CPI AEROSTRUCTURES INC

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, a wholly owned subsidiary of WMI (collectively, the “Company”, “we”, “us”, or “our”).

The condensed consolidated interim financial statements of the Company as of September 30, 2025 and for the three and nine months ended September 30, 2025 and 2024 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, 2024 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, 2024 (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 September 30, 2025, the Company had $334,493 of uninsured balances. The Company limits its credit risk by selecting financial institutions considered to be highly creditworthy.

Recently Issued Accounting Standards – Adopted

In 2025, the Company adopted ASU No. 2023-09, Income Taxes (Topic 740): Improvements to Income Tax Disclosures, which focuses on the rate reconciliation and income taxes paid. The updated accounting guidance requires expanded income tax disclosures, including the disaggregation of existing disclosures related to the effective tax rate reconciliation and income taxes paid. The guidance is effective for fiscal years beginning after December 15, 2024. An entity may apply the amendments in this ASU prospectively, but an election to treat this retrospectively is permitted. The Company has adopted this ASU, which is expected to impact the annual disclosure in its 10-K.

Recently Issued Accounting Standards – Not Adopted

In September 2025, the Financial Accounting Standards Board (FASB) issued Accounting Standard Update (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 July 2025, the Financial Accounting Standards Board (FASB) issued Accounting Standards Update (ASU) 2025-05,Measurement of Credit Losses for Accounts Receivable and Contract Assets, (“ASU 2025-05”) which provides a practical expedient to measure credit losses on accounts receivable and contract assets. ASU 2025-05 is effective for annual periods beginning after December 15, 2025, and interim periods within those annual reporting periods. Early adoption is permitted. The Company is currently evaluating the timing of the adoption and the impact of ASU 2025-05 on its consolidated financial statements and related disclosures.

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 clarifies that all public business entities should initially adopt the disclosure requirements in the final annual reporting period beginning after December 15, 2026, and interim reporting periods within annual reporting periods beginning after December 15, 2027. The new guidance is effective for fiscal years beginning after December 15, 2026, which is our annual period beginning January 1, 2027, and interim 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. We are evaluating the impact of ASU 2025-01 in conjunction with ASU 2024-03.

Disaggregation of Revenue

The following tables present the Company’s revenue disaggregated by contract type and revenue recognition method:

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 three and nine months ended September 30, 2025 and 2024:

The net adjustment of $1.0 million for the three months ended September 30, 2025 is driven primarily by an unfavorable adjustment associated with the F-16 Rudder Island program, and increased labor and material costs on the NGJ Mid-Band Pod, and Embraer Phenom-300 Engine Inlets Assembly programs.

The net adjustment of $8.1 million for the nine months ended September 30, 2025 is driven primarily by an unfavorable adjustment associated with the termination of the Boeing A-10 program and increased labor and material costs on the NGJ Mid-Band Pod, T-38 Classic Structural Modification Kits and Embraer Phenom-300 Engine Inlets Assembly programs.

Transaction Price Allocated to Remaining Performance Obligations

As of September 30, 2025, the aggregate amount of transaction price allocated to the remaining performance obligations was approximately $100.1 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 September 30, 2025.

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.

Revenue recognized for the nine months ended September 30, 2025 and 2024 that was included in the contract liabilities balance as of January 1, 2025 and 2024, was approximately $1.6 million and $5.0 million, respectively.

The components of inventory consisted of the following:

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 September 30, 2025.

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 292,985 shares available for grant under the 2016 Plan as of September 30, 2025.

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 800,000 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. As of September 30, 2025, the Company had not issued any shares from the 2025 Plan.

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

The Company grants restricted stock units (“RSUs”) to directors as partial compensation. These RSUs vest quarterly on a straight-line basis over aone-year period and will fully vest on October 1, 2025.

The following table summarizes activity related to outstanding RSUs for the nine months ended September 30, 2025:

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 asfour 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 September 30, 2025, the weighted average remaining amortization period was 1.9 years.

The following table summarizes activity related to outstanding Restricted Stock Awards for the nine months ended September 30, 2025:

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 September 30, 2025, weighted average remaining amortization period was 0.5 years.

The following table summarizes activity related to outstanding PRSAs for the nine months ended September 30, 2025:

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 September 30, 2025, unamortized stock-based compensation costs related to restricted share arrangements was $114,831.

