31, 2024.

 The
BankUnited Facility is secured by all of the Company's assets.

 The
Company has cumulatively paid approximately $ 962,000 of total debt issuance costs in connection with the BankUnited Facility of
which approximately $ 36,000 and $ 82,000 is unamortized and included in other assets at December 31, 2024 and 2023, respectively.

 The
maturities of the long-term debt (excluding unamortized debt issuance costs) as of December 31, 2024, are 26,483 maturing during
2025.

 Included
in the long-term debt are financing leases and notes payable totaling $ 26,483 and $ 70,981 at December 31, 2024 and 2023, respectively,
including a current portion of $ 26,483 and $ 44,498, respectively.

 F- 17

 CPI

 NOTES

 9.

 LEASES

 The
Company leases manufacturing and office space under an agreement classified as an operating lease. On November 10, 2022, the Company
executed the second amendment to the lease agreement for its manufacturing and office space, which extends the lease agreement's
expiration date to April 30, 2026. The lease agreement does not include any renewal options. The agreement provides for an initial
monthly base amount plus annual escalations through the term of the lease. In addition to the monthly base amounts in the lease
agreement, the Company is required to pay real estate taxes and operating expenses during the lease terms.

 The
Company also leases office equipment in agreements classified as operating leases.

 For
the years ended December 31, 2024 and 2023, the Company's operating lease expense was $ 2,137,830 and $ 2,142,338, respectively.

 Future
minimum lease payments under non-cancellable operating leases as of December 31, 2024 were as follows:

 Year ending December 31,

 2025

 $

 2,283,354

 2026

 850,276

 2027

 111,065

 2028

 9,228

 2029

 —

 Total undiscounted
 operating lease payments

 3,253,923

 Less imputed interest

 ( 153,351

)

 Present value of operating lease payments

 $

 3,100,572

 The
following table sets forth the ROU assets and operating lease liabilities as of December 31, 2024 and 2023:

 2024

 2023

 Assets

 ROU assets, net

 $

 2,856,200

 $

 4,740,193

 Liabilities

 Current operating
 lease liabilities

 $

 2,162,154

 $

 1,999,058

 Long-term operating
 lease liabilities

 938,418

 3,100,571

 Total lease liabilities

 $

 3,100,572

 $

 5,099,629

 The
Company's weighted average remaining lease term for its operating leases is 1.5
years as of December 31, 2024. The Company's weighted average discount rate for its operating leases is 5.56 %
as of December 31, 2024. Cash paid for the year ended December 31, 2024 and 2023 was $ 2,228,784 and $ 2,151,050, respectively.

 10.

 INCOME TAXES

 We
account for income taxes in accordance with ASC 740 Income Taxes. ASC 740 is an asset and liability approach that requires the
recognition of deferred tax assets and liabilities for the expected tax consequences or events that have been recognized in our
consolidated financial statements or tax returns. ASC 740 also clarifies the accounting for uncertainty in income taxes recognized
in the consolidated financial statements. The interpretation prescribes a recognition threshold and measurement attribute for
the consolidated financial statements recognition and measurement of a tax position taken, or expected to be taken, in a tax return.

 The
Company files income tax returns in the U.S. federal jurisdiction and in various state jurisdictions. The Company generally is
no longer subject to U.S. or state examinations by tax authorities for taxable years prior to 2020. However, net operating losses
utilized from prior years in subsequent years' tax returns are subject to examination until three years after the filing
of subsequent years' tax returns. The statute of limitations expiration in foreign jurisdictions for corporate tax returns
generally ranges between two and five years depending on the jurisdiction.

