CPI Aerostructures (CVU) posts Q2 2026 profit and grows $533M backlog
Rhea-AI Filing Summary
CPI Aerostructures reported a return to profitability for the quarter ended June 30, 2026. Q2 revenue was $17,581,532, up 15.8% year over year, with net income of $685,615 versus a loss in the prior-year quarter. Gross margin improved sharply to 22.0%, driven in part by the absence of prior-year A-10 program termination adjustments, though 2026 results still reflect unfavorable estimate changes on certain Embraer and Sikorsky programs.
For the first six months of 2026, revenue was $34,941,472 and net income $1,922,333, with a 23.9% gross margin. Total backlog grew to $533,136,000, including $508,779,000 tied to government and military work, providing multi‑year visibility. Cash stood at $835,875 with working capital of $23,488,549, and total debt under the Western Alliance Bank facilities was $19,111,172. Management states that liquidity is expected to cover needs for at least 12 months and reports that disclosure controls and internal control over financial reporting were effective as of June 30, 2026.
Positive
- Revenue and earnings turnaround: Q2 2026 revenue rose 15.8% to $17.6M, and net income reached $0.7M versus a prior-year loss.
- Margin expansion: Q2 gross margin improved to 22.0% from 4.4%, and year‑to‑date gross margin reached 23.9%, reflecting significantly stronger contract economics.
- Backlog growth: Total backlog increased to $533.1M (from $504.5M), with $508.8M tied to government and military contracts, supporting future revenue visibility.
- Improved operating cash use: Net cash used in operating activities for the first half was $425,705, substantially better than the $3,317,875 used in the prior‑year period.
- Controls and reporting: Management concluded disclosure controls and internal control over financial reporting were effective as of June 30, 2026.
Negative
- Leverage and liquidity tightness: Debt outstanding under the Loan and Security Agreement totaled $19,111,172 against cash of $835,875, indicating reliance on credit facilities.
- Continued use of cash in operations: Despite improvement, operating activities still used $425,705 in cash in the first six months of 2026.
- Program estimate pressures: Net unfavorable EAC adjustments reduced gross profit by $676,503 in Q2 and $1,408,692 year‑to‑date, driven by specific Embraer and Sikorsky programs.
- Customer concentration risk: During the first half of 2026, the three largest customers accounted for 46%, 13% and 11% of revenue, and significant portions of receivables and contract assets are tied to a few counterparties.
Key Figures
Key Terms
contract assets financial
funded backlog financial
performance obligations financial
Secured Overnight Financing Rate (SOFR) financial
Consolidated Fixed Charge Coverage Ratio financial
loss reserve financial
Earnings Snapshot
AI-generated analysis. How Rhea-AI works. Not financial advice.
FAQ
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UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
Washington, DC 20549
FORM
| QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934 |
For
the quarterly period ended
OR
| TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934 |
For the transition period from ___________ to __________
Commission
File Number:
(Exact name of registrant as specified in its charter)
| (State or other jurisdiction | (IRS Employer Identification Number) | |
| of incorporation or organization) |
| (Address of principal executive offices) | (Zip code) |
(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 |
Indicate
by check mark whether the registrant: (1) has filed all reports required to be filed by Section 13 or 15 (d) of the Securities
Exchange Act of 1934 during the preceding 12 months (or for such shorter period that the registrant was required to file such
reports), and (2) has been subject to such filing requirements for the past 90 days.
Indicate
by check mark whether the registrant has submitted electronically every Interactive Data File required to be submitted pursuant
to Rule 405 of Regulation S-T during the preceding 12 months (or for such shorter period that the registrant was required to submit
such files).
Indicate by check mark whether the registrant is a large accelerated filer, an accelerated filer, a non-accelerated filer, or a smaller reporting 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 ☐ |
| Smaller
reporting company | |
| Emerging
growth company |
If an emerging growth company, indicate by check mark if the registrant has elected not to use the extended transition period for complying with any new or revised financial accounting standards provided pursuant to Section 13(a) of the Exchange Act. ☐
Indicate
by check mark whether the registrant is a shell company (as defined in Rule 12b-2 of the Exchange Act). Yes ☐
As of August 10, 2026, the registrant had shares of common stock, $.001 par value, outstanding
| INDEX | ||
| Part I - Financial Information | 1 | |
| Item 1 – Consolidated Financial Statements (Unaudited) | 1 | |
| Condensed Consolidated Balance Sheets as of June 30, 2026 (Unaudited) and December 31, 2025 | 1 | |
| Condensed Consolidated Statements of Operations for the Three and Six months ended June 30, 2026 and 2025 (Unaudited) | 2 | |
| Condensed Consolidated Statements of Shareholders’ Equity for the Three and Six months ended June 30, 2026 and 2025 (Unaudited) | 3 | |
| Condensed Consolidated Statements of Cash Flows for the Six months ended June 30, 2026 and 2025 (Unaudited) | 4 | |
| Notes to Condensed Consolidated Financial Statements (Unaudited) | 5 | |
| Item 2 – Management’s Discussion and Analysis of Financial Condition and Results of Operations | 14 | |
| Item 3 – Quantitative and Qualitative Disclosures About Market Risk | 20 | |
| Item 4 – Controls and Procedures | 20 | |
| Part II - Other Information | 21 | |
| Item 1 – Legal Proceedings | 21 | |
| Item 1A – Risk Factors | 21 | |
| Item 2 – Unregistered Sales of Equity Securities and Use of Proceeds | 21 | |
| Item 3 – Defaults Upon Senior Securities | 21 | |
| Item 4 – Mine Safety Disclosures | 21 | |
| Item 5 – Other Information | 21 | |
| Item 6 – Exhibits | 21 | |
| Signatures | 22 | |
Part I - Financial Information
Item 1 - Consolidated Financial Statements (Unaudited)
CONDENSED CONSOLIDATED BALANCE SHEETS
| June
30, 2026 (Unaudited) |
December
31, 2025 |
|||||||
| ASSETS | ||||||||
| Current Assets: | ||||||||
| Cash | $ | $ | ||||||
| Accounts receivable, net | ||||||||
| Contract assets | ||||||||
| Inventory | ||||||||
| Prepaid expenses and other current assets | ||||||||
| Total Current Assets | ||||||||
| Operating lease right-of-use assets | ||||||||
| Property and equipment, net | ||||||||
| Deferred tax asset, net | ||||||||
| Goodwill | ||||||||
| Other assets | ||||||||
| Total Assets | $ | $ | ||||||
| LIABILITIES AND SHAREHOLDERS’ EQUITY | ||||||||
| Current Liabilities: | ||||||||
| Accounts payable | $ | $ | ||||||
| Accrued expenses | ||||||||
| Contract liabilities | ||||||||
| Loss reserve | ||||||||
| Current portion of long-term debt | ||||||||
| Financing lease liabilities, current | ||||||||
| Operating lease liabilities, current | ||||||||
| Income taxes payable | ||||||||
| Total Current Liabilities | ||||||||
| Line of credit | ||||||||
| Long-term financing lease liabilities | ||||||||
| Long-term operating lease liabilities | ||||||||
| Long-term debt, net of current portion | ||||||||
| Total Liabilities | ||||||||
| Commitments and Contingencies (see note 11) | ||||||||