Basic loss 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 and RSAs. Incremental shares of 54,706 were used in the calculation of diluted income per common share for the three months ended September 30, 2025. Diluted loss per common share for the nine months ended September 30, 2025 is computed using the weighted-average number of common shares outstanding adjusted for the securities attributed to unvested RSUs and unvested RSAs. 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 nine months ended September 30, 2025 include 26,855 RSU and 88,800 RSA. Incremental shares of 70,105 and 90,463 were used in the calculation of diluted income per common share for the three and nine months ended September 30, 2024, respectively.

On March 24, 2016, the Company entered into the Amended and Restated Credit Agreement with the lenders named therein and BankUnited N.A. as Sole Arranger, Agent and Collateral Agent (as amended from time to time, the “Credit Agreement” or the “BankUnited Facility”). The BankUnited Facility originally provided for a revolving credit loan commitment of $30 million (the “Revolving Credit Loans”) and a $10 million term loan (“Term Loan”). The Term Loan has been repaid. The Revolving Credit Loans bear interest at a rate based upon a pricing grid, as defined in the Credit Agreement.

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 Revolving Credit Loans 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 from July 1, 2025 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.

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 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 (the “Additional Payment Obligation”).

As of March 31, 2025, the Company was not in compliance with the Credit Agreement’s minimum debt service coverage ratio, minimum fiscal quarter net income after taxes, and minimum quarterly adjusted EBITDA financial covenants and the Company obtained a written waiver from the Lenders waiving the specified covenant non-compliance for the fiscal quarter ended March 31, 2025.

As of June 30, 2025, the Company was not in compliance with all the Credit Agreement’s financial covenants. In addition, the Company did not satisfy the July 1, 2025 mandatory repayment requirement under the Credit Agreement (the “July 2025 Payment Obligation”). On August 14, 2025, the Company obtained a written waiver from the Lenders pursuant to which the Lenders (i) waived the financial covenant non-compliance for the fiscal quarter ended June 30, 2025 and (ii) temporarily waived non-compliance with the July 2025 Payment Obligation until September 30, 2025.

On August 19, 2025, the Company executed a Fifteenth Amendment to the Credit Agreement (the “Fifteenth Amendment”). The amendment revised certain financial covenants to reflect specified adjustments for the quarters ended March 31, 2025 and June 30, 2025. These covenant-based adjustments were designed to offset the effect of the termination of the Company’s Boeing A-10 Program on covenant compliance.

As of September 30, 2025, the Company was not in compliance with the aggregate principal amount of all Revolving Credit Loans and the Company obtained a Waiver and Sixteenth Amendment to the Credit Agreement (the “Sixteenth Amendment”). The Sixteenth Amendment reset the aggregate maximum principal amount of all Revolving Credit Loans to $15,890,000 from July 1, 2025 through March 31, 2026, $15,140,000 from April 1, 2026 through June 30, 2026, $14,390,000 from July 1, 2026 through September 30, 2026, and $13,640,000 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 waived the Company’s failure to make the July 2025 Payment Obligation on September 30, 2025. The Sixteenth Amendment also extended the maturity date of the Revolving Credit Loans to November 30, 2026, and waived the Additional Payment Obligation.

The Credit Agreement, as amended, requires us to maintain the following financial covenants: (a) minimum debt service coverage ratio of no less than 1.5 to 1.0 for trailing four fiscal quarter periods; (b) maximum leverage ratio of no less than 4.0 to 1.0 for trailing four fiscal quarter periods; (c) minimum net income after taxes as of the end of each fiscal quarter being no less than$1.00; and (d) a minimum adjusted EBITDA at the end of each fiscal quarter of no less than$1.0 million (collectively, the “Financial Covenants”). In accordance with ASC 470, the Company has determined that it is reasonably possible it will meet its covenants within the next 12 months.

Although waivers and Credit Agreement amendments cured the events of defaults described above, the Company’s failure to comply with the Financial Covenants in future periods or make mandatory repayments could result in additional events of default, and unless further waivers or amendments are obtained, of which there is no assurance, future non-compliance could permit the Lenders to accelerate the Company’s outstanding obligations under the Credit Agreement and exercise other remedies available under the loan documents.

The BankUnited Facility is secured by all the Company’s assets and the Revolving Credit Loans bore interest at the Prime Rate +2.0%. The Prime Rate was 7.25% as of September 30, 2025 and as such, the Company’s interest rate on the Revolving Credit Loans was 9.5% as of September 30, 2025.

As of September 30, 2025 and December 31, 2024, the Company had $15,890,000 and $17,390,000 outstanding under the Revolving Credit Loans, respectively. $1,500,000 of the Revolving Credit Loans is payable by September 30, 2026 and the remaining balance of $14,390,000 of the Revolving Credit Loans matures and is payable by November 30, 2026, as amended November 13, 2025.

