CPI AEROSTRUCTURES INC

Management is responsible for establishing and maintaining adequate internal control over financial reporting. Internal control over financial reporting, as defined in Exchange Act Rules 13a-15(f) and 15d-15(f), is a process designed by, or under the supervision of, our principal executive and principal financial officers and effected by our board of directors, management and other personnel, to provide reasonable assurance regarding the reliability of financial reporting and the preparation of financial statements for external purposes in accordance with U.S. GAAP and includes those policies and procedures that:

Because of its inherent limitations, internal control over financial reporting may not prevent or detect misstatements. Projections of any evaluation of effectiveness to future periods are subject to the risk that controls may become inadequate because of changes in conditions, or that the degree of compliance with the policies or procedures may deteriorate.

Disclosure Controls and Procedures

Under the supervision and with the participation of our Chief Executive Officer and Interim Chief Financial Officer, management 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, 2025. Based on that evaluation, management concluded that our disclosure controls and procedures were not effective as of that date due to the material weakness described below.

During the second quarter, a Material Weakness was identified concerning the application of ASC-470 –*Debt,*more specifically as it relates to 470-10-45-11, that if a company is in violation of a debt covenant and it is probable that the borrower will not be able to comply with the covenant at measurement dates within the next twelve months, this debt shall be classified as short term. Due to the financial impact of the Boeing A-10 program, the Companywas not able to meet the financial covenants for the second quarter and therefore obtained a waiver to remediate the non-compliance. As this waiver did not cover the twelve months from the date of the Company’s financial statements the Company had a potential misclassification of short and long term debt.

On August 19, 2025, the Company executed the Fifteenth Amendment, which revised the definition of EBITDA for covenant-calculation purposes by permitting add-backs for the six months ended June 30, 2025 due to the Boeing A-10 program adjustments. The Fifteenth Amendment also has customary terms and conditions, including representations, reaffirmations of prior obligations, and related provisions.

A material weakness is a deficiency, or a combination of deficiencies, in internal control over financial reporting, such that there is a reasonable possibility that a material misstatement of the Company’s annual or interim consolidated financial statements will not be prevented or detected on a timely basis.

The Company has begun to develop new controls designed to remediate the aforementioned material weakness pertaining to the application of ASC-470 –Debtwhich the Company implemented during the quarter ended September 30, 2025.

Changes in Internal Control Over Financial Reporting

During the quarter ended September 30, 2025, the Company implemented a compliance checklist based on ASC 470-10 which provides guidance on the classification determination for obligations of callable debt for use by CPI’s finance management in reviewing the quarterly and annual covenant requirements.