| Shareholders’ Equity: | ||||||||
| Preferred stock- $ par value; authorized shares, shares issued and outstanding | ||||||||
| Common stock - $ par value; authorized shares, and shares, respectively, issued and outstanding | ||||||||
| Additional paid-in capital | ||||||||
| Accumulated deficit | ( |
) | ( |
) | ||||
| Total Shareholders’ Equity | ||||||||
| Total Liabilities and Shareholders’ Equity | $ | $ | ||||||
See Notes to Condensed Consolidated Financial Statements
1
CONDENSED CONSOLIDATED STATEMENTS OF OPERATIONS (UNAUDITED)
For the Three Months Ended June 30, |
For
the Six Months Ended June 30, |
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| 2026 | 2025 | 2026 | 2025 | |||||||||||||
| Revenue | $ | $ | $ | $ | ||||||||||||
| Cost of sales | ||||||||||||||||
| Gross profit | ||||||||||||||||
| Selling, general and administrative expenses | ||||||||||||||||
| Income (loss) from operations | ( |
( |
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| Other income | ||||||||||||||||
| Interest expense | ( |
( |
( |
( |
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| Income (loss) before provision for income taxes | ( |
( |
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| Provision (benefit) for income taxes | ( |
( |
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| Net income (loss) | $ | $ | ( |
$ | $ | ( |
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| Income per common share, basic | $ | $ | ( |
$ | $ | ( |
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| Income per common share, diluted | $ | $ | ( |
$ | $ | ( |
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| Shares used in computing income per common share: | ||||||||||||||||
| Basic | ||||||||||||||||
| Diluted | ||||||||||||||||
See Notes to Condensed Consolidated Financial Statements
2
CONDENSED CONSOLIDATED STATEMENTS OF SHAREHOLDERS’ EQUITY (UNAUDITED)
| Common Stock Shares | Common Stock Amount | Additional Paid-in Capital | Accumulated Deficit | Total Shareholders’ Equity | ||||||||||||||||
| Balance at January 1, 2026 | $ | $ | $ | ( | ) | $ | ||||||||||||||
| Net income | — | |||||||||||||||||||
| Issuance of common stock upon settlement of restricted stock, net | ||||||||||||||||||||
| Stock-based compensation expense | — | |||||||||||||||||||
| Balance at March 31, 2026 | $ | $ | $ | ( | ) | $ | ||||||||||||||
| Net income | — | |||||||||||||||||||
| Issuance of common stock upon settlement of restricted stock, net | ||||||||||||||||||||
| Stock-based compensation expense | — | |||||||||||||||||||
| Balance at June 30, 2026 | $ | $ | $ | ( | ) | $ | ||||||||||||||
| Balance at January 1, 2025 | $ | $ | $ | ( | ) | $ | ||||||||||||||
| Net loss | — | ( | ) | ( | ) | |||||||||||||||
| Issuance of common stock upon settlement of restricted stock, net | ||||||||||||||||||||
| Stock-based compensation expense | — | |||||||||||||||||||
| Balance at March 31, 2025 | $ | $ | $ | ( | ) | $ | ||||||||||||||
| Net loss | — | ( | ) | ( | ) | |||||||||||||||
| Issuance of common stock upon settlement of restricted stock, net | ( | ) | ( | ) | ( | ) | ||||||||||||||
| Stock-based compensation expense | — | |||||||||||||||||||
| Balance at June 30, 2025 | $ | $ | $ | ( | ) | $ | ||||||||||||||
See Notes to Condensed Consolidated Financial Statements
3
CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS (UNAUDITED)
| For
the Six Months ended June 30, |
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| 2026 | 2025 | |||||||
| Cash flows from operating activities: | ||||||||
| Net income (loss) | $ | $ | ( |
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| Adjustments to reconcile net income (loss) to net cash used in operating activities: | ||||||||
| Depreciation and amortization | ||||||||
| Amortization of debt issuance cost | ||||||||
| Stock-based compensation | ||||||||
| Deferred income taxes | ( |
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| Provision for credit losses | ( |
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| Amortization of lease right-of-use assets | ||||||||
| Changes in operating assets and liabilities: | ||||||||
| Increase in accounts receivable | ( |
( |
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| (Increase) decrease in contract assets | ( |
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| Decrease (increase) in inventory | ( |
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| Decrease in prepaid expenses and other assets | ||||||||
| (Decrease) increase in accounts payable and accrued expenses | ( |
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| Increase (decrease) in contract liabilities | ( |
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| Decrease in operating lease liabilities | ( |
( |
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| (Decrease) increase in loss reserve | ( |
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| Increase (decrease) in income taxes payable | ( |
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| Net cash used in operating activities | ( |
( |
) | |||||
| Cash flows from investing activities: | ||||||||
| Purchase of property and equipment | ( |
( |
) | |||||
| Net cash used in investing activities | ( |
( |
) | |||||
| Cash flows from financing activities: | ||||||||
| Principal payments on line of credit | ( |
) | ||||||
| Principal payments on long-term debt | ( |
( |
) | |||||
| Proceeds from line of credit | ||||||||
| Repayments of insurance financing obligation | ( |
( |
) | |||||
| Equity issuance costs | ( |
|||||||
| Net cash provided by (used in) financing activities | ( |
) | ||||||
| Net decrease in cash | ( |
( |
) | |||||
| Cash at beginning of period | ||||||||
| Cash at end of period | $ | $ | ||||||
| Supplemental disclosures of cash flow information: | ||||||||
| Cash paid during the period for: | ||||||||
| Interest | $ | $ | ||||||
| Income Taxes | $ | $ | ||||||
| Non Cash item Investing and Financing Activities: | ||||||||
| Increase to operating right-of-use asset and operating lease liability from lease amendment | $ | $ | |
|||||
| Increase to financing right-of-use asset and operating lease liability | $ | $ | ||||||
| Deferred equity issuance costs incurred but not yet paid | $ | $ | ||||||
See Notes to Condensed Consolidated Financial Statements
4
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (UNAUDITED)
| 1. | INTERIM FINANCIAL STATEMENTS |
Basis of Presentation
The Company consists of CPI Aerostructures, Inc. (“CPI Aero”), Welding Metallurgy, Inc. (“WMI”), a wholly owned subsidiary of CPI Aero, and Compac Development Corporation (“Compac”), a wholly owned subsidiary of WMI (collectively, the “Company”, “we”, “us”, or “our”).
The condensed consolidated interim financial statements of the Company as of June 30, 2026 and for the three and six months ended June 30, 2026 and 2025 have been prepared pursuant to the rules and regulations of the Securities and Exchange Commission (“SEC”). Certain information and notes normally included in financial statements prepared in accordance with generally accepted accounting principles in the United States of America (“U.S. GAAP”) have been condensed or omitted pursuant to those rules and regulations. The consolidated balance sheet at December 31, 2025 has been derived from audited consolidated financial statements, but does not include all of the information and notes required by U.S. GAAP. The Company believes that the disclosures are adequate to make the information presented not misleading.