 F- 18

 CPI

 NOTES

 The
provision (benefit) for income taxes consists of the following:

 Year ended December 31,

 2024

 2023

 Current:

 State

 $

 42,906

 $

 14,248

 Deferred:

 Federal

 624,509

 ( 12,608,425

)

 State

 476,039

 ( 755,237

)

 Total

 $

 1,143,454

 $

 ( 13,349,414

)

 The
difference between the income tax provision (benefit) computed at the federal statutory rate and the actual tax benefit is accounted
for as follows:

 December 31,

 2024

 2023

 Taxes computed at the federal statutory rate

 $
 932,985

 $
 808,876

 State income tax, net

 409,967

 ( 585,381
)

 Research and development tax credit

 ( 145,954
)

 ( 133,089
)

 Change in valuation allowance

 ( 20,846
)

 ( 13,531,626
)

 Other

 ( 43,413
)

 88,308

 Permanent differences

 10,715

 3,498

 Provision (Benefit) for income taxes

 $
 1,143,454

 $
 ( 13,349,414
)

 The
components of deferred income tax assets and liabilities are as follows at December 31:

 Deferred Tax Assets:

 2024

 2023

 Allowance for credit losses

 $
 45,969

 $
 20,632

 Capitalized R&D

 1,705,529

 1,420,263

 Credit carryforwards

 2,424,596

 2,278,642

 Inventory reserve

 341,031

 350,073

 Accrued payroll

 133,052

 151,986

 Loss contracts reserve

 4,878

 75,402

 Restricted stock

 55,082

 94,809

 Acquisition costs

 63,781

 74,136

 Lease liability

 461,967

 1,139,836

 Disallowed interest expense

 709,604

 1,067,063

 Net operating loss carryforward

 14,643,979

 16,356,545

 Other

 32,642

 45,057

 Deferred tax assets

 20,622,110

 23,074,444

 Valuation allowance

 ( 973,367
)

 ( 569,143
)

 Deferred Tax Liabilities:

 Prepaid expenses

 66,695

 143,126

 Revenue recognition

 —

 1,224,106

 Property and equipment

 134,214

 140,449

 ROU asset

 610,258

 1,059,496

 Deferred tax liabilities

 $
 811,167

 $
 2,567,177

 Net deferred tax assets

 $
 18,837,576

 $
 19,938,124

 As
of December 31, 2024, the Company had approximately $ 66.0 million of gross net operating loss carryforwards ("NOLs")
for federal tax purposes and approximately $ 18.0 million of post apportionment NOLs for state tax purposes. The Federal NOLs begin
to expire in 2034. Losses generated in 2018 and forward of $ 14.4 million have an indefinite life and can offset up to 80 % of taxable
income in the future. Federal NOLs generated prior to 2018 can offset 100 % of future taxable income. The state NOLs begin to expire
in 2034.

 F- 19

 CPI

 NOTES

 The
Company will recognize a tax liability in the consolidated financial statements for an uncertain tax position only if
management's assessment is that the position is "more likely than not" (i.e., a likelihood greater than 50%) to be
allowed by the tax jurisdiction based solely on the technical merits of the position. The term "tax position" refers to
a position in a previously filed tax return or a position expected to be taken in a future tax return that is reflected in measuring
current or deferred income tax assets and liabilities for financial reporting purposes. For income tax purposes, the Company has
historically calculated taxable income from its long-term contracts with customers using methodology governed under Internal Revenue
Code ("IRC") Section 460 ("Section 460") utilizing the simplified method of cost allocation. The financial
statements have been prepared to reflect a change in tax reporting methods to another method that is acceptable under Section 460,
the percentage of completion method which approximates the revenue included for U.S. GAAP reporting. This type of change from one
acceptable method to another is not automatic and subject to an approval process with the IRS. The result of this change had no
impact on the financial position or earnings reported by the Company, and only had disclosure impact in regard to the components of
deferred tax assets and liabilities.

 Assessing
the realizability of deferred tax assets requires the determination of whether it is more likely than not that some portion or
all the deferred tax assets will not be realized. In assessing the need for a valuation allowance, the Company considers all available
positive and negative evidence, including future reversals of existing taxable temporary differences, projected future taxable
income, loss carryback and tax-planning strategies. Generally, more weight is given to objectively verifiable evidence, such as
a cumulative loss in recent years, as a significant piece of negative evidence to overcome. For the period ended December 31,
2023, the Company achieved three years of cumulative book and taxable income, along with projections of profitability, for which
management determined that there was sufficient positive evidence to conclude that it is more likely than not that a portion of
the deferred tax assets will be realized. As such, $ 14,170,891 of the valuation allowance was released during the fourth quarter
of 2023. During 2024 the Company continued to assess its ability to realize its deferred tax asset. The Company continued to be
profitable in 2024 and there was no significant change to the Company's forecast of income or its ability to realize the
deferred tax asset at December 31, 2024. The increase of $ 404,224 is most significantly related to the state valuation allowance.