The Company has cumulatively paid approximately $962,000 of total debt issuance costs in connection with the BankUnited Facility, of which approximately $20,000 and $36,000 is unamortized and is included in other assets at September 30, 2025 and December 31, 2024, respectively.

Also included in short-term debt is financing leases of $5,449 and $26,483 at September 30, 2025 and December 31, 2024, respectively, included as current liabilities.

During the nine months ended September 30, 2025, our four largest customers accounted for 37%,19%,13% and 13% of revenue. During the nine months ended September 30, 2024, our four largest customers accounted for 35%,24%,12%, and 12% of revenue. During the three months ended September 30, 2025, our three largest customers accounted for 46%,13% and 12% of revenue. During the three months ended September 30, 2024, our three largest customers accounted for 40%,23% and 11% of revenue

At September 30, 2025,54%,13% and 11% of our accounts receivable were from three of our largest customers. At December 31, 2024,21%,18%,16%,12%,12%, and 12% of accounts receivable were due from our six largest customers.

At September 30, 2025,39%,26%, and 19% of our contract assets were from three of our largest customers. At December 31, 2024,27%,20%,16% and 15% of our contract assets were related to our four largest customers.

At September 30, 202512% of our accounts payable was from one of our largest vendors. At December 31, 2024,13%,12%,11%, and 11% of our accounts payable was from our top 4 largest vendors.

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 extends the term of the lease until April 30, 2031. 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 nine months ended September 30, 2025 and 2024, the Company’s operating lease expense was $1,784,937 and $1,611,487, respectively. For the three months ended September 30, 2025 and 2024, the Company’s operating lease expense was $594,979 and $528,127, respectively.

Future minimum lease payments under non-cancellable operating leases as of September 30, 2025 were as follows:

The following table sets forth the right-of-use assets and operating lease liabilities as of:

The Company’s weighted average remaining lease term for its operating leases is 5.5 years as of September 30, 2025. The Company’s weighted average discount rate for its operating leases is 9.5% as of September 30, 2025.

10. INCOME TAXES

On July 4, 2025, H.R.1, commonly referred to as the One Big Beautiful Bill Act (“OBBBA”) was enacted. OBBBA includes a broad range of tax reform provisions affecting businesses. The Company does not expect this legislation to have a significant impact on its financial statements.

The (benefit)/provision for income tax for the nine months ended September 30, 2025 and 2024 was $(1,043,373) and $535,634, respectively. The provision for income tax for the three months ended September 30, 2025, and September 30, 2024 was $253,345 and $154,590, respectively.

The effective income tax rate for the nine months ended September 30, 2025 is 40.5%. The difference between the effective income tax rate for the nine months ended September 30, 2025 and the statutory income tax rate of 21% is due primarily to the estimated R&D credit, state income taxes and permanent tax differences.

The effective income tax rate for the three months ended September 30, 2025 is 18.5%. The difference between the effective income tax rate for the three months ended September 30, 2025 and the statutory income tax rate of 21% is due primarily to the estimated R&D credit, state income taxes and permanent tax differences.

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.

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”) 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 onlyone 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 Condensed Consolidated Balance Sheet as of September 30, 2025 and December 31, 2024 and the Condensed Consolidated Statements of Operations for the financial information with respect to the Company’s single operating segment for the three and nine months ended September 30, 2025 and 2024.

Economic Environment

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.

On October 1, 2025, the federal government entered a shutdown, after Congress failed to reach an agreement on a short-term spending deal or full-year appropriation. The defense industry, including our company, could be impacted if the shutdown becomes prolonged, stemming from slow downs in incremental funding on existing contracts or delays in payments on government contract invoices. Since government employees are furloughed, many critical operations will cease, including purchase order acceptance and new contract awards.

Boeing A-10 Program Contract Termination

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. The company continues to have correspondence with the Boeing Company over the termination of 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 address the risk during the quarter ended June 30, 2025. The Company will continue to evaluate the situation and will recognize further adjustments if required, in the period in which a reasonable estimate can be determined.

Credit Agreement Waiver; Sixteenth Amendment to Credit Agreement

On November 13, 2025, the Company entered into a Sixteenth Amendment to its Credit Agreement. The amendment extended the maturity of the revolving credit facility to November 30, 2026, adjusted borrowing limits for future periods, waived a failure to pay principal, and eliminated a prior contingent payment requirement. See Note 7 for additional information concerning the amendment and the Credit Facility.