All adjustments that, in the opinion of the management, are necessary for a fair presentation for the periods presented have been reflected. Such adjustments are of a normal, recurring nature. It is suggested that these consolidated financial statements be read in conjunction with the consolidated financial statements and notes thereto included in the Company’s Annual Report on Form 10-K for the year ended December 31, 2025 (the “Form 10-K”). The results of operations for interim periods are not necessarily indicative of the operating results to be expected for the full year or any other interim period.
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.
The
Company maintains its cash in multiple financial institutions. The balances are insured by the Federal Deposit Insurance Corporation.
From time to time, the Company’s balances may exceed insurance limits. As of June 30, 2026, the Company had $
Recently Issued Accounting Standards – Not Adopted
In September 2025, the FASB issued ASU No. 2025-06, Intangibles – Goodwill and Other – Internal-Use Software (Subtopic 350-40): Targeted Improvements to the Accounting for Internal-Use Software (“ASU 2025-06”). This guidance removes all references to prospective and sequential stages (referred to as “project stages”) throughout ASC 350-40 and clarifies the threshold entities apply to begin capitalizing costs. Under ASU 2025-06, cost capitalization should only commence when both management has authorized and committed to funding a software project and it is probable the project will be completed and the software will be used to perform the function intended. ASU 2025-06 is effective for annual reporting periods beginning after December 15, 2027 and interim reporting periods within those annual reporting periods. Entities may apply the guidance using a prospective, modified transition or retrospective approach. Early adoption is permitted as of the beginning of an annual reporting period. The Company is currently evaluating the preferred transition approach and assessing the impact of the ASU on our disclosures and financial statements, including the timing of adoption.
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, which will be our interim period beginning January 1, 2028. Early adoption of ASU 2024-03 is permitted. The Company is currently evaluating the impact of these standards on its consolidated financial statements and related disclosures.
5
| 2. | REVENUE |
Disaggregation of Revenue
The following tables present the Company’s revenue disaggregated by contract type and revenue recognition method:
| Three
months ended June 30, |
Six
months ended June 30, |
|||||||||||||||
| 2026 | 2025 | 2026 | 2025 | |||||||||||||
| Government subcontracts | $ | $ | $ | $ | ||||||||||||
| Prime government contracts | ||||||||||||||||
| Commercial contracts | ||||||||||||||||
| $ | $ | $ | $ | |||||||||||||
| Three
months ended June 30, |
Six
months ended June 30, |
|||||||||||||||
| 2026 | 2025 | 2026 | 2025 | |||||||||||||
| Revenue recognized using over time revenue recognition model | $ | $ | $ | $ | ||||||||||||
| Revenue recognized using point in time revenue recognition model | ||||||||||||||||
| $ | $ | $ | $ | |||||||||||||
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.
6
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 three and six months ended June 30, 2026 and 2025:
| Three months ended June 30, | Six months ended June 30, | |||||||||||||||
| 2026 | 2025 | 2026 | 2025 | |||||||||||||
| Net Adjustment | $ | ( | ) | $ | ( | ) | $ | ( | ) | $ | ( | ) | ||||
The net adjustment of $ million and $ million for the three and six months ended June 30, 2026 respectively, is driven primarily by unfavorable adjustments on our Embraer Phenom-300 Engine Inlet Assemblies program and Sikorsky UH60 Gunner Windows.
The
net adjustment of
million for the three months ended June 30, 2025 is driven primarily by an unfavorable adjustment of $
The
net adjustment of million for the six months ended June 30, 2025 is driven primarily by an unfavorable adjustment of $
Transaction Price Allocated to Remaining Performance Obligations
As
of June 30, 2026, the aggregate amount of transaction price allocated to the remaining performance obligations was approximately
$
| 3. | CONTRACT ASSETS AND LIABILITIES |
Contract assets represent revenue recognized on contracts in excess of amounts invoiced to the customers 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 as well as military contractor 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 and military contract or 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.
June 30, 2026 |
December 31, 2025 |
December 31, 2024 |
||||||||||
| Contract assets | $ | $ | $ | |||||||||
| Contract liabilities | ||||||||||||
Revenue
recognized for the six months ended June 30, 2026 and 2025 that was included in the contract liabilities balance as of January
1, 2026 and 2025, was approximately $
7
| 4. | INVENTORY |
The components of inventory consisted of the following:
June 30, 2026 |
December 31, 2025 |
|||||||
| Raw materials | $ | $ | ||||||
| Work in progress | ||||||||
| Finished goods | ||||||||
| Inventory | $ | $ | ||||||
| 5. | STOCK-BASED COMPENSATION |
In 2009, the Company adopted the Performance Equity Plan 2009 (the “2009 Plan”). The 2009 Plan reserved 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 shares available for grant under the 2009 Plan as of June 30, 2026.
In 2016, the Company adopted the 2016 Long Term Incentive Plan (the “2016 Plan”). The 2016 Plan reserved common shares for issuance, provided that no more than 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 shares to the 2016 Plan, which increased the number of shares reserved for issuance under the 2016 Plan to shares. In the second quarter of 2023, the Company added an additional shares to the 2016 Plan, which increased the number of shares reserved for issuance under the 2016 Plan to shares. The Company has shares available for grant under the 2016 Plan as of June 30, 2026.
On June 24, 2025, the shareholders of the Company approved the 2025 Long-Term Incentive Plan (the “2025 Plan”) at the Company’s 2025 annual meeting of shareholders. The 2025 Plan had previously been approved by the Company’s Board of Directors (the “Board”) on April 28, 2025, upon the recommendation of the Company’s Compensation and Human Resources Committee, subject to shareholder approval. The 2025 Plan is intended to advance the Company’s interests by providing equity-based incentives to attract, retain, and motivate employees, officers, directors, and consultants. The plan authorizes the issuance of up to shares of the Company’s common stock and allows for a variety of award types, including stock options, stock appreciation rights, restricted stock, restricted stock units, performance shares, and other stock-based awards. The 2025 Plan is administered by the Company’s Compensation and Human Resources Committee, which has broad authority to determine the terms of individual awards, including eligibility, size, vesting conditions, performance criteria, and other terms. Awards may generally not be transferred and are subject to forfeiture under certain conditions. The Company had shares available for grant under the 2025 Plan as of June 30, 2026.
| Three months ended June 30, | Six months ended June 30, | |||||||||||||||
| 2026 | 2025 | 2026 | 2025 | |||||||||||||
| Cost of sales | $ | $ | $ | $ | ||||||||||||
| Selling, general and administrative | ||||||||||||||||
| Total stock-based compensation expense | $ | $ | $ | $ | ||||||||||||
The Company grants restricted stock units (“RSUs”) to its board of directors as partial compensation. The 2026 RSUs vest annually. and are expensed on a straight-line basis. These RSUs will fully vest on .