 The
income tax for the year ended December 31, 2024 was $ 1,143,454, which was an effective tax rate of 25.7 %. The tax rate was primarily
due to federal and state statutory rates in 2024. Management makes these estimates quarterly in order to determine the appropriate
level of valuation allowance to include in the Company's financial statements at the balance sheet date.

 11.
 ACCRUED
EXPENSES

 Accrued
expenses consists of the following:

 31,

 2024

 31,

 2023

 Accrued purchases

 $

 4,683,246

 $

 7,132,847

 Accrued payroll

 1,323,018

 1,143,913

 Accrued insurance

 803,185

 855,190

 Accrued interest

 487,428

 601,200

 Accrued professional fees and other accrued
expenses

 625,439

 542,545

 Total

 $

 7,922,316

 $

 10,275,695

 12.

 STOCK-BASED COMPENSATION

 In
2009, the Company adopted the Performance Equity Plan 2009 (the "2009 Plan"). The 2009 Plan reserved 500,000 common
shares for issuance. The 2009 Plan provides for the issuance of either incentive stock options or nonqualified stock options to
employees, consultants or others who provide services to the Company. The Company has 2,364 shares available for grant under the
2009 Plan as of December 31, 2024.

 In
2016, the Company adopted the 2016 Long Term Incentive Plan (the "2016 Plan"). The 2016 Plan reserved 600,000 common
shares for issuance, provided that, no more than 200,000 common shares be granted as incentive stock options. Awards may be made
or granted to employees, officers, directors and consultants in the form of incentive stock options, non-qualified stock options,
stock appreciation rights, restricted stock, restricted stock units and other stock-based awards. Any shares of common stock granted
in connection with awards other than stock options and stock appreciation rights are counted against the number of shares reserved
for issuance under the 2016 Plan as one and one-half shares of common stock for every one share of common stock granted in connection
with such award. Any shares of common stock granted in connection with stock options and stock appreciation rights are counted
against the number of shares reserved for issuance under the 2016 Plan as one share for every one share of common stock issuable
upon the exercise of such stock option or stock appreciation right awarded. In the fourth quarter of 2020, the Company added 800,000
shares to the 2016 Plan, which increased the number of shares reserved for issuance under the 2016 Plan to 1,400,000 shares. In
the second quarter of 2023, the Company added an additional 800,000 shares to the 2016 Plan, which increased the number of shares
for reserved for issuance under the 2016 Plan to 2,200,000 shares. The Company has 308,094 shares available for grant under the
2016 Plan as of December 31, 2024.

 F- 20

 CPI

 NOTES

 Stock-based
compensation expense for restricted stock in the consolidated statements of operations is summarized as follows:

 2024

 2023

 Cost of sales

 $

 3,675

 $

 65,470

 Selling, general and administrative

 601,007

 705,156

 Total stock-based compensation expense

 $

 604,682

 $

 770,626

 The
Company grants restricted stock units ("RSUs") to its board of directors as partial compensation. These RSUs vest
quarterly on a straight-line basis over a one-year period.

 The
following table summarizes activity related to outstanding RSUs for the year ended December 31, 2024:

 RSUs

 Weighted
 Average

 Grant
 Date

 Fair
Value of

 RSUs

 Non-vested – January
 1, 2024

 —

 $

 —

 Granted

 181,323

 $

 2.45

 Vested

 ( 181,323

)

 $

 2.45

 Forfeited

 —

 $

 —

 Non-vested – December 31, 2024

 —

 $

 —

 The
Company grants shares of common stock ("Restricted Stock Awards") to select employees. These shares have various vesting
dates, ranging from vesting on the grant date to as late as four years from the date of grant. In the event that the employee's
employment is voluntarily terminated prior to certain vesting dates, portions of the shares may be forfeited. At
December 31, 2024, the weighted average remaining amortization period was 1.3 years.