8
| RSUs | Weighted
Grant Date Fair Value of RSUs |
|||||||
| Non-vested – January 1, 2026 | $ | |||||||
| Granted | $ | |||||||
| Vested | $ | |||||||
| Forfeited | $ | |||||||
| Non-vested – June 30, 2026 | $ | |||||||
The Company grants shares of common stock (“Restricted Stock Awards” or “RSAs”) to select employees. These shares have various vesting dates, ranging from vesting on the grant date to as late as 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 June 30, 2026, the weighted average remaining amortization period was years.
Restricted Stock Awards |
Weighted
Grant Date Fair Value of RSA |
|||||||
| Non-vested – January 1, 2026 | $ | |||||||
| Granted | $ | |||||||
| Vested | ( |
$ | ||||||
| Forfeited | ( |
$ | ||||||
| Non-vested – June 30, 2026 | $ | |||||||
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 % or % and all three metrics must be met to vest at %. The PRSAs granted under this program will vest on the fourth anniversary of the grant date, subject to the aforementioned performance criteria. At June 30, 2026, the weighted average remaining amortization period was years.
The following table summarizes activity related to outstanding PRSAs for the six months ended June 30, 2026:
| PRSAs | Weighted
Fair Value of PRSAs |
|||||||
| Non-vested – January 1, 2026 | $ | |||||||
| Granted | $ | |||||||
| Vested | $ | |||||||
| Forfeited | ( |
$ | ||||||
| Non-vested – June 30, 2026 | $ | |||||||
The fair value of all RSUs, PRSAs and RSAs 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 June 30, 2026, unamortized stock-based compensation costs related to restricted share arrangements was $.
9
| 6. | NET INCOME (LOSS) PER SHARE |
Basic income (loss) per common share is computed using the weighted average number of common shares outstanding. Diluted income (loss) per common share for the three and six months ended June 30, 2026 and 2025 is computed using the weighted-average number of common shares outstanding adjusted for the effect of unvested RSUs and RSAs. Incremental shares of and were used in the calculation of diluted income per common share for the three and six months ended June 30, 2026, respectively. Securities that could potentially dilute basic earnings per share in the future, but that were excluded from the computation of diluted earnings per share because they were antidilutive for the three and six months ended June 30, 2025 include RSU and RSA.
| 7. | LINE OF CREDIT AND LONG-TERM DEBT |
On
December 12, 2025, the Company entered into a Loan and Security Agreement (the “Loan and Security Agreement”) with
Western Alliance Bank (the “Bank”). The Loan and Security Agreement provides for a revolving line of credit in the
maximum principal amount of $
Borrowings
under the Credit Facilities bear interest at a variable rate equal to the 1-month Term Secured Overnight Financing Rate (“SOFR”)
plus an applicable margin as set forth in the Loan and Security Agreement. During the continuance of an event of default, all
outstanding obligations bear interest at a rate equal to
The
SOFR Rate was
Our Credit Facilities consisted of the following as of:
| June 30, | December 31, | |||||||
| 2026 | 2025 | |||||||
| Long-term debt | $ | $ | ||||||
| Unamortized value of debt issuance costs | ( |
( |
||||||
| Net carrying value | ||||||||
| Less: current portion of long-term debt | ||||||||
| Long-term debt, net of current portion | $ | $ | ||||||
The Credit Facilities mature on December 12, 2030. The Term Loan was funded in full on the closing date and is repayable in scheduled quarterly installments beginning on April 5, 2026. As of June 30, 2026, the aggregate future principal payments on long term debt are as follows:
| Period | Year
Ended December 31, |
||||||
| 2026 (Remaining six months) | $ | ||||||
| 2027 | $ | ||||||
| 2028 | $ | ||||||
| 2029 | $ | ||||||
| 2030 | $ | ||||||
| Total | $ | ||||||
Borrowings under the Revolving Line may be made, repaid and reborrowed from time to time before the maturity date, subject to the other conditions set forth in the Loan and Security Agreement. Voluntary prepayments of the Credit Facilities are permitted at any time without premium or penalty, other than customary breakage amounts, and the Loan and Security Agreement requires mandatory prepayments in certain circumstances.
The
Loan and Security Agreement requires the Company to pay an unused commitment fee equal to
10
The Company’s obligations under the Loan and Security Agreement, and the guaranties of WMI and Compac, are secured by a first-priority security interest in substantially all of the personal property assets of the Company and the guarantors, in each case subject to permitted liens and customary exclusions as set forth in the Loan and Security Agreement and related security documents.
The
Loan and Security Agreement contains customary affirmative, negative and financial covenants. Among other things, these covenants
impose limitations, subject to agreed exceptions, on the ability of the Company and its subsidiaries to incur additional indebtedness,
grant liens, make certain investments, dispose of assets, pay dividends and other restricted payments, enter into certain transactions
with affiliates and effect certain mergers or other fundamental changes. The Loan and Security Agreement also includes quarterly
tested financial covenants, including a minimum Consolidated Fixed Charge Coverage Ratio of
The Loan and Security Agreement includes customary events of default, including payment defaults, covenant defaults, certain cross-defaults, certain events of bankruptcy or insolvency, certain unsatisfied judgments, certain ERISA events and certain change-of-control events. If an event of default occurs and is continuing, the Bank may, subject to the terms of the Loan and Security Agreement, declare all or a portion of the outstanding obligations under the Credit Facilities to be immediately due and payable, terminate the commitments and exercise other rights and remedies available to it, including with respect to the collateral.
As
of June 30, 2026 the Company had $
As
of June 30, 2026, the Company had cumulatively incurred approximately $
| 8. | MAJOR CUSTOMERS AND VENDORS |
During
the six months ended June 30, 2026, our three largest customers accounted for
At
June 30, 2026,
At
June 30, 2026,
At
June 30, 2026
11
| 9. | LEASES |
The
Company leases manufacturing and office space under an agreement classified as an operating lease. The
Company entered into an amendment to the lease agreement for its operating facility on April 15, 2025 that extended the term of
the lease until
The Company also leases office equipment in agreements classified as operating and financing leases.
For
the six months ended June 30, 2026 and 2025, the Company’s operating lease expense was $
Future minimum lease payments under non-cancellable operating and financing leases as of June 30, 2026 were as follows:
| For the Year Ending December 31, | Operating | Financing | Total | ||||||||||
| Remainder of 2026 | $ | $ | $ | ||||||||||
| 2027 | |||||||||||||
| 2028 | |||||||||||||
| 2029 | |||||||||||||
| 2030 | |||||||||||||
| Thereafter | |||||||||||||
| Total undiscounted lease payments | |||||||||||||
| Less imputed interest | ( | ) | ( | ) | ( | ) | |||||||
| Present value of lease payments | $ | $ | $ | ||||||||||
The following table sets forth the right-of-use assets and lease liabilities as of:
| June 30, | December 31, | |||||||
| 2026 | 2025 | |||||||
| Assets | ||||||||
| Right-of-use assets operating | $ | $ | ||||||
| Right-of-use assets finance (included in Property and equipment, net) | ||||||||
| Total Right-of-use assets | $ | $ | ||||||
| Liabilities | ||||||||
| Current operating lease liabilities | $ | $ | ||||||
| Long-term operating lease liabilities | ||||||||
| Total operating lease liabilities | $ | $ | ||||||
| Current finance lease liabilities | $ | $ | ||||||
| Long-term finance lease liabilities | ||||||||
| Total finance lease liabilities | $ | $ | ||||||
| Total Lease Liabilities | $ | $ | ||||||
The
Company’s weighted average remaining lease term for its operating leases is
12
| 10. | INCOME TAXES |
The
provision/(benefit) for income tax for the six months ended June 30, 2026 and 2025 is $
The
effective income tax rate for the six months ended June 30, 2026 and 2025 is
| 11. | COMMITMENTS AND CONTINGENCIES |
On May 7, 2025, the Company submitted to The Boeing Company a Request for Equitable Pricing Adjustment on the Boeing A-10 program addressing higher manufacturing costs on its 2019 firm fixed price contract. Subsequently, on July 14, 2025, the Company received a Termination Notice from The Boeing Company with respect to the Boeing A-10 program directing the Company to scrap and return materials and tooling to the Air Force prior to August 15, 2025 when funding would no longer be available, as well as a claim for damages incurred by Boeing as a result of the alleged contract default. The Company disputes Boeing’s claim and maintains its position for an Equitable Pricing Adjustment related to the Boeing A-10 program. In light of these events, and in conjunction with the Air Force’s decision to accelerate the retirement of the Boeing A-10 fleet, the Company evaluated the situation and recognized an adjustment to its contract revenues and costs to address the contract termination during the quarter ended June 30, 2025. The Company will continue to evaluate the customers claim and will recognize any contingent losses, if required, in the period in which additional losses become both probable, and reasonably estimable.
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.
| 12. | 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, maintenance repair and overhaul (“MRO”) services 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 of the form 10-K.
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
| 13. | RISK AND UNCERTAINTIES |
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, and our material costs are established on issued purchase orders, future procurements may be impacted by economic and political uncertainties including tariffs, and may directly affect the Company’s profitability on previously negotiated Firm Fixed Price contracts.
13
Item 2 – Management’s Discussion and Analysis of Financial Condition and Results of Operations
The following discussion should be read in conjunction with the Company’s consolidated financial statements and notes thereto contained in this report.
Forward Looking Statements This Form 10-Q contains forward-looking statements within the meaning of the Private Securities Litigation Reform Act of 1995, including statements within the meaning of Section 27A of the Securities Act of 1933 and Section 21E of the Securities Exchange Act of 1934. When used in this Form 10-Q and in future filings by us with the Securities and Exchange Commission (“SEC”), the words or phrases “believe”, “expect,” “anticipate,” “intend”, “plan”, “may,” “will”, “should,” “could”, “estimate,” or similar expressions are intended to identify forward-looking statements. In addition, any statements that refer to projections, forecasts or other characterizations of future events or circumstances, including any underlying assumptions, are forward-looking statements. These statements are not guarantees of future performance and are subject to risks and uncertainties. There can be no assurance that future developments will be those that have been anticipated. We may not actually achieve the plans, intentions or expectations disclosed in our forward-looking statements. Further, such statements are subject to certain risks and uncertainties that could cause actual results to differ materially from historical earnings and those presently anticipated or projected. The risks are included in Part I, Item 1A – Risk Factors of our Annual Report on Form 10-K for the year ended December 31, 2025 (the “Form 10-K”).
The forward-looking statements contained in this Form 10-Q speak only as of the date of this report. Except as required by applicable law, we undertake no obligation to update or revise any forward-looking statements to reflect subsequent events, changed circumstances, or changes in expectations.
Business Operations
We are engaged in the contract production of structural aircraft assemblies for fixed wing aircraft and helicopters in both the commercial and defense markets. We also participate in the aerosystems sector through our production of reconnaissance pod structures and fuel panel systems. Within the global aerostructures and aerosystems supply chain, we are either a Tier 1 supplier to aircraft OEMs or a Tier 2 subcontractor to major Tier 1 manufacturers. We also are a prime contractor to the U.S. Department of Defense, primarily the United States Airforce “USAF”. In conjunction with our assembly operations, we provide engineering, program management, supply chain management and kitting, and MRO services.
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 programs. Substantially all of our backlog is subject to termination at will and rescheduling, without significant penalty. Funds are often appropriated for programs or contracts on a yearly or quarterly basis, even though the contract may call for performance that is expected to take a number of years. Therefore, our funded backlog does not include the full value of our contracts.
Backlog is not necessarily indicative of future revenues or the timing of such revenues. The realization of backlog depends on a number of factors, including program funding, customer requirements, and the continuation of the underlying programs. Backlog may also include amounts associated with options or anticipated orders under existing contracts that are not yet funded or awarded and are subject to change.
Our total backlog as of June 30, 2026 and December 31, 2025 is shown below.
| Backlog (Total) |
June
30, 2026 |
December
31, 2025 |
||||||
| Funded | $ | 100,033,000 | $ | 91,818,000 | ||||
| Unfunded | 433,103,000 | 412,704,000 | ||||||
| Total | $ | 533,136,000 | $ | 504,522,000 | ||||
Approximately 95% of the total amount of our backlog at June 30, 2026 was attributable to government and military contractor contracts. Our backlog attributable to government contracts at June 30, 2026 and December 31, 2025 was as follows:
| Backlog
(Government) |
June
30, 2026 |
December
31, 2025 |
||||||
| Funded | $ | 97,717,000 | $ | 89,067,000 | ||||
| Unfunded | 411,062,000 | 393,530,000 | ||||||
| Total | $ | 508,779,000 | $ | 482,597,000 | ||||
14
Our backlog attributable to commercial contracts at June 30, 2026 and December 31, 2025 was as follows:
| Backlog (Commercial) |
June
30, 2026 |
December
31, 2025 |
||||||
| Funded | $ | 2,316,000 | $ | 2,751,000 | ||||
| Unfunded | 22,041,000 | 19,174,000 | ||||||
| Total | $ | 24,357,000 | $ | 21,925,000 | ||||
The total backlog at June 30, 2026 is primarily comprised of long-term programs with Raytheon (NGJ-Mid Band Pods and Advanced Tactical Pods), L3Harris (NGJ-Low Band Pods), Raytheon (B-52 Radar Racks) Lockheed Martin (F-16 RI/DCC’s), Sikorsky (MH-60 Seahawk Stabilator MRO) and Sikorsky (CH-53K Welded Tubes).
The funded backlog at June 30, 2026 is primarily from purchase orders under long-term contracts with Raytheon (NGJ-Mid Band Pods and Advanced Tactical Pods), USAF (T-38 Classic Structural Modification Kits), and L3Harris (NGJ-Low Band Pods).
Critical Accounting Estimates
We make a number of significant estimates, assumptions and judgments in the preparation of our financial statements. See Management’s Discussion and Analysis of Financial Condition and Results of Operations in the Form 10-K, for a discussion of our critical accounting estimates. There have been no significant changes to the application of our critical accounting estimates during the quarter ended June 30, 2026.