 The
following table summarizes activity related to outstanding Restricted Stock Awards for the year ended December 31, 2024:

 Restricted
 Stock Awards

 Weighted
 Average

 Grant
 Date

 Fair
Value of

 Restricted
 Stock

 Awards

 Non-vested – January
 1, 2024

 167,071

 $

 3.25

 Granted

 114,104

 $

 2.38

 Vested

 ( 44,819

)

 $

 3.04

 Forfeited

 ( 83,481

)

 $

 2.88

 Non-vested – December 31, 2024

 152,875

 $

 2.86

 The
Company grants shares of common stock ("Performance Restricted Stock Awards" or "PRSAs") to select officers
as part of our long-term incentive program that will result in that number of PRSAs being paid out if the target performance metric
is achieved. The award vesting is based on specific performance metrics related to accounts payable delinquency, debt, and net
income during the performance period. The PRSAs vest at 0 % or 100 % and all three metrics must be met to vest at 100 %. The PRSAs
granted under this program will vest on the fourth anniversary of the grant date, subject to the aforementioned performance criteria.
At December 31, 2024, the weighted average remaining amortization period was 2.4 years.

 F- 21

 CPI

 NOTES

 The
following table summarizes activity related to outstanding PRSAs for the year ended December 31, 2024:

 PRSAs

 Weighted Average

 Grant Date
 Fair Value of PRSAs

 Non-vested – January 1, 2024

 48,050

 $
 3.27

 Granted

 64,611

 $
 2.91

 Vested

 —

 $
 —

 Forfeited

 ( 68,585
)

 $
 3.12

 Non-vested – December 31, 2024

 44,076

 $
 2.98

 The
fair value of all RSUs, PRSAs and Restricted Stock Awards is based on the closing price of our common stock on the grant date.
All RSUs, PRSAs, and Restricted Stock Awards vest and settle in common stock (on a one-for-one basis).

 As
of December 31, 2024, unamortized stock-based compensation costs related to restricted share arrangements was $ 209,869.

 In
addition, our income tax liabilities for 2024 and 2023 were reduced by $ 138,296 and $ 174,617, respectively, due to recognized
tax benefits on stock-based compensation arrangements.

 13.

 EMPLOYEE BENEFIT
 PLAN

 On
September 11, 1996, the Company's board of directors instituted a defined contribution plan under Section 401(k) of the
Internal Revenue Code (the "Code"). On October 1, 1998, the Company amended and standardized its plan as required
by the Code. Pursuant to the amended plan, qualified employees may contribute a percentage of their pretax eligible compensation
to the Plan and the Company will match a percentage of each employee's contribution. Additionally, the Company has a profit-sharing
plan covering all eligible employees. Contributions by the Company are at the discretion of management. The amount of contributions
recorded by the Company during the years ended December 31, 2024 and 2023 amounted to $ 305,934 and $ 300,600, respectively.

 14.

 MAJOR
 CUSTOMERS

 For
the year ended December 31, 2024, 36 %, 24 %, and 14 % of our revenue was generated from our three largest customers. For the year
ended December 31, 2023, 30 %, 26 %, 13 % and 12 % of our revenue was generated from our four largest customers.

 At
December 31, 2024, 21 %, 18 %, 16 %, 12 %, 12 % and 12 % of accounts receivable were due from our six largest customers. At December
31, 2023, 30 %, 17 %, 12 %, and 11 % of accounts receivable were due from our four largest customers.

 At
December 31, 2024, 31 %, 27 %, and 20 % of our contract assets were related to our three largest customers. At December 31, 2023,
 26 %, 23 %, 18 %, and 15 % of our contract assets were related to our four largest customers.

 At
December 31, 2024, 13 %, 12 %, 11 % and 11 % of our AP was from our top 4 largest vendors. At December 31, 2023, no vendors accounted
for more than 10% of accounts payable.

 15.

 COMMITMENTS AND
 CONTINGENCIES

 The
Company may be involved in various claims, suits, assessments, investigations, and legal proceedings that arise from time to time
in the ordinary course of its business. The Company accrues a liability when it is both probable a liability has been incurred
and the amount of the loss can be reasonably estimated. The Company reviews these accruals at least quarterly and adjusts them
to reflect ongoing negotiations, settlements, rulings, advice of legal counsel, and other relevant information. To the extent
new information is obtained and the Company's views on the probable outcomes of claims, suits, assessments, investigations,
or legal proceedings change, changes in the Company's accrued liabilities would be recorded in the period such determination
is made. For some matters, the amount of liability is not probable or the amount cannot be reasonably estimated and, therefore,
accruals have not been made.