Results of Operations
Revenue
Total Revenue for the three months ended June 30, 2026 was $17,581,532 compared to $15,179,108 for the same period last year, an increase of $2,402,424 or 15.8%, driven by our RTX MPBD Missile Wing program, our NGJ – Mid Band Pods and Advanced Tactical Pods program and our NGJ – Low Band Pods program, partially offset by our Sikorsky MH-60 Seahawk Stabilator MRO program, and our Sikorsky Hover Infrared Reduction System (HIRRS) program.
Total Revenue for the six months ended June 30, 2026 was $34,941,472 compared to $30,579,716 for the same period last year, an increase of $4,361,756 or 14.3%, driven by our NGJ – Mid Band Pods and Advanced Tactical Pods program and NGJ – Low Band Pods program, partially offset by our USAF T-38 Pacer Classic Structural Modification Kits program and Embraer Phenom-300 Engine Inlet Assemblies program.
Revenue from military subcontracts for the three months ended June 30, 2026 was $15,340,158 compared to $12,266,475 for the three months ended June 30, 2025, an increase of $3,073,683 or 25.1%, driven primarily by our RTX MPBD Missile Wing program, our NGJ – Mid Band Pods and Advanced Tactical Pods program and NGJ – Low Band Pods program.
Revenue from military subcontracts for the six months ended June 30, 2026 was $30,019,135 compared to $23,593,083 for the six months ended June 30, 2025, an increase of $6,426,052 or 27.2%, driven primarily by our NGJ – Mid Band Pods and Advanced Tactical Pods program and NGJ – Low Band Pods program partially offset by to our F-16 RI/DCC’s program.
Revenue from prime government military contracts for the three months ended June 30, 2026 was $716,367 compared to $1,335,358 for the three months ended June 30, 2025, a decrease of $618,991 or 46.4%, driven primarily by a decrease in our USAF T-38 Pacer Classic Structural Modification Kits program due to timing of material receipts.
Revenue from prime government military contracts for the six months ended June 30, 2026 was $2,480,423 compared to $4,128,970 for the six months ended June 30, 2025, a decrease of $1,648,547 or 39.9%, driven primarily by a decrease in our USAF T-38 Pacer Classic Structural Modification Kits program due to timing of material receipts.
Revenue from commercial subcontracts for the three months ended June 30, 2026 was $1,525,007 compared to $1,577,275 for the three months ended June 30, 2025, a decrease of $52,268 or 3.3%, driven primarily by a decrease in our Embraer Phenom-300 Engine Inlet Assemblies program, partially offset by the commencement of production on our Embraer Phenom-100 Engine Inlet Assemblies and Collins Compac Enclosures programs
Revenue from commercial subcontracts for the six months ended June 30, 2026 was $2,441,914 compared to $2,857,663 for the six months ended June 30, 2025, a decrease of $415,749 or 14.5%, primarily driven by a decrease in our Embraer Phenom-300 Engine Inlet Assemblies program, partially offset by the commencement of production on our Embraer Phenom-100 Engine Inlet Assemblies and Collins Compac Enclosures programs
15
Cost of Sales
Total Cost of Sales for the three months ended June 30, 2026 and 2025 was $13,709,795 and $14,515,726, respectively, a decrease of $805,931 or 5.6%.
Total Cost of Sales for the six months ended June 30, 2026 and 2025 was $26,589,844 and $28,266,859, respectively, a decrease of $1,677,015 or 5.9%.
The components of the cost of sales were as follows:
| Three months ended | Six months ended | |||||||||||||||
| June 30, 2026 | June 30, 2025 | June 30, 2026 | June 30, 2025 | |||||||||||||
| Procurement | $ | 8,787,126 | $ | 8,860,302 | $ | 16,296,835 | $ | 17,154,890 | ||||||||
| Labor | 1,467,673 | 1,504,475 | 2,783,830 | 3,147,061 | ||||||||||||
| Factory overhead | 3,602,568 | 3,952,350 | 7,539,754 | 8,070,931 | ||||||||||||
| Other cost of sales | (147,572 | ) | 198,599 | (30,575 | ) | (106,023 | ) | |||||||||
| Cost of sales | $ | 13,709,795 | $ | 14,515,726 | $ | 26,589,844 | $ | 28,266,859 | ||||||||
Procurement for the three months ended June 30, 2026 was $8,787,126 compared to $8,860,302 for the three months ended June 30, 2025, a decrease of $73,176 or 0.8%, remaining consistent.
Procurement for the six months ended June 30, 2026 was $16,296,835 compared to $17,154,890 for the six months ended June 30, 2025, a decrease of $858,055 or 5.0%, driven primarily by lower material receipts for Embraer Phenom-300 Engine Inlet Assemblies program and the Collins MS-110 program.
Labor costs for the three months ended June 30, 2026 were $1,467,673 compared to $1,504,475 for the three months ended June 30, 2025, a decrease of $36,802 or 2.4%, remaining consistent.
Labor costs for the six months ended June 30, 2026 were $2,783,830 compared to $3,147,061 for the six months ended June 30, 2025, a decrease of $363,231 or 11.5% primarily driven by decreased work performed on the A-10 Main Landing Gear Pods program due to termination.
Factory overhead for the three months ended June 30, 2026 was $3,602,568 compared to $3,952,350 for the three months ended June 30, 2025, a decrease of $349,782 or 8.8%.
Factory overhead for the six months ended June 30, 2026 was $7,539,754 compared to $8,070,931 for the six months ended June 30, 2025, a decrease of $531,177 or 6.6%.
Other cost of sales relates to items that can increase or decrease cost of sales such as changes in inventory reserves, changes in loss contract provisions, absorption variances and direct charges to cost of sales. Other cost of sales for the three months ended June 30, 2026 was $(147,572) compared to a $198,599 for the three months ended June 30, 2025, a decrease of $346,171 or 174.3%. The decrease is primarily the result of increased inventory reserve requirements in the prior year due to aged material compared to the current period.
Other cost of sales for the six months ended June 30, 2026 was $(30,575) compared to $(106,023) for the six months ended June 30, 2025, an increase in cost of $75,448 or 71.2%. The increase is primarily due to benefits realized in prior year on programs nearing completion.
Gross Profit
Gross profit and gross profit percentage (“gross margin”) for the three months ended June 30, 2026 and June 30, 2025 was $3,871,737 and 22.0% compared to $663,382 and 4.4% respectively, an increase of $3,208,355, or 483.6%, and 1,760 basis points.
Gross profit and gross profit percentage for the six months ended June 30, 2026 was $8,351,628 and 23.9%, respectively, compared to $2,312,857 and 7.6%, respectively, for the six months ended June 30, 2025, an increase of $6,038,771 or 261.1%, and 1,634 basis points.
The increase in gross margin for the three and six months ended June 30, 2026 compared to June 30, 2025 was primarily driven by adjustments made in the prior year associated with the termination of our A-10 Main Landing Gear Pods program.
16
Favorable/Unfavorable Adjustments to Gross Profit
During the three and six months ended June 30, 2026 and 2025, circumstances required that we make changes in estimates to various contracts. Such changes in estimates resulted in changes in total gross profit as follows:
| Three months ended June 30, | Six months ended June 30, | |||||||||||||||
| 2026 | 2025 | 2026 | 2025 | |||||||||||||
| Net Adjustment | $ | (676,503 | ) | $ | (3,966,358 | ) | $ | (1,408,692 | ) | $ | (7,095,588 | ) | ||||
The net adjustment of $0.7 million and $1.4 million for the three and six months ended June 30, 2026 respectively, is driven primarily by unfavorable adjustments on our Embraer Phenom-300 Engine Inlet Assemblies program and Sikorsky UH60 Gunner Windows.
The net adjustment of $4.0 million for the three months ended June 30, 2025 is driven primarily by an unfavorable adjustment of $2.3 million associated with the termination of our A-10 program. Additional net unfavorable adjustments of $1.7 million were driven primarily by the NGJ Mid-Band Pod and the T-38 Classic Structural Modification Kits program were due to increased labor and material costs.
The net adjustment of $7.1 million for the six months ended June 30, 2025 is driven primarily by an unfavorable adjustment of $4.5 million associated with the termination of our A-10 program. Additional net unfavorable adjustments of $2.6 million were driven primarily by the NGJ Mid-Band Pod and the T-38 Classic Structural Modification Kits program were due to increased labor and material costs.
Selling, General and Administrative Expenses
Selling, general and administrative expenses for the three months ended June 30, 2026 were $2,675,952 compared to $2,654,024 for the three months ended June 30, 2025, an increase of $21,928 or 0.8%. The increase was primarily the result of higher professional fees and accrued compensation, partially offset by lower salaries.
Selling, general and administrative expenses for the six months ended June 30, 2026 were $5,326,215 compared to $5,489,801 for the six months ended June 30, 2025, a decrease of $163,586 or 3.0%. The decrease was primarily due to lower Board of Director and accounting fees partially offset by increased professional fees and increased contract labor.
Interest expense
Interest expense for the three months ended June 30, 2026 was $312,939, compared to $287,546 for the three months ended June 30, 2025, an increase of $25,393 or 8.8%.
Interest expense for the six months ended June 30, 2026 was $604,874, compared to $775,637 for the six months ended June 30, 2025, a decrease of $170,763 or 22.0%. The decrease was the result of lower year-over-year interest rates charged on our outstanding debt under the Loan and Security Agreement.
Income (loss) Before Provision for Income Taxes
Income (loss) before provision for income taxes for the three months ended June 30, 2026 was $882,846 compared to $(2,272,708) for the three months ended June 30, 2025 an increase of $3,155,554.
Income (loss) before provision for income taxes for the six months ended June 30, 2026 was $2,450,912 compared to $(3,945,601) for the six months ended June 30, 2025 an increase of $6,396,513.
Provision (Benefit) for Income Taxes
Provision for income taxes for the three months ended June 30, 2026 was $197,231 compared to (benefit) for income taxes of $(947,749) for the three months ended June 30, 2025, an increase of $1,144,980 is primarily related to the increase in income. The effective income tax rate for the three months ended June 30, 2026 and 2025 was 22.3% and (44.7%), respectively.
Provision for income taxes for the six months ended June 30, 2026 was $528,579 compared to (benefit) for income taxes of $(1,296,718) for the six months ended June 30, 2025, an increase of $1,825,297. The effective income tax rate for the six months ended June 30, 2026 and 2025 was 21.6% and (34.2%), respectively.
The change in effective tax rate is result of the varying levels of income in each year and the relative impact of the R&D credit, state income taxes and permanent tax differences.
17
Net (Loss)/Income and Earnings per Share
Net income for the three months ended June 30, 2026 was $685,615 or $0.05 per basic share, compared to net (loss) of $(1,324,959) or $(0.10) per basic share, for the same period last year. Diluted income per share was $0.05 for the three months ended June 30, 2026 calculated utilizing 13,042,595 weighted average shares outstanding. Diluted (loss) per share was $(0.10) for the three months ended June 30, 2025 calculated utilizing 12,748,869 weighted average shares outstanding. The increase in net income was primarily driven by an increase in gross profit.
Net income for the six months ended June 30, 2026 was $1,922,333 or $0.15 per basic share, compared to net (loss) of $(2,648,883) or $(0.21) per basic share, for the same period last year. Diluted income per share was $0.15 for the six months ended June 30, 2026 calculated utilizing 13,056,924 weighted average shares outstanding. Diluted (loss) per share was $(0.21) for the six months ended June 30, 2025 calculated utilizing 12,728,209 weighted average shares outstanding. The increase in net income was primarily driven by an increase in gross profit.
Liquidity and Capital Resources
General
At June 30, 2026, we had working capital of $23,488,549 compared to $20,388,755 at December 31, 2025, an increase of $3,099,794 or 15.2%. The increase was driven primarily by an increase in accounts receivable.
Cash Flow
A large portion of our cash flow 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 and related earnings for which we do not bill on a progress basis, and which, as a result, we bill upon shipment of products, are components of contract assets on our consolidated balance sheets 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 revenue, 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.
Some 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 continuously work to improve our payment terms from our customers, including accelerated progress payment arrangements, as well as exploring alternate funding sources.
At June 30, 2026, we had cash of $835,875 compared to $899,199 at December 31, 2025, a decrease of $63,324 or 7.0%. This decrease was primarily the result of cash flow used in operating activities and net impacts of financing activities.
Bank Credit Facilities
On December 12, 2025, the Company entered into a Loan and Security Agreement (the “Loan and Security Agreement”) with Western Alliance Bank (the “Bank”). The Loan and Security Agreement provides for a revolving line of credit in the maximum principal amount of $10,000,000 (the “Revolving Line”) and a term loan in the original principal amount of $10,000,000 (the “Term Loan” and, together with the Revolving Line, the “Credit Facilities”). WMI and Compac, have guaranteed the Company’s obligations under the Loan and Security Agreement.
Borrowings under the Credit Facilities bear interest at a variable rate equal to the 1-month Term Secured Overnight Financing Rate (“SOFR”) plus an applicable margin as set forth in the Loan and Security Agreement. During the continuance of an event of default, all outstanding obligations bear interest at a rate equal to 5% above the rate otherwise applicable.
The SOFR Rate was 3.7% as of June 30, 2026 and as such, the Company’s interest rate on the Revolving Loan and Term Loan was 6.2% as of June 30, 2026.