 The Company reached a settlement with the SEC on June 20, 2024 related
to the Company's previously announced and filed restatements of certain of its financial statements for fiscal periods between January
1, 2018 and December 31, 2022. Under the terms of this settlement, if the Company fails to comply with various undertakings, a civil monetary
penalty in the amount of $ 400,000 will be due to the SEC by June 30, 2025 (the "Undertakings"). The Undertakings are as follows:
(a) the Company shall fully remediate its outstanding material weaknesses in Internal Controls over Financial Reporting ("ICFR")
and have effective ICFR and disclosure controls and procedures ("DCP") by December 31, 2024; (b) the Company shall publicly
disclose, concurrent with the filing of the 2024 Form 10-K, whether in management's opinion, the Company has fully remediated its material
weaknesses in ICFR and has effective ICFR and DCP; and (c) the Company shall certify, in writing, compliance with the undertaking(s) set
forth above. The certification shall be made by the Company's CEO and identify the undertaking(s), provide written evidence of compliance
in the form of a narrative, and be supported by exhibits sufficient to demonstrate compliance. The certification and supporting material
shall be submitted to the SEC no later than sixty (60) days from the date of the completion of the undertakings.

 F- 22

 CPI

 NOTES

 Termination
of Shareholder Derivative Actions and Class Action Lawsuit

 Termination
of Shareholder Derivative Actions

 In
2020 and 2021, four shareholder derivative actions were filed against certain current and former members of our board of directors
and certain of our current and former officers. All
four of the actions—each described in further detail below—were based on substantially
the same allegations and claims – specifically, that the defendants allegedly breached their fiduciary duties and/or violated
securities laws by permitting false and misleading statements to be included in the Company's registration statement and
prospectus supplements issued in connection with the Company's October 16, 2018 securities offering and/or by permitting
false and misleading statements to be made in the Company's periodic reports filed between March 22, 2018 and February 14,
2020.

 The
first action (captioned Moulton v. McCrosson, et.al., No. 20-cv-02092) was filed on May 7, 2020, in the U.S. District Court
for the Eastern District of New York. It purported to assert derivative claims against the individual defendants for violations
of Section 10(b) and 21D of the Exchange Act, breach of fiduciary duty, and unjust enrichment and sought to recover on behalf
of the Company for any liability the Company might incur as a result of the individual defendants' alleged misconduct. The
complaint also sought declaratory, equitable, injunctive, and monetary relief, as well as attorneys' fees and other costs.

 The
second action (captioned Woodyard v. McCrosson, et al., Index No. 613169/2020) was filed on September 17, 2020, in the
Supreme Court of the State of New York (Suffolk County). It purported to assert derivative claims against the individual defendants
for breach of fiduciary duty and unjust enrichment and sought to recover on behalf of the Company for any liability the Company
might incur as a result of the individual defendants' alleged misconduct, along with declaratory, equitable, injunctive,
and monetary relief, as well as attorneys' fees and other costs.

 The
third action (captioned Berger v. McCrosson, et al., No. 1:20-cv-05454) was filed on November 10, 2020, in the U.S. District
Court for the Eastern District of New York. The complaint, which was based on the shareholder's inspection of certain corporate
books and records, purported to assert derivative claims against the individual defendants for breach of fiduciary duty and unjust
enrichment, and sought to implement reforms to the Company's corporate governance and internal procedures and to recover
on behalf of the Company an unspecified amount of monetary damages. The complaint also sought equitable, injunctive, and monetary
relief, as well as attorneys' fees and other costs.

 On
March 19, 2021, the parties to the Moulton and Berger actions filed a joint stipulation consolidating the actions (under
the caption In re CPI Aerostructures Stockholder Derivative Litigation, No. 20-cv-02092) and staying the consolidated action.