18
Our Credit Facilities consisted of the following as of:
| June 30, | December 31, | |||||||
| 2026 | 2025 | |||||||
| Long-term debt | $ | 9,937,500 | $ | 10,000,000 | ||||
| Unamortized value of debt issuance costs | (109,449) | (121,610) | ||||||
| Net carrying value | 9,828,051 | 9,878,390 | ||||||
| Less: current portion of long-term debt | 250,000 | 187,500 | ||||||
| Long-term debt, net of current portion | $ | 9,578,051 | $ | 9,690,890 | ||||
The Credit Facilities mature on December 12, 2030. The Term Loan was funded in full on the closing date and is repayable in scheduled quarterly installments beginning on April 5, 2026. As of June 30, 2026, the aggregate future principal payments on long term debt are as follows:
| Period | Year
Ended December 31, |
||||||
| 2026 (Remaining six months) | $ | 125,000 | |||||
| 2027 | $ | 250,000 | |||||
| 2028 | $ | 437,500 | |||||
| 2029 | $ | 687,500 | |||||
| 2030 | $ | 8,437,500 | |||||
| Total | $ | 9,937,500 | |||||
Borrowings under the Revolving Line may be made, repaid and reborrowed from time to time before the maturity date, subject to the other conditions set forth in the Loan and Security Agreement. Voluntary prepayments of the Credit Facilities are permitted at any time without premium or penalty, other than customary breakage amounts, and the Loan and Security Agreement requires mandatory prepayments in certain circumstances.
The Loan and Security Agreement requires the Company to pay an unused commitment fee equal to 0.40% per annum on the unused portion of the Revolving Line and to pay fees and charges in connection with any letters of credit and any cash management services provided by the Bank and to reimburse the Bank’s expenses as provided in the Loan and Security Agreement.
The Company’s obligations under the Loan and Security Agreement, and the guaranties of WMI and Compac, are secured by a first-priority security interest in substantially all of the personal property assets of the Company and the guarantors, in each case subject to permitted liens and customary exclusions as set forth in the Loan and Security Agreement and related security documents.
The Loan and Security Agreement contains customary affirmative, negative and financial covenants. Among other things, these covenants impose limitations, subject to agreed exceptions, on the ability of the Company and its subsidiaries to incur additional indebtedness, grant liens, make certain investments, dispose of assets, pay dividends and other restricted payments, enter into certain transactions with affiliates and effect certain mergers or other fundamental changes. The Loan and Security Agreement also includes quarterly tested financial covenants, including a minimum Consolidated Fixed Charge Coverage Ratio of 1.25 to 1.00 and a maximum Funded Leverage Ratio that is initially 3.75 to 1.00 through December 31, 2026 and is reduced to 3.50 to 1.00 from January 1, 2027 onward, in each case as defined in and calculated under the Loan and Security Agreement.
The Loan and Security Agreement includes customary events of default, including payment defaults, covenant defaults, certain cross-defaults, certain events of bankruptcy or insolvency, certain unsatisfied judgments, certain ERISA events and certain change-of-control events. If an event of default occurs and is continuing, the Bank may, subject to the terms of the Loan and Security Agreement, declare all or a portion of the outstanding obligations under the Credit Facilities to be immediately due and payable, terminate the commitments and exercise other rights and remedies available to it, including with respect to the collateral.
As of June 30, 2026 and December 31, 2025, the Company had $19,111,172 and $18,373,672 outstanding under the Loan and Security Agreement, respectively.
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Liquidity
We believe that our existing resources as of June 30, 2026 will be sufficient to meet our current working capital needs for at least the next 12 months from the date of issuance of our consolidated financial statements. However, 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 availability for borrowings under our borrowing arrangement to satisfy those needs, as well as potential sources of additional capital, which may not be available on satisfactory terms and in adequate amounts, if at all.
Contractual Obligations
For information concerning our contractual obligations, see Contractual Obligations under Item 7 of Management’s Discussion and Analysis of Financial Condition and Results of Operations of the Form 10-K.
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 3 – Quantitative and Qualitative Disclosures About Market Risk
Not applicable.
Item 4 – Controls and Procedures
Disclosure Controls and Procedures
Under the supervision and with the participation of our management, including our Chief Executive Officer and Chief Financial Officer, we evaluated the effectiveness of our disclosure controls and procedures (as defined in Exchange Act Rules 13a-15(e) and 15d-15(e)) as of June 30, 2026. Based on that evaluation, our Chief Executive Officer and Chief Financial Officer concluded that our disclosure controls and procedures were effective as of June 30, 2026.
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 June 30, 2026.
Changes in Internal Control Over Financial Reporting
There were no changes in our internal control over financial reporting during the quarter ended June 30, 2026 that materially affected, or are reasonably likely to materially affect, our internal control over financial reporting.
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Part II - Other Information
Item 1 – Legal Proceedings
None.
Item 1A – Risk Factors
“Part I Item 1A - Risk Factors” of our Comprehensive Form 10-K for the year ended December 31, 2025, includes a discussion of significant factors known to us that could materially adversely affect our business, financial condition, or results of operations. There have been no material changes from the risk factors described in such report.
Item 2 – Unregistered Sales of Equity Securities and Use of Proceeds
None.
Item 3 – Defaults Upon Senior Securities
None.
Item 4 – Mine Safety Disclosures
Not applicable.
Item 5 – Other Information
During the fiscal quarter ended June 30, 2026, no director or officer adopted or terminated a Rule 10b5-1 trading arrangement or non-Rule 10b5-1 trading arrangement, as each term is defined in Item 408(a) of Regulation S-K
Item 6 – Exhibits
| Exhibit No. | Description |
| 31.1* | Section 302 Certification by Chief Executive Officer and President |
| 31.2* | Section 302 Certification by Chief Financial Officer (Principal Financial and Accounting Officer) |
| 32.1** | Section 906 Certification by Chief Executive Officer and Chief Financial Officer |
| 101.INS* | Inline XBRL Instance Document. The instance document does not appear in the Interactive Data File because its XBRL tags are embedded within the Inline XBRL document. |
| 101.SCH* | Inline XBRL Taxonomy Extension Schema Document. |
| 101.CAL* | Inline XBRL Taxonomy Extension Calculation Linkbase Document. |
| 101.DEF* | Inline XBRL Taxonomy Extension Definition Linkbase Document. |
| 101.LAB* | Inline XBRL Taxonomy Extension Label Linkbase Document. |
| 101.PRE* | Inline XBRL Taxonomy Extension Presentation Linkbase Document. |
| 104* | Cover Page Interactive Data File. The cover page XBRL tags are embedded within the Inline XBRL document. |
* Filed herewith
** Furnished herewith
Attached as Exhibit 101 to this report are the following formatted in Inline XBRL (Extensible Business Reporting Language): (i) Condensed Consolidated Statement of Operations for the three and six months ended June 30, 2026 and 2025, (ii) Condensed Consolidated Balance Sheet as of June 30, 2026 and December 31, 2025, (iii) Condensed Consolidated Statement of Cash Flows for the six months ended June 30, 2026 and 2025, (iv) Condensed Consolidated Statement of Changes in Equity for the three and six months ended June 30, 2026 and 2025 and (v) Notes to Condensed Consolidated Financial Statements.
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SIGNATURES
Pursuant to the requirements 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.
| CPI AEROSTRUCTURES, INC. | ||
| Dated: August 13, 2026 | By. | /s/ Dorith Hakim |
| Dorith Hakim | ||
Chief Executive Officer and President (Principal Executive Officer) | ||
| Dated: August 13, 2026 | By. | /s/ Robert Mannix |
| Robert Mannix | ||
Chief Financial Officer (Principal Financial and Accounting Officer) | ||
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