 The
fourth action (captioned Wurst, et al. v. Bazaar, et al., Index No. 605244/2021) was filed on March 24, 2021, in the Supreme
Court of the State of New York (Suffolk County). The complaint purported to assert derivative claims against the individual defendants
for breach of fiduciary duty, unjust enrichment, and waste of corporate assets, and sought to recover on behalf of the Company
for any liability the Company might incur as a result of the individual defendants' alleged misconduct. The complaint also
sought declaratory, equitable, injunctive, and monetary relief, as well as attorneys' fees and other costs.

 On
June 13, 2022, plaintiffs in the consolidated federal action informed the court that the Company and all defendants had reached
an agreement in principle with all plaintiffs to settle the shareholder derivative lawsuits described above. On June 16, 2022,
plaintiffs in the consolidated federal action filed an unopposed motion for preliminary approval of the settlement. On February
14, 2023, the magistrate judge recommended that the court grant the motion in its entirety. On March 6, 2023, the Court granted
preliminary approval of the proposed settlement.

 On
May 17, 2023, plaintiffs in the consolidated federal action filed an unopposed motion for final approval of the settlement. The
magistrate judge held a final approval hearing on June 7, 2023. On October 27, 2023, the magistrate judge recommended that the
Court grant the final approval motion in its entirety. On December 11, 2023, the Court adopted that recommendation and entered
orders granting final approval to the settlement and closing the case.

 Pursuant
to the settlement agreement, after the federal court's final approval of the settlement, the plaintiffs in the Woodyard
 and Wurst state-court actions voluntarily requested that those actions be dismissed. The parties to the Woodyard
 action filed a stipulation of dismissal on December 15, 2023, and the Court entered an order dismissing the action on December
19, 2023. The parties to the Wurst action filed a stipulation of dismissal on December 14, 2023, and the Court entered
an order dismissing the action on December 18, 2023.

 F- 23

 CPI

 NOTES

 As
part of the settlement, the Company agreed to undertake (or confirm that it has undertaken already) certain corporate governance
reforms. In addition, the Company and/or its insurer have agreed to pay a total of $ 585,000 in attorneys' fees to plaintiffs'
counsel. The Company's insurer paid the full amount due of $ 585,000. Because the settlement amount was transferred to counsel
for plaintiffs on May 5, 2023 from the escrow account established for this purpose, we relieved from our balance sheet, as of
that date, the amounts previously owed from our directors' and officers' insurance carrier and to that plaintiff.

 Termination
of Class Action Lawsuit

 A
consolidated class action lawsuit (captioned Rodriguez v. CPI Aerostructures, Inc., et al., No. 20-cv-01026) was filed
in the U.S. District Court for the Eastern District of New York against the Company; Douglas McCrosson, the Company's former
Chief Executive Officer; Vincent Palazzolo, the Company's former Chief Financial Officer; and the two underwriters of the
Company's October 16, 2018 offering of common stock, Canaccord Genuity LLC and B. Riley FBR. The Amended Complaint in the
action asserted claims on behalf of two plaintiff classes: (i) purchasers of the Company's common stock issued pursuant
to and/or traceable to the Company's offering conducted on or about October 16, 2018; and (ii) purchasers of the Company's
common stock between March 22, 2018 and February 14, 2020. The Amended Complaint alleged that the defendants violated Sections
11, 12(a)(2), and 15 of the Securities Act by negligently permitting false and misleading statements to be included in the registration
statement and prospectus supplements issued in connection with its October 16, 2018 securities offering. The Amended Complaint
also alleged that the defendants violated Sections 10(b) and 20(a) of the Securities Exchange Act of 1934, as amended (the "Exchange
Act"), and Rule 10b-5 promulgated by the SEC, by making false and misleading statements in the Company's periodic
reports filed between March 22, 2018 and February 14, 2020. Plaintiff sought unspecified compensatory damages, including interest;
rescission or a rescissory measure of damages; unspecified equitable or injunctive relief; and costs and expenses, including attorney's
fees and expert fees. On February 19, 2021, the Company moved to dismiss the Amended Complaint. Plaintiff submitted a brief in
opposition to the motion to dismiss on April 23, 2021.

 On
May 20, 2021, the parties reached a settlement in the amount of $ 3,600,000, subject to court approval. On July 9, 2021, Plaintiff
filed an unopposed motion for preliminary approval of the settlement. On November 10, 2021, a magistrate judge recommended that
the court grant the motion for preliminary approval in its entirety. The Court adopted the recommendation on May 27, 2022, and
entered an order granting preliminary approval of the settlement on June 7, 2022. On August 5, 2022, the Plaintiff filed an unopposed
motion for final approval. The magistrate judge held a hearing on the final approval motion on September 9, 2022. On February
16, 2023, the magistrate judge recommended that the Court grant the final approval motion in its entirety. The Court adopted that
recommendation in its entirety on March 10, 2023, and terminated the case on March 13, 2023. On May 5, 2023, the Settlement Amount
was transferred to plaintiff's counsel from the escrow account established for this purpose.

 Litigation
Settlement Obligation and Insurance Recovery Receivable Pertaining to the Class Action Lawsuit and Shareholder Derivative Action

 The
attorneys' fees for both the class action lawsuit and the shareholder derivative actions were covered and paid by our directors'
and officers' insurance carrier, after satisfaction of our $ 750,000 retention. As of December 31, 2023, we had previously
paid and accrued to our financial statements covered expenses totaling $ 750,000, and had therefore met our insurance carrier's
directors' and officers' retention requirement, which capped the Company's expenses pertaining to the class
action suit at $ 750,000. Because the Settlement Amount was transferred to counsel for plaintiff in the class action lawsuit on
May 5, 2023, from the escrow account established for this purpose, we have relieved from our balance sheet, as of that date, the
amounts previously owed from our directors' and officers' insurance carrier and to that plaintiff.

 17.

 Segment
 reporting

 We
manage our business activities on a consolidated basis and operate as a single operating segment. We primarily derive our revenue
in the United States by supplying aircraft parts, complex aerostructure assemblies, aerosystems, MRO and kitting contracts for
fixed wing aircraft and helicopters in both the commercial and defense markets. The accounting policies are the same as those
described in Note 1 – Principal Business Activity and Summary of Significant Accounting Policies.

 Our
CODM is our Chief Executive Officer, Dorith Hakim. The CODM reviews financial information presented on a consolidated basis for
purposes of making operating decisions including the allocation of resources and assessing financial performance.

 As
the Company has only one
operating segment and is managed on a consolidated basis, the measure of profit or loss is consolidated net income or loss, which
include all significant expenses and assets as presented in the consolidated financial statements which is consistent with the
information provided to the CODM. Refer to the Consolidated Balance Sheet and the Consolidated Statements of Operations for the
financial information with respect to the Company's single operating segment for the years ended December 31, 2024 and
2023.

 F- 24

 Pursuant
to the requirements of Section 13 or 15(d) of the Securities Exchange Act of 1934, the registrant has duly caused this report
to be signed on its behalf by the undersigned, thereunto duly authorized.

 Dated: March 31,
 2025

 CPI
 AEROSTRUCTURES, INC.

 (Registrant)

 By:

 /s/
 Philip Passarello

 Philip
 Passarello

 Chief
 Financial Officer

 (Principal
financial and accounting officer)

 Pursuant
to the requirements of the Securities Exchange Act of 1934, this report has been signed below by the following persons on behalf
of the registrant and in the capacities and on the dates indicated:

 Signature

 Title

 Date

 /s/
 Carey Bond

 Chairman of the
 Board of Directors

 Carey Bond

 /s/
 Richard Caswell

 Director

 Richard Caswell

 /s/ Michael
 Faber

 Director

 Michael Faber

 /s/
 Dorith Hakim

 Chief Executive
 Officer and President

 Dorith Hakim

 (Principal Executive
 Officer)

 /s/ Pamela
 Levesque

 Director

 Pamela Levesque

 /s/
 Philip Passarello

 Chief Financial
 Officer

 Philip Passarello

 (Principal Financial
 and Accounting Officer)

 /s/
 Rick Rosenjack

 Director

 Rick Rosenjack

 /s/
 Terry Stinson

 Vice Chairman
 of the Board of Directors

 Terry Stinson